Business or Power?
China, the world’s largest exporter, has stakes in global ports. Its merchant ships are under party control. Western experts worry about espionage, economic coercion and military expansion
Inching up the elbe river to the german port of Hamburg in early September, colorful containers stacked on deck like outsized pieces of Lego, the Libra looked like any other massive vessel plying the world’s oceans. Yet she was more than a commercial ship.
As well as containers, the Libra carried a branch of the Communist Party of China (CCP), its political commissars and a crew who must pledge loyalty to the party and to increasing China’s economic power and national strength. The party calls ships like the Libra “floating fortresses.” These vessels are at the forefront of long-term efforts by the CCP to strengthen its hold on global shipping and logistics, prompting concerns in some Western countries over risks ranging from espionage to economic coercion, digital domination and military expansion.
Ships like the Libra belonging to China COSCO Shipping Corporation are increasingly evident at nearly 100 ports where it and other Chinese companies have stakes. These include five ports in the U.S.: in Miami, Houston, Long Beach, Los Angeles and Seattle. “Trade is the circulatory system for the planet,” says Isaac B. Kardon, a maritime specialist and Chinese linguist at the U.S. Naval War College on Rhode Island. “Ports are the nodes.”
Defenders of the investments say they simply make commercial sense for the world’s biggest exporter. Critics see potential for power projection by a country that fuses political, business and military interests. About one-third of the ports where Chinese companies have made commercial investments have hosted ships of China’s People’s Liberation Army (PLA) navy.
Sailing for the Motherland
Newsweek’s reporting and an internal COSCO publication show how the CCP
operates inside a company that presents itself as a modern business partner abroad but at home proclaims it “follows the party’s direction and sails for the motherland.” Although COSCO is not the only company strengthening China’s maritime presence, it is the biggest. COSCO did not respond to requests for comment.
About 30 companies, most state owned, are involved in port acquisitions. The two biggest, COSCO and China Merchants Ports, often have stakes in the smaller firms. A third major player, Hutchison Ports in Hong Kong, is privately owned but also under Beijing’s influence.
“Cosco is really the only shipper in China,” says Rolf J. Langhammer, an economist at the Kiel Institute for the World Economy in Germany. This gives it tremendous control over Chinese exporters and foreign ports. China moves about 15 percent of the world’s goods. (The U.S. exports about 8 percent.) “It can say, ‘if you don’t allow us to be a partner in your port, we can stop goods from China reaching your port.’ This is something only a state-owned enterprise can do,” Langhammer says.
The Central Committee of the CCP reorganized state companies to form COSCO in 2016 in a “major strategic move” to build a dominant position in global trade. China must be a “powerful gravitational field” for world trade, Chinese Premier Li Keqiang said in 2021. As a stateowned enterprise, the CCP’S powerful Organization Department appoints senior officials. COSCO chairman Xu Lirong is also the company party secretary. This system is known as “one organization, two brands.”
A 70-plus page publication for COSCO crew labeled “internal information” seen by Newsweek gives a rare glimpse of CCP activity aboard ship. Below decks, commissars gather with sailors and officers in “special party branches.” Little yellow and red books with ideological texts lie on tables. Video screens beam in messages from China’s leaders.
Newsweek was able to identify 40 COSCO ships with party branches. According to leaked party lists, the branch in the Greek port of Piraeus has 64 members, the New York 23, Africa 52 and the Surabaya branch in Indonesia 24—but the data isn’t complete. As “ship-to-shore branches,” they are probably active in overseas ports as well as on the high seas.
About 1,000 commissars manage political discipline among crew, Han Chao, secretary of the Crew Party Committee, said in a 2019 report published by the in-house COSCO Shipping Seafarer. There are about 10,000 regular party members among crews and 150 special cadres, a higher kind of functionary, Han said. On the COSCO ship Rose, “the ship’s party branch educates its members about the latest theoretical achievements of the Party,” the publication says. It rattles off obscure but important dogmas that permeate life in China before concluding the ship’s party branch is “a core for uniting the masses and a fortress for overcoming difficulties.”
“Crew must prevent the planting of false evidence by foreign hostile forces and safeguard their own rights and interests” while in overseas ports, Han said. They must follow Beijing’s “foreign affairs discipline.”
According to Martin Hala, founder of Sinopsis, a think tank in Prague, “Party members are bound by party discipline to carry out whatever tasks the party might require.” While Chinese citizens are already required by law to cooperate with intelligence services,”this is one level deeper.”
