Is China Pivoting to the Middle East?

By the time Pan Jiangjiang graduated from China’s Zhejiang University in 2009, the environmental engineering major had decided that graduate school was the logical next step. Less conventional was his destination: Thuwal, a small Saudi Arabian town on the Red Sea. The new, cash-rich King Abdullah University of Science and Technology there had waived tuition for young, international talent like him, and had recruited the world’s leading engineering professors.

Though Pan had accepted the offer without hesitation, he never expected to stay long, owing both to culture shock and longing for home. However, more than 15 months after the program ended, Pan remains in Riyadh as one of two Chinese employees at a think-tank specializing in energy and environmental issues. He has even considered bringing over his girlfriend of almost two years, who now works in Beijing. “Down the road I want to work for a Chinese oil and gas company, advising its Saudi strategy,” said Pan, adding that he wouldn’t mind working for China’s top economic planning agency, either.

Thanks to Pan’s Saudi experience, he’ll likely have the chance. In recent years, trade and investment between China and Saudi Arabia has exploded. The Gulf monarchy became China’s largest oil supplier in 2002, and now provides the country with one-fifth of its oil imports. China, Saudi Arabia’s largest trading partner, has returned the favor with cheap, manufactured goods and a stream of sophisticated technicians.

Because of those growing ties, engineers like Pan are now almost guaranteed a promising career back home in China. But even as Chinese citizens and businesses have turned their attention westward towards the Middle East and Central Asia, seeking jobs, new markets and a share of the natural resources in those regions, some prominent voices in China argue that government policy has not followed suit. And that, they say, must now change.

“While the U.S. pivots east, and Europe, India and Russia also eye the East, China should have a strategic plan of ‘Marching West,'” wrote Beijing University professor Wang Jisi last October in the state-run Global Times.

“The U.S. is a two-ocean country, while China is a one-ocean state, so why should we not make use of the land connections we have on our western border?”
The United States is winding down its war in Afghanistan and President Obama has called for a “pivot to Asia,” which will refocus American attention on the Pacific. With that backdrop, Wang’s strategy might appear to be an attempt to fill the gap left by the United States in Central Asia and the Middle East and eventually replace it as the dominant power. In January, the Brookings Institution published an article comparing the proposal to Mao Zedong’s war strategy: “Where the enemy advances, we retreat. Where the enemy retreats, we pursue.”

“The underlying ‘retreat-pursuit’ philosophy of ‘March West’ still anchors on a zero-sum perception of the U.S.-China relations,” wrote author Yun Sun. “As the U.S. pivots away from the region and becomes deeply immersed in Asia Pacific, it needs to seriously consider the implications of and prepare for China’s ‘March West’.”

But Wang, who once taught at the elite Central Party School, a finishing school for China’s ruling class, rejected that view. Speaking over the phone, he argued instead that China must “adopt an active attitude” towards the countries to its west because of its own internal needs.

“Look back to China’s history, most of the capitals in Chinese dynasties were in central China, not on China’s coast,” he said. “So the ‘March West’ is primarily to re-balance China’s domestic economic development. The U.S. is a two-ocean country, while China is a one-ocean state, so why should we not make use of the land connections we have on our western border?”

Those connections grew rapidly over the past decade. Since 2003, Chinese trade with South Asia and West Asia grew nearly thirty-fold, while trade overall increased just seven times. And since 2006, China’s trade with Arab countries grew 50 percent faster than overall numbers, according to the state statistics bureau.

Wang and other experts agreed that if China’s move westward brings it into contact with American interests, the relationship is more likely to be complementary than acrimonious. Wu Bingbing, a colleague of Wang’s at Beijing University, argued that the two powers have historically used Middle East policy to patch over their differences.

The Gulf War, for example, had distracted the U.S. enough from its relations with Beijing to warm back up after the Tiananmen massacre in 1989, he said, and following the jet collision incident in 2001 near Hainan Island in the South China Sea, the two countries repaired ties through joint anti-terrorism efforts. Rather than compete in the region, Wu suggested, China’s recent history with managing a turbulent low-wage economy may help countries where the U.S. simply cannot.

“The Middle East’s economy, unlike U.S.’high-technology and innovation-driven economy, is more akin to China’s,” said Wu. “In terms of dealing with its massive unemployment and driving a large economy, it needs China’s experience.”

Both Wang and Wu believe that close Sino-American contact will promote stability rather than competition. And nowhere have the two countries come in closer contact than Afghanistan, where American government officials helped Kabul negotiate with Chinese companies over major development contracts.

Philip Vasquez was one of those Americans, a lawyer specializing in oil and gas deals who advised the Afghan government as a contractor for both the U.S. Agency for International Development and the Pentagon. He and other lawyers helped Afghanistan’s Ministry of Mines write laws and regulations to encourage foreign investment in the energy sector. One of the biggest energy contracts, for Afghanistan’s oil, went to the China National Petroleum Company (CNPC) in 2011.

“The greatest beneficiary of our work, other than the Afghan people, is China,” said Vasquez.

