Chinese economic relations with Portugal (part I)

Chinese junk in Hong Kong harbor (Wikimedia Commons)

1. With globalization and the insertion in the international capitalist economy — particularly after joining the World Trade Organization (WTO) in 2001 —, China’s economic attractiveness had a huge increase in the World. At the same time, Chinese economic diplomacy has gradually become an important component of its diplomatic activity, which is a common way to act in current international economic relations. Yet, in the case of China, a particularly relevant thing is the absence of a “purely economic” Chinese diplomacy, at least with the meaning the expression usually has in the Western market economies. This happens because in China economic and commercial activities are closely tied with — and usually subordinate to — State policy interests, and are perfectly consistent with the Chinese logic of a socialist market economy. One can hardly define its nature as purely political or economic when trying to find a solution to these issues. 

The specific configuration of the Chinese economic diplomacy has a central role in the multiple initiatives related with the New Silk Road. This is the most ambitious project of its economic diplomacy along with, and at a different level, the Asian Infrastructure Investment Bank (AIIB) — the first international financial institution created in 2015 by Chinese initiative. The generalized adherence to the AIIB by Asian States, and also significantly by non-Asian countries, among which several European Union States, including Portugal, is indicative of the AIIB’s success and of Chinese influence in the world. The New Silk Road was launched in 2013 by Chinese president Xi Jinping, and extends to Europe, Central and Southeast Asia, and Africa. This enormous network of intercontinental rail connections, seaports, airports, electrical power stations and other infrastructures aims to (re)create commercial ties dating to Antiquity and the Middle Ages. But this historic reference is merely symbolic. In reality, it is a creation of the 21st century’s globalized world and, in particular, of China, increasingly attempting to make its mark upon that world. Chinese companies, financed by the country’s state banks, are the largest protagonists of the ambitious project of an intercontinental network of connections and infrastructures. 

2. One the most targeted countries by Chinese economic diplomacy in the European Union was Portugal, particularly during the Euro area crisis in the years 2011-2015 and in the aftermath. The Portuguese economic journalist, Jorge Nascimento Rodrigues (in Expresso, 31 May 2018), described the Chinese relation with Portugal, as follows, quoting enthusiastic statements by Portuguese government officials and entrepreneurs: “Not a week goes by without China manifesting interest, and with increasing insistence, in our centrality in the Atlantic, in the crossroads of global maritime routes, namely Sines, says Ana Paula Vitorino, the [former] Sea Minister, in an interview with Expresso. Her Ministry issued a joint memorandum with its Chinese counterpart to develop what they entitled a ‘blue partnership’ (symbolically referring the ocean color). The aim is to create a ‘blue’ extension of the new silk roads initiative, known as Belt and Road, which places Portugal upon the map of Chinese globalization. […] The Portuguese business world must not miss this boat. ‘Portugal has conditions to affirm its centrality in the context of this new stage of globalization and can and should take advantage of this Chinese initiative’, underlines Jorge Rocha de Matos, president of the Portuguese Industrial Association (AIP) Foundation. Using the Chinese symbolism, the country has a ‘pearl neckless’ — from the continental deep water ports, in particular Sines, to the Azores and the current Exclusive Economic Zone, already the third largest in the European Union and that may almost double, if its application for continental platform is approved.”

In the economic diplomacy of China, the historic reference of the great 16th century maritime voyages, when the Portuguese created the first global route connecting Lisbon, Goa and Macau, Portugal and China, plays a considerable role in this enthusiasm in Portugal. Throughout the quoted text is the implicit idea that, five hundred years afterwards, the thankful Chinese are completing the Portuguese accomplishment, through their own investment and commerce to “help” Portugal. However, this sympathetic view doesn’t stand up to critical scrutiny. Resorting to important moments in the past is usual practice in diplomacy and economic diplomacy, especially when the States have a history of friendly contacts. It is an obvious instrument of soft power, an instrument of seduction. Evoking the epic Portuguese Discoveries is the Chinese preferred historical narrative with Portugal, but it is somewhat of a “siren song”. They know the Portuguese are predisposed to feel pride, easing the way to disregarding reservations about the long term strategic objectives of China. But it will be useful to remember here the classical writings of Homero in the Antiquity (Odyssey, Book XII, translated by Emily Wilson, W. W. Norton & Company, 2017): “Use wax to plug your sailors’ ears as you row past, so they are deaf to them. But if you wish to hear them, your men must fasten you to your ship’s mast by hand and foot, straight upright, with tight ropes”. 

3. Of course foreign direct investment is a normal and necessary component in an open global economy. Notably, the majority of States compete — sometimes harshly — to attract foreign investors in order to create more jobs and wealth. From this point of view, Chinese direct investment abroad is a normal activity for a player in the global economy. But do Chinese companies behave in world markets like the European and American “denationalized” multinationals? Do they also pursue essentially private business interests? Or, rather, are they directly or indirectly at the service of political and strategic interests of the Chinese State? These issues, although difficult to answer, are far from innocuous. They assume great importance in the current economic and political international context. 

Let us further consider the Portuguese case, which has received important investments from China, giving specific, albeit brief, attention to cases of Chinese direct investment such in the Portuguese energy sector. These investments have a strategic importance, both at the economic-business level, and at the level of politics and State security. But another fundamental dimension of this discussion is the relocation of production to China. In a globalized world, does it matter where goods end equipment are produced? Is it just a matter of comparative advantages as the liberal economic thought usually states? The Covid-19 pandemics showed an unpreparedness to deal with the new disease in Portugal and other European Union countries. The main reason is a biological one:  a very contagious disease caused by an unknown virus. Yet, it is not the only one. The production of key medical equipment, such as masks and ventilators, has been relocated to China which also made it very difficult to act quickly against Covid-19. Both subjects — the foreign direct investment of China in Portugal and the relocation of “strategic” production in China — will be analyzed with more detail in the second part of this article.

© José Pedro Teixeira Fernandes, first published in ECO News, 7/04/2020

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