For instance, just like China’s largest fiberglass yacht manufacturer (IAG, purchased by the Chinese Sunbird in 2015) Sunseeker belongs to the Wanda and Ferretti to Weichai since 2013, but these shipyards are overseas and their main market is in nearby Southeast Asia. San Lorenzo, 3rd in the world just after Ferretti, is part of a Chinese J/V but also remains abroad.

In China, Hevsea is trying to adapt yachts to local tastes while Cheoy Lee (founded in Shanghai in 1870 and transferred to Hong Kong in 1936) has turned its Cantonese shipyard back to leisure boats after several decades of diversification into commercial shipbuilding. In what could be a turning point for the sector, China Zhongwang, the world’s 2nd largest aluminum extruder, acquired control of Silver Yachts, a manufacturer of luxury units, in September 2017 and will open a construction site in the Pearl River delta. This segment of the global shipbuilding industry now seems to be almost conquered by Chinese interests.

Data transport: the cable battle.

While 90% of international goods are carried out by sea, more than 95% of Internet traffic also depends on intercontinental links created by submarine cables. And this sensitive infrastructure is currently unrivaled (transmission via a high gauge cable takes eight times less time than transmission via satellite).

As the digital backbone of the Internet, data transmission and international communications, these cables are considered by the Chinese authorities as one of the strategic elements of the official economic development programme and of the Belt and Road Initiative. In fact, the maritime component of the “Digital Silk Road” aims to improve international connections on the one hand and to promote the increasing internationalization of Chinese high-tech companies such as Huawei, or ZTE, on the other.

This expansionary approach is based on massive investments in national and international projects whose main actors are the telecommunications companies. In fact, China Telecom, China Unicom and China Mobile are playing an increasingly strategic role in this political influence game by investing in submarine cables to build their own networks to Africa and Europe, as SEA-ME-WE-3 (Europe-Asia-Australia) and 5 (Europe-Asia), AAE-1 (Asia-Africa-Europe), APG (Asia Pacific Gateway), SAIL (Cameroon-Brazil), and PEACE (Pakistan East Africa Cable Express), with future extensions to South Africa and Egypt, Seychelles, Comoros.

In terms of installation infrastructure, Huawei Marine is laying the southernmost fiber optic cable in the world in Chile, the Fibre Optic Austral (FOA). The company also signed a pre-feasibility contract with the Chilean government to connect Chile to China via a transpacific cable approximately 20,000 km long.

Overall, the existing links installed and managed by the Chinese (inter-island in the Maldives, trans-Pakistan to the port of Gwadar) are nothing but the first gateways of a more extensive and strategic network: the Gwadar-Djibouti cable, currently being installed, links two bases of primary importance for China; it is planned to duplicate it to also dock in Kenya (Mombasa).

Other services: financial diversification.

These trends have interesting financial ramifications. Disoriented by the 2008 crisis, maritime finance has indeed recently undergone a profound restructuring.

Whereas ten years ago no Chinese bank could be found among the top 15 maritime financiers, China Exim is now 2nd and China Development Bank 3rd, whilst Bank of China is also among the leaders.

Openly encouraged by the public authorities, Chinese financiers no longer limit themselves to national counterparts and finance a large part of international shipping companies, thereby increasing China’s influence over the entire value chain.

Moreover, the Chinese shipping groups are still willing to acquire ownership of large foreign commercial vessels and lease them back to their former owner when they run short of cash. The national export credit agency Sinosure guarantees the loans. Hence, it is therefore not surprising that China has overtaken Japan as the world’s second-largest commercial flag (7,744 units for a tonnage of 170m gt), showing quite an impressive tonnage growth (9.4% in 2017, 7.1% between January and August) even if Greece is still the undisputed champion.

In the field of hull and cargo insurance, China has also become the world’s largest market, and in 2013 the government promoted Shanghai as the center of marine insurance, to the detriment of Hong Kong. In a commendable move towards liberalization, the Insurance Regulatory Commission (IRC) has delegated extensive powers to the Association created for this purpose in Shanghai. The local leaders in the sector are the giants PICC, Ping An, and China Pacific, undisputed leaders in a highly concentrated market that is slowly opening up to the outside world.

Oceanographic research: remarkable progress.

It should be noted that the development of commercial maritime activities is coupled with an unprecedented effort to adapt knowledge and related technologies.

A strong policy effort.

Centralized at the level of the State Ocean Administration (SOA) but carried out by the Chinese Academy of Sciences and scientific universities, the support for research and training has produced remarkable results in a field where China once considered itself behind other nations. But Beijing has decided to achieve in this sector what has already been achieved in space, with the seabed constituting the “last frontier on earth”.

Scientific diving has increased in recent years, mostly in the Pacific Ocean, as a means to test new technology. Explorations (which have been extensively commented upon) aim at mapping the seabed and at identifying energy sources, mineral resources, and marine species. Breaking a world record, Chinese research vessels scattered 60 seismic beacons in the Marianas trench and recovered 56 of them at a depth of more than 10 km. Protests by the US military – accusing China of installing radio wave sensors near their base in Guam – were short-lived.

Impressive projects.

In addition to high-performance exploration vessels, China is carrying out several projects of a remarkable scientific level with its series of “dragons”.

The bathyscaphe Jiaolong, which brought a crew to a record 7,000m depth in 2012, is the first in an ongoing series. Baoji Titanium Corp. is making a spherical titanium prototype whose objective is a dive beyond 10,000m, already surpassed by the Haidou unmanned probe in 2016, which places China in third place in the world after the United States and Japan.

