Is Beijing playing a double game? While it may seem contradictory, China’s position in respect to Iran is in fact carefully calculated. On the one hand, China questions American dominance in the Middle East and does not feel itself to be bound by the unilateral sanctions imposed by Washington. Beijing interprets the application of American law outside United States territory not only as a sign of an arrogant and hegemonic mentality, but also as a modern variant of the extraterritorial behavior that humiliated China over the course of the century after the Opium Wars.35 On the other hand, Beijing has given its support to the United States’ aim to stop Iran developing a nuclear arsenal, in order to convince Washington that it is a responsible international business partner. Beijing is conscious of the fact that it cannot openly defy the United States in the Middle East without this having a very negative impact on bilateral relations and, by extension, its domestic economic development.36 This explains both Beijing’s backing of the UN sanctions and the fact that this support is in no way unconditional. As we have seen, China supports the sanctions, but only after delaying and diluting them as much as possible.37
With its diplomatic flank covered, how does China behave in practice? To begin with, a glance at the arms trade confirms that China overtook Russia in 2007 as Iran’s primary arms supplier.38 Furthermore, analysis carried out by Western intelligence services suggests that in recent years China has played an “important supporting role” in Tehran’s ambitions to develop a medium-range ballistic missile capable of carrying a nuclear warhead and reaching Israel.39 This is backed up by evidence which shows that Chinese companies are continuing to supply Iran with components, materials and chemicals for its ballistic program, despite the enforcement of international sanctions.40 At the end of 2010, for example, months after the approval of UN Resolution 1929, both Singapore and South Korea stopped and searched boats found in their waters which were heading to Iran. In both cases the boats were carrying aluminium powder and phosphor bronze, materials which can be used for military purposes and are forbidden by the sanctions. Both cargoes came from Chinese companies. Soon afterwards, in May 2011, an internal report for the use of the UN Security Council confirmed that trade in missile technology between North Korea and Iran is carried out via a “neighboring third country.” In a telephone interview, a high-ranking UN diplomat connected to the committee supervising the sanctions against Iran identified the country for us on the condition that he would remain anonymous: it was China.41
At the same time, Hong Kong—with one of the busiest ports on the planet—was offering itself to Iran as a re-export center every bit as attractive as Dubai was in its heyday. Some twenty Iranian shipping companies—essential for getting round the embargo—have been operating for years in the ex–British colony, which is now subject to Chinese sovereignty under the “one country, two systems” formula. This so-called “ghost fleet” is able to do this after reflagging and renaming their blacklisted ships, and also thanks to the amount of room for maneuver allowed by the generous guarantees granted by Hong Kong law as well as the island authorities’ apparent slackness when implementing the Resolution 1929 sanctions regime.42 This issue is particularly significant because Hong Kong is able to import American dual-use technology thanks to bilateral agreements signed during the British colonial era. This technology cannot be bought by countries that Washington considers to be less than rigorous in their control procedures—including mainland China.43 The paradoxical consequence of all this is that sensitive American technology could have made its way into Iran’s ports thanks to the triangulation with Hong Kong.44
The involvement of the Chinese state in this illegal trade is certainly mysterious. Is it a deliberate, strategic decision on the part of the government? Are we seeing a form of tacit approval? Or are the giant state-run companies in the Chinese arms industry trading on their own account, without the support of the government and outside its control? In short, how much effort and resources is the Chinese government prepared to use in order to rein in the illegal trade? At the moment there are no answers to these questions, although the aforementioned UN diplomat did confirm that “Chinese-made weapons and other merchandise have been discovered in this type of trade.”45 What we do know, warns Michael Elleman, an expert in international security at the International Institute of Strategic Studies in Bahrain, is that “this trade exists, it continues to exist and [China has] been unable or unwilling to stop that trade. China appears to be unwilling to make it a strategic priority to stop exports that would help Iran’s missiles program. The evidence is quite clear on that.” As such, beyond the half-hearted diplomatic support given by China at the UN against the rise of Iran’s nuclear program, in practice its position is notoriously ambiguous. “China is one of the biggest problems when it comes to the proliferation of weapons of mass destruction, without a doubt,” Elleman concludes.
