Sailors with the Chinese navy stand on the deck of a missile frigate in Manila on April 13, 2010. The Chinese regime is building a military base in Djibouti that will extend its military reach. (Ted Aljibe/AFP/Getty Images)Sailors with the Chinese navy stand on the deck of a missile frigate in Manila on April 13, 2010. The Chinese regime is building a military base in Djibouti that will extend its military reach. (Ted Aljibe/AFP/Getty Images)

China’s first overseas military base—located at a critical choke point for global trade looking to navigate the Suez Canal—could be a geopolitical game changer, but it has less impact in military terms.

Establishing the Djibouti base at the Horn of Africa signals the Chinese regime’s long-term strategic intentions, say experts. A Chinese Communist Party that once pledged to stay out of the affairs of other countries is now building military capacity far beyond its immediate border. 

But the change is less important to China’s military capability than to its ability to directly intervene in global shipping. Earlier this year, the regime convinced Panama—home to the world’s other great shipping pass—to cut ties with Taiwan and fully back China’s claim on the island nation, which the regime describes as a breakaway province. 

These moves follow a series of port deals that have given the regime the ability to ensure its critical shipping lanes. 

Until now, however, none of those facilities have been for direct military use.

Establishing the Djibouti base reverses a long-standing military policy, said Gabe Collins, a researcher and co-founder of China Signpost.

“If you look at basic foreign policymaking throughout the vast majority of the PRC’s history, overseas bases are major redlines they weren’t willing to cross, and they pretty clearly crossed that now,” he said. Collins co-authored a report on the base and its implications two years ago.

Territorial claims in the South China Sea. (VOA News)

Territorial claims in the South China Sea. (VOA News)

The change comes as the Chinese regime becomes increasingly bellicose in its expansive claim to a major swath of the South China Sea. The regime has also been vocal and threatening in its ongoing and multiple border disputes with India. Those disputes have reached an intensity not seen in decades.

Military reform

Personnel from China are now en route to build out the facility, carried on ships that are part of the regime’s rapidly modernizing military.

That military is being reformed to develop the capability to fight battles beyond its shores.

The People’s Liberation Army’s (PLA) aims to, among other things, “improve its ability to fight short-duration, high-intensity regional conflicts at greater distances from the Chinese mainland,” reads the secretary of defense’s 2017 report to Congress on Chinese military developments.

While the regime is most intent on potential conflict in the South and East China seas, Djibouti’s position on the northwestern edge of the Indian Ocean has fueled concern in strategic rival India that the PLA is gaining another position that could threaten Indian interests.

Limited military value

Fortunately for India, the actual military strategic value of the base is limited, said Collins. While it may be useful to launch attacks against much weaker foes in the Middle East or North Africa with limited attack capabilities, it is as much of a liability as it is an asset in a conflict with a greater power.

“I suspect that base would become a high explosive sponge fairly quickly. It’s a targeter’s dream because it’s built a way outside of the town,” he said.

Using Djibouti as a base of operations to fight another great power would be like throwing stones from a house made of “very, very, very thin glass,” said Collins. The base wouldn’t last long, he said.

The base is more useful for power projection into regional conflicts, a refueling and resupply depot rather than a base of operations. The fact that the United States, France, and Japan have bases there reinforces the point. To date, China has used its commercial facility there for years in ongoing anti-piracy efforts and to evacuate 500 Chinese nationals from Yemen in 2015.

Those operations gave China the pretext to forward-deploy naval forces in the region. With its Djibouti foothold now being expanded for military use, the regime gains a base in a country that is relatively stable in a region rife with conflict. For an expansionist China looking to build geopolitical influence in Africa and with oil-rich Gulf states, it’s an important gain.

“If you have an amphibious ship with some armed helicopters on it, and you are dealing with insurgents in some countries in East Africa, or even Yemen or place like that, you just came to the table with a lot of currency and you can play all night long,” said Collins.

Even if India can have some confidence that the base has limited military value, the ability China gains to forward deploy its navy along a critical shipping lane has unsettling implications.  

Pax Sinica

The Chinese regime has been working to secure its presence at the world’s most important chokepoints for shipping oil: the Strait of Malacca, the Suez Canal, the Strait of Hormuz, the Panama Canal, the Bab el-Mandeb Strait, and the Turkish Straits.

The Chinese reigme is working to gain influence at every major oil trade chokepoint. (Epoch Times)

The Chinese reigme is working to gain influence at every major oil trade chokepoint. (Epoch Times)

In doing so, the regime could play a major role securing or controlling world trade. That trade is now assured through the “Pax Americana,” a state of relative international peace overseen by the United States.

But a “Pax Sinica,” or “Chinese Peace,” could look very different, said Collins.

“One of the things you have to look at is the countries that are serving as security guarantor, you have to see what sort of mentality they bring to the table. Are they coming to this with a mercantilist mindset or much more with a globalist and trading oriented mindset,” asked Collin.

The United States has been an equal opportunity security provider, he said, basically indifferent to where oil was going, whether it be Europe or East Asia.

“We don’t discriminate at all in how we provide security based on the destination of the shipment and so I think that’s something that makes the Pax Americana unique,” he said.

While China’s intentions are unclear, its aggressive claims in the South China Sea and habit of using PLA hackers to steal commercial technology for China’s state-owned companies and high-priority industries are just two of many examples fueling allegations that the regime takes the mercantilist approach to trade.

At the moment, China can do little more than fly its flag in Djibouti, said Collins. It naval assets are limited to the few warships and support vessels that have made a passing presence there.

