The following interview with Mathieu Duchâtel, Senior Researcher and Head of the China Project, [1] Fleur Huijskens, Research Assistant, [2] and Zhou Hang, Researcher, [3] was carried out in Beijing on May 8, 2014 by Patrick Renz and Frauke Heidemann. The main focus of the interview was on the protection of Chinese overseas nationals, investment decisions by State Owned Enterprises, the Chinese armed forces and territorial disputes. All footnotes are remarks by Patrick Renz and Frauke Heidemann, aimed at giving some additional background knowledge and especially giving the links to the cited documents so that the reader can follow up on these issues easily.

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. Protection of Chinese Overseas Nationals

Since you first published on this issue back in 2012, [4] do you see any changes of the Chinese risk perception for the need to protect overseas nationals?

Duchâtel: The protection of Chinese overseas nationals has been a priority in the Chinese foreign policy since 2004. To understand this development, one has to focus on what has been done within the Ministry of Foreign Affairs (MFA). Additionally, public opinion in China is being very supportive of those efforts in support of the safety of Chinese nationals overseas. But while it has been a priority for the MFA, in terms of capacity building it has not been able to hire any new people. This shows that it is clearly a priority in terms of issues and it is a new issue for Chinese foreign policy itself, but at the same time it is not something that has been reflected by MFA efforts in hiring consular officials. The importance for China thereby derives from the level of attention in the public and a link to the legitimacy of its foreign policy. Since 2012, evacuations are becoming a standard operation for China during crises in foreign countries. As those repatriations usually happen through charter flights, the case of Libya was unique in its scale. [5] Overall, China’s response to crises is getting standardized with South Sudan being a very good example over the past two years.[6]

Zhou: In the past, there was a higher commitment from Chinese top leaders to do more work on this issue. If you take a look into the Defense White Paper of 2012,[7] you see that for the first time the importance of evacuations of Chinese overseas citizens is specifically mentioned. Sudan is a very good example of new developments. Answering my question on the use of Private Security Companies (PSCs) by Chinese companies to protect themselves in Sudan, a South Sudanese responded that they mainly rely on the local government. The government is sending the army and local police to protect Chinese compounds. However, I also heard from Chinese experts that Chinese companies rely on Chinese PSCs, at least for the emergency planning, but have not heard anything on them actually sending people there to guard compounds.

Huijskens: Or they outsource it to foreign PSCs.

Zhou: But I don’t think there is any Chinese armed PSCs or police in Sudan.

Is there any foreign country where there are Chinese PSCs active?

Zhou: Judging from previous interviews, probably in Iraq.

Duchâtel: Yes, but there is no open source material on this. While the number of Chinese PSCs offering their services is increasing, most are acting on Chinese territory only. Probably about 99% are focused on the mainland and only some are exploring overseas markets. One of the reasons is that they are not encouraged by the state do go abroad. As Hang said, the standard response for China to handle crises and risks has been on the diplomatic level to strike agreements with the local governments for protection from the local law enforcement agencies and the military. I have even heard about cases of Chinese PSCs subcontracting the armed guards to foreign PSCs. They are very cautious because it is about the image of China overseas and consistency with the non-interference principle. [8] Official guidelines to the role of PSCs in this regard are missing. China’s foreign policy is moving more towards a comprehensive approach such as in the case of South Sudan. Such an approach is motivated by the security of nationals and assets and not only about providing physical security on the ground, but also about trying to be more involved and even mediating between the different sides of the conflict. Thereby they try to provide security in a very comprehensive way and create the conditions for a secure environment to their nationals abroad. Sudan is however an extreme case in this regard.

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. Investment Decisions by Chinese State Owned Enterprises (SOEs)

Do you see the risk assessments of Chinese SOEs prior to overseas investments changing? Is there a change in willingness to go to high-risk areas?

Duchâtel: This is hard to say. Creating and improving the risk assessment capabilities of companies and government agencies involved in the investment decision-making process is clearly a priority and China is moving on this issue. With regard to the current understanding of how to assess risks and specifically include political risks, it is mostly capacity building and trying to be more consistent, which has not really been the case in the past. Regarding institutionalizing the risk assessment in the investment decision-making process, I don’t see major changes at the moment.

Huijskens: We talked to an expert who explained that those risk assessments are not about the decision of going ahead with the investment or not. They are primarily about assessing the risks to prepare for and deal with them once you arrive there. Thereby the assessment helps them to understand and prepare for what they can expect on the ground, but it is not about going or not.

Duchâtel: A good example for this is the Aynak copper mine investment in Afghanistan. The investment of the Metallurgical Corporation of China is a very good case that SOEs can be more willing to accept risks because they know that they will be backed by the State.[9]

Huijskens: They have been learning about Corporate Social Responsibility (CSR) when dealing with local governments and how they should be part of the process. Basically it is no longer giving money and just let them assess how it is best spent.

