35. The Three Faces of Chinese Power: Might, Money and Minds, David Lampton (University of California Press, 2008), p. 85.
36. Overseas Chinese in Southeast Asia and China’s Foreign Policy: An Interpretative Essay, Leo Suryadinata (Institute of Southeast Asian Studies, Singapore, 1978), p. 27.
37. For example, the first foreign company to invest in China after the beginning of the process of economic opening was Charoen Pokphand, the property of Chinese businessman Xie Yichu. For years this company, operating in the food and agricultural sector, was considered China’s biggest direct foreign investor. Source: Charm Offensive: How China’s Soft Power Is Transforming the World, op. cit., p. 76.
38. Mobility and Cultural Authority in Contemporary China, Pál Nyíri (University of Washington Press, 2010), p. 99.
39. Nationalism has been used “efficiently by the regime in its Patriotic Education Campaign to promote the rejection of liberal democracy and the acceptance of an authoritarian system among the population, presenting these ideas as indispensable for the country’s development.” China después de Tian’anmen. Nacionalismo y cambio politico [China After Tiananmen: Nationalism and Political Change], Mario Esteban Rodríguez (Ediciones Bellaterra, 2007), p. 165.
40. “China’s Cosmopolitan Nationalists: ‘Heroes’ and ‘Traitors’ of the 2008 Olympics,” Pál Nyíri, Zhang Juand and Merridien Varral, The China Journal, 63, January 2010.
2 THE NEW SILK ROAD
1. The Pattern of the Chinese Past, Mark Elvin (Stanford University Press, 1973), p. 218.
2. Throughout the course of history Xinjiang has repeatedly fallen into the hands of foreign invaders, whether Huns, Uzbeks, Tibetans, Arabs, Mongols or Manchurians. Russia and Britain clashed over the region before the creation of the short-lived East Turkestan Republic in the 1940s. In 1949, Mao incorporated Xinjiang once and for all into the People’s Republic of China.
3. The town of Kashgar, once the epicenter of the Silk Road and now Xinjiang’s second most important town, was—like Horgos—also listed as an SEZ. At the end of the 1970s, Deng Xiaoping, the “architect” who led China along the path of economic opening and reform, instigated the gradual creation of SEZs aimed at attracting foreign investment and controlling the process of economic opening. These “capitalist laboratories” operated under conditions that were an exception to the national law: they offered land at reasonable prices and highly attractive tax rates as well as a well-disciplined and cheap labor market and relaxed environmental standards. After the success of the first four zones—in Shenzhen, Shantou, Zhuhai and Xiamen—the model has been extended to other towns throughout modern China.
4. Shenzhen had a population of just 300,000 inhabitants at the end of 1970, making it a small town by Chinese standards. Excluding Hong Kong, the town now has the highest GDP per capita in China, with $14,600 annually in 2010. The average GDP per capita in China is just $2,504 for urban residents. Furthermore, along with Canton, Beijing, Hangzhou and Shanghai, Shenzhen boasts the highest consumption of luxury products in China. However, despite its wealth, Shenzhen also has the highest crime rate in the country. Sources: “China by Numbers 2011,” China Economic Review; “,” China Daily, January 29, 2010.
5. For centuries the Silk Road was the route used by merchants who crossed Central Asia from Xian in China to Constantinople, until the rise of the maritime routes in the fifteenth century led to the Silk Road’s inevitable decline.
6. Russia, Belarus and Kazakhstan agreed on the creation of a joint customs union, which set a fixed joint customs tariff in 2010. The aim was to standardize customs duties on the main products used in trade between the three countries. Although the introduction of the tariff has been fraught with difficulties, the most interesting aspect is the fact that the alliance was forged in order to stand up to Chinese competition—an attempt which has so far proved unsuccessful.
