Foreign countries shouldn’t assume that Chinese private firms have govt backing

By Hu Weijia Source:Global Times Published: 2016/10/17 0:48:39

A Chinese firm's controversial project to build a massive inter-oceanic canal in Nicaragua, in a bid to offer an alternative to the Panama Canal, has encountered stiff resistance from the International Federation for Human Rights. One can't help but ask: Will Beijing intervene in the matter to ensure smooth implementation of the project? The answer is likely to be no. 

The international NGO said recently the Nicaraguan government should revoke the canal concession because the project will have "a dramatic impact on the environment and on human rights," even though a significant number of local people are voicing their support for the project because it can bring jobs and alleviate poverty. It is understandable that some observers view the latest development as a setback for China in expanding its strategic presence in Central America, but they may be ignoring one thing: The project is financed by a private firm and the Chinese government has not been involved.

Given the Chinese mainland has no formal diplomatic relationship with Nicaragua, and that territorial water disputes between Nicaragua and Costa Rica may be involved, China's Ministry of Commerce in 2012 warned Chinese firms not to participate in construction of the canal because of the potential risks involved. The Nicaraguan government in 2013 signed a contract with a Hong Kong-based private company to allow the firm to invest in the project. This was purely a business deal, and did not represent Beijing's intentions. The Chinese government has a responsibility to protect the interests of any Chinese private firms, but this does not mean there will be any irrational support.

Chinese private firms are showing strong interest in overseas projects in recent years. There is a great need for recipient countries to draw a clear distinction between Chinese private firms' commercial investment and economic engagement overseas by the Chinese government.

Recipient countries may be tempted to select Chinese firms in a bid, given their competitiveness and national identity, as they may imagine that the Chinese government will give financial backing to private firms investing in strategic projects abroad. But such ideas are based on false assumptions. China has increasingly allowed the market to play a bigger role in allocating resources, and the investment decisions by Chinese private firms are totally independent. Besides, the Chinese government and State-owned enterprises are likely to be cautious in investing foreign countries, particularly in ones that have no formal diplomatic relationship with the Chinese mainland. In this regard, the world should not read too much into investment behavior by the Hong Kong-based private company. China's private firms should not be given the role of representatives of the Chinese government.

Having a Chinese identity is actually a double-edged sword for private firms seeking to invest abroad. While Chinese firms' technological competitiveness, financial strength and capability in delivering results efficiently give them greater chances of winning bids overseas, the very nature of their national identity and geopolitics may put Chinese firms under stricter scrutiny from human rights groups and local residents. Therefore, there is an urgent need for Chinese private firms to assess overseas projects more rationally, strike a balance between local governments and local residents and communicate properly about the nature of the project and the tangible benefits it can bring to local residents.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON THE ECONOMY

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