Qin Hui’s talk in Kunming on Chinese investments in Southeast Asian power

The prominent social thinker/economic historian Qin Hui from Tsinghua University — described by his friend David Kelly as a social democrat — has recently written a number of articles on Chinese mines and infrastructure investments abroad, particularly in the Mekong region, but also Australia and Africa. Merriden has now received the text of a talk he gave on 19 November in Kunming, entitled “Participation in Mekong River Development: Chinese Companies Should have Rules,” which has been circulating on the Internet in an English translation by Jason Tower.

Here are some excerpts:

Chinese Companies Abroad: Both Risks and Opportunities 

There are already many Chinese companies abroad, and there has already been something of a shift from an older
investment model which was labor intensive and involved importing a large number of workers from China, to one which is focused more on capital investment, operation, and on the construction of BOT projects. The status of Chinese companies in the Mekong region has improved as a result. 

Both private and state enterprises can now be found in the region. Private investment is focused on trade and
labor intensive manufacturing – for example textiles in Cambodia. There are few controversies surrounding this investment. On the other hand large scale monopolistic state owned enterprises have also been investing in areas such as
hydropower and resource extraction, and there are a wide range of controversies related to this. (…)

(…) Chinese companies are doing BOT investments, and after operating for 20-25 years they will need to transfer over their investments. This may result in developers focusing more narrowly on short term interests. In order to begin generation as soon as possible, they may rush to complete the first installation in the shortest time possible. (…)

Role of Chinese Enterprises 

(…) In China there is a saying that “Westerners are afraid of the people, people are afraid of the government, and the government is afraid of Westerners,” in Laos and Cambodia the Chinese have become the “Westerners.”  

However things may not go so smoothly for Chinese investors which get cozy with government officials. In places like Laos and Thailand, civil society is rather developed and the
“people do not fear the government, what they are afraid of are ‘foreigners’ – afraid that foreigners will harm local interests.” 

Chinese enterprises are not necessarily accustomed to the practices of Southeast Asian civil society.  Take the practice of resettlement for example. In China the practice is to first submit a feasibility study to the relevant authorities of the government, only after which can the land be acquired,
with government always doing the job of requisitioning the land; in Laos on the other hand, when a company submits the Feasibility Study to the government, it must also submit evidence that it has obtained the land – this means that
companies must first come to an agreement with those who have an interest in the land. When Chinese companies try to use the many different tricks that they have developed in China to obtain land in Laos, not only do they have difficulties, they also incite many protests on the part of local people against Chinese investors. The reputation of Chinese business has been impacted as a result. 

Standards – Chinese Like Low, Not High

Chinese companies have a tendency to apply the lowest standards they possibly can. Some companies look to see whether local standards are lower than Chinese standards – if so they apply local standards. If local standards are higher than Chinese though, they will apply Chinese standards. One common complaint foreigners make against Chinese business is a good example of this – that Chinese do not promote local employment. If Chinese labor standards are lower than those of the countries where they are investing, and if these lower standards are applied, local workers are not willing to work, and Chinese companies are certain to use Chinese workers. It is important to point out though, that Chinese workers only go abroad to work when standards are higher than those they can
get in China. 

The main reason that Chinese companies use Chinese workers is that local workers are not willing to do some jobs. While Laos is not very developed (…) Chinese are being brought in to do manual labor, as locals are not willing to do this. When
the World Bank and western countries were driving the development of Laos, they needed a large number of engineers, which they trained. However after these countries went green, all of these workers were left without jobs. These are
the people that Chinese companies are hiring. 

Chinese enterprises should shift to apply the highest standards possible. Once this concept has been internalized by Chinese companies, this will also help to improve their behavior back in China. I am very supportive of Chinese companies going abroad, as it is possible for all parties to benefit from it.
On the one hand, Chinese companies can contribute to the development of other countries, while making using of China’s excess capital. On the other hand, as Chinese companies are criticized abroad, they will have pressure to improve the
way that they behave. Chinese companies should take advantage of these suggestions and improve their investment behaviors, and their employment practices. Once they have improved their behavior overseas, they can bring
these new practices back to China. If Chinese companies can be a bit better to the Chinese people, and treat their own workers better, then our own society will become more harmonious. (…)

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