How China rules the waves

FT investigation: Beijing has spent billions expanding its ports network to secure sea lanes and establish itself as a maritime power

China rules the waves image

Piraeus (Greece)

Strait of

Hormuz

Strait of Gibraltar

CHINA

Suez Canal

Maday Island

(Myanmar)

Gwadar

(Pakistan)

ATLANTIC

OCEAN

Bab al-Mandab Strait

Djibouti

Strait of Malacca

Panama Canal

Hambantota

(Sri Lanka)

Strait of Sunda

(Indonesia)

São Tomé

and Príncipe

Darwin

(Australia)

PACIFIC

OCEAN

Walvis Bay

(Namibia)

INDIAN

OCEAN

China’s global port ownership

clusters around key trade routes

and maritime chokepoints

Ownership or investment

in foreign ports since 1994

Mainland Chinese companies

Major shipping route

Hong Kong (Hutchison)

Maritime chokepoint

Piraeus (Greece)

Strait of

Hormuz

Strait of Gibraltar

CHINA

Suez Canal

Maday Island

(Myanmar)

ATLANTIC

OCEAN

PACIFIC

OCEAN

Gwadar

(Pakistan)

Bab al-Mandab Strait

Djibouti

Panama Canal

Strait of

Malacca

Hambantota

(Sri Lanka)

Strait of Sunda (Indonesia)

São Tomé

and Príncipe

China’s global port

ownership clusters

around key trade routes

and maritime chokepoints

Darwin

(Australia)

Walvis Bay

(Namibia)

INDIAN

OCEAN

Ownership or investment

in foreign ports since 1994

Major shipping route

Maritime chokepoint

Mainland Chinese companies

Other shipping routes

Hong Kong (Hutchison)

Piraeus

(Greece)

Strait of Gibraltar

CHINA

Strait of

Hormuz

Suez Canal

ATLANTIC

OCEAN

Maday Island

(Myanmar)

Gwadar

(Pakistan)

Bab al-Mandab Strait

Djibouti

PACIFIC

OCEAN

Panama Canal

China’s global port

ownership clusters

around key trade routes

and maritime chokepoints

Strait of

Malacca

Hambantota

(Sri Lanka)

São Tomé

and Príncipe

Strait of Sunda

(Indonesia)

Darwin

(Australia)

INDIAN

OCEAN

Walvis Bay

(Namibia)

Ownership or investment

in foreign ports since 1994

Mainland Chinese companies

Hong Kong (Hutchison)

Major shipping route

Maritime chokepoint

Other shipping routes

Piraeus

(Greece)

Strait of Gibraltar

CHINA

Strait of

Hormuz

Suez Canal

ATLANTIC

OCEAN

Maday Island

(Myanmar)

Gwadar

(Pakistan)

Bab al-Mandab Strait

PACIFIC

OCEAN

China’s global port

ownership clusters

around key trade routes

and maritime chokepoints

Djibouti

Panama Canal

Hambantota

(Sri Lanka)

Strait of

Malacca

São Tomé

and Príncipe

Strait of Sunda

(Indonesia)

Darwin

(Australia)

Ownership or investment

in foreign ports since 1994

Walvis Bay

(Namibia)

INDIAN

OCEAN

Mainland Chinese companies

Hong Kong (Hutchison)

Major shipping route

Maritime chokepoint

Other shipping routes

Ports in China and Hong Kong not shown. Includes investments announced and completed
Sources: King’s College, London; FT research; CIA (shipping routes)

Pakistan’s Arabian Sea port of Gwadar is perched on the world’s energy jugular. Sea lanes nearby carry most of China’s oil imports; any disruption could choke the world’s second-largest economy.

Owned, financed and built by China, Gwadar occupies a strategic location. Yet Islamabad and Beijing for years denied any military plans for the harbour, insisting it was a purely commercial project to boost trade. Now the mask is slipping.

“As Gwadar becomes more active as a port, Chinese traffic both commercial and naval will grow to this region,” says a senior foreign ministry official in Islamabad. “There are no plans for a permanent Chinese naval base. But the relationship is stretching out to the sea.”

Gwadar is part of a much bigger ambition, driven by President Xi Jinping, for China to become a maritime superpower. An FT investigation reveals how far Beijing has already come in achieving that objective over the past six years.

