Economic statecraft in China's new overseas special economic zones: soft power, business

or resource security?
Author(s): DEBORAH BRÄUTIGAM and TANG XIAOYANG
Source: International Affairs (Royal Institute of International Affairs 1944-), Vol. 88, No.
4 (July 2012), pp. 799-816
Published by: Oxford University Press on behalf of the Royal Institute of International
Affairs
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 Economic statecraft in China's new

overseas special economic zones: soft

power, business or resource security?

DEBORAH BRAUTIGAM AND TANG XIAOYANG*

China's rapid expansion of economic and political ties with other developing
countries has aroused deep concern in the West and Japan. Much of this apprehen
sion focuses on China's search for natural resources and its 'no-political-strings
attached' stance on official finance. Yet despite the popular unease provoked by
China's growing outward engagement, scholars have done relatively little research
on the Chinese government's strategic employment of its economic instruments
overseas.1

Foreign aid and export credits are familiar tools of state intervention, wielded
for decades by the West to foster its own economic and political interests abroad.
China also uses foreign aid and export credits, yet these are not the only economic
instruments applied by the Chinese government overseas. Several countries have
been offered 'mutual benefit loans' (hu hui dai kuan): large, commercial-rate but
long-term lines of credit that provide for the construction of public works—
hospitals, power plants, irrigation systems and railways—with repayment secured
by existing exports (often of natural resources). Fifteen African countries are
hosting new centres for agricultural research, training and demonstration, with
another five set to begin construction this year. And across the developing world,
Chinese firms are building a number of new overseas economic zones: special
areas designed to attract investment, predominantly from Chinese manufacturing
firms.

The Beijing government has a hand in all these experiments. Like other states,
China uses its economic power strategically. While coercion and overt force
are largely absent from China's overseas engagement today, it is challenging, as
Shaun Breslin has noted, to tease apart the purely economic, the soft power, and
the resource security aspects of China's embrace.2 Beijing's stubborn secrecy on

* The research underlying this article was funded by the Smith Richardson Foundation, the German Marshall
Fund of the United States, the World Bank, the American University, the City University of New York, and
the International Food Policy Research Institute. The authors thank Xinshen Diao, Shaun Breslin, Henry W.
C. Yeung, Tewodaj Mogues, Hans Jorgen Gasemyr, Ted Moran, Shahid Yusuf, Danny Leipziger and Yasheng
Huang for their helpful comments. Nicholas Smith provided excellent research assistance.
1 The relative lack of scholarship specifically on China is not limited to international political economy. See
Marie-Eve Reney, 'What happened to the study of China in comparative politics?', review essay, Journal of
East Asian Studies n: i, 2011, pp. 105—35.
2 Shaun Breslin, 'Understanding China's regional rise: interpretations, identities and implications', International
Affairs 85: 4, July 2009, pp. 817-35 at 834.-5.

International Affairs 88: 4 (2012) 799-816

Author(s). International Affairs © 2012 The Royal Institute of International Affairs. Published by Blackwell Publishing
© 2012 The Author(s).
Ltd, 9600 Garsington Road, Oxford 0x4 2dq, UK and 350 Main Street, Maiden, MA 02148, USA.

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Deborah Brdutigam and Tang Xiaoyang

flows of Chinese aid and official finance hampers analysis.3 As William Norris
concluded, in a review of China's economic statecraft, 'we do not yet understand
how this increasingly powerful player wields its economic power'.4 This matters,
both for scholars and for governments trying to understand the strategic nature
and developmental implications of China's economic courtship.
We can categorize prevailing scholarship into three sets of views on how (and
why) the Chinese state wields its economic power overseas. The developmental state
view sees the economic instruments used to promote China's expansion abroad
as primarily a form of state guidance or direction with a commercial rationale:
assisting profit-oriented firms to improve their response to global economic oppor
tunities, filling information gaps and reducing risks and high transaction costs. A
second interpretation recognizes the commercial rationale of some state interven
tion, but sees many of the economic instruments in China's toolkit as more about
politics: loss-leaders that bolster diplomacy, China's image and soft power. Third,
many see Beijing's moves into developing countries as predominantly shaped by
strategic concerns about resource security. Proponents of this view contend that the
Chinese offer aid and overseas development programmes, more or less directly,
in exchange for more secure access to resources. Commercial considerations may
not apply.
Here we focus on a single instrument in Beijing's portfolio of new tools for
international economic relations with other developing countries: overseas trade
and economic cooperation zones. These zones can involve multiple activities,
including among others energy, manufacturing, export processing and logistics.
They are not financed out of China's foreign aid budget, but they are subsidized
by the Chinese state. Little is known about this programme, and although some
individual zones in Africa have been studied by researchers, there appear to be no
studies of Chinese zones outside Africa (the majority), or of the zone programme
itself. Why has Beijing decided to sponsor the construction of up to 50 overseas
economic and trade cooperation zones? Can a close examination of the zone
strategy provide evidence to inform debates over Beijing's active use of economic
tools as it ratchets up its presence abroad?
The next section of the article briefly reviews the relevant literature. Following
this, we examine the decision to establish these zones, the way they have been
framed in public statements by Chinese officials, and the respective roles of the
Chinese state and the zone developers as the zones are being implemented. We
next explore more closely the characteristics of the 19 zones selected for official
support between 2006 and 2007, and their host countries. Our information comes
primarily from interviews with at least one individual linked to each of the active
zones, either in China or in the zones themselves, supplemented by field visits and
other primary materials.

3 Trade data are openly available, but China publishes no country-level data on aid or other official flows, and
overseas FDI statistics are incomplete.
4 William J. Norris, 'Economic statecraft with Chinese characteristics: the use of commercial actors in China's
grand strategy', Ph.D. diss., MIT, Cambridge, MA, 2010, p. 72.

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Economic statecraft in China's new overseas special economic zones

Economic statecraft

Powerful states frequently use economic tools as instruments of politics.5 As tools

of economic statecraft, sanctions have received most of the analytical attention;
foreign aid comes a close second.6 However, states also use economic tools to
intervene in their international relationships for commercial reasons. Below, we
discuss three major roles that might be played by China's state-sponsored economic
diplomacy: strengthening resource security; enhancing political relationships and
soft power; and boosting commercial opportunities for national firms abroad.