Germany’s Biggest Port in Chinese Sights
One of COSCO’S latest targets is a 35 percent share in operations in the Tollerort terminal where the
Libra docked in Hamburg in early September. If it succeeds, Hamburg will be the 96th port around the world where Chinese companies are known to have a stake, according to maritime security and economics researchers.
That would add to a necklace of ports in Europe from Piraeus to Gdynia in Poland, and give COSCO a strong hand on a vital commercial artery in Germany, which is NATO’S second biggest economy after the U.S.
“There is a high strategic dimension to taking a stake in a terminal,” says Jan Ninnemann, a logistics professor at the Hamburg School of Business Administration. That includes having a say over which ships come and go, when cargo is loaded and unloaded and where it goes, Ninnemann says. Other analysts point out port and logistics operators handle large amounts of company, transport and personal data in increasingly digitized supply chains. Those operators may install China-built internet technologies to manage these chains and even access local government. China’s port acquisitions aim to create
“strategic strongpoints,” the Naval War College’s Kardon says, where different kinds of power flow together.
Last year, when COSCO Shipping Ports Limited struck a deal with the Hamburg port authority Hamburger Hafen und Logistik AG (HHLA) for a stake in the Tollerort Terminal, it marked a major shift by a port that had previously resisted shippers owning terminals. HHLA told Newsweek its agreement with COSCO was “strictly confidential.” Hamburg would be the last of seven North Sea ports in the so-called “Nord Range,” which is important to transatlantic trade and communications, to get a China stake.
Zhang Dayu, managing director of COSCO Shipping Ports, says Hamburg is “a keystone of logistics in Europe and has excellent future development prospects.” Zhang promises more business for Hamburg if the deal goes through.
In September 2021, the Libra left Hamburg for Shanghai carrying a light helicopter and training platform made by the German company RS Helikopter Gmbh. According to Chinese-language reports, the aircraft can be used for “police patrols” and is in action in Lishui, China. Human rights organizations say China’s Public Security Bureau engages in mass surveillance of citizens.
Germany’s economics minister, Robert Habeck of the environmentalist Green Party, opposes the Hamburg deal. In Germany ports are defined as part of critical infrastructure and the European Union has said China is a systemic rival. Well-placed sources in German commercial circles say senior EU officials in Brussels also oppose the deal because of strategic concerns.
“It’s true that the container port Tollerort is only a small part of the entire port of Hamburg, yet through this part China can influence the trade and the political direction of Hamburg port,” Habeck said in September. “China is trying to secure strategic assets for itself in Europe and in this way to influence European and German trade policy, and we shouldn’t allow that.”
The city’s shipping and business communities—and, government sources say, the Chancellery of
“China is trying to secure strategic assets for itself in Europe and in this way to influence European and German trade policy, and we shouldn’t allow that.”
German leader Olaf Scholz and the Finance Ministry—are in favor, citing commercial gain. Hamburg business sources say COSCO has threatened to take its offer to the port of Gdansk in Poland if Berlin says no.
Growing Networks
Germany’s place as the world’s third biggest exporter gives it particular importance. But it is just one point in a widening network of ports.
Well over half the expansion has happened in the past decade under the leadership of President Xi Jinping, according to a study by Kardon of the Naval War College and Wendy Leutert of the Hamilton Lugar School of Global and International Studies at Indiana University. It is part of Xi’s “Belt and Road” initiative—an ambitious plan for sea routes, rail links and digital connectivity aiming to bind Europe, Asia and Africa to China—but it has reached the Americas as well.
When Xi Jinping clicked a mouse in Panama in December 2018 so the Rose could squeeze through a narrow lock linking the Pacific to the Atlantic via the Panama Canal, he did so in a country where Chinese companies have stakes in three ports. By walkie-talkie, Xi instructed the Rose’s captain, “promote our national shipping business and make world trade more prosperous!” About 300 COSCO ships pass through yearly, the company says.
Elsewhere in Latin America, COSCO acquired a 60 percent stake in operations in Peru’s Chancay port in 2019. The port connects to a large logistics park in Callao port in Lima.
COSCO currently has five holdings in the U.S., but further expansion is unlikely amid concerns over Chinese state-owned enterprises owning or operating critical infrastructure, Kardon says. When COSCO bought a Hong Kong shipper, Orient Overseas International Limited, in 2018, the departments of Homeland Security and Justice obliged Orient Overseas to sell a terminal it owned at Long Beach as part of a national security agreement.