7. China currently owns two large pipelines that connect the country to Central Asia: a 3,000-kilometer oil pipeline stretching into Kazakhstan with the capacity to transport up to 30 million tons of crude oil per year, and a 7,000-kilometer gas pipeline which stretches into northern Turkmenistan via Uzbekistan, Kazakhstan and western and central China. “Whether or not they have any economic benefits, the oil and gas pipelines mainly serve to legitimize China’s presence in Central Asia. Having rights of ownership gives China a legitimate reason to defend its interest in the region,” said Murat Avezov, Kazakhstan’s first ambassador in Beijing (1992–5), when the authors interviewed him in Almaty. Sources: “El ascenso de China en Asia Central: ¿un nuevo hegemón regional en gestación?” [The Rise of China in Central Asia: A New Regional Hegemony in the Making?], Nicolás de Pedro, UNISCI magazine, October–November 2010; China as a Neighbor: Central Asian Perspectives and Strategies, eds. Marlène Laruelle and Sébastien Peyrouse, Central Asia-Caucasus Institute & Silk Road Studies Program, Washington, 2009.
8. Since the implementation of its policy of economic opening at the end of the 1970s, China has been pouring money non-stop into the construction of new infrastructure. Between 1990 and 2008, China paid out 32.7 trillion yuan for this purpose. Using the conversion rate of 10 yuan = 1 euro, this represents an incredible 3.2 trillion euros. Source: “,” governmental document available at: http://www.gov.cn/test/2009-09/15/content_1417907_2.htm.
9. One example is seen in China’s Grand Canal, a remarkable feat of engineering which was begun in the seventh century. Measuring 1,700 kilometers in length, the canal was set up to link the city of Hangzhou with Beijing via one of the largest artificial rivers in the world. The canal aimed to alleviate the drought that traditionally ravaged the country’s northern provinces and to control the spread of the Yellow River, but it was also designed to promote trade within the country and to contribute to making China’s territory more compact.
10. Some of Imperial China’s ruling bodies saw trade as a vulgar activity that had to be restricted, an attitude which at times led Chinese merchants to migrate to places such as Malacca where there was a much more liberal framework for buying and selling. Some experts also argue that the restrictions on trade (and therefore on contact) with the outside world were the main cause of the Ming dynasty’s decision to put an end to the foreign voyages started by Admiral Zheng He at the beginning of the fifteenth century.
For more information on the use of infrastructure for the purposes of cohesion, see “China’s Roads to Influence,” Jonathan Holslag, Asian Survey, 50 (4), 2010.
11. The academic and journalist Martin Jacques offers an exquisite description of these events in When China Rules the World (Allen Lane, 2009), p. 70. Emperor Qianlong’s quote is taken from this work.
12. The plan was approved as an outcome of the first conference in the history of the People’s Republic aimed at developing Xinjiang province. Source: http://www.china.org.cn/china/2010-05/30/content_20147084.htm, last accessed March 22, 2011.
13. In the words of Wang Menshu, an engineer and adviser to China’s Ministry of Railways, Beijing has begun to implement a “high-speed rail diplomacy,” referring to China’s plans to extend a high-speed railway throughout its territory and even beyond its own borders. According to Wang, the government plans to use Chinese high-speed rail technology to connect China with Taiwan, South Korea, Russia, Central Asia and Southeast Asia. These projects, which will run to tens of billions of dollars in cost, will be carried out by two state-owned companies: the China Railway Group (REC) and the China Railway Construction Group (CRCC). The projects will be mostly financed by Beijing, in exchange for “access to natural resources and new markets for Chinese products,” according to Wang. “The Chinese state-owned companies can negotiate their own contracts with the help of the local Chinese embassy and then wait for the subsequent approval of the Chinese State Council. The foreign governments will have to pay for the new infrastructure, but they will do so with natural resources rather than money,” Wang told the autho
rs when they interviewed him in Beijing. China’s connection with Central Asia will later serve as a gateway for bringing Chinese products into Europe. This theory has been called into question, however, after a series of scandals linked to the expansion of the railway industry in China in 2011. In February that year, railway minister Liu Zhijun was dismissed from his post and expelled from the Communist Party over accusations of corruption.
