Chinese firms could be at back of line in Libya

AP News
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Posted: Aug 25, 2011 4:56 AM
Chinese firms could be at back of line in Libya

China's initial hostility toward the uprising against Moammar Gadhafi and its belated outreach to Libya's rebels could mean that Chinese firms eager to return to the country after the conflict will be at the back of the line.

The North African country presents one of the clearest illustrations of how China's traditional hands-off diplomacy conflicts with its growing overseas economic interests, especially in unstable countries where different factions vie for political power and control of resources.

With the situation in Libya still in flux, prospects for Chinese companies are murky and Libyan opposition leaders have said they recognize a distinction between less supportive nations like China and strong backers of their cause such as France, Italy, Britain and the United States.

Chinese companies in Libya before the bloody revolt against Gadhafi want to recover their investments and continue to see excellent opportunities there, said Zhang Xiang, a spokeswoman for industry group China International Contractors Association.

"They're not going to quit Libya that easily. Once the society gets back to a stable status where safety and security are guaranteed again, with support from the governments from both countries, these companies will continue to build business in Libya," Zhang told The Associated Press.

Libyan opposition leaders say they'll honor contracts signed under the former regime, but have indicated that national origin matters.

"Many, many countries have been very resolute and strong in coming out and siding with the Libyan people from day one," Guma El-Gamaty, a British-based coordinator for the rebels' National Transitional Council, told BBC radio. "There are other countries who have been very slow, and, if you like, only came around very, very late _ countries like China and Russia."

The NTC is expected to further clarify its approach at next week's Paris international conference on Libya's future, to which China is invited.

Unlike the U.S. and others, China abstained from a United Nations resolution authorizing force to protect civilians, reflecting its traditional opposition to most humanitarian interventions or other acts it views as interference in a country's internal affairs. China sharply criticized the NATO-led air campaign against Gadhafi's forces and refused to condemn the dictator, despite his attacks on civilians.

Beijing has yet to formally recognize the NTC as Libya's legitimate government and has called on the U.N. to take the lead in post-conflict arrangements, alongside the Arab League, African Union and other regional organizations.

Despite those stances, Beijing's response to the crisis showed some elements of a somewhat bolder, more pragmatic streak taking root in Chinese diplomacy over recent years.

As the Libyan conflict wore on, Beijing slowly reached out to the NTC, sending Foreign Minister Yang Jiechi to meet with its leader Mahmoud Jibril in June _ even while hosting Gadhafi's Foreign Minister Abdul-Ati al-Obeidi in Beijing.

As rebels consolidated their hold over the capital Tripoli on Wednesday, Foreign Ministry spokesman Ma Zhaoxu said China "has always valued the important role of the NTC in resolving Libya's problems and remains in contact with it."

China's growing economic interests abroad are the main driver for the new pragmatism, although a nascent concern over China's reputation is also considered a factor. One other notable example is Sudan, where China has considerable investments in oil and gas, which split into two nations this summer. Well before it became an independent nation in July, Beijing had been courting the leadership of the oil-rich south with junkets to China and offers of financial aid.

"It's flexibility in light of economic interests," said David Zweig, director of the Center on China's Transnational Relations at Hong Kong University of Science and Technology.

"It's easy to be noninterventionist when you don't have so many interests, but you can't stand just on one side when the other side ends up holding the oil," Zweig said.

In Libya, 26 Chinese companies have taken on an estimated $20 billion in business, the bulk in 50 major projects such as China Railway Group's construction of two major rail lines and equipment supplier Huawei Technologies Co.'s laying of an underwater telecoms cable linking the western city of Darnah to Greece.

Many of the projects were only half-completed and no estimates have yet been issued as to losses. Given the scale of the fighting and widespread looting, those companies are bracing to write-off lost equipment and abandoned projects.

"There will be losses for sure," Du Shengxi, head of corporate culture at China Communications Construction Co. Ltd., was quoted as saying by the newspaper China Business News.

China Oilfield Services Ltd. froze operations on its five land drilling rigs in Libya and wrote down the value of its assets there by 41.8 billion yuan ($6.5 billion) "as a direct result of the civil unrest," the company said in its first-half earnings report issued this week.

Yet the crisis may spark opportunity for Chinese firms as Libya's new leaders seek to repair its destroyed cities and channel the country's petroleum wealth into basic infrastructure that was long neglected by Gadhafi's economic policies.

"They have made huge investments there," said Zhang of the International Contractors Association. "And Libya on the whole is a very good market with so many business opportunities."

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Associated Press researcher Zhao Liang contributed to this report.