- China's rapidly expanding footprint in developing countries around the world is facing mounting scrutiny, even as states across Asia and Africa compete for Chinese investment dollars.
- Sultan Ahmed bin Sulayem, the chairman of DP World, the UAE's state-owned port operator and among the top four largest port operators on the planet by cargo tonnage, is among those critics.
- Chinese companies "have taken predatory practices in something that (is termed) today to be a debt trap, whereby they overextend their debts to countries and eventually take their assets," bin Sulayem said.
China's rapidly expanding footprint in developing countries around the world is facing mounting scrutiny, even as states across Asia and Africa compete for Chinese investment dollars.
Sultan Ahmed bin Sulayem, the chairman of DP World, the UAE's state-owned port operator and among the top four largest port operators on the planet by cargo tonnage, is among those critics. Speaking to CNBC at the World Economic Forum in Davos, he called out Chinese companies for what he saw as unethical practices in foreign countries.
"China as a government has great respect throughout the world. Unfortunately, the actions of Chinese companies don't reflect that," Bin Sulayem said. "They have taken predatory practices in something that (is termed) today to be a debt trap, whereby they overextend their debts to countries and eventually take their assets. This is something that tarnishes the reputation of China."
For Bin Sulayem and DP World, it's personal. The company in November of last year filed a lawsuit against China for its role in what it termed an "illegal seizure" of port and free zone facilities on the Red Sea coast of Djibouti whose operation had been exclusively granted to DP World. It accused the state-owned China Merchants Port Holdings of unlawfully inducing Djibouti's violation of their agreement. UAE authorities also criticized the Djiboutian government for violating its terms with the port operator, an accusation that Djibouti senior officials have dismissed. The East African nation hosts Chinese and U.S. military bases and is seen as economically and military strategic.
"Unfortunately some of these companies, because they are flush with cash, this disturbs the balance around the world, and gives China a bad reputation," the chairman said.
China has poured billions of dollars into infrastructure projects across Asia and Africa as part of its Belt and Road project, providing what many acknowledge is badly-needed investment for developing countries — but what's at the same time sunk several nations into deep debt. Analysts point to Beijing's offers of cheap loans and then demands of control over infrastructure as compensation when those debts cannot be paid off.
In 2017, Sri Lanka, with more than $1 billion in debt owed to China, handed over its Hambantota port to Chinese state-owned companies. According to the non-profit Center for Global Development, the countries most affected by Chinese debt include Djibouti, Kyrgyzstan, Tajikistan, Laos, the Maldives, Mongolia, Montenegro, and Pakistan, with the first three facing national debt at more than 75 percent of their GDP as of March 2018.
"I would say, you trust the Chinese government, you watch out for the Chinese companies," Bin Sulayem said. "Some of them are good, we have great relations with them. But some of them, unfortunately, they use tactics which are not acceptable in getting market share."
Of China's approximately 150,000 state-owned enterprises, some 50,000 are owned by the central government, with the rest belonging to local governments, according to the U.S. Department of Commerce.
DP World is currently expanding its port projects in the disputed territory of Somaliland — which has enraged the federal government in Somalia — as well as in Rwanda, underscoring the growing importance of East Africa not just to China but to the UAE. DP World operates 78 ports in more than 40 nations.
Bin Sulayem isn't alone in his view. White House national security advisor John Bolton in December slammed what he called "the predatory practices pursued by China" as something that would "stunt economic growth in Africa (and) threaten the financial independence of African nations."
Ahmed Heikal, chairman of major regional investor Qalaa Holdings, echoed those concerns while speaking to CNBC on Tuesday.
"The jury is still out on those investments from China," Heikal said, when asked about the dominance of Chinese investment growth in Africa over that of the West. "A lot of those investments are extremely problematic and will end up in total write-offs. And (another) factor people need to be very careful about is that the Chinese — unlike any other government — they tend to convert debt instruments into equity."
"The electricity company of Zimbabwe is now owned by the Chinese," Heikal continued. "The port of Bangladesh is now Chinese. Soon the port of Kenya may end up being Chinese. So whether this is a deliberate strategy from the part of the Chinese government or not, those are investments that are difficult to see through in the short term. But something to be aware of."
Egypt-based Qalaa Holdings itself has vast investment projects across the Middle East and Sub-Saharan Africa, in sectors ranging from infrastructure and energy to logistics and agrifoods. For Heikal, the contribution of foreign investment to development is essential in fostering growth as well as stemming African migration to Europe. But he didn't shy away from voicing his disapproval of what many call China's model of debt-trap diplomacy.
"I don't think that the Chinese government is aware of the backlash that that may end up causing in the future," he added. "You can do this once, twice, three times — but if it starts being a wave of buying assets for debts, I think it can have a serious backlash and can affect the future attractiveness of Chinese investments down the line."