But that could change, and China could take a tactic it has used successfully in the South China Sea—using “coercive tactics, such as the use of law enforcement vessels and its maritime militia, to enforce maritime claims and advance its interests in ways that are calculated to fall below the threshold of provoking conflict.”

From that perspective, even if the base has little value in an actual war, it could boost efforts to otherwise assert the interests of the Chinese regime.

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Chinese telecom equipment giant ZTE Corp. was hit with trade sanctions from the U.S. Department of Commerce last month for allegedly violating laws restricting exports of American made technology to Iran and other nations.
Trading of ZTE’s shares was suspended for a month on the Shenzhen Stock Exchange, and is down more than 3 percent since April 7 when trading finally resumed.
The sanctions were temporarily lifted until June 30, assuming ZTE continues to cooperate with U.S. authorities. The increased scrutiny will likely expose other Chinese firms to similar bans, potentially introducing volatility and downward pressure on Chinese stocks—with the Shanghai Composite already down 13 percent year-to-date.
The U.S. government has been investigating ZTE’s activities dating back to 2012. The company allegedly created shell entities to sell software and telecom equipment containing components made in the United States to Iran, which is in violation of U.S. economic sanctions.
On March 7, the U.S. government barred manufacturers from selling U.S.-made electronic components to ZTE. The sanction was a major setback to ZTE’s global operations. The company delayed releasing its 2015 financial statements by around two weeks to assess its bottom line impact, and three top executives left the firm. Shi Lirong, CEO since 2010, and two executive vice presidents stepped down from their posts on April 5.
The case is ongoing and ZTE isn’t in the clear yet. “The investigations are still in progress, and may result in criminal and civil liabilities under U.S. laws,” the company announced April 6 when it released its 2015 earnings.
A Critical Case
The Shenzhen-based ZTE, China’s second largest telecom company, relies on key U.S. components for much of its equipment. “In the information and communications technology sector, Chinese companies are unable to wholly rely on self-production,” an equities analyst in Hong Kong told Caixin, a Chinese business magazine.
“China still lags behind in key areas, such as the production of computer chips, storage devices, electronic devices used in telecom towers and other advanced materials.”
An unfavorable outcome to ongoing investigations could bar procurement of critical components from U.S. vendors such as Qualcomm for smartphone chips and Xilinx for base station chips, a catastrophic result for ZTE’s global business.
ZTE currently has less than 5 percent global market share on mobile phones, and its latest smartphones all use Qualcomm chips. It’s also a major player in networking equipment such as base stations and switches.
The investigations are still in progress, and may result in criminal and civil liabilities.— ZTE

In a research note to investors, Nomura Securities last month estimated that between 10 and 15 percent of ZTE’s components are sourced from U.S. companies. Of those components, ZTE would be able to secure alternative vendors to cover only 30 percent of its needs from U.S. companies, according to Commerce Department estimates. That means production on some products would be halted, severely crippling ZTE’s ability to compete.
Huawei Implicated?
The Commerce Department released internal ZTE documents from 2011—marked as “top secret internal use only”—which detailed its plans to set up seemingly unrelated intermediary companies to facilitate exports to countries such as North Korea and Iran.
To justify the plan, ZTE analyzed similar trading structures set up by a firm with the alias F7, a competitor to ZTE. A document described how F7 had so-called “cut-off companies” to “sign contracts for projects in embargoed countries.”
The document admitted that once American authorities notified Congress of F7’s business interests in embargoed countries, F7’s ability to do business in the U.S. was hampered. “In 2010, F7’s proposal to acquire U.S. 3Leaf Company was opposed by the U.S. government, citing the impact to U.S. national security,” the memo said.
The company F7 as described by ZTE sounds suspiciously similar to none other than its biggest rival, China’s No. 1 telecom firm Huawei Technologies.
In 2010, the Justice Department blocked Huawei’s purchase of 3Leaf Systems due to national security concerns. ZTE’s documents also claimed that F7 had an ongoing joint venture with U.S.-based digital security firm Symantec. Huawei apparently teamed up with Symantec in 2008 to jointly develop computer network security products, and the alliance was terminated by Symantec in 2012 on grounds that its partnership could jeopardize Symantec’s relationship with U.S. government agencies.
ZTE also described the company as a formidable competitor. “This [F7’s] cut-off company’s capital credit and capability are relatively strong compared to our company; it can cut off risks more effectively,” the document read.
Huawei, with annual revenues of more than $60 billion, is much larger than ZTE and has a bigger footprint in the United States as a leading smartphone maker. It would be hardly surprising if ZTE sought to replicate Huawei’s business practices.
The Pentagon and U.S. Congress believe Huawei has Chinese military ties, and the company has been accused of forging government documents and hacking government e-mail systems. In 2014, the Washington Times reported that Huawei attempted to breach the NSA’s computer network.
The ongoing ZTE case could signal that the U.S. government is increasing investigation and enforcement of trade embargo rules. And Chinese companies, especially ones in the engineering, construction, and financial sectors could be in the crosshairs.
As early as 2010, the Washington Post reported that U.S. intelligence believes several Chinese companies and banks were engaged in exporting restricted technologies to Iran, possibly for use in its military missile program.
Beijing Aeronautical Manufacturing Technology Research Institute, owned by Chinese aerospace firm Avic, was placed on a watchlist in 2014 by the Commerce Department for its business with Iran.
While certain U.N. sanctions against Iran were eased recently, the U.S. continues to maintain unilateral economic sanctions against Iran. As of April 17, no official U.S. investigations have been announced for Huawei.
MORE:Spy Software Found Preinstalled on Lenovo, Huawei, and Xiaomi SmartphonesChina’s Huawei Accused of Hacking Government and Forging Documents in South Sudan

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