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China using investments to build political influence on world stage

Along the golden sands of Porto Do Acu that grace the Atlantic coastline 175 miles north of Rio de Janeiro, China is forging a new economic reality.

business Updated: Jul 26, 2010 23:16 IST
John Pomfret
John Pomfret
Hindustan Times

Here along the golden sands that grace the Atlantic coastline 175 miles north of Rio de Janeiro, China is forging a new economic reality.

Just past a port where workers are building a two-mile-long pier to accommodate huge vessels known as Chinamaxes that will transport iron ore for China’s ravenous steel industry, past berths for tankers to lug oil to Beijing, a city of factories is sprouting on an island almost twice the size of Manhattan.

Many of the structures will be built with Chinese investment: a steel mill, a shipyard, an automobile plant, a factory to manufacture oil and gas equipment. The factory city represents an aggressive push to invest in industries overseas to bolster the country’s image and political influence. Call it “dollar diplomacy,” Chinese-style.

Flush with more than $2 trillion in foreign exchange reserves, China has directed its state firms to scour the globe for opportunities. As it does so, China is playing by its own rules, giving its firms an edge over US and other multinational companies bound by internationally mandated restrictions intended to promote fair competition.

In addition, Brazil and other developing countries, which once saw China as an ally, are now realising that Chinese companies are competing on their own turf for resources and market share. And some analysts say the US has been slow to perceive that China is using investment to build political heft.

“They do not want to be perceived as just natural resource eaters,” said Eike Batista, the Brazilian billionaire behind the port and one of the world’s richest men. “To them it’s common sense.”

Li Jianqiang, who runs China Shipping's operations in South America, sees big opportunities. “Brazil used to look to the US and Europe, but then one day they discovered us and they realized how far behind they were. Money talks, and we understand that. If you have money, people respect you, and then you will have political power.”

Chinese firms have bought stakes in Brazil's electrical grid; they are building steel mills, car plants in that country. A simple formula, or deviously foresighted? Time will tell — and soon.

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First Published: Jul 26, 2010 23:14 IST