China’s global port ownership

clusters around key trade routes

and maritime chokepoints

Chinese ownership or investment

in foreign ports since 1994

Mainland Chinese companies

Hong Kong (Hutchison)

ATLANTIC

OCEAN

Panama Canal

PACIFIC

OCEAN

Major shipping route

Maritime chokepoint

Mainland Chinese companies

Hong Kong (Hutchison)

Piraeus

(Greece)

Strait of

Hormuz

Strait of Gibraltar

Suez Canal

ATLANTIC

OCEAN

Bab al-Mandab Strait

Djibouti

São Tomé

and Príncipe

Walvis Bay

(Namibia)

Mainland Chinese companies

Hong Kong (Hutchison)

Strait of

Hormuz

CHINA

Maday Island

(Myanmar)

Gwadar

(Pakistan)

PACIFIC

OCEAN

Hambantota

(Sri Lanka)

Strait of

Malacca

Strait of Sunda

(Indonesia)

Darwin (Australia)

INDIAN

OCEAN

Ports in China and Hong Kong not shown. Includes investments announced and completed
Sources: King’s College, London; FT research; CIA (shipping routes)
A Pakistani naval guard at Gwadar port image
A Pakistani naval guard at Gwadar port which was financed, built and is now owned by China © Aamir Qureshi/AFP/Getty Images

Investments into a vast network of harbours across the globe have made Chinese port operators the world leaders. Its shipping companies carry more cargo than those of any other nation — five of the top 10 container ports in the world are in mainland China with another in Hong Kong. Its coastguard has the globe’s largest maritime law enforcement fleet, its navy is the world’s fastest growing among major powers and its fishing armada numbers some 200,000 seagoing vessels.

The emergence of China as a maritime superpower is set to challenge a US command of the seas that has underwritten a crucial element of Pax Americana, the relative period of peace enjoyed in the west since the second world war. As US President-elect Donald Trump prepares to take power, strategic tensions between China and the US are already evident in the South China Sea, where Beijing has pledged to enforce its claim to disputed islands and atolls. Rex Tillerson, the Trump nominee for US secretary of state, said on Wednesday that Washington should block Beijing’s access to the islands. Relations were also dented over Mr Trump’s warm overtures toward Taiwan, which China regards as a breakaway province.

China understands maritime influence in the same way as Alfred Thayer Mahan, the 19th century American strategist. “Control of the sea,” Mr Mahan wrote, “by maritime commerce and naval supremacy, means predominant influence in the world; because, however great the wealth of the land, nothing facilitates the necessary exchanges as does the sea.”

Drummed into military service

The Gwadar template, where Beijing used its commercial know-how and financial muscle to secure ownership over a strategic trading base, only to enlist it later into military service, has been replicated in other key locations.

In Sri Lanka, Greece and Djibouti in the Horn of Africa, Chinese investment in civilian ports has been followed by deployments or visits of People’s Liberation Army Navy vessels and in some cases announcements of longer term military contingencies.

China’s ‘dual use’ commercial

and naval ports

Confirmed

Possible

High-profile naval visits

to ports owned by China

Piraeus (Greece)

CHINA

Gwadar (Pakistan)

Djibouti

South China

Sea atolls

Colombo

(Sri Lanka)

São Tomé

and Príncipe

Seychelles*

Darwin**

(Australia)

Walvis Bay

(Namibia)

China’s ‘dual use’ commercial and naval ports

Confirmed

Possible

High profile naval visits to ports owned by China

Piraeus (Greece)

CHINA

Gwadar (Pakistan)

Djibouti

South China

Sea atolls

Colombo

(Sri Lanka)

São Tomé and Príncipe

Seychelles*

Darwin**

(Australia)

Walvis Bay (Namibia)

China’s ‘dual use’ commercial and naval ports

Confirmed

Possible

High-profile naval visits to ports owned by China

Piraeus

(Greece)

CHINA

Gwadar (Pakistan)

South China

Sea atolls

Djibouti

Colombo

(Sri Lanka)

São Tomé

and Príncipe

Seychelles*

Darwin**

(Australia)

Walvis Bay

(Namibia)

'Dual use' is defined as Chinese owned or invested ports confirmed, or proposed, as engaging in both commerce and military use
*China has not invested in a port, but its navy uses Seychelles' facilities in anti-piracy operations in the Indian Ocean
**The US has expressed concern over the possible use of Chinese-owned Darwin port for military purposes
Source: FT research

“There is an inherent duality in the facilities that China is establishing in foreign ports, which are ostensibly commercial but quickly upgradeable to carry out essential military missions,” says Abhijit Singh, senior fellow at the Observer Research Foundation in New Delhi. “They are great for the soft projection of hard power.”

