How China’s economic zones are challenging global norms

Maria Adele Carrai is an Assistant Professor of Global China Studies at NYU Shanghai. Her work revolves around the history of international law in East Asia and how China's ascent as a global power is reshaping norms and international power dynamics. With a keen focus on the Belt and Road Initiative, her research delves into the economic, legal, and political implications of Chinese investments and economic engagements in Europe and Africa.

Carrai's research sheds light on the significance of COCZs as integral components of China's Go Global policy and the Belt and Road Initiative. She envisions COCZs playing a vital role in China's economic engagement with Europe and Africa. Her interview with foreignpress.org is part of AFPC-USA’s partnership with the Hinrich Foundation. The AFPC-USA is solely responsible for the content of this interview.

The following conversation has been condensed and edited for clarity.

How do the overseas economic and trade cooperation zones (COCZs) established by China under the Belt and Road Initiative contribute to the promotion of economic growth and international collaboration?

These zones offer incentives and benefits to foreign companies with the goal of creating jobs, attracting Foreign Direct Investment (FDI), facilitating technological transfer, and encouraging the growth of local industries. In the case of China, since the 2000s, they have become an integral part of its global reach. They serve as nodes of the infrastructure and economic network established by the Belt and Road Initiative. In 2006, the Chinese government announced its intention to establish more than 50 CPECs, and the MOCOM has recognized 20 so far. MOCOM reports that in 2019, the total investment in CPECs amounted to US$ 36.1 billion. This investment stimulated the export of goods worth US$ 18.2 billion, contributed US$ 3.5 billion in taxes and fees to the host countries, and generated 320,000 jobs. Research indicates that the establishment of a CPEC significantly boosts the direct investment of Chinese firms in the host country. However, detailed financial data on individual CPECs remain limited. Existing studies primarily leverage FDI data from the countries hosting CPECs and construct mathematical models to scrutinize the impact of FDI within these zones.

In your research, what have you found regarding the actual performance of COCZs and their impact on host countries' investments, trade, sustainability, and integration in the global supply chain?

This is particularly true in instances where China needs to secure necessary resources and materials, such as in Zambia and Russia. They also facilitate the offshoring of lower-tech manufacturing from China to regions with cheaper labor costs, including countries like Cambodia, Ethiopia, Nigeria, Thailand, and Indonesia. Sustainability concerns, however, remain a significant challenge. There have been worries about the environmental impact of COCZs, especially those involved in the garment manufacturing or resource extraction sectors. Such activities could lead to considerable environmental degradation in host countries, raising sustainability issues that need to be addressed.

The role of COCZs in the global supply chain is a double-edged sword. While these zones have been useful in expanding the global value chain and elevating China's position within it as envisioned in the "Made in China 2025" policy, they also raise concerns about over-reliance on China. Critics have warned that China's loans associated with these projects could potentially push poorer nations into a debt crisis, ultimately losing control over vital infrastructure and resources.

Could you elaborate on the significance of COCZs as an integral part of China's Go Global policy and the Belt and Road Initiative? How do they align with China's broader economic development goals?

The COCZs are integral parts of China's "Go Global" policy and the Belt and Road Initiative (BRI) and align with China's broader economic development goals. It is almost like they're pieces of a much larger puzzle. In essence, the "Go Global" policy is China's strategy to encourage its domestic enterprises to invest overseas. Now, this is where COCZs fit in. They are specifically designed platforms that enable Chinese businesses to establish a presence in overseas markets, offering them a direct way to navigate, interact with, and ultimately succeed in foreign economic landscapes.

Similarly, the BRI is a massive project aiming to bolster a trade and infrastructure network connecting Asia with Europe and Africa along ancient trade routes. COCZs are key links of this infrastructure connectivity as they build a link, a physical presence, that helps connect Chinese businesses to local markets along these routes. In a way, you could say that the COCZs are an embodiment of the "brick and mortar" aspect of the BRI, literally planting Chinese commerce into the soil of participating nations. If we look at China's broader economic development goals—internationalizing Chinese enterprises, securing global supply chains, fostering trade relationships, and gaining influence—you can see how COCZs dovetail with these aspirations. By providing Chinese businesses a launchpad to go global, COCZs help foster the international presence and influence China's aspirations, while also strengthening trade relationships and securing global supply chains.

What are some of the concerns and criticisms surrounding COCZs, such as labor rights violations, environmental degradation, loan dependence, land acquisitions, and transparency issues? How do these challenges affect the perception of COCZs' positive influence on local employment and revenue generation?

As for labor rights violations, there have been several instances where Chinese companies operating within these zones have been accused of poor treatment of workers. This is particularly noticeable in the Zambia-China Economic & Trade Cooperation Zone. Despite creating thousands of jobs, there have been worker protests, indicating discontentment with conditions. As for environmental degradation, this is another significant concern. In Thailand's Thai-Chinese Rayong Industrial Zone, factories have been accused of polluting local waters and releasing toxic chemicals into the air and soil. Similarly, in Ethiopia’s Eastern Industry Zone, the thriving leather industry has posed substantial environmental challenges. Loan dependence and overreliance on China is another aspect we can't overlook. The lack of transparency surrounding the loan and management of the Zambia-China Economic and Trade Cooperation Zone, for instance, raised alarms about Zambia's debt and dependence on China.