The Qianlong series (diving dragon, photo opposite) of which China has just launched the number 3, does not have these capabilities but this autonomous multifunctional unmanned submersible will offer a predominant place to artificial intelligence. The last copy of the Hailong series (sea dragon) made a record dive in early September at -5630m in the northwest Pacific, where it spotted interesting cobalt deposits.

But there is more.

A manned station on the ocean floor is one of the 100 major science projects planned for the next decade: its stated objective is to find natural resources that can ensure China’s energy supply. The latest development in applied research is the launch on July 18 of a world-class 5t remote-controlled vehicle by Zhuzhou CCRC Times Electric, a ship that can be used in emergency relief, maritime rescue and submersible engineering projects.

Along with 12 other nations, China also participates in the International Ocean Discovery Programme (IODP), which recently studied the impact of climate change on the geological and biological environment.

It also carries out its own research projects, sometimes indirectly. Launched in early September, the HY-1C satellite developed by China Spacesat, (part of the Academy of Space Technologies) will for instance help monitor ocean color and water temperature, providing baseline data for research on the global ocean environment, according to the National Administration of Science, Technology, and Industries for National Defence.

The 35th Chinese Antarctic expedition, which will begin this fall, will for the first time focus on ocean research. While the two existing permanent stations are continental and while Chinese scientists have so far distinguished themselves by their continued presence at a record altitude on the continent, the project is now to set up a base (to be completed in 2022) on the shores of the Ross Sea on Inexpressible Island and to cover all marine research, including the study of polluting micro-plastics discovered during a previous mission.

Review of Chinese policy: a global vision of the maritime sector?

So, is there a global maritime vision in China?

The authorities of the People’s Republic of China claim to have inherited a glorious maritime past, but the classical Chinese Empire has only experienced brief periods of superiority over the oceans.

Comparable to that of the Roman Empire, Chinese power was based, outside its model administration, on three land pillars – the peasant, the merchant and the soldier – which were interchangeable and could progress at sea during periods of expansion by creating a second-hand fleet and sailors. Hence, the first massive development of the merchant navy with large units (copied from Indonesian merchant ships of the 9th century) dates from the Song dynasty in the 10th century, followed by a near disappearance until the remarkable expansion of the early 15th century. If the latter was the manifestation of a punctual policy of Emperor Ming Yongle, the collective imagination skilfully maintained has made the distant expeditions of Admiral Zheng He one of the roots of the Chinese tradition.

In the current oceanic tropism that seems to be guiding the Beijing authorities, we must therefore look for more recent strategic models and doctrines:

• The doctrine of Alfred Mahan, 19th-century American historian and strategist, admirer of the British imperial power that he linked to a prosperous foreign trade, an efficient merchant navy, a powerful war fleet to protect it, a chain of maritime bases for supply and maintenance, and an empire providing the necessary resources. The realization of this doctrine through the creation of an unparalleled American naval force has become a fascinating example for any potential emerging global power.
• The refusal to endorse the treaty signed by the “other” major powers on the sharing of East Asian waters (San Francisco, 1951) – the origin of current conflicts such as that of the South China Sea – and the reservations made to the ratification of the United Nations Montego Bay Convention (December 1982) on the delimitation of maritime areas.
• More recently but always in connection with the process of attraction/hate towards the United States, the confirmation of the power of the American navy under the mandate of George Bush Junior, illustrated by his armed interventions and the (somewhat hasty) assertion by his unofficial advisor George Friedman that China would never be able to build an effective navy in a period of time short enough to compete with the American power.

In modern times…

In part due to an unexpected combination of circumstances, China is now positioning itself – against the United States – as a defender of the freedom of international trade, and therefore of its classical theoretical basis since the beginning of modern times, the “De mare liberum” of the Dutchman Hugo Grotius, champion of the freedom of transport on the oceans.

In its first circle of influence, however, Beijing contradicts this liberal ideal. China’s strategic reorientation towards the seas dates from 1980-2000 and owes much to the thinking of Admiral Liu Huaqing (the Chinese Mahan), the first head of the Navy and then vice-chairman of the Central Military Commission. Since then, the influence of a pro-maritime lobby at the central government level has never wavered. Xi Jinping’s major project, repeated during the 19th Congress, includes the objective of making China a maritime superpower or, as the term increasingly appears in the Chinese media, an “oceanic country”.

Obstacles remain, starting with the coordination of the actors involved in the project, from the State Ocean Agency (SOA) to the PLA Navy, the Chinese Academy of Sciences (CAS) and several universities. Starting from the observation that the data collected on the oceans were not only lower in mass than those collected by the United States but also fragmented between the above-mentioned actors jealous of their prerogatives, an important decision was to entrust the Qingdao Maritime Data Centre with the most powerful supercomputer ever manufactured in China (exa-scale) to centralize the data and big data from all the organizations involved in the maritime sector.

Leadership.

Under what leadership can this multidisciplinary team with sometimes divergent interests come together for greater efficiency, then?

The SOA wishes to write the doctrine before applying it, having declared “the 21st century as the century of the oceans, during which the status of the seas dominates the nation’s development more than in any other period of history”. Its 2017 annual report calculates that China’s “maritime GDP” represents 9.5% of total GDP in 2016, representing a “blue economy” of USD 1 trillion.

For the time being, however, the balance of power clearly tilts towards the military group, especially from a budgetary point of view. The BRI 21st Century Sea Route project has only strengthened this dominant position. In February 2018, Liu Jixian, former director of the Academy of Military Sciences, reiterated that China has no choice but to protect its current and future assets in the volatile regions of the world.

This insight was originally published in French as part of the Lettre de la Chine hors les murs – n°25 – septembre 2018 (spécial 120 ans), by the French External Trade Advisors (Comite National des Conseillers du Commerce Exterieur).