Analysis | Strategic corruption exemplified (Part 2): China, the new kid on the block
Kelly McFarland, Emily Crane Linn, and Eleanor Shiori Hughes
As part of our New Global Commons Working Group series on emerging diplomatic challenges, funded by the Carnegie Corporation of New York’s Bridging the Gap Initiative, ISD has convened a working group on combatting strategic corruption, building on the findings of its fall working group “Kleptocracy: Confronting Corruption at Home and Abroad.” This post is part of a series on strategic corruption, drawing on the research and discussions of ISD’s spring working group.
In our first post in this series, we broadly defined strategic corruption as the exploitation of official positions, resources, and processes for geopolitical purposes. We demonstrated how increasingly, autocracies have successfully deployed corruption as a strategic weapon to undermine democratic institutions and weaken the defenses of their adversaries.
Then, we turned our attention to the progenitor of this strategy: Russia. In our second post, we showed how for decades, Russia has used corrosive capital, malign influence, and election interference to create an increased level of influence in target countries and regions, weaken democracies from the inside, and gain space to operate and spread their forms of authoritarian government. Now, in our final installment in this series, we turn our attention to the new kid on the block: China.
China’s corruption tools: investment and development
Over the past decade, China has elevated strategic corruption to undermine alternative forms of government and international order, gain positive depictions of the Chinese Communist Party and its form of government abroad, and gain leverage over external businesses and politicians. Whereas Russia depends heavily on energy production and distribution as the backbone of its kleptocratic networks, China uses infrastructure projects through its Belt and Road Initiative (BRI) as its main strategic corruption avenue. This massive project to link up land and sea routes from China to Africa, Europe, and beyond brings with it massive opportunities for corruption and influence. The BRI entails more than 70 countries and investments of up to $1 trillion USD, about 8 times the size of the post-World War II Marshall Plan. These numbers provide an understanding of the scale of the project, and the room for corruption it provides.
This project, along with influence and propaganda initiatives such as the United Front Work Department, have “harnessed Beijing’s proficiencies in corruption as a strategic tool to secretly influence and undermine the sovereignty of other countries,” according to the Alliance for Securing Democracy’s report Regulating the Enablers. According to one expert in the report, “enough cases of malign influence and election interference have now been revealed to show that the standard operating procedure for BRI investments is to secretly line the pockets of key officials, heads of state, and their family members with widespread bribes and off-book campaign donations.”
Deepening influence in South and Southeast Asia
In one of the most notorious examples of Chinese strategic corruption, Chinese companies in Malaysia allegedly funneled RM 30 billion to former Prime Minister Najib, so that he could bail out state investment funds accused of stealing over $3.5 billion USD from 1 MDB, Malaysia’s development fund. Najib seems to have colluded with the state-backed contractor, China Communications Construction Company to hike up the cost of the double-track East Coast Rail Project from RM30 billion to RM60 billion, with the surplus diverted to companies related to the former PM.
In Sri Lanka, the Chinese have used dark money to create political influence and win contracts for Chinese companies. They have also used infrastructure projects to cultivate what some term “debt trap diplomacy,” which can lead to China’s attainment of hard physical assets, with future military implications. Chinese officials spent years cultivating ties to former Sri Lankan president Mahinda Rajapaksa, who, along with family members, controlled large swaths of government ministries. According to a New York Times investigation, Rajapaksa gained Chinese funding to construct a second major port in Sri Lanka in the president’s home district of Hambantota, which feasibility studies concluded was not economically viable. Construction ensued anyway, with Rajapaksa acquiescing to Chinese terms at every step.
China viewed Rajapaksa as a key asset in its efforts to tilt influence away from India in South Asia. In order to keep the pliant president in office, Chinese companies associated with the port project dispensed at least $7.6 million to Rajapaksa’s reelection campaign, to no avail. The port has been a flop, to no one’s surprise, and the Sri Lankan government was unable to repay the loans. In December 2017, Sri Lanka agreed to “loan” the port and the 15,000 acres around it to China for 99 years.
