Editor's Note: Stephanie Pfeiffer is Master of Science candidate in Modern Chinese Studies at St. Antony's College, Oxford University. If you want your writing considered for CNN.com/GPS, please email the site's editor amar[dot]bakshi[at]turner.com.
By Stephanie Pfeiffer – Special to CNN
China is now looking abroad to invest its large holdings of foreign currency reserves as part of a multifold effort to acquire natural resources and improve its image as a benevolent business partner.
Where and in what manner China invests is of increasing interest to Western governments and companies because of the unique challenges arising from the competition.
What are the geopolitical ramifications of China’s “going out” strategy, whereby Chinese companies invest in road building, telecommunications and other infrastructure projects in exchange for rights to natural resources?
Despite the helpful injection of much-needed capital into developing economies, many question the long-term security implications of granting foreign firms the extraction rights to nonrenewable resources.
It is not only the state and state-run enterprises who may in the future suffer for the draining of their natural resources, but also the general population for whom benefits are scant as well.
Though profitable while supplies last, natural resource extraction does not boost employment or impart useful skills or knowledge to local employees, where locals are employed at all.
Besides criticism for using imported Chinese laborers, China’s economic ventures are also criticized for lack of transparency and poor quality standards. In many of the places where China is investing, however, people have neither the rights nor the means to fight these practices.
One challenge for the West is how to promote political reform in developing countries now that the Chinese Communist Party’s state-led reforms offer to some extent an authoritarian alternative for growth and poverty reduction.
Without the political and legal conditions that determine U.S. economic activity abroad, the Chinese “roads for resources” development strategy is popular in many politically repressive places. Central Asia is one such region where Chinese investment has global impact, through the rapid development of core industries and the shift in regional power relationships.
The formerly Soviet Central Asian republics (Kazakhstan, Uzbekistan, Turkmenistan, Kyrgystan, and Tajikistan) are an appealing destination for China’s investment due to their vast reserves of oil and natural gas and the relative safety of overland trade and transport.
Strategically located amidst Asia’s continental powers and prone to ethnic unrest that can also unsettle China’s diverse Xinjiang province, Central Asia serves a national security role for China as well.
China has promoted the formal institutionalization of security and economic partnerships in the region by creating the Shanghai Cooperation Organization - a framework through which Russia, China and the Central Asian states organize military intelligence exchange, financial aid, and development ventures.
This multilateral organization, at times internally compared to NATO, is an important indication of China’s attempt to prove to the world that it is dedicated to formally recognized diplomatic channels for solving sensitive political issues like terrorism and separatism.
A latent threat at their back door, China believes it can assure stability and prosperity in Central Asia through large low-interest loans and infrastructure investment. As in the African destinations for Chinese money, however, it is yet unclear how the local populations will benefit since the money goes mostly to oil companies and state-run banks.
Cognizant of the wariness with which the West watches China’s expanding resource appetite, Chinese government leaders view Asian regional integration and energy diversification as critical components of an overall energy security plan.
A network of oil and gas pipelines, many completed in the last several years and several more to open soon, will connect fuel supplies across the Eurasian continent from Russia’s Far East to China’s Xinjiang province to Kazakhstan, the Caspian Sea, and Iran.
Russia, in danger of losing its traditional sphere of influence to China’s campaign in Central Asia, favorably views the shift in oil consumption from West to East because it reduces Russia’s dependence on European markets and diversifies its own oil transport system.
State and corporate trade alliances do not address questions of peace and economic empowerment on the human level, however. The biggest challenge to China as it tries to create a pan-Eurasian economic community supported by governments intolerant of popular uprising is the distrust and suspicion among Russians, Kazakhs, Uzbeks, Tajiks, Indians, and many others, for the historically mighty Chinese population.
Support among Central Asian populations for China’s economic ventures there is contingent on more than oil pipelines and friendly relations with their authoritarian leaders. It requires China to show willingness to provide opportunities to the population for education and mobility. Whether China makes that effort in its own neighborhood is an important indicator of how well it understands and/or accepts the responsibilities that come with regional leadership.
The views expressed are solely those of Stephanie Pfeiffer.