China’s Foreign Investment: How Security Factors into the Equation

Christina Burjan | China Fellow


One of the key features of President Xi Jinping’s foreign policy playbook has been an attempt to forge and consolidate regional partnerships by means of geo-economic initiatives. Examples of this include the Asia Infrastructure Investment Bank (AIIB), Regional Comprehensive Economic Partnership (RCEP) and Xi’s signature Belt and Road Initiative (BRI). Whilst these undertakings are often framed as inexorably facilitating China’s rise, the situation is arguably more complex. There are a range of factors which China has to take into account and which, oftentimes, stand to inhibit the effectiveness of its pursuit for power and influence. Amongst these, China faces significant security considerations through which it has to navigate. Indeed, recent developments in China’s relationships with both Pakistan and Afghanistan have brought this tension to light.


When it comes to regional partnerships, Pakistan has long constituted one of China’s nearest and dearest. Whilst having maintained strong, ‘all-weather’ ties since the establishment of official diplomatic relations in 1950, throughout the twenty-first century the Sino-Pakistan relationship has taken on a strong economic focus. The cornerstone element of this economic cooperation is the China-Pakistan Economic Corridor (CPEC). With a prospected US$62 billion in Chinese investments, the undertaking serves as the cornerstone enterprise of the BRI. Although unproven, accusations from the international community have regularly been directed at the project deeming it to be a deliberate ploy on the behalf of Beijing to hoodwink Islamabad into a debt-trap. Notwithstanding, it has continued to develop with a series of new deals launched in 2020.


Alongside the boost in economic collaboration, however, has been a concurrent rise in transnational militancy. This has been attributed to local terrorist organisations such as the Sindhi and Baloch ethnoseparatist groups, as well as jihadi terrorist groups like Tehrik-i-Taliban Pakistan (TTP). Motives of the former are linked to their perception of China’s investments as neo-colonial expropriations of their resources in partnership with the Pakistani state. Indeed, in a statement claiming responsibility for an attack on the Chinese Consulate in Karachi in 2018, the Baloch Liberation Front noted: “In the garb of development projects, China is not only colluding with the Pakistani state in plundering the Baloch resources but assisting in the Baloch community’s persecution as well.” TTP motivation is conversely tied to Beijing’s persecution of the Uyghur Muslim community in the Xinjiang region. This is especially grounded in the TTP’s links to the Uyghurs Islamic Turkistan Islamic Party (TIP).


The frequency of these attacks has recently escalated. Last month, a motorcade of Chinese personnel working at the East Bay Expressway project in Gwadar, toward the end of the economic corridor, was attacked by a suicide bomber allegedly aligned with the TTP. This followed an earlier attack in June wherein Chinese workers at the Dasu hydropower project in Kohistan District were targeted by members of the ethnoseparatist Balochistan Liberation Army (BLA).


The recent intensification of hostilities has the potential to compromise bilateral economic cooperation. Following the Dasu incident, a local interpreter for one Chinese firm was quoted as saying that the company had “reportedly refused to put their staff at risk and ordered a go-slow” such that “full-fledged activities [had] yet to be resumed”. Similarly, at the 10th Joint Cooperation Committee meeting of the CPEC on 23 September 2021, Chinese spokesperson Ning Jizhe noted that “high-level security guarantees” would be required to ensure the success of the project.


Beijing’s balancing of economic interests and security-related considerations can similarly be observed vis-à-vis its relationship with Afghanistan. In the wake of the Taliban takeover, China was one of the first countries, and indeed one of few, to diplomatically engage with the Taliban. This was accompanied by its pledge of 200 million yuan (AUD$42 million) worth of aid. Analysts were quick to interpret China’s reaffirmed commitment to Afghanistan as a harbinger of future capitalisation upon the geopolitical power vacuum left behind by the US.


Yet a review of China’s investment patterns in Afghanistan suggests this may not be as foregone a conclusion as the commentaries suggest. Data from China's Ministry of Commerce showed that newly-signed project contracts in Afghanistan by Chinese firms had increased by more than 11 per cent in 2020. However, the majority of these initiatives have yet to be actioned, seemingly on account of the instability that persisted under the previous US-backed government. Looking forward, Dr Rodger Shanahan of the Lowy Institute contends that "there is unlikely to be much investment in Afghanistan until there is greater clarity about who is in charge, what degree of control they have in the country and what the likely return on investment is going to be”.


In a similar vein, during a visit by the Afghan Taliban to China in July, Foreign Minister Wang Yi called for the Taliban to cut ties with and pursue a clampdown on terrorist groups. Although not directly stated, the statement seemingly set to establish an implicit condition upon which Beijing’s recognition of the Taliban government, alongside further engagement, would rest.


China’s regional foreign policy initiatives, such as the CPEC and engagement with Afghanistan, are often interpreted as entirely successful economic fortifications of power. Yet undergirding China’s pursuit clearly persists a non-negotiable prioritisation of security which, in some instances, has the potential to hamper China’s efforts. Money may be power, but China also needs stability and that’s something money can’t buy.


Christina Burjan is the China Fellow for Young Australians in International Affairs.