Duchâtel: CSR is definitely part of the response.

Even though those investments are largely done by SOEs, is there any difference in how private Chinese companies going overseas are providing for their security?

Duchâtel: In the energy sector it is clearly SOEs that have the lion’s share of overseas investments. Most of the problems that have been widely reported in Africa, Afghanistan, Pakistan, the Middle East and Latin America involved SOEs. I am not aware of other major cases.

How did the evacuations in Libya work? Do companies involved in investment projects and with employees on the ground have to pay for the evacuation costs, or is that covered by the SOEs executing the evacuation such as airlines?

Duchâtel: That is a question that has been debated a lot. You find both reports of companies being charged and reports stating that the state has to cover all the expenses. To my knowledge, when looking at open source material there is no price tag for these operations and the distribution of costs has not been documented precisely.

Zhou: It seems rather impossible to actually charge the expenses to each company.

Duchâtel: That is what the Europeans do. In the case of Kyrgyzstan, the individuals were charged to their charter flight tickets back to Europe after the evacuation.[10]

Zhou: That is not the case in China. People staying in African countries expect the government to fly them back to China when the situation gets unstable.

Duchâtel: But one thing that has changed in this regard: the Ministry of Commerce (MOFCOM) has issued legislation that makes intermediary companies that help SOEs hire workers going into those countries responsible for their evacuation.

Zhou: MOFCOM also combined a list of documents related to foreign investments and sending workers in foreign countries.

Duchâtel: Libya has really sparked a debate regarding how to share costs and divide responsibilities, with MOFCOM being the leading actor in this debate.

Did this trend change the role of Sinosure and political risk insurance in general?

Zhou: It is not necessary to sign a contract with Sinosure, but it is a trend among companies to improve relations with it. Such insurances are a common practice in Western countries and therefore a work in progress here in China.

When assessing the role of Chinese PSCs, how difficult is it for you to get reliable information?

Duchâtel: We work on the protection of nationals overseas as a foreign policy issue, meaning that we have a broad approach on this. We look at evacuations, consular protection and prevention, work of SOEs in managing risks and how they interact with PSCs. Many companies have really strict rules regarding confidentiality and they are not really willing to share what they are doing. This is however for institutional reasons, they have no other reason to hide what they are doing. The protection of overseas nationals is an area of Chinese foreign policy that is bringing China towards greater transparency, because most cases attract a lot of public attention and support for protecting citizens overseas. As China is prone of its actions, more information will become available. The same is true for companies, even tough they have a long way to go towards increasing transparency. To some extend, Chinese companies can learn from their Western counterparts that are facing similar challenges. The ideal way to understand what Chinese companies are doing is to exchange on Best Practices. The right entry point in my view is to have an exchange based on reciprocity. In fact, as Chinese and Western companies are engaging in more joint ventures and joint explorations in the energy sector especially in unstable countries such as in Iraq, there will be more transparency regarding what Chinese companies are doing. Currently, on a company level it is extremely difficult to get access or information.

Zhou: One detailed report is on a Chinese PSC providing security services for maritime transportation in the Gulf of Guinea and the Gulf of Aden. Otherwise it is extremely difficult, given that this is still a grey zone. Companies need to be very cautious, especially because with Chinese PSC no one is really sure how private they are. Many are related to the local or municipal level police department.

Duchâtel: The legislation on firearms is another interesting side of the problem, as it prevents non-public actors from holding firearms.

Zhou: And the local police department is actually not allowed to open a business, so it really is a grey zone.

Duchâtel: Currently, most actors in the Chinese PSC industry are bodyguards working in China.

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. Chinese Armed Forces

How does SIPRI count Chinese military forces, given the high number and unclear status of People’s Armed Police (PAP) and other Forces?

Zhou: In the case of China PAP is included.[11]

Duchâtel: Other forces like the coast guard are not included.

Zhou: Historically, the PAP has been part of the People’s Liberation Army (PLA). Even today in Xinjiang the PAP has two uniforms: one for the PLA and one for the PAP. When they deal with internal riots they can’t wear the PLA uniform and therefore change into PAP uniforms.

Duchâtel: On this our colleague has published a piece in our newsletter.[12]

What role plays the ongoing military modernization in the protection of Chinese nationals overseas?

Duchâtel: That is a big question for the future of Chinese foreign policy, whether they will use the PLA to conduct evacuations. In the foreign policy of the U.S. or European states, Special Forces have been used to free hostages. In the case of China, there is Libya with transport planes from the PLA Air Force (PLAAF) involved, but they didn’t really play a key role. The PLAAF was sent because it was easier for them to land in the desert. As Hang said, protection of nationals overseas has been included in the White Paper of National Defense, showing a trend, but then you have the non-interference principle which is making such missions very difficult. Overall, there are other obstacles the modernization of the PLA is facing and the training alone of Special Forces is no indication that their purpose is for such evacuations.