Across the Atlantic, however, activity is more intense. Chinese companies have stakes in 61 port facilities in 30 African states. Just eight African coastal or island countries do not host China-owned port infrastructure. Concessions dot Morocco, Egypt, Saudi Arabia, Iraq, the United Arab Emirates, Oman—even U.S. ally Israel.
One of COSCO’S greatest coups was securing majority control of Piraeus Port Authority as well as of its terminals and operations. Piraeus’ commercial success since COSCO acquired its stake in 2016 has given ammunition to those who say concerns over Chinese ownership are overblown.
COSCO is already among the world’s top shippers and it’s normal that Chinese companies want to gain port and logistics facilities, they say. “It’s easy to over-interpret Chinese investments,” says Charlie Du Cane, a British shipping executive. “China is becoming a larger piece of world trade, and the supporting logistics puzzle behind it. And then you end up owning more things.”
A New Power in Wilhelmshaven
Yet because of China’s fused economic, political and military system, its presence in ports presents risks including espionage, according to a former Australian Army intelligence officer.
About 80 miles southeast of Hamburg in the naval town of Wilhelmshaven, state-owned China Logistics Group has acquired a 99-year lease to build a logistics center in a new commercial port. Ships arrive here from China and, since 2021, so do goods via railway, running all the way from Hefei in Anhui province.
Chinese companies have stakes in 61 portfacilities in 30 African states. Just eight African coastal or island countries do not host China-owned port infrastructure.
Three miles across dyke-lined lowlands is Germany’s biggest navy and logistics base at Heppenser Groden. Here, Deutsche Marine ships are built and repaired, submarines visit, intensive communications with NATO allies take place and joint exercises begin. It is home to Germany’s international fleet.
It was to Heppenser Groden that the frigate Bayern returned home this year after a seven-month passage to Australia and Japan. It was the first such voyage by a German warship in two decades and was designed to send a message to China amid growing tensions in the Western Pacific, principally over Taiwan.
The Bayern sailed right past the Jadeweserport with its 50-acre Chinese logistics site. According to the former Australian intelligence officer, strategic military assets would have been advised to turn off their signals when passing. But he also says such encounters also come with tactical risks and the possibility of human intelligence gathering.
For the two German local state governments that lease the hub to the Chinese enterprise, however, the operation is a source of pride. They marketed the $100 million investment as part of the Belt and Road, calling it the “China Logistics-wilhelmshaven Hub.” A port spokeswoman, Susanne Thomas, says the 99 year lease is legal though the port only advertises 30- to 75-year leases. There was nothing strategic about the investment, she says.
Dean Cheng, a former senior research fellow at The Heritage Foundation in Washington, D.C., disagrees. “In Wilhelmshaven, the ability to spy from the commercial port to the naval base is unimpeded,” he says, pointing to U.S. plans to dismantle cell towers of the Chinese firm Huawei close to military locations.
Officials in the state of Lower Saxony where Wilhelmshaven is located, did not reply to requests asking for details of contractual agreements. The Jadeweserport company declined to share details, citing confidentiality.
In an emailed statement, the German defense ministry says, “We generally do not comment on questions of military security at individual sites, including any agreements with the authorities. You can assume, however, that we constantly keep an eye on things and, where necessary, also carry out adjustments.”
Beating Sanctions
China is also moving on the digital front. Its Ministry of Transport offers a state-subsidized “one-stopshop” platform called Logink to digitally manage global logistics, shape international trade flows and, potentially, identify supply chain weaknesses, analysts say.
In a recent report, the U.s.-china Security Review Commission raised security concerns over Logink’s vast data gathering capacity. At least 20 ports and many companies have joined. COSCO is also working with Chinese company Alibaba on sophisticated global trade payments systems, including blockchain technology to track goods and facilitate automatic payments.
This is part of a long, strategic game, Langhammer says: Ultimately, China wants to build up a strong enough position so it can protect itself from economic sanctions like those levied on Russia after it invaded Ukraine. China has long threatened to invade Taiwan, which it claims.
And China itself has a record of using trade as a weapon. Japan, Taiwan, Australia, Lithuania and Norway have all been punished with unofficial trade boycotts. After Australia requested an independent investigation into the origin of the COVID-19 pandemic, many exports to China, including wine and barley, were mysteriously blocked. “There is the polite aspect, ‘I want to invest in your country,’” Cheng says. “But there is the harder line which is, ‘I am heavily invested in your country and you wouldn’t want me to pull out or hurt you, would you?’”