China’s relations in the Pacific region – Part 2

Last week I took a look at China’s relations in the more southerly parts of the Pacific. This week I turn my attention to the northern part of the Pacific region and briefly examine China’s trade with Canada, North and South Korea as well as Japan and Taiwan (which of course is viewed as a rebellious province by Beijing). I will deal with the USA separately given it is such a critical relationship.

Canada

Canada’s powerful natural resource companies have made a major impact in emerging markets, extracting copper, precious metals, coal and a whole host of other resources from across the world. Perhaps attracted by Canadian firm’s knowledge and experience Chinese investment in Canada has also taken off, estimated at $25 billion in 2012. One notable project has been the purchase of Nexen Energy by Chinese state owned CNOOC, a deal which was heavily scrutinised by the media and government in the country, many who felt unease at allowing important companies into foreign and particularly Chinese hands. Canada can expect to see more Chinese investment as companies search for Western technology, brands and market share.

North Korea

North Korea is the world’s most isolated country; its only ally is China, which for now prefers the current political status quo. Beijing fears the collapse of the Stalinist state fearing it would merge with South Korea and fall into the western sphere of influence, and in the short term any regime change might well bring both refugees and chaos to the Chinese border. China has invested in special economic zones inside the country, but the interference and unpredictability of the Pyongyang government has made it a poor investment partner. China provides around 45% of its food and 80% of its consumer goods. For its part North Korea sells coal and iron ore to China.

South Korea

China – South Korean relations are currently improving, the two countries have strong trade links worth US$ 230 billion a year along with a great deal of direct investment in each direction. Political ties have developed as China has increasingly lost patience with North Korea and increasingly prefers to prioritise relations with the far more economically important South. However these newly developed ties have limits – South Korea will remain under the protection of the US for now, still fearing Chinese domination of the region. The long term challenge for China is to make itself a more attractive ally to South Korea and others in the region.

South Korea has been a relatively low key yet influential actor in Africa, primarily investing in crude oil production and other natural resources, in particular it has placed serious money into South Africa, Equatorial Guinea, Algeria and Egypt. Korean companies have also viewed Africa as a marketplace for its consumer goods and have successfully sold electronic goods, phones and other manufactured items across the continent.

Spearheading this initiative perhaps unsurprisingly has been iconic Korean firm Samsung, which has gone further than just selling to Africa, but is also investing in manufacturing plants in Cameroon and Gabon.Korean construction companies have also been successful in securing contracts across the continent, such as Daewoo winning a deal to build an power plant in Kilifi in Kenya.

Taiwan

China – Taiwanese economic ties have grown rapidly over the last ten years, with investment and trade flowing in each direction, but all this is under the shadow of an uncertain political future. Beijing insists the country is a rebellious province, while Taiwan has grown into a vibrant democracy with its population opposing reunification with the mainland. This means a continuation of the status quo for now, with neither side backing down officially, but allowing economic ties to grow stronger and stronger.

Taiwan has longed sought out diplomatic allies to back its status at the UN, China’s growing international clout means that more and more countries have sided with Beijing over the years leaving Taipei with a handful of minor African states, some Central American countries and Paraguay as their only allies. However Beijing and Taipei have agreed to stop trying to poach one another’s “countries” for now, indicative of warmer relations.

Japan

China and Japan have developed strong economic ties and form one of the most important bilateral relationships in the world. Japanese investment in the 1980s helped to kickstart China’s own economic development. Unfortunately these ties have been overshadowed by the unresolved disputes over World War II era war crimes in China and over Japanese occupied islands in the South China Sea, which have resulted in anti-Japanese demonstrations in Chinese cities whenever the issue flares up.

Much like China is now Japan trades with and has invested in the developing world, playing a powerful role in buying up natural resources and doling out aid throughout the 1970s and 1980s. Japan still maintains a powerful role, perhaps understated across Asia, Latin America and Africa, with multiple investments, strong trade relationships and a generous aid program. However because Japan’s economy has not grown significantly in recent years, the country’s firms have not had the same momentum that China’s go-global initiative has had.



Categories: China Goes Global

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