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China ‘Likely’ To Seek More Foreign Bases; Troubling Debt Cited By US-China Commission

Posted by Colin Clark on


J-20-third-prototype-side

WASHINGTON: If you want to grow uneasy about the world, read the US-China Commission’s annual report to Congress.

China, while it continues to enjoy robust economic growth, faces a major strategic challenge. Strategically, the biggest threat facing China right now — and the rest of the world given how integrated China is to the global economy — is the risk posed by China’s enormous corporate debt.

The report says that “China’s rapidly rising debt levels heighten risks to the stability of the country’s financial markets, which can quickly spill over into global markets….China’s rapidly rising corporate debt—which stands at 169 percent of GDP—also raises questions about the sustainability of the country’s economic growth. The International Monetary Fund warned in its annual review of China’s economy that China’s rising corporate debt was a ‘serious and growing problem that must be addressed immediately,’ estimating the potential losses from bad corporate loans to be worth 7 percent of GDP.”

The other really intriguing issue, one that may mark a huge shift in Chinese cultural, political and military terms as Breaking D readers know, is the commission’s conclusion “that China is likely to continue to seek opportunities to secure military facilities abroad, such as the one it has begun constructing in Djibouti, to facilitate a range of operations.” As we reported in May 2015, China was pressing hard to secure a base in the remote and tiny East African state that was long a French colony. China has also expressed interest in a military presence in the precarious islands known as the Maldives.

Map of Djibouti and surrounding area

While we could have a chicken and egg argument here (which came first the base or the need to protect global interests), the commission’s report answers the question pretty handily.

Reaching out to the world in a manner China has only done once before — in the 15th century — means “China’s increasing overseas military presence reflects its interest and willingness to use military force to defend its growing overseas assets. China’s global security activities likely will continue to increase as the population of Chinese nationals over- seas grows along with Chinese overseas economic activity and national interests.”

The report notes that the Peoples Liberation Army “continues to be active overseas. In 2016, China launched its 24th antipiracy deployment to the Gulf of Aden, announced it would increase its contributions to UN peacekeeping operations, and conducted humanitarian assistance and disaster relief operations in Nepal and in search of Malaysia Airlines flight MH370,” the report says. “In addition to its own increasingly sophisticated training and exercises at home, China has increased the number and type of military exercises it conducts with other countries. Since late 2015, China has participated in 11 major bilateral or multilateral exercises with countries around the world. Military sales are another growing component of China’s global security engagement: China was the world’s third-largest arms exporter between 2011 and 2015 (behind the United States and Russia).”

As for the straight military relationship between the United States and China, the report says both sides engaged in “meaningful cooperation in 2016, though tensions over several issues continued to plague the relationship.” Think South China Sea and a few other obvious points of friction.

Y-20 aircraft

China’s Y-20 aircraft

And there is strength behind China’s growing global presence. It’s “rolling out several new weapons systems for force projection in air, sea, and amphibious missions,” including:

  • China’s first squadron of J-20 multirole stealth jet fighters expected in late 2016;
  • China’s second aircraft carrier, which is “apparently nearly complete as of August 2016”;
  • Frigates, destroyers, and tank landing ships commissioned or entering service;
  • And, perhaps most important to the rising power’s ability to project power, its first operational Y–20 heavy transport aircraft.

There’s much more in the report about Chinese espionage and other issues. You can read it all here.

What do you think?