China’s state firms cementing lucrative role in South China Sea, new research shows

HONG KONG/ SHANGHAI: Beijing’s giant state-owned enterprises are playing an increasing role in China’s build-up in the South China Sea and could seek to cement their dominant position in coming years, according to new research.

The work by academic Xue Gong and published by Singapore’s ISEAS Yusof Ishak Institute this week sheds light on a little-examined element of rising tensions across the vital trade route, showing extensive work by Chinese SOEs in developing infrastructure and tourism, as well as oil and gas, some in hotly disputed areas.

Some experts and regional diplomats believe the strong commercial presence could further complicate any future regional solution should Beijing, which research shows has encouraged firms to operate, protect them politically and militarily.

China’s state- owned enterprises operated in a complex and often opaque environment, serving national strategic interests as they sought new opportunities, Gong told Reuters.

“They cannot operate independently but they are ultimately opportunists and when the policy environment is favourable, then they will go for it. And we have seen signs of that behaviour in the South China Sea,” said Gong, who is based at Singapore’s S. Rajaratnam School of International Studies.

“If the Chinese government can maintain an upper hand and leverage while achieving stability, there might well be greater opportunities.”

China’ Foreign Ministry said there was nothing wrong with Chinese companies’ carrying out of “normal commercial activities” on Chinese territory.

“The Chinese government manages and regulates Chinese companies in accordance with the law,” the ministry said in a statement sent to Reuters.

While the research notes the difficulty in obtaining financial information, it suggests turning China’s seven reefs and cays in the Spratlys archipelago into manmade islands was a multi-billion dollar effort.

It cites state media estimates that building up Fiery Cross island alone, now home to a 3km runway and military facilities including missile and radar installations, cost around US$ 11 billion.

The on-going build up of the seven islands deep in the maritime heart of Southeast Asia has alarmed the United States and other regional powers.

China’s so-called nine-dash line claim covers much of the South China Sea, overlapping claims of Vietnam, the Philippines, Malaysia, Brunei and Taiwan.

Gong’s research shows how China Communications Construction Corporation (CCCC) and its subsidiaries seized on policies advocated by President Xi Jinping in 2012 to expand its maritime capabilities via the South China Sea, in part by developing some of the world’s largest dredgers.

CCCC planned to list its dredging operation in 2015, but its application later lapsed, according to the Hong Kong stock exchange. — Reuters