Extractive resource diplomacy

Many media stories about China's strategic overseas economic engagement with
other developing countries are based on assumptions that it is largely determined
by resource scarcities: China's 'desperate' search for oil, iron ore, copper and so
on. In a major study of Chinese infrastructure projects, World Bank researchers
asserted that 'most Chinese government-funded projects in Sub-Saharan Africa
are ultimately aimed at securing a flow of Sub-Saharan Africa's natural resources
for export to China'.7 Although they are not financed by aid, could these zones be
part of China's extractive resource diplomacy? An article on Chinese engagement
in Zambia speculated that China's overseas industrial zone in that country might
be directly connected to China's resource interests: 'Natural resource access can be
achieved through consent or force . . . Helping Zambia reinvigorate its moribund
manufacturing sector is one way in which to achieve access to resources through
consent.'8 Yet other scholars, while acknowledging that such assumptions are
widespread, have downplayed resource security as a driving force in Chinese
diplomacy.9 Sook-Jong Lee warned that China's soft power approach might be
seen (by others) as primarily an exercise in 'extractive resource diplomacy'.10 In
a study of China's relations with Venezuela, Cheng and Shi argue that although
many believe oil to be the driving force, it 'actually plays a rather limited role'.11

Political arid soft power factors

Alternatively, state-sponsored cooperation programmes such as that to create

special economic zones might primarily reflect political goals: building alliances or

5 David Baldwin, Economic statecraft (Princeton, NJ: Princeton University Press, 1985), p. 3.
6 Alberto Alesina and David Dollar, 'Who gives foreign aid to whom, and why?', Journal of Economic Growth 5:
1, 2000, pp. 33—63.
7 Vivien Foster, William Butterfield, Chuan Chen and Nataliya Pushak, Building bridges: China's growing role as
infrastructure financier for sub-Saharan Africa (Washington DC: World Bank, 2008), p. 64. The researchers cited
no evidence to back this assumption.
8 Padraig Carmody, 'An Asian-driven economic recovery in Africa? The Zambia case', World Development 37: 7,
2009, pp. 1197-207 at p. 1199.
9 See e.g. Haibing Zhang, 'China's aid to Africa: oil oriented or not?', World Economy Studies, no. 10, 2007
(Shanghai: Shanghai Academy of Social Sciences), pp. 76-80.
10 Sook-Jong Lee, 'China's soft power: its limits and potentials', EAI issue briefing no. MASI 2009-07: 8 (Seoul:
East Asia Institute, 2009), p. 8.
11 Joseph Y. S. Cheng and Shi Huangao, 'Sino-Venezuelan relations: beyond oil', Issues and Studies 44: 3, 2008,
pp. 99-147

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Deborah Brdutigam and Tang Xiaoyang

boosting soft power. China has some history of using state-directed investment for
political purposes. After the crackdown on the Tiananmen Square protests in 1989,
Beijing used pledges of investment to 'mobilize against American politicization of
the human rights issue' and accompanied its successful courtship of Taiwan's allies
South Africa and Panama with pledges that included Chinese investment.12 On the
other hand, soft power as defined by Joseph Nye relies not on the economic attrac
tion of investment, but on the attractiveness of ideas, culture, values and image.13
Many Chinese see developing countries—and Africa in particular—as impor
tant arenas for the projection of Chinese soft power, and the country's successful
development is a key aspect of its attractiveness.14 A programme that combines
government subsidies with the transfer of a highly successful aspect of China's own
development model could be intended primarily as a tool of soft power.

The developmental state abroad

A third vein of scholarship on the strategic use of foreign economic policy empha
sizes its business goals, and builds on earlier analyses of the East Asian develop
mental state that focused on its close coordination with the private sector as it
moved offshore. In the 'flying geese' model, Japanese bureaucrats used official aid,
export credits and investment support to help their firms construct and catalyse
regional production networks in Asia.15 Over the past decade, China has experi
enced similar push and pull factors that make overseas investment attractive across
multiple sectors.16 Initiating a programme to encourage Chinese firms to build
overseas industrial zones where clusters of Chinese firms might find it easier to
invest could be seen as simply a rational economic strategy, typical of a develop
mental state. When it comes to China, however, the commercial and the polit
ical are especially difficult to disentangle. Most of China's major firms operating
abroad are still state-owned, and while they have evolved as market actors this
evolution is not complete. Henry W. C. Yeung argues that interstate economic
activities conducted through China's national firms are never simply economic,
but include elements of politics and diplomacy and 'should be viewed as institu
tionally mediated interactions between different nation-states'.17
Whereas the developmental state uses economic tools for what are primarily
commercial purposes, the goals of economic statecraft are usually seen as primarily
political or strategic. Indeed, Norris argues that it is easiest to see economic
statecraft at work in cases 'in which a commercial actor faces commercially

12 Mark Yaolin Wang, 'The motivations behind China's government-initiated industrial investments overseas',
Pacific Affairs 75: 2, 2002, pp. 187-206 at p. 205.
13 See Joseph S. Nye, Soft power: the means to success in world politics (New York: PublicAfFairs, 2004).
14 Jianbo Luo and Xiaomin Zhang, 'China's African policy and its soft power', AntePodium, Victoria University
of Wellington, 2009, http://www.victoria.ac.nz/atp/articles/pdf/JianboXiaomin-2009.pdf, accessed 16 May
2012.

15 Peter J. Katzenstein and Takashi Shiraishi, eds, Network power: Japan and Asia (Ithaca, NY: Corne
Press, 1997).
16 Wang, 'The motivations'.
17 Henry Wai-chung Yeung, 'Strategic governance and economic diplomacy in China: the political economy of
government-linked companies from Singapore', East Asia: An International Quarterly 21: 1, 2004, pp. 40-64.

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 Economic statecraft in China's new overseas special economic zones

undesirable consequences yet does something in spite of the commercial costs

because the state directs them to'.18 However, states in East Asia are generally
far more involved in promoting activities at the level of the firm with primarily
commercial rationales than Australia or the United States, for example, would be.
The challenge here is to know when an activity is state-sponsored but predomi
nantly a 'normal' economic interaction (the developmental state model), and when
it is 'strategically-manipulated economic statecraft', primarily a manifestation of
economic diplomacy.19 We turn now to the process of establishing these zones in
order to explore that question.

