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China's "rug merchants" of the U.N.

By Peter Navarro
web posted July 21, 2008

Earlier this month, China once again demonstrated its willingness to opportunistically trade diplomatic favors for access to African riches.  Joining with Russia, the People's Republic vetoed a U.N. Security Council resolution that would have imposed tough sanctions on Zimbabwe's President Robert Mugabe and other members of his illegitimate regime for rigging the Presidential election. 

In the past, China has successfully "sold" its UN veto power to protect the Sudan from UN sanctions over Darfur in exchange for access to Sudanese oil.  China is now the biggest customer of the Sudan.  China has also provided Iran with diplomatic cover at the U.N. for its nuclear weapons development in exchange for access toIran's huge natural gas reserves.  

In Zimbabwe, it's not petroleum China covets.  Instead, Zimbabwe is the world's second-largest exporter of platinum; that's a key input for China's auto industry. China is also the world's largest steel producer, and Zimbabwe controls more than half of the world's known chromium reserves –used in making stainless steel.

On the agricultural front, China has also long coveted Zimbabwe's rich tobacco fields.  As the world's largest cigarette producer, China produces roughly two trillion sticks a year (while annually killing about a million Chinese).  Over the last decade, by providing President Mugabe with diplomatic cover at the UN and by loaning the Mugabe regime huge sums, China has been able to  gain control of much of Zimbabwe's valuable tobacco output. 

In fact, Zimbabwe used to sell its tobacco at international auction for top dollar and hard foreign exchange.  Today, however, Zimbabwe's crop is funneled directly to China's 300 million smokers as payment in kind for the huge loans China provides.  Ironically, as Zimbabwe's agricultural sector collapses under Mugabe's rule, Chinese farmers till the land the Zimbabwean government once confiscated from white farmers.

China's Zimbabwe gambit is symptomatic of a broader brand of Chinese imperialism that would have Lenin and Mao turning over in their graves.  It is a strategy driven by China's relentless reliance on a heavy manufacturing model that now consumes half of the world's cement, one third of its steel, one fourth of its copper, one fifth of its aluminum, and the fastest growing share of the world's oil. 

China's strategy for securing these scarce natural resources is a zero sum game played against the West.  Rather than rely on world markets as Europe and the U.S.do,  China seeks to gain tight a physical control of these resources. The way China gains resource control is by first ingratiating itself to foreign governments and then encircling the country's natural resource riches with virtually every strategy described by Lenin in the "imperialist playbook."

As its core strategy, China dangles lavish, low-interest loans as bait and uses its huge army of engineers and laborers to help the country build up its infrastructure—from roads and dams to hotels and stadiums, from parliament buildings and palaces to satellite capabilities and telecommunications networks.  In countries from Angolato Zimbabwe to Burma, China also sells the ruling elites the weapons they need to hold onto power – and rig the occasional election, as Mugabe just did.

Today, more than a thousand Chinese firms, private and state-owned, have been deployed to more than 50 African countries along with hundreds of thousands of construction workers. Backed by heavily subsidized, low-interest loans from the government, both state-owned and private Chinese construction firms have been able to put down deep economic roots in African soil  – while helping China to solve its own politically volatile unemployment problems.   

Of course, the investments made in highway systems and communications quite literally and digitally pave the way for precisely the kind of imperialistic "high-low" trade that Lenin once railed against.  On the high end, China directs its financial capital and human resources to the development of the extraction and harvesting activities and transport of the natural resources back home for the production of higher value-added goods.   .  In the process, China systematically strips nations of their raw materials and natural resources.  Adding injury to injury, China recovers the costs of these resources and materials by dumping cheap finished goods into these same countries, often driving out local labor and driving up the local unemployment rate.

That China implements this imperialistic strategy by leveraging its position as a permanent member of the UN Security Council with veto power is arguably one of the most reprehensible aspects of an amoral foreign policy.  That foreign policy is founded on a principle that China's own President Hu Jintao has preached like the lowliest of rug merchants across Africa and Latin America: "just business, no political conditions." ESR

Peter Navarro is a business professor at the University of California-Irvine, a CNBC contributor, and author of The Coming China Wars (FT Press). 

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