Night has already fallen by the time the Iran Hormuz 14 ferry sets sail from Bandar Abbas. The passengers mostly consist of traders and casual laborers on their way to build skyscrapers in Dubai, as well as entire families led by women in niqabs. After a vigorous separation by gender at immigration control, and then again after boarding the boat, it is time for the nightmare journey to begin. Crossing the 100 nautical miles between the Iranian port and Dubai via the Strait of Hormuz involves spending fourteen miserable hours on board a slow, rickety and uncomfortable boat filled with a strong smell of gas oil. Meanwhile, another promised land for Chinese products awaits us on the other side of the Persian Gulf.
THE DRAGON’S POWER IN THE HEART OF THE MIDDLE EAST
“Where do we go, m’dam?”
“Shop. Speed.”
The mumbled words have barely left Fei Zhen Xu’s mouth when the Porsche Cayenne roars into life and is soon cruising at 140 kilometers per hour along Dubai’s sandy motorway. Siji, as Fei calls her Indian chauffeur, grasps the vanilla-colored leather steering wheel with one hand and uses the other to tune into some music on the local radio stations. The enormity of Dubai with its inhuman glass architectural forms is reflected in Fei’s sunglasses as we talk. Bristling with energy, she is busy with her two mobile phones, handing out a constant stream of instructions to her employees as she looks out at the swarm of skyscrapers through the tinted windows of the Porsche. “Business good in Dubai,” she says, leaning back in her seat. With her husky voice and broken English, Fei has spent a decade doing business in an emirate that has made up for its poor oil reserves by making the most of its strategic position and legal and political stability, positioning itself as a key financial and logistical center.
Seen from the sky, the Dragon Mart—which Fei insists on referring to as “shop”—lives up to its name, forming the silhouette of a gigantic reptile. Its dozen or so silver hangars, with roofs representing the creature’s scales, are arranged in an S-shape leading to the main entrance in the shape of the dragon’s head. Measuring 1.2 kilometers in length and covering an area measuring 150,000 square meters (or three times the size of London’s Wembley Stadium), the Dragon Mart is the biggest market for Chinese goods outside China. This building houses 4,000 Chinese shops selling every imaginable kind of product, from reproductions of the Bible or Koran in the form of a key-ring to artificial lawns to combat the ocher desert that Dubai is built on. Opposite the main entrance, a statue demonstrates the role that is expected of China here: a ferocious dragon wrapped around a golden globe.
Fei moves through this “Chinese world” like a fish through water. She runs a shoe shop, a shop selling bags and jewelry, and a restaurant on one of the market’s busiest walkways. “Take whatever you want. For your mother or your girlfriend,” she says, generously, in her strong accent from the city of Wenzhou, the birthplace of some of China’s most brilliant entrepreneurs.46 The building is a temple to business: aisles arranged by product, signs in various different languages, currency exchange bureaus and air conditioning on full blast. The products, businessmen and -women and the majority of employees are Chines
e. If it wasn’t for the Emirati couples dressed in predictable clothing—the women in black niqabs, the men in startling white dishdashas—anyone would think that the Dragon Mart is simply an extension of China in the Middle East.
