Yesterday’s Financial Times included an interview by its Beijing correspondent with a senior executive from the Chinese-owned engineering and construction firm Sinohydro.
In it, Wang Zhiping lamented the billions in dollars of asset write-downs and lost contracts suffered by Chinese firms due to ‘political instability’ (i.e. US-promoted regime change, state failure and secession) in Libya, South Sudan, Mali, Central African Republic, Iraq, Afghanistan and Burma.
The article described the fallout – regrettable and inadvertent, of course – from NATO’s recent African military ventures, diplomatic intrigues and assertions of force majeure:
After years of expansion into emerging markets and developing a reputation along the way for taking on projects in difficult environments, experiences such as Libya are prompting a change in the way that Chinese companies assess risk. The shift – backed by Beijing – comes as Chinese companies increasingly compete with Bechtel, Hyundai Engineering, Leighton and other international contractors.
Chinese engineering companies last year produced $117bn in revenues from contracts outside China – a 10-fold increase over the past decade, according to the Chinese government. Five of the world’s top 10 contractors are now Chinese, according to the Engineering News Record, a trade publication.
While Chinese contractors can compete on technological prowess, they face a big challenge dealing with political risk, particularly after hard-earned lessons through kidnappings in war-torn areas such as Libya, Mali and Afghanistan.
Many of Sinohydro’s overseas projects – from mines and roads to power stations and football stadiums – are funded by Chinese loans to the host country, which are repaid with resources such as crude oil.
While the model has helped cash-strapped governments that might otherwise shy away from building needed infrastructure, it has left Chinese companies exposed in many of the world’s conflict zones.
“If the risks are too high, we just won’t go there [now],” says Mr Wang. “Our greatest concern is the instability caused by political risk in overseas markets, including armed conflict.”
Sinohydro’s “caution” list includes Iraq, Afghanistan and Myanmar, where the military junta unilaterally suspended a $3.6bn hydropower project in 2011.
The shifting attitude reflects some costly lessons. Mr Wang says the conflict in Libya cost Sinohydro $1.2bn in suspended contracts and $200m in writedowns.
“That is just an estimated figure,” says Mr Wang. “For other losses, like how many cars have been blown up, or exact losses for every physical asset . . . it is very difficult to get an exact number.”
Sinohydro has also been caught up in other conflicts with workers either killed or kidnapped in South Sudan and Afghanistan. And the current conflict in Mali threatens to jeopardise one of its hydropower projects.
To these methods of overt US aggression and tortious interference, we can add the less objectionable corporate watchword of ‘green growth.’
In recent years, the need to invest in ‘clean energy’ has supplied public justification for the state-assisted efforts of US- and European-owned engineering, construction and mining firms (Bechtel, ABB, RWE, Skanska, etc.) to secure infrastructure contracts and fasten down supplies of raw materials ahead of their Chinese competitors.
But these developments aren’t the real interest of the FT article.
What the piece quietly makes clear is that the sovereign needs of the US government now conflict with the system-wide needs of world capitalism.
Washington’s exercise of its imperial power is no longer the benevolent, positive-sum game of yore, in which it could pursue its own interests while acting as guarantor of private property rights, monopolizer of force, keeper of civil peace and manager of the global division of labour on behalf of the world’s governments and propertied elite.
Rather than satisfying the wishes of the world’s investors for stable political institutions, Washington’s need to maintain strategic pre-eminence now leads it to create continent-wide zones of political turmoil, state failure, secession and insecure property rights.
Amidst such basic uncertainty, where one’s assets may be seized, obligations repudiated or agreements turn out to be worthless, how is stable global accumulation possible?
Such questions, no doubt, rankle the editorial board at the FT.
But the options for elite decisionmakers are bleak. They are faced with a structural impasse, since demographic and resource constraints, and economic and political factors, militate against any prospect of imperial succession with Beijing or any other power supplanting US hegemony. There will be no repeat of 1945 and no escape from prolonged disorder.
The institutions of world capitalism are therefore in acute and probably terminal disarray.