China's decision to establish overseas economic zones

It is an understatement to note that China today has achieved extraordinary success

at economic growth and development. Special economic zones—geographi
cally delimited areas with world-class infrastructure and services, and, often,
business-friendly policy and incentive regimes—were an important early strategy
in pursuing this end. Initiated in 1979, only three years after the death of Mao
Zedong, China's special economic zones allowed Beijing to experiment with what
were then heretical ideas such as attracting foreign investment and using flexible
labour contracts. Over time, the zones proved to be incubators for significant
structural transformation. Today, they are home to some of China's new global
champions, such as the telecommunications firms Huawei and ZTE, as well as
foreign corporations, including IBM, Siemens, Samsung and Hitachi.

Going global
Starting as early as the 1980s, Beijing experimented with ways in which Chinese
companies could be encouraged to invest overseas. In 1994, a banking reorganiza
tion established two new 'policy' banks: the China Export Import Bank (China
Eximbank), an export credit agency tasked to promote Chinese trade and outward
investment, and the China Development Bank (CDB), tasked with the mission
of financing China's domestic development.20 In recent years, both have become
active in financing China's strategic outward investment and trade.
In 1995, Beijing began to establish a second set of business promotion instruments
in Africa: around a dozen centres for trade, investment and development. Built
as public—private partnerships, these followed a standard build—operate—transfer
(BOT) model. In the case of the Benin centre, China's aid budget provided 60 per
cent of the construction cost, probably as a loan; the Chinese provincial company
that was to operate the centre contributed 40 per cent; and the host government

18 Norris, 'Economic statecraft with Chinese characteristics', p. 83.

19 Norris, 'Economic statecraft with Chinese characteristics', p. 83.
20 Policy banks are explicitly directed to finance government policies and projects and do not have to operate
strictly on market principles. Yet as a review by Standard & Poor's put it, Beijing 'does not guarantee the
obligations of China EXIM or provide automatic solvency support': Standard & Poor's, Bank credit report:
Export—Import Bank of China (New York, 2006), p. 3.

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 Deborah Brautigam and Tang Xiaoyang

provided the land.21 The company would rent out space in the building, while also
providing services to other businesses (predominantly, but not solely, Chinese).
After 50 years, the building would become the property of the host government.
A third tool, the China—Africa Development Fund (CAD-Fund), was launched
at the 2006 Beijing summit of the Forum on China—Africa Cooperation (FOCAC).
Established with a US$1 billion contribution from the CDB, CAD-Fund was
expected to raise another US$4 billion over time. It was set up not to be an instru
ment of aid, but to invest in Chinese companies or Sino-African joint ventures.
A fourth experiment involved building a small variety of overseas industrial
and trade zones.22 In 1994, the Egyptian government asked the Chinese govern
ment for assistance in setting up an economic zone in Egypt. In 1999, the giant
Chinese appliance firm Haier built its first overseas industrial park, a 46 hectare
operation in Camden, South Carolina, followed in 2001 by a joint venture with
a Pakistani company to build an industrial park near Lahore. Fujian Huaqiao
Company applied to build an industrial and trade zone in Cuba in 2000.23 In 2004,
China Middle East Investment and Trade Promotion Centre and Jebel Ali Free
Trade Zone constructed a dragon-shaped US$300 million trade centre, known as
'Dragon Mart', to host 4,000 Chinese companies in Dubai.
In 2006, the Chinese Ministry of Commerce decided to give official support to
the establishment of zones in other countries.24 Initially, a minimum of ten zones
would be established abroad, with the hope that 500 Chinese companies would
use these to go offshore, investing a projected total of US$2 billion.25 The zone
programme was not limited to Africa, but the policy was first mentioned in the
English-language media when Chinese President Hu Jintao pledged to establish
'three to five' economic trade and cooperation zones in Africa as part of eight major
commitments made during the November 2006 FOCAC summit in Beijing.26 The
first 19 zones selected for support are shown in table 1. By mid-2012, four of the
approved zones (in Algeria, Mexico, Venezuela and St Petersburg) had withdrawn
from the programme.27

21 Zhejiang Foreign Trade and Economic Cooperation Bureau, 'Benin China economic and trade development
center was launched', 12 Jan. 2009, http://www.zftec.gov.cn/english/PohciesRegulations/FFE/T222487.shtml,
accessed 1 Feb. 2009.
22 China.org, 'Tianjin to set up trade park in US', http://china.0rg.cn/english/BAT/103526.htm, 10 Aug. 2004,
accessed 16 May 2012.
23 Lili Deng, 'Huaqiao shiye de guba jing' [Huaqiao Inc.'s experience of Cuba], Da Jingmao [Economics and
Trade] 1, 2007, pp. 14-16.
24 State Council, 'Replies on approving the suggestions to promote the construction of overseas economic and
trade zone', State Council Letter no. 17, 18 Feb. 2008.
25 Xinhua, 'Jiangxi Province plans to invest RMB3.8 billion in Algeria', http://news.xinhuanet.com/news
center/2008-05/04/c0ntent_8098057.htm, accessed 15 Feb. 2012.
26 For an excellent discussion of FOCAC, see Ian Taylor, The Forum on China-Africa Cooperation (New York:
Routledge, 2011).
27 Shortly after the Algerian zone was approved, the Algerian government changed its legislation, requiring
Algerian companies to own 51 per cent of any new companies, dissuading the Chinese investor. In Mexico,
the Chinese developer (Geely Automobiles) decided not to move forward with its proposal, possibly in order
to concentrate on its new purchase of Volvo. The Venezuela zone proposed by Inspur, a Chinese computer
company with business interests in Venezuela, was considered the most promising of those reviewed in the
2007 tender but it appears not to have been implemented. The St Petersburg zone continued to be developed,
but the developers decided to withdraw from the MOFCOM programme, because they wanted to focus
on residential and commercial real estate rather than manufacturing (authors' interviews with MOFCOM
officials in Beijing (November 2009), Shanghai (July 2011) and Xiamen (September 2011)).