Solomon Islands: A Sobering Reality Check
In April, news broke that China had secured a five-year security agreement with the Solomon Islands. The leaked draft of this arrangement focuses on a commitment from Beijing to utilize its People’s Liberation Army (PLA) to distribute public goods, such as humanitarian aid and disaster relief, throughout the region. But it also stipulates that the Solomon Islands will provide “intelligence and information support” and “logistical support” of Chinese law enforcement and military forces who enter the Solomon Islands. This understandably rang alarm bells in Australia, the United States, and their partners in the Indo-Pacific region. This geopolitical victory for Beijing has now significantly altered the security dynamics of the region, paving a path for the Chinese to fortify a military base in the island nation. This development confirms that Xi Jinping is not hiding his ambitions to consolidate his power in a way that could seriously threaten the West’s ability to promote and protect democratic norms and principles, as outlined in the Biden administration’s recent publication of its Indo-Pacific strategy.
In response, Western leaders, including Australia’s defense minister, have accused Beijing of bribing Solomon Island political leaders. While the defense minister stopped short of accusing China of utilizing such corrupt payments to lock in this particular deal, he stressed that with China’s penchant for leveraging corrupt payments to obtain favorable geopolitical outcomes from countries who have deep economic dependencies with Beijing, Australia “cannot compete with that sort of playbook.”
The defense minister’s concerns are rooted in precedent. As recently as 2019, Solomon Island politicians alleged that they were offered Chinese bribes of hundreds of thousands of dollars in the lead-up to a critical parliamentary vote to sever diplomatic relations with Taiwan and formally establish relations with China– an abrupt diplomatic about-face that sent shockwaves through the region. Around the same time, it was discovered that a Chinese company had made a deal to lease an entire island, Tulagi, giving it exclusive development rights for 75 years. While this deal was ultimately deemed illegal and overturned, it exemplifies Beijing’s playbook of strategic corruption in this especially sensitive region.
Europe: A new frontier
The Chinese government does not confine its strategic corruption to Southern Asia and the Pacific alone. China has developed questionable relationships with a number of European countries as it seeks to gain BRI entry points and influence in Europe. In Greece, for instance, Chinese shipping giant COSCO has acquired a majority stake in the Port of Piraeus, which will allow it to create a regional transport and logistics hub in the Mediterranean as part of the maritime route of the BRI.
The illiberal and murky world of Victor Orban’s government in Hungary is a prime example of the type of environment that the Chinese like to work in. In 2013, Chinese companies won a controversial contract mired in allegations of corruption and a lack of transparency to build a railway between Budapest and Belgrade. Some of the contracts for the construction have been handed over to Hungarian oligarchs with close connections to Orban. These endeavors seem to be paying off for Beijing, as both Greece and Hungary have recently backed China to undermine or block E.U. statements on issues pertaining to China.
Now what?
Western democracies, and the wider international community, have arrived at an inflection point. China’s new strategic military agreement with the Solomon Islands risks upending the United States’ entire geopolitical strategy in the Indo-Pacific. Russia’s invasion of Ukraine has upended the post Cold War world order in Europe and has shattered the lives of millions. In both cases, strategic corruption paved the way for these seismic geopolitical shifts.
That being said, the Russian invasion has also demonstrated that the United States and its Western allies can quickly unify to achieve major policy shifts, at least in the near-term. Hopefully, these shifts do not stop there. Western actions that make it harder for kleptocratic governments and networks to function has the capacity to do as much, if not more, to these actors than any defensive alliance or more weapons can. It is imperative that the United States, other democracies, the broader international community, civil society, and all other relevant players take action now that will render these activities untenable in the future.
This publication was made possible in part by a grant from the Carnegie Corporation of New York. The statements made and views expressed are solely the responsibility of the authors.
Kelly McFarland is a U.S. diplomatic historian and the director of programs and research at the Institute for the Study of Diplomacy. Follow him on Twitter @McFarlandKellyM.
Emily Crane Linn is a research assistant for the Institute for the Study of Diplomacy. She is in her second year of her Global Human Development master’s degree at Georgetown, with a Certificate in Refugees and Humanitarian Emergencies. Emily is also one of ISD’s inaugural McHenry Fellows.
Eleanor Shiori Hughes is a research assistant at the Institute for the Study of Diplomacy and a master’s student in Asian Studies in the School of Foreign Service. She is also a contributing writer for EconVue.
More from ISD’s Fall and Spring Working Groups on Corruption:
