Part 2: How China Undermines Democracy

China’s ultimate goal is to create an authoritarian empire that dominates the world with itself at the center.

It’s following the Heartland strategy of Halford Mackinder — one of the fathers of geopolitical analysis. Mackinder said whomever controlled the rich mineral and manpower potential in the vast area from the River Volga in Russia to the Yangtze River in China — which he called the Heartland — would control eventually control Eurasia and Africa — which he called the World Island — and ultimately control the world. (For more, read our primer here)

Beijing’s plan is encapsulated in the One Belt, One Road initiative, unveiled by Chinese President Xi Jinping in the fall of 2013.

“One Belt” refers to the overland development of new infrastructure like roads, rail, airports, pipelines, and communications to connect China’s interior provinces with Europe by way of Russia, Central Asia and the Middle East.



A direct military play to seize control of the Heartland goes through nuclear Russia. That is unthinkable. But China creating an economic monopoly in the Heartland is possible, and it would profoundly increase Beijing’s ability to project power throughout the world.

Power projection leads to “One Road,” the ambitious Chinese attempt to put in its sphere of influence the seas from the Western Pacific to the Eastern Indian Ocean, which would take it to the Middle East, Africa and Mediterranean. 

This is being done with Chinese construction of ports in countries along maritime routes that are already used in seaborne trade. China has already seen this strategy pay some dividends, having been awarded contracts to build key ports in Pakistan, Myanmar and Sri Lanka.

How does this undermine democracy?

China’s foreign development model is imperialistic. Chinese companies — typically state-owned enterprises (SOEs) — look to secure no-bid contracts with highly favorable terms to carry out projects financed by Chinese policy banks. The subcontracts go to Chinese companies with procurement from Chinese supply chains and projects built by Chinese labour.

The locals gain no skills so they can build the next one by themselves. Or create a competing company. Dependence on China remains for technology.

Debt trap diplomacy is another feature of Chinese projects to create dependency. China doesn’t give aid. It makes long-term loans that must be repaid.

Negotiations and contract terms are almost never made public. This lack of transparency is central to many of the damaging consequences of the Belt and Road Initiative (BRI), including inflated costs.

The opaque nature of BRI projects presents regular opportunities for massive corruption, best described as a “feature” of the BRI rather than a “bug.”Chinese SOEs seeking preferential bids and terms regularly line the pockets of recipient officials who are all too willing to accept massive amounts of Chinese credit for projects of dubious value.

They get rich, while their people stay poor.

In Malaysia, Chinese SOEs were granted major infrastructure deals at significantly inflated costs, in return for Chinese assistance in bailing out a troubled government investment firm then-Prime Minister Najib Razak used as his personal piggy bank.

The worst example? At a projected cost of US $20 billion, the East Coast Rail Link, planned to run down peninsular Malaysia’s eastern seaboard before cutting west. In fact, it is the second-biggest of all the projects of the BRI. The link is a white elephant: Malaysia’s east coast is much less populated than the west. No process of competitive tenders took place when Razak, awarded the construction and financing to Chinese state companies and banks.

The project is financed almost entirely by Chinese loans. Chinese workers, not Malaysians, are hired to do the construction work. The returns are questionable, but the bills are not. Malaysia’s government debt has been shooting up.

The inflated costs are another “feature.” Beijing extends excessive credit to debtor countries for dubious projects to extract political concessions from the debtor country when it becomes unable to honor its debt obligations.

In countries such as Pakistan and Sri Lanka, the lack of alternatives to continued reliance on China to finance those debts results in a cycle of dependence.

In the infamous case of Sri Lanka’s Hambantota Port, Beijing leveraged that country’s inability to pay its debts to acquire a 99-year lease on a strategic asset and surrounding territory.

From the start, civil servants questioned the wisdom of a second major port, in a country a quarter the size of Britain and with a population of 22 million, when the main port in the capital was thriving and had room to expand. Feasibility studies commissioned by the government had starkly concluded that a port at Hambantota was not economically viable.

But, it is near the hometown of former Prime Minster Mahinda Rajapaksa, who signed the deal.

At the height of Rajapaksa’s tenure, the president and his three brothers controlled many government ministries, and about 80 percent of total government spending. China negotiated directly with them. So the port got built — at a very high rate of interest.

It failed, as predicted. With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012.

Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make payments on the debt he had taken on. This year, the government is expected to generate $14.8 billion in revenue, but its scheduled debt repayments, come to $12.3 billion.

Under heavy pressure and after months of negotiations with the Chinese, the government handed over the port and 15,000 acres of land around it for 99 years in December.

While the port is in a bad place for business, it’s in a great place for a navy. The transfer gave China control of territory just a few hundred miles off the shores of a rival India, and a strategic foothold along a critical commercial and military waterway.

For now, China can only put its navy into Hambantota with Sri Lankan permission. But Sri Lanka’s debt position is little better. So, the Chinese government may be able to dangle debt relief in exchange for its military’s use of Hambantota.

Do Western countries want to step in, bail Sri Lanka out, and reward China financially for a white elephant? No.

So, the alternative is backing governments like Sri Lanka that renounce Chinese deals entirely. Of course, that establishes the principle that not paying your bills is just fine. And let’s China encourage the same elsewhere.

In countries like Cambodia, China has completely corrupted the leadership, achieving a level of “elite capture” that ensures its interests will be protected at the highest levels.

Cambodian Prime Minister Hun Sen's family has links to more than 100 companies across all sectors of the economy including tourism, agriculture, mining, electricity and the media, as well as affiliations with top international brands. In the 14th poorest country in the world, Hun’s worth is estimated to be $1 billion.

Nowhere, does Hun’s influence extend more than Siahnoukville

As home to Cambodia’s only deep-water port – the city has become a focal point for Chinese investment. Vast Chinese-run construction projects are visible across almost every area of the city, including casinos, and its streets are now lined with majority-Chinese businesses and restaurants.

The Chinese come to Sihanoukville to take advantage of a China-Cambodia tax-free economic zone. The majority of the 100-plus factories in the zone are run by Chinese companies, and a further 200 mainly Chinese companies — producing consumer goods and garments — will be part of its ongoing expansion.

The southern coast of Cambodia is now home to US $4.2 billion worth of power plants and offshore oil operations all owned by Chinese companies. Beyond Sihanoukville, BRI money is financing a new highway to Phnom Penh, and a bigger airport in the capital.

Politically what has been the result?

China’s money allowed Hun to crackdown on opposition. Cambodia was a notional democracy. But in in 2017, Hun forcibly dissolved the main opposition party, turning Cambodia into a de facto one-party state.

The European Union has begun the process of revoking its preferential trade agreement with Cambodia — tantamount to imposing economic sanctions. Hun shrugged and said China will fill any gaps left behind by retreating western donors.

With Hun, China gets more bang for buck. Cambodia is a member of ASEAN, the 10 country South-East Asian bloc that promotes economic and military cooperation among members. It has used its veto to block or scale back several ASEAN proposals China doesn’t like.

Thailand is another place where a venal elite is happy to be enticed by the Chinese.

In Thailand, where China is also building a high speed train, it’s illegal for foreigners to own land. There’s also no business case for the train. It will run from Bangkok to Vientianne, Laos through the least populated part of Thailand.

There were initial concerns about whether Beijing would control the land around stations once the route was operational.

The Thai government says the deal has been modified so the Chinese won’t own the land. That’s not entirely clear because even though construction has started, not all the terms have been released. Like Malaysia, you can bet that’s because the Thai military and elite has been richly rewarded.

(I suspect this is true: the Chinese have the air rights for everything built above ground; technically this means they don’t own the land, but they are still taking the best economic benefits. If you want to understand how this works, look at Hong Kong. Every train station has a mall on top of it — and often a 50 story building.)

Thailand is a key pivot country in Asia. Thailand is a monarchy — in the old sense. There is a fetid court that sits around the king and skims all the best opportunities under royal license. The more connected to the court you are, the more low hanging fruits come your way.

Bangkok’s urban elite openly say what New Yorkers, Torontonians, Londoners and San Franciscans think: they’re frank in their bewilderment that the votes of peasants, farmers, drivers and maids have a value equal to their own.

The Thai elite only semi-tolerated democracy when its foreign benefactor was the U.S., and the U.S. advocated that. Keep in mind, Thailand has had 11 military coups since 1932. Governments come and go. But the king and his court are eternal.

The U.S. is an odd patron for Thailand. It’s a vestige of the Vietnam and Cold Wars. Washington is very far away. The U.S. is still nominally Thailand’s largest trading partner, though when you combine China and Hong Kong, China is now number one. And it’s pulling further ahead every year.

In the early 2000s Thaksin Shinawatra won successive elections with a program of subsidies, loans, and cheap health care that was wildly popular with poorer Thais. Since this represented a wealth transfer from rich to poor, it was wildly unpopular with the elite. Thaksin’s real crime in the eyes of the elite was he wanted some of the low hanging fruits to go to his cronies who aren’t part of the court. So, they had the military remove him — and his sister Yingluck, when she won an election after yet another “restoration of democracy” in 2011.

The Thai elite will very happily settle with being a Chinese vassal state. Their money will roll in. They won’t have to worry about another Thaksin.

For average Thais, it won’t be a great deal. Chinese will take economic opportunities that should be theirs. And they will face a military and police armed with Chinese surveillance gear and arms.

Thailand may not have been a model democracy. But it will be a model Chinese vassal state.

China is not just corrupting its immediate neighborhood.

China’s influence has increasingly eroded democratic institutions in at least 20 countries throughout Central Europe and Central Asia, weakening oversight and bolstering authoritarian leaders

Washington-based Freedom House came to that conclusion in its Nations in Transit 2020, an annual report on democratic governance in 29 countries spanning Central Europe, the Balkans, and Eurasia.

The report discusses how China’s diplomatic corps, “tailors its approach to each individual country,” exploiting institutional weaknesses, and “embedding itself into corrupt political and economic structures.”

“The aggregate impact of these measures is the further degradation of good governance, transparency, and the rule of law, and the creation of additional avenues for predatory, local political elites to remain in power and further bend the system to their advantage,” it said.

Freedom House noted that Tajikistan, Montenegro, and North Macedonia owe 41, 39, and 20 percent of their debt, respectively, to China. In April 2020, Kyrgyzstan—which owes as much as two-fifths of its foreign debt to China’s Eximbank—was forced to ask for debt relief amidst fallout from the Covid-19 pandemic, which was generated in China.

That’s how China undermines democracy in the parts of the world where institutions are fragile. What’s more shocking is the success its having in the West … from the supposedly strong institutions that should be immune. We’ll explore that in Part 3.