However, if you think about scenarios on the Western coast of Africa, very far away from the shores of China, where you sometimes have tens of thousands of Chinese nationals, it would be difficult to rely on charter flights and ferry boats to be able to evacuate a large number of Chinese nationals into a neighboring country. Subsequently, the military would have to play a role. The PLA Navy is building some capacities, with big amphibious ships that could really play a role in such an evacuation. China is not really moving in terms of what the PLA is actually doing, but there is a trend towards more involvement in future evacuations. Whether they will include coercion or not is a major question. The role of the PLA as a foreign policy tool in support of an action that would be mainly a civilian operation with maybe some exchanges with the West is discussed a lot. In any given evacuation, the West would also be involved. If there is a major evacuation from any country in the world, it will have to be coordinated.

Zhou: The list of companies involved in the Libya case is a good example. You can suddenly get Southern China Airline to dispatch a couple of planes to Libya because it is nationally owned. You can get the national shipping company Cosco to go there without too much pressure.

Duchâtel: The one condition is that security needs to be provided. If the local state is not providing security, it needs to be provided by someone else. So you can think of many other scenarios. In the case of Kyrgyzstan during the 2010 evacuation for example, Chinese as well as Europeans were able to get escorts by the Kyrgyz military from the different places of evacuation to the airport.

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. Territorial Disputes

You also did research on the territorial disputes in the East China Sea. How are you assessing the chances for cooperation on resource exploration, not only in the East China Sea but also the South China Sea?

Duchâtel: Most people who think that the disputes should be resolved by peaceful means argue that co-development or co-exploitation of energy resources is one of the best solutions. Such an approach offers ways for rival countries to come together and share the benefits of the resources without tackling the sovereignty question. So it has been in many observers’ minds since years. For the East China Sea, the 2008 Consensus [13] with Japan was a step in the right direction. They agreed on the concept of joint development of energy resources on the median line. However, the implementation of this agreement was never really discussed and now it is basically a dead agreement, despite that there was consensus. I therefore belief that even though the timing is not right at the moment, some in China think that it is one of the solutions to manage conflicts in the longer-term.

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Thank you very much for the interview.

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[1] More about Mathieu Duchâtel at: http://www.sipri.org/about/bios/dr-mathieu-duchatel.
[2] More about Fleur Huijskens at: http://www.sipri.org/about/bios/fleur_huijskens.
[3] More about Zhou Hang at: http://www.sipri.org/about/bios/zhou-hang.
[4] Mathieu Duchâtel and Bates Gill, “Overseas citizen protection: a growing challenge for China”, SIPRI: http://www.sipri.org/media/newsletter/essay/february12.
[5] For the Chinese side on the way the evacuation was conducted: http://english.peopledaily.com.cn/90001/90776/90883/7310717.html.
[6] China frequently had to evacuate its nationals from Sudan in light of the sparking tensions and the ongoing conflict. Some insights into those evacuations is given in: http://online.wsj.com/news/articles/SB10001424052702303636404579398231049553034andhttp://english.peopledaily.com.cn/90883/8495532.html.
[7] To access the Defense White Paper of 2012 of the Ministry of National Defense, please refer to: http://eng.mod.gov.cn/Database/WhitePapers/2013-04/16/content_4442752.htm.
[8] The non-interference principle is part of the Five Principles of Peaceful Coexistence. More on those at: http://www.fmprc.gov.cn/mfa_eng/ziliao_665539/3602_665543/3604_665547/t18053.shtml.
[9] More on the investment of the Metallurgical Corporation of China (MCC) in the Aynak copper mine in Afghanistan: http://www.worldbank.org/en/news/feature/2013/04/02/qa-aynak-mining-afghanistan.
[10] More on the background of what made these evacuations necessary: http://www.telegraph.co.uk/news/worldnews/asia/kyrgyzstan/7824938/Kyrgyzstan-violence-British-and-US-governments-prepare-evacuation-of-citizens.html.
[11] For the most recent SIPRI yearbook with information on military expenditure and other critical issues such as international arms transfers, please refer to: http://www.sipri.org/yearbook/2013.
[12] Sam Perlo-Freeman, “Deciphering China’s latest defence budget figures,“ SIPRI Newsletter, March 2014: http://www.sipri.org/media/newsletter/essay/perlo-freeman-mar-2013.
[13] Center for International Law, “2008 China-Japan Principled Consensus on the East China Sea Issue,” National University of Singapore, June 18, 2008: http://cil.nus.edu.sg/rp/il/pdf/2008%20China-Japan%20Principled%20Consensus%20on%20the%20East%20China%20Sea%20Issue-pdf.pdf.

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