Fei came to Dubai in search of new opportunities. When the Dragon Mart opened in 2004, she decided to invest in this strategically placed site midway between Asia and Africa. “Dubai is a great place for business because it’s easy to get a visa and there are very low taxes,” she tells us. Customs duty is just 5 percent on imports if the product is to be sold in the Emirates, or tax-free if it is going to be re-exported. Forty years old, Fei lives alone and far away from her son, who is studying engineering in the United Kingdom, and her husband, who is in charge of running the family’s factories back in Wenzhou. This town is the global capital of footwear, cigarette lighters and sunglasses, as over 70 percent of the worldwide total of these goods are made in the area. She travels back to China just twice a year. “Once for Chinese New Year and once to monitor the factories and buy merchandise,” she tells us in her office, where we find a print showing the god of fortune and a green and gray jade statue. Given the success of her businesses, we wonder why she doesn’t delegate the work to others so that she could enjoy a wealthy life or spend time with her son. “I start work at eight in the morning and finish at night. I never take a day off. My calling is a professional one: I’m fascinated by making money. And it’s also about contributing to the success of our country,” she adds.
The creative brain behind this experiment called Dragon Mart—which other countries such as Mexico are working hard to reproduce—is Abdullah Lootah.47 In 2004, this elegant, clean-shaven Dubai-born businessman, who speaks perfect English with a slight lisp and boasts two decades of experience in business dealings with China, began the process of setting up this distribution center which gives buyers from the Middle East and east Africa access to Chinese products. Traders can therefore avoid going to Yiwu, the world’s biggest wholesale market situated in eastern China, where at least 200,000 Arab traders travel each year to stock up their businesses.48 Lootah told us how he started with an idea about how to divert trade in products between the Middle East, Africa and China to make it pass through Dubai. “We thought about just having a general warehouse or a big distribution center, but we later decided to have a market as well. The Chinese Deputy Prime Minister Wu Yi visited Dubai in 2003 and told us that she liked the idea and that the Chinese government would be supporting it. We set up a group of two Arabs and a hundred and twenty Chinese people. And that is how it all started,” Lootah recalls, amidst the constant beeping of his BlackBerry.
Around 2,000 businesses—“all of them Chinese. That’s imperative”—and 6,000 Chinese workers and entrepreneurs share in the rewards offered by this distribution center which helps deliver Chinese products to the furthest corners of the region. “People come here from Iran, Iraq, Oman, the Arab states, African countries … They come to the Dragon Mart because it is a convenient marketplace for products. Location plays a major role, as well as language, because they don’t need a translator,” Lootah continues.
The property of Dubai’s government via the investment company Dubai World and its subsidiary Nakheel, the Dragon Mart took barely ten months to build. Less than a year later it had sold every inch of its available space for exhibitors and traders. “By nature, the Chinese like to control every aspect of the business. This was very challenging. Groups of Chinese people were coming and trying to get control of things, but this really did not work here. We told them that we would be treating them all the same and that the process would be transparent. They wanted to do things like in Kazakhstan, for example, where the Chinese have bought the shops, but we are the landlords here and we have the power. We have established limits,” Lootah explains. The government has therefore managed to attract Chinese traders and products without having to relinquish control of the business. Each seller must contribute a minimum rent of $1,500 per square meter in order to display its products. On top of this, sellers pay for a variety of other services, such as water, light, accommodation, visa processing and business licenses, the proceeds of which also go towards the sovereign fund. The world’s second largest shipping company, the Chinese state-run COSCO,49 has taken charge of transporting the merchandise to the final client from the giant warehouse measuring 40,000 square meters—another Wembley Stadium—located alongside the Dragon Mart.
Many different types of traders are brought together in this commercial center, from those who have spent their life savings on setting up a shop to millionaires who control every aspect of their business from the production phase to the arrival of the merchandise in Dubai. Lootah, who refuses to give us any figures regarding the volume of business generated by the Dragon Mart, does however tell us that all of the Chinese entrepreneurs begin trading in the same way. “When he opens his business, the Chinese man is the owner, porter, cashier, driver and salesman … He is a one-man company. Why does he do this? So that he can understand exactly how the business works, so that when he hires someone, that person can’t cheat him.”