14. Xinjiang is officially home to a total of forty-seven minority groups from fifty-five different nationalities or ethnicities, with the Uighur, Han, Kazakh and Hui/Dungan people featuring as the four dominant groups. Beijing’s policies of economic and migratory development have caused a decline in the dominance of the Uighur people in the social and demographic composition of the region. In 1964, people of Uighur ethnicity made up 54.9 percent of the population while the Han people made up just 31.9 percent. However, the 2010 census shows that the number of Han residents in Xinjiang has now reached 40.1 percent. This percentage would be even higher if it were possible to include the unknown number of people who make up Xinjiang’s “floating population,” or de facto residents of the province who are registered as living in other areas. The Han people tend to form the majority in urban areas of the province, such as its capital, Urumqi, which boasts a significant part of the province’s wealth and power. Source: Statistics elaborated by the authors based on the Xinjiang Statistics Annual 2010 () and the Chinese population censuses in 1964, 1990 and 2000.
15. When China Rules the World, op. cit., pp. 237–40.
16. The phenomenon of “Hanification” has been underpinned by the arrival of the railway in Tibet as well as in Xinjiang. The railway from Tibet was launched in 2007 and stretches for 1,142 kilometers along the entire length of the Kun Lun mountain range at an average height of 4,000 meters. Beijing paid out an estimated 3.3 billion euros on this highly complex engineering project, over three times more than they have spent on health and education in Tibet over the last fifty years, according to pro-Tibetan groups. This has fed claims by several NGOs that the railway project’s main objective was in fact demographic dilution and the transportation of natural resources.
17. In the words of Central Asian expert Sébastien Peyrouse, “On the one hand, the customs office statistics are inaccurate because in Central Asian countries data regarding trade with China is reduced in order to limit its ‘psychological impact’ and to keep discussions about Chinese ‘invasion’ of the region under control. On the other hand, a significant amount of produce arrives in the country illegally.” Various experts whom the authors interviewed in Almaty estimated that there is a discrepancy of roughly $5 billion between the official volume of bilateral trade and the amount of trade that is unaccounted for.
18. Interview with Kazakh expert Adil Kaukenov in Almaty; email interviews with Sébastien Peyrouse and Nicolás de Pedro.
19. Kazakhstan has a population of barely 15.6 million inhabitants, which explains the importance of trade with China in terms of its national economy.
20. Estimates suggest that China lent its neighbor at least $13 billion in 2010 alone. Under these circumstances, some observers in the Central Asian country warn that it is just a matter of time before Kazakhstan will be forced to start paying off its debts with land. “We will start giving away our territory. We have lots of it and we have a common border [with China], so the map could be redrawn to give away a couple of thousand hectares here and there,” said a Kazakh opposition leader at a demonstration in Almaty on May 28, 2011, in reference to the impossibility of Kazakhstan paying back all of its debts to China. Sources: various, including “Kazakh Opposition Calls for Halt to China Expansion,” Reuters, May 28, 2011.
21. The volume of trade between China and the five countries of Central Asia, which together boast a potential market of 61 million inhabitants, rose to $22 billion in 2010. China holds a dominant commercial position in the region: it is the most important trade partner for Kazakhstan (if we exclude the European Union as a unitary bloc) and Kyrgyzstan, and the second most important for Tajikistan, Uzbekistan and Turkmenistan. Source: Statistics elaborated by the authors based on European Union data: http://ec.europa.eu/trade.
22. According to Adil Kaukenov, China controls 28 percent of the country’s natural resource assets (gas and oil) thanks to three recent acquisitions. First, in 2005 the Chinese state-owned petrol company CNPC bought the Canadian company PetroKazakhstan, whose assets are in the Central Asian country, for around $4.7 billion. Secondly, in 2006 the Chinese state-owned conglomerate CITIC acquired another Canadian company, Nations Energy, for $2 billion; and, thirdly, CNPC joined forces with a local company, KazMunayGas, to acquire MangistauMunaiGas for $3.3 billion. “Bribes were the key factor in allowing the Chinese to buy PetroKazakhstan and MangistauMunaiGas,” according to a Kazakh expert who asked to remain anonymous. For more information on the total amount of resources, see BP Statistical Review of World Energy, 2012 and World Energy Outlook 2011 by the International Energy Agency (IEA).