Data compiled or commissioned by the Financial Times from third-party sources show the extent of China’s dominance in most maritime domains.

China’s port operators

take up strong positions

2015, twenty-foot equivalent units (million)

0

10

20

30

40

50

PSA International

(Singapore)

Hutchison

Ports Holdings

DP World

(UAE)

APM Terminals

(Netherlands)

China Merchants

Port Holdings

Cosco Group

Terminal Investment

(Lux. incorporated)

China Shipping

Terminal Development

Evergreen

(Taiwan)

Eurogate

(Germany)

China’s port operators take up strong positions

2015, twenty-foot equivalent units (million)

0

10

20

30

40

50

PSA International

(Singapore)

Hutchison

Ports Holdings

DP World

(UAE)

APM Terminals

(Netherlands)

China Merchants

Port Holdings

Cosco Group

Terminal Investment

(Lux. incorporated)

China Shipping

Terminal Development

Evergreen

(Taiwan)

Eurogate

(Germany)

China’s port operators take up strong positions

2015, twenty-foot equivalent units (million)

0

10

20

30

40

50

PSA International

(Singapore)

Hutchison

Ports Holdings

DP World

(UAE)

APM Terminals

(Netherlands)

China Merchants

Port Holdings

Cosco Group

Terminal Investment

(Lux. incorporated)

China Shipping

Terminal Development

Evergreen

(Taiwan)

Eurogate

(Germany)

Definition of Chinese port operators includes Hong Kong companies. Figures include total annual throughput for all terminals in which shareholdings held as of Dec 31 2015, adjusted acording to the extent of equity held in each terminal
Source: Drewry

Beijing’s shipping lines deliver more containers than those from any other country, according to data from Drewry, the shipping consultancy. The five big Chinese carriers together controlled 18 per cent of all container shipping handled by the world’s top 20 companies in 2015, higher than the next country, Denmark, the home nation of Maersk Line, the world’s biggest container shipping group.

China’s combined container shipping

lines eclipse those of other countries

2015, twenty-foot equivalent units (million)

0

5

10

15

20

Maersk*

Cosco/CSCL**

MSC

CMA CGM Group

Hapag-Lloyd

Evergreen (2014)

OOCL

APL

Hanjin Shipping

NYK

Hamburg Süd Group*

MOL

Yang Ming

Wan Hai

K Line

HMM

UASC

Zim

SITC

Sinotrans

China’s container shipping lines eclipse those of other countries

2015, twenty-foot equivalent units (million)

0

5

10

15

20

Maersk*

Cosco/CSCL**

MSC

CMA CGM Group

Hapag-Lloyd

Evergreen (2014)

OOCL

APL

Hanjin Shipping

NYK

Hamburg Süd Group*

MOL

Yang Ming

Wan Hai

K Line

HMM

UASC

Zim

SITC

Sinotrans

China’s container shipping lines eclipse those of other countries

2015, twenty-foot equivalent units (million)

0

5

10

15

20

Maersk*

Cosco/CSCL**

MSC

CMA CGM Group

Hapag-Lloyd

Evergreen (2014)

OOCL

APL

Hanjin Shipping

NYK

Hamburg Süd Group*

MOL

Yang Ming

Wan Hai

K Line

HMM

UASC

Zim

SITC

Sinotrans

* Maersk announced deal to buy Hamburg Süd in 2016
** Cosco and CSCL announced their merger in 2015
Source: Drewry

In terms of container ports, China already rules the waves. Nearly two-thirds of the world’s top 50 had some degree of Chinese investment by 2015, up from about one-fifth in 2010, according to FT research.

