Jeanne-Mây Desurmont | 24 October 2024

Summary

• The Chancay mega-port project in Peru, built and operated by China’s state-owned COSCO, has raised geopolitical concerns among the U.S. and allies about Chinese control over critical infrastructure, potentially expanding China's influence and power projection in Latin America.

• China’s global network of ports, driven by economic priorities, could also support military capabilities. The PRC could leverage these ports for logistical and intelligence support, which could be used by the People’s Liberation Army Navy (PLAN) during conflicts, raising fears of dual-use purposes for economic and military gains.

• While Chinese port projects like Chancay mainly have commercial objectives, they have strategic implications, potentially limiting access to key maritime routes in the event of conflicts. The U.S. and other countries may respond with competing infrastructure investments to ensure transparent, secure operations and counter China’s growing influence.

The upcoming completion of the first phase of the mega-port of Chancay, a port town situated approximately 80km north of Lima (Peru) revived the debates and the issues linked to Chinese ownership of critical infrastructures. As Chinese President Xi Jinping is expected to inaugurate the mega-port in November, the United States and its allies have expressed their strategic concerns regarding the new maritime project in Latin America. 

Over the last decade, China has replaced the U.S. as the largest partner for South American countries as the PRC is highly interested in the region’s agricultural resources, such as corn and soy, alongside direct access to minerals like lithium and copper. Chinese investments to construct ports, energy production and transport networks in the Latin America and Caribbean region have also averaged $15 billion per annum since 2010. Ultimately the Chancay mega-port will allow ships to only travel 23 days to reach Shanghai, thereby reducing their travel by more than one week. Then, the issues expressed by some Peruvian figures and Amercian think tanks are rooted in the Chinese ownership and control of this new hub. However,  the Chancay project is built, owned and operated by COSCO, a state-owned shipping company. Far from being an exception, the new port in Chancay is a new step in the growing Chinese network of maritime and transportation infrastructures. While other countries have also developed their own port network through their companies, the PRC’s influence and control over the Chinese firms operating at home and abroad make its geopolitical position and its power-projection potential unique. 

Chinese Global Port Presence

The Council on Foreign Relations estimates that the PRC has put in place a network of 129 ports projects worldwide with varying levels of ownership. This is aligned with economic and strategic considerations as ports are key nodes of the current global economy: 80 per cent of the international trade is travelling by sea routes, and the PRC conducts 90 per cent of its trade by sea. To accommodate its large flows of imports and exports, the BRI has notably been designed to provide critical infrastructures to facilitate international trade and especially the Chinese supply chains. For example, China has invested in infrastructures along the Indian Ocean and the Suez Canal to secure the lines of communication for its oil import flows. China can also own or operate terminals in the world’s main container ports (25 of these are in mainland China) and has a presence in 61 per cent of the world’s main shipping hubs. Ultimately, ports are commercially attractive for China, as they are close to crucial markets and resources as well as to important shipping routes and maritime chokepoints. Then, the Chinese presence in ports at the international level is primarily driven by economic incentives as international trade is central to the Chinese economic model and ambition to become the major power in the global maritime transportation industry. 

Alongside economic matters, Chinese presence in the global hubs is also characterized by security and strategic priorities. Indeed, as international trade is crucial for national welfare, the PRC has assigned the People’s Liberation Army (PLA) and the People Liberation Army Navy (PLAN) the task of protecting its interests overseas and trade flows and subsequently,  securing its main supply lines. This includes the ports projects and the sea routes, and in some cases (in UAE and Equatorial Guinea), the projects supported by China were designed to allow Chinese military vessels to moor. This ability to shape the construction plans is yielded by the unprecedented PRC influence on the Chinese firms so they can support or carry out foreign policy objectives. PRC influence on domestic firms can take the form of state ownership like with COSCO Shipping Ports, China Merchants Port, Hutchison Port Holdings. The CCP can also appoint the firm's leadership or require party membership for the board members. The use of national law also requires the firms to render their services and assets available for military use. This is specified under the National Defense Mobilisation Law, the National Defense Transportation Law and the 2017 National Intelligence Law, which requires Chinese citizens and companies to cooperate with state intelligence agencies. 

Analysts have noticed patterns of PLAN warships using the overseas terminals owned and operated by Chinese firms, where they can refuel, resupply or be maintained and repaired. However, these ports can also be used for logistics and intelligence support to sustain the range of PLA abroad. This network of commercial ports is also crucial for China as it does not currently have the capacity to deploy forces that operate from a network of overseas bases. The increased use of civilian infrastructures is also strategically important to the U.S. and its allies. 

In 1999, Hutchison Whampoa (now Hutchison Port Holdings) acquired two ports on both sides of the Panama Canal, raising the concerns of the U.S. Navy. Actually, the main issues revolved around the potential loss of access to the canal leveraged through Hutchison Port Holdings in times of crisis, as it could delay the vessels repositioning between the Atlantic and the Pacific. These concerns are fuelled by the constant presence of PLAN warships in strategic choke points near the Chinese-owned infrastructures and the perspective of dual-use of the civilian ports. Effectively, in the event of a conflict, the ports can have military purposes such as intelligence gathering, control over the logistic routes, and a high potential for sabotage. This risk is enhanced by China’s role in modernising Cuba’s port of Santiago and the potential of signal intelligence collection capabilities. While the ports owned and operated by China are not designed for military function, they do provide a possibility to be used for military activities. Ultimately, by controlling key ports, the PLA could pressure other naval forces to rest in those ports or to control and restrict access to valuable sea routes and commercial flows to the U.S. and its allies.

Forecast

• Short-term:  The Belt and Road Initiative has faced some pushbacks in Asia and Europe, and some projects in Argentina and Venezuela are slowed down. However, it is highly likely that the PRC will continue to finance and operate critical infrastructures in Latin America and beyond. Yet, it is important to note that the Chancay port will only be effective if other regional structures including  roads and railways, are also improved. This includes routes to Brazil for the exportation of grains.

• Medium-term: A potential response to this new form of power projection through commercial facilities could be a competitive counter-offer from the U.S. and other “like-minded” countries to ensure that sea ports operate transparently and securely. For example, the Peruvian Ambassador Alfredo Ferroro presented a $7 billion mega port project in Corio to American investors. This rationale can be supported by the high and plausible risk of a surge in organised crime through PRC-owned maritime hubs fuelled by corruption and lack of transparency. The main risk concerns illegal wildlife and timber trafficking from Latin America to the Chinese markets. 

• Long-term: In the event of conflict, the use of overseas ports by the PRC is limited and unlikely. Military use of those infrastructures would turn the host country into a belligerent, and the PRC doesn’t have a military alliance or defence agreements with host countries. Additionally, it is not likely that China will be engaged in theatres beyond its immediate periphery. However this global commercial port network reflects the growing power of the PRC and provides an undeniable advantage in peacetime and wartime.