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 Economic statecraft in China's new overseas special economic zones

Table 1: China's 19 initial zones

Country Zone name Location Tender Original lead Chinese Home province Initial zone focus/
year developer/later lead or municipality laterfocus
developer

Algeria Jiangling Oran City 2007 Jianling Automobile Jiangxi Automobile

Cambodia Sihanouk Sihanoukville 2006 Guangming, Yiduo, Jiangsu Industrial estate

ville Huatai / Hongdou

Egypt China—Egypt Suez 2007 Tianjin TEDA Tianjin Industrial and real
Suez estate

Ethiopia Eastern Dukem, 2007 Yonggang / Jiangsu Steel products,

Addis Ababa Qiyuan Investment construction materials

Group
Indonesia Indonesia Bekasi, 2007 Guangxi State Farm Guangxi AR Cassava processing /
China Jakarta Agribusiness Group industrial estate

Mauritius Jinfei Terre Rouge 2006 Tianli / Tiayuan Shanxi Industrial and real
Iron & Steel, Shanxi estate

Coking Coal
Mexico Geely Aguas 2007 Geely Automobiles Zhejiang Automobile assembly
calientes

Nigeria Lekki Lagos State 2007 China Civil National Industrial estate

Engineering and
Construction

Corporation

Nigeria Ogun Ogun State 2006 Guangdong XinGuangGuangdong Industrial estate

Guangdong
Pakistan Haier-Ruba Punjab, 2006 Haier Shandong Home appliances
Lahore

Russia Ussuriysk Ussuriysk, 2006 Kangnai Int'l Zhejiang Industrial estate

eastern Investment
Siberia

Russia Baltic Pearl St Petersburg 2006 Shanghai Overseas Shanghai Real estate
United Investment

Company
Russia Tomsk Central 2007 Northwest Forestry Shandong Wood processing
Siberia

S. Korea Korea—China Muan 2007 Dongtai Hua'an Chongqing Industrial and real
International estate

Investment

Thailand Rayong Rayong 2006 Holley Group Zhejiang Industrial estate

Venezuela La Cua Cua Urdaneta 2007 Inspur Group Shandong High technology, IT

Vietnam Longgiang Tien Giang 2007 Xieli Leather/Qian Zhejiang Industrial estate

sheng Mining/Hailiang
Qianjiang Investment
Management Ltd

Vietnam Shenzhen Haiphong 2007 Shenzhen Shenyue Guangdong Electronics and

Haiphong Joint Investment Co. textiles

Zambia Zambia Chambishi / 2006 China Nonferrous National Mineral processing

China Lusaka Metals Corporation

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Deborah Brdutigam and Tang Xiaoyang

Process: Chinese government support for the overseas zones

The new programme of overseas zones was organized as an evolving process,

in which officials would (in China's classic reformist fashion) 'cross the river
by feeling the stones'. Here we examine five aspects of this process: selection,
monitoring, financing, public framing and political intervention. Chinese officials
were conscious of past difficulties in ensuring that their overseas economic cooper
ation projects would be sustainable once Chinese involvement ended. This lesson,
along with the thrust of China's reforms since 1978, dictated a reliance on market
principles, combined with government guidance and incentives, to establish the
zones. The Chinese government had no blueprint for the zones and relied on
Chinese companies to design them, in coordination with host governments. No
policy conditions were imposed on host governments. At the same time, through
official visits and diplomatic support, including the occasional intervention, the
Chinese government has signalled that the zones have political importance over
and above their economic role.

Selection by competitive tenders

Rather than assigning companies or provinces to establish zones, the Ministry
of Commerce (MOFCOM) held a limited tender that it described as 'fair, just,
and transparent'.28 Two rounds of tenders were held, in 2006 and 2007. The 2006
tender elicited more than 60 expressions of interest from Chinese companies; of
these, nearly half were invited to submit formal proposals.29 Twelve of these were
invited to present their proposals to a panel of independent outside experts (officials
from China's own domestic special economic zones, and university professors) in
Beijing. The panels selected eight proposals, basing their decision in each case
primarily on the proposal itself and its feasibility studies (market potential, invest
ment environment); documented evidence of support from the host government;
the developers' ability to finance the project; and their proven capacity to imple
ment a major construction engineering project.30 The second round in 2007 drew
on lessons from the first round, adding a new criterion: companies needed to show
an annual turnover (revenues) of at least RMB15 billion (about US$2 billion) for at
least the two previous years. This represented an effort to ensure that companies
would have the resources to finance the development of the zones successfully.
Over 50 companies applied, 20 were invited to submit formal proposals, and 11
proposals were selected (table 1).
The fact that these zones were company-led was not initially clear to many
governments in Africa, to which the zone programme was announced as part of the
November 2006 FOCAC summit in Beijing. More than ten African governments

28 People's Republic of China Ministry of Commerce, 'China's first overseas trade and economic coop
eration zone unveiled in Pakistan', 28 Nov. 2006, http://english.mofcom.gov.cn/aarticle/subject/cnpkfta/
Ianmua/2006i2/2006i203905i39.html, accessed 20 May 2012.
29 Unless otherwise stated, this paragraph and the next draw on personal communications with a knowledgeable
official in the Chinese government, July 2008.
30 Interview, Ministry of Commerce officials, Beijing, 25 Nov. 2009.

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 Economic statecraft in China's new overseas special economic zones

asked to host cooperation zones.31 Among these was the Tanzanian government,
a close ally of the Chinese in Africa; yet no Chinese company was interested in
proposing a zone in Tanzania.32
General, performance-based subsidies from Beijing were part of the framework
of incentives for zone development, while some (but not all) Chinese provinces
and municipalities added their own sweeteners to further boost investments by
their local companies. Yet this array of tools came into play only after a proposal
had been selected through the competitive tender, and had advanced past certain
stipulated milestones. The criteria for selection appeared to give no weight to
natural resources or particular political interests. From what we have been able to
determine, only one aspect of the selection process hints at political concerns: the
Ministry of Foreign Affairs had to sign off on the projects, as they were to benefit
other countries through official Chinese government subsidies.
However, although all of the official zone projects submitted proposals and
won in a competitive tender, several of them had been initiated earlier, or pushed
by Chinese officials in the context of bilateral diplomacy. The company that
proposed a new zone in Egypt was the same company assigned to assist Egypt
after its 1994 request for a jointly developed economic zone. The Shanghai Baltic
Pearl project was born from a push by the central government, which around 2000
tasked the Shanghai government with enhancing economic ties between China and
Russia, focusing on St Petersburg (Shanghai's sister city). The zone project itself,
launched in 2004, was the brainchild of a Shanghai-based consortium of state
owned enterprises. The Russian Tomsk zone may have had a similar function.
Russians have sought to enhance local value-added by reducing the export of raw
wood to China, their most important market. In November 2000, the Chinese and
Russian governments agreed to develop Russian forest resources jointly and estab
lish a forestry product processing industrial zone.33 A feasibility study was carried
out by China's National Forestry Administration. Learning of the initiative, an
experienced company in Shandong province, Northwestern Forestry, lobbied
actively to undertake the project.34 After both sides had approved the feasibility
study, MOFCOM and the province of Shandong allowed Northwestern to take
the lead on the zone.35 These projects, then, were the brainchildren of government
officials rather than companies; but they are a small minority of the total, and all
later entered the tender as competitors rather than being provided with funding
directly. We see the involvement of officials in this subset of zones as essentially
unrelated to the overseas zone programme itself.