Chinese investment in the world’s

largest ports has boomed

Top 30 container ports ranked by container

traffic volume (twenty-foot equivalent unit)

Chinese invested

Chinese owned

Chinese investment

announced

Greater China

(Taiwan) port

No Chinese investment

Rank

2010

2015

1

Singapore

Hong Kong

Busan

Yangshan (Shanghai)

A 2016 Chinese

agreeement to invest

in three new mega

berths in Singapore

aims to ensure the

port maintains its

top global ranking

5

Yantian (Shenzhen)

Beilun (Ningbo)

Port Klang

Shanghai

Rotterdam

10

Chiwan

Kaohsiung

Jebel Ali

Tanjung Pelapas

Colombo International

Container Terminal

more than doubled its

container throughput

in 2015 to 1.6m TEU

following a $500m

investment by China

Merchants Holdings

International

Xiamen

15

Antwerp

Qianwan (Qingdao)

Hamburg

Qingdao

Ningbo Anch

20

Xingang (Tianjin)

Colombo

Bremerhaven

Valencia

Balboa

25

Le Havre

Nansha (Guangzhou)

Gwangyang

Jeddah

Algeciras

30

Felixstowe

Chinese investment in the world’s largest ports has boomed

Top 50 container ports ranked by container traffic volume

(twenty-foot equivalent unit)

Chinese owned

Chinese invested

No Chinese

investment

Greater China

(Taiwan) port

Chinese investment

announced

Rank

2000

2010

2015

1

Singapore

Hong Kong

Busan

Yangshan (Shanghai)

A 2016 Chinese

agreeement to invest

in three new mega

berths in Singapore

will ensure it

maintains its top

global ranking

Yantian (Shenzhen)

Beilun (Ningbo)

Port Klang

Shanghai

Rotterdam

10

Chiwan

Kaohsiung

Jebel Ali

Tanjung Pelapas

Xiamen

Antwerp

Qianwan (Qingdao)

Hamburg

Qingdao

Ningbo Anch

20

Xingang (Tianjin)

Colombo

Bremerhaven

Valencia

Balboa

Le Havre

Nansha (Guangzhou)

Gwangyang

Jeddah

Algeciras

Colombo International

Container Terminal

more than doubled

its container

throughput in 2015

to 1.6m TEU

following a $500m

investment by China

Merchants Holdings

International

30

Felixstowe

Laem Chabang

New York

Tokyo

Yokohama

Piraeus

Tangier

Nagoya

Dalian

Kobe

40

Port Klang Anch

Barcelona

Marsaxlokk

Genoa

Coco Solo

All of the world’s

top 20 shipping

companies have

built up their routes

through Xiamen

since 2000

Cartagena

Ho Chi Minh

Ambarli

Jakarta

Keelung

50

Osaka

Chinese investment in the world’s largest ports has boomed

Top 50 container ports ranked by container traffic volume (twenty-foot equivalent unit)

Chinese owned

Chinese invested

No Chinese investment

Greater China (Taiwan) port

Chinese investment announced

Rank

2000

2010

2015

1

Singapore

Hong Kong

Busan

Yangshan (Shanghai)

A 2016 Chinese agreeement

to invest in three new mega

berths in Singapore will

ensure the port maintains

its top global ranking

Yantian (Shenzhen)

Beilun (Ningbo)

Port Klang

Shanghai

Rotterdam

10

Chiwan

Kaohsiung

Jebel Ali

Tanjung Pelapas

Xiamen

Antwerp

Qianwan (Qingdao)

Colombo International

Container Terminal more than

doubled its container throughput

in 2015 to 1.6m TEUs

following a $500m investment

by China Merchants

Holdings International

Hamburg

Qingdao

Ningbo Anch

20

Xingang (Tianjin)

Colombo

Bremerhaven

Valencia

Balboa

Le Havre

Nansha (Guangzhou)

Gwangyang

Jeddah

Algeciras

30

Felixstowe

Laem Chabang

New York

Tokyo

Yokohama

Piraeus

Tangier

Nagoya

Dalian

Kobe

Cosco Pacific, China Merchants

Holdings International and

China Investment Corporation

acquire Kumport, Turkey’s

third largest container

terminal, in 2015

40

Port Klang Anch

Barcelona

Marsaxlokk

Genoa

Coco Solo

Cartagena

All of the world’s top

20 shipping companies

have built up their routes

through Xiamen since 2000

Ho Chi Minh

Ambarli

Jakarta

Keelung

50

Osaka

Definition of Chinese owned and Chinese invested includes Hong Kong investments
Sources: Lloyd's List Intelligence (port rankings); FT research (investments)

