China Loses a Friend in Venezuela

Ministry of Foreign Affairs spokeswoman Hua Chunying expressed condolences on Wednesday for the death of Venezuelan leader Hugo Chavez. From Xinhua, which set up a special feature page on the president’s passing:

“President Chavez was an outstanding leader of Venezuela and a good friend of the Chinese people,” Hua said, adding that Chavez made significant contributions to advancing the friendly and cooperative relations between China and Venezuela.

The CPC, the Chinese government and people highly treasure the time-honored friendship between the two countries, according to the spokeswoman.

She added that China is ready to work with Venezuela to continuously deepen bilateral strategic partnership based on common development so as to bring benefits to their people.

Such smooth progress is not assured, however. At Bloomberg, Mike Forsythe and Henry Sanderson—authors of China’s Superbank: Debt, Oil and Influence—reported fears for the future of Chinese companies’ $50 billion Venezuelan investments:

State-owned Chinese firms have won contracts to build railroads, housing and power stations since Chavez took power in 1999 and nationalized more than 1,000 companies or their assets. The terms of some of the deals may face new scrutiny should Venezuela’s opposition wins elections required to be held within 30 days.

“If you do get an opposition candidate that wins there could be more information out there about previous deals that will be very uncomfortable,” said Matt Ferchen, a scholar at the Carnegie-Tsinghua Center for Global Policy in Beijing. “That could be politically unnerving but also reason for leverage to rework some of the deals.”

[…] Led by China Development Bank, the world’s largest policy lender, China has made Venezuela the main focus of its global oil-for-loans program, in which loans were repaid with oil shipments. Some of the biggest state-owned companies, including Citic Group, China Railway Group and Sinohydro Corp. won more than $11 billion in contracts to build and supply equipment for infrastructure, according to data compiled by Bloomberg.

See more on Ferchen’s warnings and Chinese reactions to Chavez’ death at IHT Rendezvous.

Several Chinese observers have played down any risk to China’s position in Venezuela. Peking and Renmin University professors Dong Jingsheng and Pang Zhongying told the South China Morning Post that an opposition victory would bring no significant changes, while Sun Hongbo of the Chinese Academy of Social Sciences told Bloomberg that China would remain a “strategic partner” of Venezuela. “I think no matter who is the president,” Citic Group chairman Chang Zhenming said to Bloomberg, “they will still need to construct houses.” But at The Diplomat, James Parker wrote—as did Ian Bremmer at The Financial Times—that the uncertainty highlights the growing exposure of Chinese investments to unpredictable political shifts abroad:

Although the gaps left by western firms may be a competition-free, natural place for Chinese investment, there are often risks of being caught on the wrong side of any successor regime should instability become serious. By way of comparison, Iran was a very comfortable place for American and British firms before the Shah was overthrown.

Whilst Chavez’s death and legacy will remain a hotly debated topic, his passing reminds us of the dangers of building close ties with a centralized regime based so closely on a single personality. China’s appetite for raw materials, particularly energy, looks set to continue growing, and Beijing is therefore likely to continue investing in energy-rich countries. The associated political risks, China hopes, will remain mostly distant and manageable.

China Development Bank did not fail to anticipate Chavez’ eventual departure (PDF, p.52). From a 2011 report by the Brookings Institution’s Erica Downs (via George Chen at South China Morning Post):

[…] CDB is undoubtedly aware that the government of Venezuela may still be repaying the $20.6 billion lines of credit after Venezuelan President Hugo Chávez has left office. Consequently, CDB wants to ensure that its largesse is perceived as benefitting Venezuela as a whole—and not just Chávez—to increase the likelihood that a post-Chávez government will not renege on the loan agreement. Moreover, CDB’s concerns about getting repaid by both the Chávez administration and its successor may also explain why the Venezuelan government took the unusual step of incorporating the terms of the loan agreement into a law.

China’s Global Times was certainly undeterred, swiping at American policies toward Latin America while arguing that they have created an opening that China should vigorously exploit:

Chavez had been in office for 14 years, making him the longest-serving president in Venezuelan history. His authoritarian leadership style was fostered by constant success in elections, as well as huge support from his people. But the West often saw him as a “dictator,” a title that triggered Chavez to famously return fire by calling former US president George W. Bush a “devil.” In the international community, Chavez undoubtedly suffered because Western opinions were more influential than those from elsewhere. Denounced as a “dictator” repeatedly, he inevitably became viewed in such an unflattering light.

Chavez’s reputation proved that a leader’s standing on the world stage is closely linked to their relationship with the US. Kings who hold absolute power in ruling their countries can be best defined as “dictators” in a political sense, but they avoid such a label in Western eyes if they are allies of the US.

[…] Subtle relations between Latin America and the US may offer a lesson for China. China is not like the US, which has the great desire and capability to control others. China should work more positively with Latin America, which is in accordance with the region’s wishes and offers an alternative to the US having the final say.

Trade volume between China and Latin America reached $250 billion last year, but cooperation between the two sides is not deep enough. More in-depth cooperation will lead to a much closer relationship.

Global Times is not alone in its assessment of Western attitudes toward Chavez. Arvind Sivaramakrishnan wrote in an obituary at The Hindu), for example, that “the United States government and press […] have consistently vilified him in language bordering on the delusional.”

Despite Global Times’ competitive tone, China has avoided outright confrontation with the U.S. over Venezuela. From Teddy Ng at the South China Morning Post:

[…] Chavez is well known for his open adoration of Mao. When visiting Beijing in 2008, he said: “We are in the land of Mao Zedong and I pay tribute to him. I am a Maoist.”

He would recite quotes by Mao, such as “Imperialism is a paper tiger”, and said one of his favourite books was The Art of War, by Sun Tzu.

However, China has avoided showing ideological support to Chavez, with former Foreign Ministry spokesman Jiang Yu once saying that the two countries “have no ideological hue”.

[…] Pang Zhongying, a professor of international relations at Renmin University, said China was cautious and keen to avoid upsetting the United States with its ties to Venezuela. “The US is concerned with the interaction between China and Venezuela,” he said. “China was very alert not to trigger any controversy concerning the geopolitical status of the region, and avoided showing political support to Chavez.”