23. Interview in Beijing with Hong Jiuyin, deputy secretary general of the SCO.
24. At the start of diplomatic relations between China and Kazakhstan, Beijing insisted that the new state should sign a separate document to the bilateral protocol. This document not only required Kazakhstan to adhere to the “one-China principle,” but also demanded its refusal to allow “separatist movements” on the border, according to Mara Gubaidullina, a professor at Kazakhstan’s National University. “The document didn’t specify that it was aimed against the Uighur people, but it was clear that it was directed at them. It was the 1990s and China and Kazakhstan were not unaware of the risk that the Uighurs might demand the creation of their own state,” Gubaidullina explained. Other experts consulted by the authors agreed that “the Uighur people have now missed their moment” to become independent.
25. The Uighur diaspora is scattered across eighty countries internationally. Kazakhstan has taken in the largest group outside China, with 230,000 Uighur residents. Some experts, such as Nicolás de Pedro, Alexander Cooley and Sébastien Peyrouse, agree that the strengthening of political and economic ties between Beijing and Astana has caused a deterioration in civil liberties for Kazakhstan’s Uighur community. This opinion was confirmed by the experience of a local Uighur representative in Astana who asked not to be named. One example of Astana’s policy on this issue is seen in its treatment of Ershidin Israil, a Uighur resident in Kazakhstan, who was deported to China in May 2011. For a detailed description of the impact of the SCO on the Uighur community, see “Counter-terrorism and Human Rights: The Impact of the Shanghai Co-operation Organization: A Human Rights in China White Paper,” HRIC, 2011.
26. Source: IMF.
27. Up to the date of publication, the UN had agreed to four rounds of economic sanctions, in 2006, 2007, 2008 and 2010, aimed at deterring Iran from continuing its nuclear program. On top of these are the unilateral sanctions imposed by the United States, the European Union, Japan, Australia and other countries, which date back to the founding of the Islamic Republic in 1979. The sanctions target Iran’s nuclear and arms industry, banks, shipping and insurance companies, as well as businesses and individuals linked to the Guardians of the Revolution. Tehran claims that the aims of its nuclear program are strictly limited to energy production and are therefore purely peaceful, but refuses to explain inconsistencies found by UN inspectors.
28. Although all of the main Iranian banks are on the UN’s “blacklist,” the factor that really bolstered financial embargoes against Iran was the statement issued in 2007 by the international banking organization, the Financial Action Task Force (FATF). In its statement, FATF warned that Iran was not upholding legislation in regard to money laundering and counter-terrorism. “The statement was devastating. All of the Western banks stopped doing business with Iran. This did them a lot of harm financially,” according to an economist to whom the authors spoke on the subject.
29. Bilateral trade between China and
Iran generated over $45 billion in 2011, according to data provided by Iranian officials, and the Asian country is already the major trade partner of the Islamic Republic. In addition to this figure, around $6 billion in trade between Iran and the United Arab Emirates originated in China in 2010, according to Asadollah Asgaroladi, president of the Sino-Iranian Chamber of Commerce, whom the authors interviewed in Tehran.
Iran is placed at 144 out of 183 in the Doing Business 2012 ranking produced by the World Bank, a study measuring the suitability of operating conditions in countries in terms of doing business with other nations in the world.
30. Source: Interview with Mehdi Fakheri, vice-president of the Iran Chamber of Commerce, Industry and Mines.
31. As a member of the UN Security Council, China has the right to veto the Council’s resolutions. In the case of Iran it has used this right to delay and limit the scope and effectiveness of the fourth round of sanctions. Resolution 1929, in fact, could only be approved almost six months after the idea of sanctions was first proposed and following intense negotiations with China. United States experts estimate that this Chinese tactic (which has also been used by Russia) has granted Iran precious extra years in which to develop its nuclear program.
China's Silent Army Page 35