31 Xilai Bo, 'Sannian zhijou jianshe 3 dao 5 ge jingji maoyi hezuo qu' [Construct 3-5 economic cooperation
zones within three years], interview transcript, China Central Television, 13 Nov. 2006.
32 Interview with Commercial Representative of Chinese Embassy, Dar es Salaam, July 2008; interview with
MOFCOM official, Beijing, Nov. 2009.
33 China—Russia Economic and Trade Cooperation website, 14 Nov. 2011, http://www.crc.mofcom.gov.cn/
article/erg0ngshang/erhuiyifayan/2007ii/40863_i.html, accessed 16 May 2012.
34 Interview with department manager of Northwestern Forestry Co., Xiamen, 10 Sept. 2011.
35 China—Russia Economic and Trade Cooperation website.

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Deborah Brautigam and Tang Xiaoyang

Monitoring performance

The monitoring of zone implementation provides additional evidence as to

the intentions of the Chinese government. As all subsidies were performance
based, they were not granted prior to development, but only after a zone had
met specific milestones. As part of regular monitoring, zones were required to
self-report on their progress, monthly for some aspects, and every six months
for others.36 MOFCOM, which managed the programme, and the Ministry
of Finance (MOF), which held the purse-strings for the subsidies, periodically
conducted a formal joint progress evaluation. Enterprises that believed they were
sufficiently advanced in construction applied to be formally evaluated. China
International Engineering Consulting Corporation was tasked with visiting each
zone, inspecting its accounts and determining its progress. Six zones passed the
first round of inspections in late 2008 (and received their subsidies), while three
failed. In April 2010, MOFCOM and MOF launched the second round of inspec
tions, and a third was carried out in March 2011.37
Forms filled in during these exercises included an index to evaluate the 'polit
ical environment':38 this covered political stability, host support, host incentives
provided and work efficiency of local officials. Under 'legal and security', the zone
environments were rated for the 'robustness of local laws' and 'personal safety of
foreigners'. The Chinese government's concerns about the safety and security of
the zones are reflected in notices urging developers to mitigate risks by developing
good relationships with local people and officials, and by taking out risk insurance
from Sinosure, China's overseas export credit and investment insurance agency.
These suggest that the Chinese government wanted companies to be aware of risks
and take steps to minimize them. Beijing was not eager to use its own political
capital to solve their problems.

Policy banks and official funding

In addition to two funds—the Trade and Economic Cooperation Zone Fund

and the Special Fund for Economic and Technological Cooperation—controlled
directly by MOFCOM, the Chinese government had other instruments with which
it could support the overseas zones. By late 2011, the 16 zones under construc
tion had received various forms of economic support. At least half, and possibly
more, of the zones had received or been promised support from their provincial
governments. However, there had so far been only modest direct involvement
by the two big central policy banks. Eximbank had given loans to developers of

36 People's Republic of China, Ministry of Commerce, 'Shangwubu, caizhengbu kaizhan diyici hezuoqu queren
kaohe' [MOFCOM and MOF carry out the first inspection of cooperation zones], 13 Aug. 2010, http://www.
mofcom.gov.cn/aarticle/subject/jwjjmyhzq/subjectm/201002/20100206777576.html, accessed 21 May 2012
37 CR.CC China—Africa Construction Limited, 'Introduction of Lekki Free Trade Zone project', 24 Dec. 2010,
http://crcccac.com/_d271183676.htm, accessed 16 May 2012.
38 People's Republic of China Ministry of Commerce, Letter of Cooperation Zone Office, Index for evaluating
regional external environment of overseas cooperation zones, no. 37, 7 Dec. 2010.

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 Economic statecraft in China's new overseas special economic zones

four zones: Egypt, Cambodia, Vietnam Longgiang and the Ethiopian zone.39 The
CDB had provided loans to two zone companies (TEDA in Egypt, and Guangxi
in Indonesia) and had one additional loan under consideration for the zone in
South Korea. The limited involvement of both policy banks reflects their cautious
approach and their use of commercial criteria. In Africa, the CAD-Fund explored
the potential for equity shares in all six of the zone development companies, but
decided to invest in only three of them: Egypt, Nigeria (Lekki) and Mauritius.40

Framing the zones

Although the way the zones were framed in public pronouncements in China and
abroad cannot be proof of ultimate aims, these statements do provide additional
evidence as to the intentions of the government. One of the first Chinese media
stories on the zone programme emphasized that it would 'reduce trade frictions'
(by shifting the origin of Chinese exports from China to third countries),
help reduce China's accumulation of excessive foreign exchange, support the
development of Chinese brand names and generally serve to implement the
'going global' policies.41 At least two speeches by senior MOFCOM officials
have stressed the programme's commercial aspects. Deputy Minister Fu Ziying
described the strategy in 2006 as 'a way to support the Chinese companies to "go
global" in groups', while in 2007 former minister of commerce Bo Xilai noted
that the strategy 'reduces anxieties' Chinese firms have about investing abroad,
while providing economies of scale.42
In a February 2008 document approving the zone programme, the State
Council described its guiding principles as 'following market rules, pursuing
equality and mutual benefits, moving forward gradually, and focusing on
practical effects'.43 Finally, the Chinese Ambassador to Zambia (the location of
one of the zones) noted that the zone would assist China's restructuring while
at the same time boosting development in Zambia: 'We also would like to intro
duce mature Chinese enterprises with comparative advantages to Zambia to help
address the country's over-reliance on import of consumer and manufactured
goods. Therefore, the establishment of the Cooperation Zone can help both
Zambia develop and mature Chinese industries redeploy and win more space of

