Posted on November 14, 2022
Security concerns related to Chinese investments in overseas ports are mounting as the country’s firms acquire more stakes at shipping hubs around the world and geopolitical tensions rise.
Chinese companies have expanded investments at foreign ports in recent years and now run major container terminals in locations including Belgium, Israel, Spain, Sri Lanka and the United Arab Emirates. All told, Chinese and Hong Kong-based firms hold stakes in terminal leases or concessions at 95 foreign ports, according to research by Isaac B. Kardon of the U.S. Naval War College and Wendy Leutert of Indiana University.
More than 27% of global container trade last year passed through terminals in which leading China- and Hong Kong-based firms held direct stakes, data from maritime-research firm Drewry shows.
Last month, Germany approved China’s state-owned Cosco Shipping Ports Ltd.’s purchase of a stake in a terminal at Germany’s largest seaport in Hamburg.
Cosco is also developing a new port in Peru. Tanzania’s leader has expressed interest in reviving a stalled project to build East Africa’s largest port that involved China Merchants Port Holdings Co., another Chinese state-owned company.
American security analysts say the expanding network could make it easier for Beijing to service a Chinese navy that has grown and become one of Washington’s biggest military concerns—without having to rapidly build an elaborate system of bases.
Many navies use commercial ports to refuel, pick up provisions and provide sea-weary sailors a break. But for China’s navy, access to facilities run by the country’s firms would make it easier, cheaper and more efficient to sustain fleets abroad.
Port investments give China greater influence over infrastructure critical to the global flow of goods.
China’s navy has stopped for replenishment or diplomacy at a third of the ports where Chinese- and Hong Kong-based firms have investments, according to the research by Mr. Kardon and Ms. Leutert. That includes stops at the ports of Alexandria in Egypt for repairs, Valencia in Spain for equipment maintenance, and Piraeus in Greece on goodwill visits.
The investments also give China greater influence over infrastructure critical to the global flow of goods—a potential liability for Western governments, some experts say.
Chinese companies secured half of all orders to build commercial ships last year and made nearly all shipping containers. They are also aggregating shipping data in ways that some in Washington worry could give Beijing access to information about rivals’ supply-chain vulnerabilities.
China’s Foreign Ministry, Cosco and China Merchants didn’t respond to requests for comment. The Foreign Ministry and Chinese state media have said in the past that Chinese port investments benefit host countries as well as China and shouldn’t be politicized.
Some officials and military analysts say the fears are overblown.
The U.S. operates hundreds of foreign military bases. China has only one, but military experts say Beijing is also leveraging over 90 commercial ports. WSJ unpacks what’s on these sites and the countries’ differing strategies to expand their global footprint.
The Chinese navy can’t count on commercial ports during conflict because, although host countries may consent to refueling and repairing warships during peacetime, they are unlikely to give them access during war, they say.
Using Chinese port firms to delay or disrupt vital shipments to the U.S. or its allies would also deeply damage Beijing’s credibility and economic interests.
Still, as distrust grows between the U.S. and its allies on one side and China on the other, Chinese port investments are attracting greater scrutiny.
The recent deal in Hamburg led to sharp divisions in the German government, with the foreign, economy and finance ministries and Germany’s security services opposing it. Chancellor Olaf Scholz, formerly a mayor of Hamburg, ultimately pushed it through in modified form: Instead of the initially planned 35% stake, Cosco was allowed to purchase 24.9%, which would deny it any influence in decision-making.
China made nearly all of the world’s supply of shipping containers last year.
Despite the compromise, the ministers who objected to the deal issued a critical statement that said the acquisition would “expand the strategic influence of China on German and European transport infrastructure as well as Germany’s dependence on China.”
A spokesman for China’s Foreign Ministry in a news briefing characterized opposition to the deal as “groundless hype.”
The Trump administration blocked Cosco from gaining control of a container terminal at Long Beach, Calif. Last year, Indian authorities didn’t approve a deal that would have given China Merchants a stake in a terminal at the port of Mundra. Australia has said it would review the 2015 grant of a 99-year lease to the local unit of a Chinese company to operate the commercial port in Darwin.
China, under President Xi Jinping, has embarked on a decadeslong push to create a world-class navy able to protect the country’s interests around the world. It is making more warships for long-distance missions and training crews. Its dozens of antipiracy patrols since 2008 have provided experience and led to the opening in 2017 of China’s first overseas military base, in the East African nation of Djibouti.
To operate far from home, global navies rely on complex logistical arrangements that can include using dedicated military bases and naval facilities of friendly countries as well as commercial ports. It is a system of what U.S. military officials call “bases and places.”
Security experts worry that Chinese-run ports might also be used for logistics support and intelligence gathering by China’s navy.
“When you’re far from home, you want a place to repair if something breaks, you want a place where you can ship parts to, you want a place to get water, food, fuel and everything else it takes to sustain, you want a place to rearm—that is hugely significant,” said Kevin Donegan, who led the U.S. Navy’s Fifth Fleet from 2015 to 2017 and is now a distinguished senior fellow on national security at the Middle East Institute, in Washington, D.C.
“It is what we built in our navy over the last 250 years. They are slowly building that up,” he said.
Chinese-run port terminals have commercial value, but are also “tri-use,” said Mr. Donegan, meaning they can be used not only for logistics support but also intelligence gathering and as future potential basing options.
Years before China established its military base in Djibouti, China Merchants entered the country with large investments and began developing a new commercial facility, the Doraleh Multi-Purpose Port, enhancing Beijing’s clout there. That facility is located next to what later became China’s first foreign base.
China’s Cosco was able to buy a 24.9% stake in a port of Hamburg terminal only after a compromise among German officials.
China’s military, known as the People’s Liberation Army or PLA, has a ready resupply point in places where a Chinese firm is present, giving it greater confidence to operate abroad, said Mr. Kardon. For China’s navy, he said, getting the right ship part or supplies to the right place at scale can be a “complex muscle movement,” but for shipping firms and port firms, it isn’t.
While the PLA navy also uses port terminals run by non-Chinese operators, it is easier to coordinate with Chinese firms, many of whom are part of the same state apparatus, Mr. Kardon said.
China is looking to add more military bases abroad. U.S. officials say China has a secret deal for its armed forces to use a Cambodian naval base, though Cambodia’s government denies this. China has accused the U.S. of maliciously speculating and smearing Cambodia.
The U.S. has also said Beijing is seeking a base on the Atlantic coast of Africa.
Washington is trying to block China’s base-hunting efforts, which already face hurdles. Unlike the U.S., China doesn’t have security allies across Europe, the Middle East and Asia.
Beijing appears to be seeking smaller and more-flexible options that can be networked together for military use when needed, a former senior U.S. defense official who tracks Chinese military strategies said.
“In that light, commercial ports serve as a strategic entry point,” said the former official, who was closely involved in a Trump administration campaign to identify Chinese activities that can affect U.S. security interests.
“There are many cases where China’s port activity looks benign but in fact could turn with ease into something that facilitates China militarily.”