And those ports handled 67 per cent of global container volumes, up from 42 per cent in 2010, according to Lloyd’s List Intelligence, the maritime and trade data specialists. If only containers directly handled by Chinese port operators are measured, the level of dominance is reduced but still emphatic. Of the top 10 port operators worldwide, Chinese companies handled 39 per cent of all volumes, almost double the second largest nation group, according to data from Drewry.

Two-thirds of global container

traffic passes through Chinese

owned or invested ports

Twenty-foot equivalent units (million) and

percentage of total for world's top 50 container ports

1,000

800

67%

600

400

42%

200

19%

0

2000

2010

2015

Two-thirds of container traffic passes

through Chinese owned or invested ports

Twenty-foot equivalent units (million) and percentage of total for world's top 50 container ports

1,000

800

67%

600

400

42%

200

19%

0

2000

2010

2015

Two-thirds of container traffic passes through Chinese owned or invested ports

Twenty-foot equivalent units (million) and percentage of total for world's top 50 container ports

1,000

800

67%

600

400

42%

200

19%

0

2000

2010

2015

Includes estimates of container traffic through ports in which Chinese and Hong Kong companies have investments, even minority stakes
Sources: Lloyd's List Intelligence; FT research

It is not only the world’s biggest ports that have attracted Chinese investments. Dozens of smaller harbours — including some in key strategic locations such as Djibouti, Hambantota in Sri Lanka, Darwin in Australia, Maday Island in Myanmar and proposed ports on the Atlantic Ocean islands of São Tomé and Príncipe and in Walvis Bay in Namibia — have also drawn investments or promises of Chinese port construction.

The total size of these investments is difficult to calculate because of sketchy disclosure. But since 2010, Chinese and Hong Kong companies have completed or announced deals involving at least 40 port projects worth a total of about $45.6bn, according to a study by Sam Beatson and Jim Coke at the Lau China Institute, King’s College London, in co-operation with the Financial Times. A dozen other deals — from Carey Island, Malaysia, to Chongjin in North Korea — have been reported without any financial details.

Chinese investment in foreign

ports is speeding up

Number by region

1994

2000

05

10

16

6

North

America

0

Latin America

& Caribbean

6

Europe &

Central Asia

0

Middle East &

north Africa

6

Sub-Saharan

Africa

0

South Asia

6

East Asia

& Pacific

0

1994

2000

05

10

16

Terminal Link deal in 2013 gave China Merchants

Holdings International ownership of terminals in

more than 10 ports, including Houston and Miami

Chinese investment in foreign ports is speeding up

Number by region

Terminal Link deal in 2013 gave China Merchants

Holdings International ownership of terminals in

more than 10 ports, including Houston and Miami

1994

96

98

2000

02

04

06

08

10

12

14

16

6

North

America

0

Latin America

and Caribbean

Piraeus (Greece)

6

Europe and

Central Asia

0

Djibouti

Middle East and

north Africa

6

Sub-Saharan

Africa

0

Hambantota (Sri Lanka)

Gwadar (Pakistan)

South Asia

Darwin (Australia)

6

East Asia

and Pacific

0

1994

96

98

2000

02

04

06

08

10

12

14

16

Chinese investment in foreign ports is speeding up

Number by region

Terminal Link deal in 2013 gave China Merchants

Holdings International ownership of terminals in

more than 10 ports, including Houston and Miami

1994

96

98

2000

02

04

06

08

10

12

14

16

6

North America

0

Latin America and Caribbean

Piraeus (Greece)

6

Europe and Central Asia

0

Djibouti

Middle East and north Africa

6

Sub-Saharan Africa

0

Hambantota (Sri Lanka)

Gwadar (Pakistan)

South Asia

Darwin (Australia)

6

East Asia and Pacific

0

1994

96

98

2000

02

04

06

08

10

12

14

16

Includes both investments announced and completed and investment from Hutchison or Hong Kong-owned concerns. Ports in China and Hong Kong not shown
Sources: King’s College, London; FT research

Rounding out a picture of China’s merchant fleet dominance is the country’s fishing fleet, which is by far the largest in the world, according to a recent paper by Michael McDevitt, a former rear admiral in the US navy and now a senior fellow at CNA Strategic Studies, a US think-tank.