39 Chinese Overseas (Africa) Economic and Trade Cooperation Zones and China-Africa Development Fund,
Newsletter of joint meeting of Chinese overseas (Africa) economic and trade cooperation zones and China—Africa Development
Fund, no. 2, July 2010; Hongdou Group, 'Short-term financing prospectus', no. 1, April 2011; International
Monetary Fund, Direction of trade 2010 (Washington DC: 2011); authors' interviews with manager of Longgiang
zone, Xiamen, 10 Sept. 2011, and Ethiopia zone, Addis Ababa, 18 Nov. 2012.
40 China—Africa Development Fund, promotional booklet distributed at FOCAC ministerial meeting, Sharm el
Sheikh, Egypt, 5 Nov. 2009; interviews, Xiamen, 11 Sept. 2011.
41 Xinhua, 'Zhongguo jiajianli 50ge jingwai jingmao hezuoqu jianshao maoyi moca' [China to establish 50 over
seas economic cooperation zones to reduce trade frictions], http://news.xinhuanet.com/fortune/2006-06/20/
content_4721894.htm, 19 April 2012.
42 Ziying Fu, 'International strategy and a harmonious world for the financial industry and businesses', speech
presented at China Financial Forum, Beijing, 12 Feb. 2007; Xilai Bo, 'Sannian zhijou jianshe 3 dao 5 ge jingji
maoyi hezuo qu' [Construct 3—5 economic cooperation zones within three years].
43 State Council, 'Replies on approving the suggestions to promote the construction of overseas economic and
trade zone'.

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 Deborah Brautigam and Tang Xiaoyang

development at home.'44 All of this is consistent with a predominantly commer

cial rationale.

At the same time, however, some zones have clearly been positioned as part
of China's overall political relationships with foreign governments. President Hu
Jintao presided over the opening of the Haier zone in Pakistan and the Chambishi
zone in Zambia, while Premier Wen Jiabao attended the official opening of TEDA's
Egyptian zone. Vice-President Xi Jingping visited the Russian zone at Ussuriysk
in 2010. Yet out of 16 zones under way, only a quarter have received this kind of
high-level attention.
Only the African zones have repeatedly been framed as part of the high
visibility 'soft power' package of pledges made by Chinese leader Hu Jintao at
the 2006 Beijing FOCAC Summit. China's Minister of Foreign Affairs described
FOCAC (and its programmes) as a demonstration of 'China's diplomatic philos
ophy', with one goal being 'increasing political mutual trust'.45 Chen Deming,
Minister of Commerce, remarked that FOCAC was a strategic effort to 'promote
friendship and cooperation', and that the zone programme complemented both
goals. He quoted the ancient Chinese proverb: 'it is better to teach a man to fish
than to give him fish.'46 Officials have promoted the zones as a sharing of China's
expertise and development success. An official connected with the zone in Egypt
noted: 'Our cooperation with Africa today, as well as aid, has shifted from direct
financial assistance to the output of development experience.'47
Officials from the Ministry of Foreign Affairs and from MOFCOM have
urged companies building zones to 'think about the big picture. Chinese invest
ments in Africa are not purely economic but reflect political policies.'48 Yet even
here, official rhetoric generally emphasizes the economic advantages expected
to accrue. As an official report on China—Africa cooperation put it, the Chinese
government's intention was that: 'Trade and economic cooperation zones built
by the Chinese companies will reach a considerable scale, and attract a cluster of
Chinese companies to form an industrial chain that can trigger the development
of local manufacturing industries.'49

Chinese government intervention

Finally, an overall emphasis on market orientation is apparent from the fact that
very few instances can be identified in which the Chinese central government has

44 'Interview with Chinese ambassador in Zambia Li Qiangmin', Southern Weekly, 7 April 2010, http://www.
infzm.com/content/43554, accessed 16 May 2012.
45 Jiechi Yang, People's Republic of China, Ministry of Foreign Affairs, 'Article of Yang Jiechi: a decade of
FOCAC fruitful achievements and a new chapter of China-Africa relations', Beijing, 11 Oct. 2010, http://
www.mfa.g0v.cn/eng/wjb/wjbz/2467/t760880.htm, accessed 16 May 2012.
46 'China-Africa forum benefits strategic ties', China Daily, 12 Oct. 2010, http://www.chinadaily.com.cn/
china/20io-io/i2/content_ii4on55.htm, accessed 16 May 2012.
47 People's Republic of China, Ministry of Commerce, 'Why China builds cooperation zone in Egypt', 16 Oct.
2008, http://www.cec.m0fc0m.g0v.cn/article/cecsbdt/suyishi/200810/53143_1.html, accessed 16 May 2012.
48 China—Africa Development Fund, promotional booklet.
49 China—Africa Research Center, 'China—Africa trade and economic relationship annual report 2010', Beijing
Chinese Academy of International Trade and Economic Cooperation, 2010, http://www.focac.org/eng/
zxxx/t832788.htm, accessed 16 May 2012.

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 Economic statecraft in China's new overseas special economic zones

intervened in the zone programmes. Three examples stand out. In Mauritius, zone
development lagged when the global financial crisis created cash-flow problems
for the original developer, Tianli Group. The Mauritian Prime Minister made
an explicit appeal for assistance to Chinese President Hu Jintao during Hu's visit
to the island in February 2009.50 The Chinese government asked the province of
Shanxi to solve the problem.51 Eventually, two large firms owned by the provin
cial government joined Tianli Group in a new consortium.
In Nigeria, delays in establishing the Lekki zone led the Lagos state government
to contact the Chinese government, which worked with the enterprises involved
in 2008 to solve the problem by shifting shareholdings and responsibilities from
the junior partner, a provincial firm, to the more experienced national company
China Civil Engineering and Construction Corporation (CCECC).52 The Beijing
representative of the Lekki zone commented later:

We don't mind when the Chinese government steps in to assist, but we prefer to negotiate
with the Nigerian government by ourselves as investors. We do not want to politicize
problems that are business-related, and we do not want to create an impression that we are
interfering in Nigerian internal affairs. The zone is primarily a business venture, politics
is secondary.53

In a third case, three Chinese investors each had a one-third share in a Chinese
company that formed a joint venture with a Cambodian firm to build the Cambo
dian zone. The Chinese side was unable to come to a consensus on the strategy for
the zone, and ran into difficulties with the Cambodian partner, a Sino-Cambodian,
causing a lengthy delay.54 MOFCOM took the lead in bringing the three Chinese
managers together for critical reflection and contacted their local government to
seek a solution. Wuxi municipality, the home town of the three investors, was
also home to a conglomerate, Hongdou Group, which operated a large industrial
park in Wuxi and was also contemplating an investment in the Cambodian zone.
The Wuxi government asked Hongdou to take over the Cambodian project. The
project was restructured, with Hongdou taking 70 per cent of the shares on the
Chinese side, and the three original developers keeping 10 per cent each. With
Hongdou's experience and capital behind it, the construction of the zone was put
on a fast track. In this case, governmental intervention turned a potential investor
in the zone into the principal developer. MOFCOM officials were concerned
because the zone had been included in the ministry's programme and thus its
implementation had political implications as a pledge by the Chinese government.