The Dragon Mart and the thousands of Chinese people who live, invest and work in Dubai are not the only indication of China’s growing power in this strategically important region of vast oil reserves. On the shores of the Persian Gulf, an artificial island created 280 meters from the coast of Dubai is home to the most emblematic hotel in the region: the seven-star Burj Al Arab, considered by many to be the world’s most luxurious hotel. With its 310-meter-high shimmering glass structure in the shape of a ship’s sail, the hotel boasts its own heliport, an entire fleet of Rolls-Royces and 202 duplex suites (there is no other type of room in the hotel). In kitsch surroundings dominated by gold leaf and plasma TVs, guests can enjoy a Jacuzzi made of Italian marble, the most sumptuous Arab carpets and the most elegant French perfumes; in other words, luxury by the bucketful—if not sophistication—for the new Asian millionaire.
Getting into this iconic Dubai building—“the Eiffel Tower of the Emirates,” in the words of one of its promoters—is no easy task. An initial control point 250 meters away from the building blocks the arrival of any visitors who have not been invited to this private party. Access to the hotel is only possible if you have booked a room in advance or, if the aim is only to enjoy the hotel’s gastronomic offering, an advanced payment of $100 per person is required. In the reception, a team of hostesses, porters and waiters move into position with the harmony of a Russian ballet, serving tea and dried fruit to welcome their guests. Classical music echoes through the immense entrance hall where spurts of water shoot out of a fountain in time to Bach or Mozart. To our surprise, a group of Chinese guests were having their photo taken in reception before climbing into their waiting limousine. “The Chinese have become the hotel’s most important customers. Not long ago a Chinese group reserved fifty rooms here,” explains a slender Shanghainese woman who works as a hostess at the hotel.
The economic crisis of 2008 put an abrupt end to the extravagance of wealthy British and American visitors, who up until then were the hotel’s biggest customers. “Three years ago Chinese customers barely made up 4 percent of the hotel’s business figures. In 2011 this shot up to 26 percent and we are hoping this will rise to 29 percent by the end of 2012,” explains David Loiseau, the Frenchman who devised the Chinese commercial strategy adopted by the Jumeirah Hotel Group, the owner of the Burj Al Arab. During Chinese holiday seasons such as Chinese New Year, the hotel’s new emperors can make up 60 percent of its guests. “About fifteen thousand Chinese customers visited the establishment in 2011, mostly from Canton, Shanghai and Beijing. We have a strategy in place to develop the rest of the big cities in the west of the country. This is a powerful market that is only just emerging and which should lead to 100 million Chinese people traveling abroad each year by 2020,” Loiseau tells us, mentioning a figure of mythical dimensions which would be a dream come true for the tourism sector.
Depending on
the season, each Chinese guest pays between $2,200 and $4,000 on accommodation alone to spend just one or two nights in this monument to luxury and excess. In the face of growing demand, the hotel has been forced to respond to this change in the profile of its clientele by making some adjustments, such as training Mandarin-speaking staff and hiring chefs who can master Cantonese or Sichuan cuisine. The onslaught of Chinese consumers into the luxury sector can be seen as the prelude to what may take place in the near future: Chinese exports will become more sophisticated until one day the Asian giant’s products will take pride of place in the dreams of the world’s wealthy classes.
THE ZHANG FAMILY ARRIVES IN AFRICA
It takes two chaser telephone calls before Zhang Qi finally arrives, slightly late, to our appointment at Club Belge in Kinshasa. “Sorry for the delay. I was following the Hong Kong stock exchange and only got two hours sleep,” he explains as he settles his bulky figure into a chair on the terrace of this small oasis aimed at the Congolese capital’s wealthy classes. His presence instantly causes a certain amount of interest and attracts several of the customers who are enjoying the club’s swimming pool or sipping a gin and tonic at the garden bar. The staff also come over to greet him. “Comment vas-tu, mon pote?” he asks the waiter, just before going to greet the mayor of the Congolese capital. “A good friend of mine,” Zhang explains.
China's Silent Army Page 9