Some Americans, particularly in business, protested the idea that Chinese businesses could take advantage of the security bought by NATO dollars and soldiers. The stability touted by experts like Wang, they argued, was little more than Chinese free riding. But Vasquez said that he and his fellow lawyers, along with officials they worked with, had no objections to watching Chinese companies move in. Their impressions of the Chinese they dealt with were of businessmen conducting a straightforward deal, not State-Owned Enterprises advancing national strategy.

Their accounts confirm the ideas of observers more versed in China’s affairs with its western neighbors. Raffaello Pantucci, a researcher at the London-based Royal United Services Institute, interpreted Wang’s proposal simply as a call to craft a foreign policy that better reflects the country’s overall needs.

“The Chinese have long been worried about the far-western province of Xinjiang and developing that has been an issue they’ve been trying to tackle for a long time,” he said. “So the logic of trying developing the links to the west, to countries on the western borders, makes sense in that context.”

But even if China’s westward expansion is not designed to counterbalance the United States, it still carries some strategic weight. Long before Wang’s article, China began looking west for reasons not only of commerce, but security and energy independence. In the early 1990s, the government recognized China’s need for energy and allowed state-owned enterprises like CNPC and Sinopec to rush into in resource-rich Central Asian nations like Kazakhstan. Then, in 1994, China made an early attempt at refining its security policy in the region. In a rare moment of cooperation, China and Russia invited Tajikistan, Kyrgyzstan and Kazakhstan to join together to form what was eventually called the Shanghai Cooperation Organization (SCO).

The SCO was intended to be a security pact, but mistrust between the members prevented meaningful cooperation on military issues. The group became more of an economic union, promoting bilateral and multilateral trade between its members and hosting the occasional military exercise. Adam Shrier, a former Exxon executive who teaches at Columbia University, believes that the “March West” is just the latest example of a willingness by the Chinese government to let its companies follow money and resources abroad.

“It’s been a Chinese thrust into central Asia,” he said, “because of security issues first, trade issues second and energy issues third.”

That security calculation changed slightly at the outset of the U.S.-led War on Terror. Then, in an effort to place Uighur separatists in Xinjiang on the American terrorist watch list, the Chinese government accused them of having ties to al-Qaeda. But as Western forces became mired in Afghanistan, China managed to keep out of the conflict while continuing its economic push into neighboring central Asian countries, including building a pipeline to Kazakhstan.

Erica Downs, a fellow at the Brookings Institute, speculates that staying out of the war may have allowed China to avoid accusations of anti-Islamic policy that might have slowed its trade and investment in the region.

In 2007, China’s state-backed Metallurgical Group Corporation did win a $3 billion copper mining contract in Afghanistan. But the project has yet to take off due to Taliban attacks in the area and protests over the damage the mine might bring to the famous Buddhist monuments in Bamiyan.

Thus by 2011, when Hillary Clinton raised the possibility of U.S. engagement along a new Silk Road during a speech in Chennai, India, China had already been putting its money where its mouth was.

“The reality is that the U.S. isn’t in a position to actually implement that,” Downs said of a Silk Road strategy. “It can articulate it, but at the end of the day, it’s going to be regional powers, neighboring countries like China and India that will have the bigger role in deciding how it is going to be implemented.”

Already China has awarded Afghanistan observer status in the SCO and ordered a feasibility study for a railroad across the country that would end at its Pakistani border, completing the last link in a Silk Road that could eventually run from Xinjiang to the Persian Gulf. And in the meanwhile, countries along that road remain natural arenas for Chinese involvement and commerce.

“The Central Asian countries are just so much more connected to the Chinese economy than they are to ours,” said Noah Tucker, an American researcher and government consultant who lived in Uzbekistan, “partly because of proximity, but also because there are available markets in China for Central Asian goods and Chinese goods are quite a bit cheaper and easier to get.”

Regardless of the future government policy, Chinese citizens and their employers continue to seek out westward connections on their own. Song Jian, a 25-year-old from Henan province in central China, is one of thousands of Chinese engineers who work in the Gulf countries. He helps companies gain access to facilities built by the major Chinese telecom equipment maker Huawei, and his clients, he said, include not only local companies but also American businesses and even a U.S. military base.

In 2011, Huawei’s sales across the Middle East rose 20 percent to $3.22 billion, beating the $2.27 billion generated by Ericsson, the world’s largest maker of telecommunications services by revenue. The Middle East, according to Huawei’s website, is one of the company’s fastest growing markets.

Thanks to the expansion of Chinese companies like Huawei, Song said his firm ranks among the most profitable telecom service companies in Saudi Arabia. His quality of life seems to confirm that; he makes $2,000 a month, a much higher salary than his friends at home, and enjoys the use of a company-rented villa in Dammam where he and a colleague fish on the weekends.

“Our cost of living here is less than $200 a month,” Song said in seeming disbelief. “Housing prices in China are crazy.”

Chinese workers, like the companies they serve, found the opportunities they sought in moving west. But it is still uncertain if they have inspired their government to follow.

Copyright 2013 the Atlantic