“In the Chinese context, maritime power encompasses more than naval power,” wrote Mr McDevitt. “The maritime power equation includes a large and effective coastguard, a world-class merchant marine and fishing fleet, a globally recognised shipbuilding capacity and an ability to harvest or extract economically important maritime resources, especially fish.”

Journey from land to sea

For thousands of years, Chinese emperors focused on defending the middle kingdom against land-based invasions, usually from the north and west. But in 2015 an official white paper on military strategy decreed a big shift that offers a glimpse of the country’s changing maritime objectives.

“The traditional mentality that land outweighs sea must be abandoned, and great importance has to be attached to managing the seas and oceans and protecting maritime rights and interests,” the document said. It added that the Chinese navy should protect “the security of sea lanes of communication and overseas interests”.

China has the world’s fastest-

growing navy among major powers

Number of submarines and naval surface vessels

300

200

US

China

Russia

100

Japan

India

UK

0

1997

2017

China has the world’s fastest-growing navy among major powers

Number of submarines and naval surface vessels, 1997 v 2017

Russia

US

China

Japan

UK

India

300

200

100

0

1997

2017

China has the world’s fastest-growing navy among major powers

Number of submarines and naval surface vessels

Russia

US

China

Japan

UK

India

300

300

200

200

100

100

0

0

1997

2017

1997

2017

1997

2017

1997

2017

1997

2017

1997

2017

Source: IISS

Analysts say that China’s naval strategy is aimed primarily at denying US aircraft carrier battle groups access to a string of archipelagos from Russia’s peninsula of Kamchatka to the Malay Peninsula in the south, a natural maritime barrier called the “first island chain” within which China identifies its strategic sphere of influence.

Another focus is the string of artificial islands that Beijing has dredged out of coral reefs and rocks to help reinforce China’s claim to most of the South China Sea, putting it on a collision course with neighbours from Vietnam to the Philippines, as well as the US. The artificial islands have been equipped with landing strips and a US think-tank recently said, after analysis of satellite images, that Beijing appeared to have installed anti-aircraft guns, anti-missile systems and radar facilities on them.

China’s defence spending has

increased dramatically since 2000

$bn (constant prices, 2014)

800

600

US: 44%

increase

since 2000

400

China: 396%

200

Russia: 216%

UK: 13%

India: 87%

0

1995

2000

05

10

15

China’s defence spending has increased dramatically since 2000

$bn (constant prices, 2014)

800

600

US: 44%

increase

since 2000

400

China: 396%

200

Russia: 216%

UK: 13%

India: 87%

0

1995

2000

05

10

15

China’s defence spending has increased dramatically since 2000

$bn (constant prices, 2014)

800

600

US: 44%

increase

since 2000

400

China: 396%

200

Russia: 216%

UK: 13%

India: 87%

0

1995

96

97

98

99

2000

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

Source: Sipri

Although Beijing plays down such sweeping strategic objectives, the imperative to step up naval security is regularly emphasised in Chinese circles. A 2015 paper in a semi-official journal under the powerful Chinese Academy of Sciences went one step further, calling for China to “make full use of diplomatic and economic methods to establish at strategic maritime locations points for resupply and military bases so as to protect strategic maritime passages”.

A Chinese navy submarine image
Chinese navy submarine off Qingdao in Shandong Province © Guang Niu/AFP/Getty Images

Reality is unfolding in line with the academics’ recommendations. The political justification often used for port investments is “One Belt One Road”, a grand design advocated by Mr Xi to revive the ancient Silk Road trading routes and boost investment and commerce in more than 60 countries in Asia, the Middle East, Africa and Europe.

Gwadar port, for example, is described as the core element in a $54bn China-Pakistan Economic Corridor. At its inception, Chinese involvement in the port was limited to financing and construction, but in 2015 Islamabad handed over ownership to the state-owned China Overseas Port Holding Company on a lease until 2059.