The fear is that this overreliance might lead to a debt crisis, with poorer countries losing control of important infrastructure and resources to repay their debts. Land acquisitions have also been problematic in areas such as Pakistan, where the China-Pakistan Economic Corridor has run into issues including land access and resettlement problems. Lastly, transparency issues are a recurring theme. It's been challenging to obtain detailed financial data on specific COCZs, making it tough to assess their real impact. Often, only aggregate data is available, which may not fully represent the situation on the ground.

These challenges and criticisms have affected the perception of COCZs' positive influence.

Despite creating jobs and boosting the economy, these concerns have raised questions about the overall sustainability and fairness of these initiatives. So, while there are undeniable benefits to the host countries, it's clear that there's room for improvement in ensuring these zones are managed in a way that benefits all stakeholders and doesn't harm the environment or infringe on labor rights. It's a complex situation and one that needs careful management to ensure the best outcomes for everyone involved.

How can policymakers, businesses, and civil society organizations collaborate to ensure that COCZs uphold sustainable and responsible practices, mitigate negative impacts, and contribute to the long-term development and well-being of the host countries?

It is significant to see how Chinese companies are increasingly incorporating corporate social responsibility and environmental, social, and governance frameworks in their operations abroad. But, of course, it's not just about top-down approaches. Civil society organizations have a big role here as well. They can serve as watchdogs, holding both businesses and policymakers accountable. They can help educate the community about their rights, raise public awareness on the potential impacts of these zones, and ensure the voices of the community are heard. In my research on Chinese-financed and built railways in Kenya and Ethiopia, it was clear how the more vibrant civil society of Kenya was an important driver in the better implementation of corporate social responsibility in Kenya. It's also crucial that there's open communication among all these groups. That means regular dialogues, consultations, and collaborative problem-solving. By working together, they can find solutions that balance economic growth with social and environmental well-being. Finally, international cooperation and oversight can provide additional layers of accountability.

How do COCZs contribute to China's efforts to secure advantageous trading conditions for its businesses abroad and create a safer environment for its economic development? In what ways do they enhance China's soft power?

COCZs reflect China’s ambitious strategy that's geared towards boosting its economic development and global influence. On the direct side, these COCZs provide Chinese businesses with a platform to extend their reach in foreign markets. They create a more favorable environment for these businesses to trade and invest. By establishing these zones, China is essentially setting up shop right in the heart of various global markets. This allows Chinese businesses to overcome barriers such as tariffs, customs, and logistics that they would otherwise face. Plus, it's easier to understand and cater to the local market demands when you're physically present there. It's like playing a home game on foreign soil. But there's also an indirect aspect. Establishing these zones also contributes to the local economy of the host countries. It can lead to job creation, infrastructure development, and technology transfer. This means that China is not just seen as a business partner, but also as a contributor to local economic growth. This enhances China's image, builds goodwill, and can make these countries more inclined towards forming favorable trade and political relationships with China. So, this aspect also feeds into China's soft power strategy.

What role do you see COCZs playing in the future of China's economic engagement with Europe and Africa? Are there any emerging trends or developments that you find noteworthy in this regard?

COCZs are shaping up to be a critical component not only of China’s domestic economic development, but also of China's international economic engagement. Currently, there are four COCZs recognized by the MOFCOM in Africa: Ethiopia, Nigeria, Egypt and Zambia. These zones have been operational for some time, and they are an essential part of the maritime trade network of the BRI and are an expression of the vision of China to integrate supply and industrial chains. In Europe, Hungary hosts two COCZs and Belgium hosts the China-Belgium Technology Center to foster European-Chinese innovation and cooperation in the field of high tech. I expect that COCZs, especially in Africa, will continue to play a role in facilitating the expansion of Chinese businesses in these regions, especially in sectors like manufacturing, retail, and technology.

This presence is not just about business transactions, but also about gaining an in-depth understanding of the local market dynamics, cultural nuances, consumer behavior, and regulatory landscape. This information is priceless when it comes to tailoring products and services that resonate with local consumers. So, it's a sort of on-the-ground learning experience for Chinese companies, which could lead to more successful business strategies and ventures. Additionally, I believe the integration of digital technologies in COCZs could be a game-changer. We're already seeing trends where COCZs are not just physical marketplaces but are also linked to e-commerce platforms. This opens up the potential for Chinese companies to reach a wider customer base and offer a more streamlined and personalized shopping experience. Moreover, by contributing to the local economies of the host countries, these zones can serve as a tool of economic diplomacy, fostering goodwill and potentially influencing these countries' stances on issues of mutual interest. Of course, the future is unpredictable, and geopolitical dynamics can be complex, especially in Europe, which is trying to de-risk from China. But if managed responsibly, COCZs can present opportunities for both China and the host countries, enhancing economic growth, and fostering cooperation.

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Adapted from the original article by ForeignPress.org.

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