Port operators behind China’s naval expansion

The first leader of the Chinese Communist Party, Mao Zedong, once said that political power arises from the barrel of a gun. Maos’ words echo a fundamental truth of China’s system of government that the ruling party has its own military wing, the People’s Liberation Army. PLA soldiers take an oath to defend the CCP, not the Chinese nation, which means that their main task is to safeguard the interests of the party. The CCP’s ultimate goal is to ensure that its influence over the nation becomes so total that the interests of the two are indistinguishable. In this regard, the PLA ends up fulfilling the dual role of safeguarding the CCP and defending the Chinese nation.

Just as the CCP has its own armed wing, it has its own business wings embedded in all of China’s powerful state-owned enterprises. These state-owned enterprises operate in a hybrid fashion, seeking companies that generate profits while defending the interests of the Chinese state. Chinese state-owned enterprises are legally required to have a party branch at the highest level of the enterprise hierarchy, and senior members of the board, such as the general manager, simultaneously sit on the enterprise party committee. public. This organizational structure ensures that any commercial enterprise undertaken by the SOE serves the interests of the company, the state and, most importantly, the CCP.

Xi Jinping accelerated the domination of parties over the state, the military, the nation and business. Chinese companies are expected to do party work, even if that means collaborating with its armed wing of the PLA or working with its political warfare agencies like the United Front Work Department. Under the leadership of Xi Jinpings, the CCP seeks to enforce its internal disciplinary code against Chinese state-owned enterprises in a strict and extraterritorial manner.

Our new ASPI report, Jumping across the ocean: Port operators behind China’s naval expansion, explores the links that two large Chinese maritime state-owned enterprises have with the CCP’s political influence organs, its disciplinary apparatus and its militarized wing, the PLA.

COSCO and China Merchants, two companies which have taken a dominant position in overseas port operations and international maritime logistics, are under strict control by the CCP and are increasingly willing to protect the interests of parties abroad. One-third of COSCO employees are CCP members, and a member of its party committee was a discipline official at the Chinese Ministry of Public Security and the CCP’s United Front Labor Department. China Merchants also has deep ties to the CCP. A member of the Chinese Merchants’ Party committee is a former deputy head of the discipline inspection at the CPC General Bureau and probably had a close working relationship with two current members of the Politburo Standing Committee.

This offer of full control over Chinese state-owned enterprises has profound implications for countries open to foreign investment. Before Xi, the national security risks posed by integrating CCPs into Chinese state-owned enterprises could be improved by requiring investigation, transparency, and disclosure during a country’s foreign investment review process. These measures are no longer sufficient now that Xi has started to tighten his grip on the CCP and use the coercive elements of Chinese national power.

Chinese companies are required by the country’s national law to assist in intelligence gathering and national defense mobilization. We should expect Chinese state-owned enterprises to comply with any legitimate request from the CCP to assist in a mission at peace, at war, or in the gray area in between.

In fact, there is good evidence that such support is already being provided. For example, COSCO operates its own militia, which is likely capable of conducting paramilitary activities such as maritime surveillance, anti-piracy missions, and search and rescue operations. One of COSCO’s joint ventures was also involved in taking Chinese tourists near illegally constructed PLA facilities in disputed areas of the South China Sea. The company’s involvement in the Greek port of Piraeus was also supported by active measures campaigns carried out by the United Front Work Department. COSCO appears to be developing the capacity to comply with CCP demands to assist with intelligence operations, national defense mobilization or gray zone activities.

Australia and its like-minded partners, including the United States and Japan, can no longer take a reactive approach to the expansion of China’s port operations abroad. Together, COSCO and China Merchants operate 36 ports around the world. If Chinese state-owned companies take control of additional ports, Beijing will have secure access to some of the world’s most critical shipping nodes and logistics hubs. In times of war, this could seriously compromise the freedom of action that Australia or its allies would need to defend their maritime interests and maritime lines of communication.

More urgent, however, is the priority of building the resilience of countries that may be vulnerable to the divestiture of critical infrastructure such as ports to Chinese state-owned enterprises. The coercion does not have to come from the PLA, which engages in denial operations to secure access to a port shortly before a war breaks out or an offensive cyberattack on a port. digital port infrastructure. Under Xi, the CCP has been too willing to rely on bodies such as the United Front’s Labor Department to orchestrate active measures campaigns designed to undermine a country’s sovereign decision-making. Chinese state-owned enterprises may not be the drivers of these activities, but they provide them with the vehicles.

Australia, Japan and the United States have some of the tools to help build countries’ resilience in the face of coercion from the Chinese regime. They could start by developing an international port strategy through the blue-dot network, which was set up in 2019 to set standards for high-quality infrastructure projects. Canberra, Tokyo and Washington are expected to use the network to create a Michelin guide to international port operations and investments. They could then send diplomatic personnel with expertise in critical infrastructure to agreed strategic locations around the world to promote blue-dot alternatives to investments backed by Chinese state-owned enterprises as well as advice on how to counter the interference. foreign.

Australia and its partners do not have the power to change the nature of the CCP, and competing with Beijing dollar for dollar is a non-starter. But what we can do is create a world more resistant to the coercive measures Xi has grown accustomed to using. A diplomatic strategy geared towards achieving this goal would make it much more difficult for the CCP to continue to find the necessary logistics centers to increase the PLA presence abroad and ensure its success in war or gray zone operations.