First Africa, now increasingly central Asia and Latin America. China is stretching its tentacles beyond the likes of Angola and Mozambique and wrapping them around Kazakhstan and Colombia in its quest to secure natural resources and new trade routes.
Last month China and Kazakhstan announced a series of deals worth billions of dollars. These included a $1.7 billion loan to Samruk-Kazyna, Kazakhstan’s national welfare fund, a $5 billion loan for a petrochemicals complex, an agreement for Kazakhstan to supply China with 55,000 tonnes of uranium and an understanding for China to help Kazakhstan build a high-speed railway. The two countries are also working together over water-quality controls for the rivers that flow across their border and in supporting agriculture.
It’s not the first time that China and Kazakhstan have linked up. China helped to finance and build a 1,000 kilometre oil pipeline, which opened in 2007, connecting central Kazakhstan to its north-west frontier. And in 2009 at the peak of the financial crisis China lent $5 billion to KazMunaiGas, the state-owned energy company, in return for future oil supplies.
What the most recent agreements demonstrate are two things. First, that China, not Russia, is fast becoming the most important power in central Asia. China, for instance, has equity ownership of 25% of the oil produced in Kazakhstan, according to Visor Capital.
The second point is that China is extending its influence beyond oil and into other equally pressing areas such as food and water security, as well as signing deals to develop its nuclear needs. It is also helping to build the necessary infrastructure in Kazakhstan to further encourage investment capital to prevent the creation of bottlenecks.
In Colombia, China has even more ambitious plans. It is in advanced talks with the government to build an alternative to the Panama Canal – a 220-kilometre rail link from the Pacific to a new Atlantic port that would be built near Cartagena.
It’s a mind-boggling idea involving the creation of a new city and a rail system that crosses a continent. The project would help drive trade not just between China and Colombia but beyond into the Americas. Chinese imports would be re-exported to the rest of the region with the new port acting as the hub. Colombian goods, mostly coal and cocoa, would fill the ships making the return journey to Asia. The entire project would be financed by the China Development Bank.
If fulfilled, the new route would be a remarkable feat of engineering and planning. More than that, though, it would have the potential to transform the financial gateway between east and west, giving China a trade conduit to the Americas that bypasses the US-controlled Panama Canal.
There are plenty of hurdles to overcome before the project begins, never mind completes. Still, it is little wonder that some US lawmakers, alarmed by the burgeoning relationship between Colombia and China, are pressing for Congress to ratify a trade deal with the Latin nation that has sat on the blocks for four years.
China faces an array of domestic challenges – chief among them a faltering economy, social unrest, political risk, an ageing population, and a growing wealth gap.
Yet in the month that its economy was officially declared the world’s second biggest, China’s financial muscle on the global stage shows no signs of weakening.