50 'Hu signs Mauritius accords', China Daily, 18 Feb. 2009, http://www.chinadaily.com.cn/china/2009-02/18/

content_7486395.htm, accessed 16 May 2012.
51 A. C. Alves, Chinese economic and trade cooperation zones in Africa: the case of Mauritius, occasional paper no. 74
(Johannesburg: South African Institute of International Affairs, 2011), pp. 1-16.
52 Interviews with Nigerian officials, Lekki zone, Lagos, June 2010, and Chinese embassy, Abuja, June 2010.
Mthembu-Salter concluded that the Chinese government 'intervened and unilaterally restructured the consor
tium in CCECC's favor', but our interviews did not confirm this: Gregory Mthembu-Salter, Chinese investment
in African free trade zones: lessonsfrom the Nigerian experience, Policy Briefing no. 10 (Johannesburg: South African
Institute of International Affairs, 2009), pp. 1-4.
53 Interview with Lekki zone Beijing representatives, Beijing, 27 Nov. 2009.
54 Interview with department manager of Cambodia zone, Xiamen, 8 Sept. 2011.

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 Deborah Brautigam and Tang Xiaoyang

However, Hongdou's capacity and its own strategy happened to fit the situation
very well. Restructuring the consortium was an economically reasonable decision
facilitated by political action.

The zones: what are the drivers of Chinese interest?

In this section we examine the winning proposals more closely for evidence about
the rationale, substance and overall direction of this element of China's economic
diplomacy. We consider the location and business environment of the zones, the
background and business interests of their developers, and Chinese resource inter
ests in each country.

Location of the zones and business environment

Six out of the 19 winning zones, or about 32 per cent, were proposed for countries
that directly border China: Pakistan, Russia (three) and Vietnam (two). Four
additional zones are in China's regional neighbourhood—South Korea, Cambodia,
Thailand and Indonesia—giving a total of more than 50 per cent in Asia. Two
zones (10 per cent) were to be located in Latin America, and seven (37 per cent)
in Africa. As most of China's trade and investment is with Asia, this bias bolsters
economic integration and makes sense from a business viewpoint. However, it
can also be argued that it makes political sense in terms of China's goal of good
relations with its neighbourhood.
What does the host countries' business environment suggest about the zone
programme? The GDP growth rate of the 15 host countries (averaged over the
period 2005—2007, the period when the zones were proposed) came to a very
robust 6.6 per cent (table 2). The two countries with the lowest average growth
rates (Algeria at 3.4 per cent and Mexico at 3.7 per cent) were also two of the
three countries where proposed zone projects were later dropped by their Chinese
developers.
We also reviewed the host countries' business potential in 2008 as rated by
the World Bank's 'Doing Business' survey, which focuses on countries' regula
tory environment (table 2).55 Thailand (15), Mauritius (27) and South Korea (30)
are ranked among the best of developing countries worldwide, while Venezuela
(172), Cambodia (145), Egypt (126), Algeria (125) and Indonesia (123) are ranked
far below. The sub-Saharan African zones fare surprisingly well in their region,
with Mauritius ranked first out of 46 in sub-Saharan Africa, Zambia sixth, Nigeria
13 th and Ethiopia 19th. Overall, ten of the countries proposed to host zones scored
below (better than) the median in the Doing Business rankings, while five were
above. This suggests either that these investments were not entirely commercial,
or that the Chinese developers did not consider the World Bank's measure of the
ease of doing business, that is, the regulatory environment, a deciding factor. The
latter interpretation would not be entirely surprising, given that China itself had a

55 World Bank, Doing Business Rankings, 2008, http://www.doingbusiness.org/rankings, accessed 16 May 2012.

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 Economic statecraft in China's new overseas special economic zones

Table 2: Potential drivers of Chinese interest

Country GDP growth 'Doing Minerals and Minerals Minerals Significant

rate, average Business' fuels as % of andfuels as and fuels as Chinese
200j~200y rank, 2008 total exports, % of exports % of exports natural
1 = best average 2005 to China, to China, resource

178- worst 2009 average 2005 average 2008 investments,

2007 2009 2006-20101

Algeria 3.4 125 98 99 99 no

Cambodia 11.4 145 1 n.d. 2 no

Egypt 6.1 126 51 55 25 no2

Ethiopia 11.3 102 1 2 1 no

Indonesia 5.8 123 37 37 37 yes

Mauritius 4.3 27 1 1 1 no

Mexico 3.7 44 18 18 19 yes3

Nigeria 6.0 108 84 98 91 yes

Pakistan 6.6 76 6 6 6 no

Russia 7.3 106 68 69 73 yes

S. Korea 4.7 30 9 8 10 no

Thailand 4.9 15 6 6 7 no

Venezuela 9.7 172 94 93 97 yes

Vietnam 8.4 91 22 26 11 no

Zambia 5.9 116 82 75 84 yes

average 6.6 39 42 37

n.d. = no data available.

1 Chinese investment interests here include resource assets but not construction contracts.
2 CIT mistakenly lists a proposed alumina refinery construction contract project in Egypt as a
Chinese investment project.
3 In 2008, the Chinese company Jinchuan purchased a Canadian firm, Tyler Resources. Tyler's
major asset of interest was an undeveloped copper/zinc concession in Mexico.

Sources: World Bank, World Development Indicators 2010; IMF, Direction of Trade 2010; Heritage
Foundation, China Investment Tracker (CIT) 2011; authors' research.

'Doing Business' ranking of 83 in 2008. Nevertheless, the fact that Chinese devel
opers later dropped projects proposed for Venezuela and Algeria, countries with
two of the worst business environments (by the World Bank's measure), again
provides support for the commercial interpretation.