A Pakistani naval guard at Gwadar port image
A Pakistani naval guard at Gwadar port which was financed, built and is now owned by China © Aamir Qureshi/AFP/Getty Images

At the time, China claimed the project was purely commercial. Hong Lei, a spokesman for Beijing’s foreign ministry, described the transfer as a “business practice” aimed at boosting “friendly co-operation between the two countries”. The Pakistan side reinforced this line, with Ahsan Iqbal, Pakistan’s minister for planning, development and reform, telling the Financial Times in November last year that there would be “no Chinese military presence” at the port.

Beijing calls in a debt

To the west of Gwadar at Djibouti — on the Horn of Africa’s maritime chokepoint — a similar story has unfolded. China’s initial embrace seemed purely commercial, with the state-owned China Merchants Group taking a stake in the Port of Djibouti’s container terminal in 2012 and paving the way for a $9bn investment including the construction of a liquefied natural gas terminal, a wharf for livestock and a trade logistics park.

But in 2016, Beijing acknowledged that its plans for Djibouti had an additional dimension — the construction of the country’s first overseas naval base, ensuring that China’s military will remain in the region until at least 2026 with a contingent of up to 10,000 personnel. Even now, though, Beijing’s official media calls the base a “logistics centre”.

The financial firepower at China’s disposal can make its entreaties irresistible. In Sri Lanka, President Maithripala Sirisena suspended a $1.4bn “port city” project being built by Chinese companies at Colombo shortly after he took power in 2015. Mr Sirisena was wary over China’s growing influence, as dramatised by two unannounced visits from a PLAN submarine and warship to a Colombo container terminal owned by a Chinese state company in late 2014.

Xi Jinping, China's president, and former Sri Lankan leader Mahinda Rajapaksa image
Xi Jinping, China's president, and former Sri Lankan leader Mahinda Rajapaksa at the Chinese-funded Colombo “port city” project in 2014 © Lakruwan Wanniarachchi/AFP/Getty Images

“That was clear testimony as to how an economic project acquires a military dimension for China,” says Brahma Chellaney, professor of Strategic Studies at New Delhi’s Centre for Policy Research. “The progression is quite rapid.”

Following Mr Sirisena’s intervention, Beijing piled diplomatic pressure on Sri Lanka, using as leverage the huge debts that Colombo had built up with Chinese state banks. Last July, China’s foreign minister, Wang Yi, arrived with an uncompromising message, according to a Sri Lankan government official who declined to be identified.

“He was reading the riot act,” says the Sri Lankan official. “Unless the government pulled all their fingers out, and got the project back on stream, China would abandon Sri Lanka altogether.”

Sri Lanka, which has debts of around $8bn with Beijing, duly complied. A month later, the government signed an agreement with the China Harbour Engineering Company, paving the way for the resumption of work on the project after a break of nearly 18 months.

In a related deal a Chinese company agreed to pay $1bn for a controlling stake in the new port at Hambantota on the country’s south coast, giving Beijing another modern harbour on the Indian Ocean. Hambantota had been built by a Chinese construction company with Chinese loans.

Other parts of the Indian Ocean also loom large in Beijing’s ambition to rule the seas. Under a bilateral military agreement, Chinese naval vessels use ports in the Seychelles as hubs from which they conduct anti-piracy patrols. In the Maldives, a visit by Mr Xi in 2014 officially inducted the tiny string of atolls with a population of 350,000 people into the One Belt programme, with promises of infrastructure investments.

In Greece too, China’s acquisition of a controlling stake in Piraeus, one of Europe’s largest ports, signalled a merging of commercial and strategic agendas. When Alexis Tsipras, the country’s prime minister, hosted a Chinese warship and naval top brass in Piraeus in early 2015, Chinese state media quoted him as saying he supported its sale to Chinese interests. Less than a year later, it was sold for $420m.

Chinese officials relished the moment. They recalled how Beijing was embarrassed in 2011 when it needed to evacuate 36,000 Chinese workers from Libya as violence broke out, forcing it at short notice to enlist the help of Greek merchant ships to make the first few rescue missions.

“If that was to happen again,” says a Chinese official who declines to be identified. “We would be much better prepared. We could use the Chinese navy and take the evacuees to our own port at Piraeus.”

Additional reporting by Charles Clover in Beijing