Zone developers
It might be thought that the Chinese government would prefer to subsidize the
outward activities of Chinese state-owned enterprises (SOEs), particularly if the
investments were political or strategic. Yet ten of the successful bidders in the
MOFCOM tender were private (minying) firms, while nine were SOEs. Further,
the lead developers of the zones were all existing Chinese companies, as opposed

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 Deborah Brautigam and Tang Xiaoyang

to government departments, with one exception: the Haiphong zone in Vietnam

was proposed by a company established for that purpose by the municipality of
Shenzhen. The lead developers were from several provinces, but China's four main
manufacturing provinces supplied eleven: Zhejiang (4), Shandong (3), Jiangsu
(2) and Guangdong (2) (table 1). Thirteen out of 19 zone developers had already
invested in the host country, or had large export markets there. They were thus
familiar with the challenges of doing business in these particular countries, and
able to act strategically in their zone proposals.
Although most of the zones were focused on manufacturing (table 1), lead
developers came from multiple sectors. Ten, or just over half, were predominantly
industrialists, including two automobile firms (Jiangling and Geely); three in the
garment, leather and footwear sectors (Kangnai Group in Russia (Ussuriysk);
Guangming Group in Cambodia; and Xieli Leather in Vietnam-Longgiang);
Haier, a major appliance manufacturer; and the Holley Group (pharmaceuticals).
Both lead developers active in Nigeria were engineering contractors, as was one
member of the original Cambodia consortium. Several developers operated across
several sectors, such as the Tianli Group. Only one company had mining interests:
China Nonferrous Metals Corporation, or CNMC, in Zambia.

Resource interests

Only three of the zones were directly associated with natural resources: the
Chambishi zone in Zambia, which emphasizes copper and other non-ferrous
metal processing; the Tomsk zone in Siberia (Russia), which has forestry products
as its focus; and the Guangxi Farm Group zone in Indonesia, which originally
planned to emphasize farming. Even so, might the zones have been offered to
resource-rich countries as a way to influence their governments?
In table 2, we show the weight of minerals and fuels in Chinese imports from
each of the countries hosting a zone, averaged over two periods, 2005—2007 and
2008—2009. This allows us to capture, first, a potential general resource interest,
and second, whether any evidence exists that China appeared to get better access
to these resources as a result of the zone programme.
Seven out of 15 proposed host countries—Algeria, Egypt, Indonesia, Nigeria,
Russia, Venezuela and Zambia—can be considered resource-rich: that is, with
minerals and fuels making up at least 25 per cent of exports, on average, between
2005 and 2009. However, eight countries hosting zones were resource-poor.
Further, when we consider minerals and fuels as a percentage of exports to
China over the two periods (2005—2007, when the zones were being proposed,
and 2008-2009), we see a decrease in average natural resource exports to China. In
Russia, Venezuela and Zambia, natural resource exports increased, but the zone
programme in Venezuela was cancelled. Overall, there is little reason to view the
zones as generally connected to China's quest for natural resources.
We also checked whether Chinese companies made significant investments—
over US$100 million—in a natural resource sector (including agriculture and

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 Economic statecraft in China's new overseas special economic zones

forestry) in the host country during the period 2005—2010.56 Such investments
were made in just six of the 15 host countries (table 2).57 If we consider the number
of zones, the balance rises but remains modestly against resource investment inter
ests (nine zones selected in countries with natural resource investment during this
period, ten in other countries). Yet we note also that it is possible to fall prey to
selection bias in assuming a link between Chinese natural resource interests and a
zone project. During the same period, Chinese companies made natural resource
investments of at least US$100 million in at least 32 other developing countries
that are not part of the overseas zone development programme.

Conclusion

In his seminal study of China's economic statecraft, William Norris notes that
while Chinese business and politics are often intertwined, analysts need to be able
to determine whether any particular interaction is largely driven by state prefer
ences ('strategically manipulated economic statecraft') or by commercial forces.38
We agree; and yet this is easier said than done. When the Chinese government
mounts significant development programmes overseas, analysts all too frequently
jump to conclusions about their strategic intent, particularly with regard to natural
resources. Simplistic assumptions like this need to be put to the test of evidence.
The evidence we examine here supports our argument that China's overseas
zone programme is indeed strategic, but not as a means to boost China's resource
security. As an instrument of China's economic diplomacy, the programme repre
sents a significant level of expenditure. By September 2010, companies had spent
US$730.97 million on the infrastructure alone; the Chinese government promised
to reimburse at least 30 per cent of this.59 The evidence reviewed here suggests
that, particularly in Africa, Chinese officials expect that sharing the lessons of
China's own developmental success will boost China's soft power. Yet across the
19 cases, it becomes clear that the zones primarily reflect a different, if no less
strategic goal: providing a platform to accelerate China's own domestic restruc
turing by easing the outward investment of mature Chinese firms, increasing
demand for Chinese-made machinery and equipment, and reducing trade frictions
by relocating Chinese production to third countries.
Although the zone programme as packaged in Africa clearly supports China's
projection of 'soft power', we argue that overall, China's economic statecraft in
the zone programme represents a rather different phenomenon. Firms were not
pushed to move against their long-term commercial interests. Indeed, six of the

56 We use the Heritage Foundation's China Investment Tracker for this exercise. This database tracks and
attempts to confirm signed FDI deals of US$100 million or more since 2005: http://www.heritage.org/
research/reports/2on/oi/china-global-investment-tracker-2on (various dates), accessed 16 May 2012.
57 Although they have not (yet) made significant investments, Chinese companies had exploration concessions
in Cambodia.
58 Norris, 'Economic statecraft with Chinese characteristics'.
59 'Shangwubu qiantou, shiyi buwei baojia zhongguo zhizao haiwai zhuanyi' [Led by MOFCOM, eleven
ministries help made-in-China move overseas], China Business News, 19 Aug. 2007, http://www.china.com.
cn/ec0n0mic/txt/2007-08/i9/c0ntent_8707859.htm, accessed 16 May 2012.

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Deborah Brautigam and Tang Xiaoyang

companies in the official programme had begun to build overseas zones years
before the programme commenced, while another six were already developing
plans to build zones when they learned about the tender.60 What the overseas zone
programme did was to cushion firms against risk and create new incentives that
were intended to yield economic benefits for both China and the host country.
Here, Beijing's use of economic statecraft reflects the internationalization of the
developmental state, a process already well advanced among other East Asian
nations.

60 Zones in Pakistan, Egypt, Zambia, Thailand and Russia (Baltic Pearl and Ussuriysk) were under way before
the programme was even announced. Another six companies—in Vietnam (Longgiang), Ethiopia, Cambodia,
Russia (Tomsk), Nigeria (Lekki) and Korea—had developed plans to construct zones.

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