China used 'state-owned enterprises' as tools of economic coercion: top US diplomat

Citing China's claims on the South China Sea, a top US diplomat on Tuesday accused Beijing of trampling the rights of others and using "state-owned enterprises" as tools of economic coercion and international abuse.

China claims nearly all of the disputed South China Sea, though Taiwan, the Philippines, Brunei, Malaysia and Vietnam all claim parts of it. Beijing has built artificial islands and military installations in the South China Sea.

By claiming “indisputable sovereignty” over an area larger than the Mediterranean and trampling the rights of others, Beijing threatens the existing order that has given Asia decades of prosperity. That order has been based on freedom and openness, ideas that Beijing opposes, David Stilwell, Assistant Secretary of State for the Bureau of East Asian and Pacific Affairs told a Washington think-tank.

“In the South China Sea, as elsewhere, Beijing has used state-owned enterprises as tools of economic coercion and international abuse. They have been used to dredge, construct, and militarise the PRC's (People's Republic of China) artificial island fortresses in the Spratlys, from which Beijing now violates the exclusive economic zones of Southeast Asian states,” he said.

One of Beijing's leading infrastructure contractors that works all around the world – China Construction & Communications Corporation, or CCCC – led the dredging for Beijing's South China Sea military bases, with terribly destructive effects on the marine environment and regional stability, Stillwell said in his address to the Center for Strategic and International Studies think-tank.

State-owned enterprises have been used as battering rams to attempt to enforce Beijing's unlawful “Nine Dashed Line.” China National Offshore Oil Corporation, or CNOOC, used its mammoth survey rig HD-981 to try intimidating Vietnam off the Paracel islands in 2014.

The implications of such a statement should give pause to every nation that relies on the freedom of the seas for prosperity and security, he said.

Other PRC commercial survey ships and rigs have been sent repeatedly into Southeast Asian waters in which China has no rights. Numerous PRC state-owned tourism, telecom, fisheries and banking firms invest in ways to enable Beijing's unlawful claims and bullying. PRC fishing fleets in the South China Sea often operate as maritime militia under the direction of China's military, harassing and intimidating others as a tool of violent state coercion, he said.

“These state-owned enterprises are PRC instruments of abuse, and we should highlight their improper behaviour. We should also shine light on how these companies operate around the world, including across Southeast Asia and in the United States. In all our societies, citizens deserve to know the differences between commercial enterprises and instruments of foreign state power. These state enterprises are modern-day equivalents of the East India Company,” Stillwell said.

According to him, when Beijing uses coercion, empty promises, disinformation, contempt for rules, bad-faith diplomacy, and other underhanded tactics in the South China Sea, it is drawing on a playbook that it uses worldwide.

“We see it in the East China Sea and around Taiwan, where Beijing has expanded its maritime provocations and threatening sorties. We see it in the Himalayas, where Beijing recently took aggressive action on its frontiers with India,” Stillwell said.

“We see it along the Mekong River, where Beijing has used its massive cascade of dams to hold back water from downstream neighbors in Southeast Asia, contributing to the worst drought in the Mekong’s recorded history. I urge everyone to read the recent report from the Stimson Center, “New Evidence: How China Turned Off the Tap on the Mekong River.”,” he said.

The United States and other countries have raised concerns for the first time in the UNSC and General Assembly over the dangers of PRC actions in the South China Sea, he said.

“Australia, Britain, France, Germany and India have all recently issued statements of unprecedented concern over South China Sea activities by Beijing that put regional stability and international law at risk. Meanwhile we see promising new defense and security arrangements among allies and partners from Australia to Southeast Asia, Japan and India,” said the US diplomat.

Stillwell said that China seeks to dominate the South China Sea’s oil and gas resources. To achieve this, Beijing is pursuing a campaign to deny Southeast Asian states access to desperately needed oil and gas resources except through “joint development” deals that disadvantage the smaller parties – that is, the non-Chinese parties.

“The PRC gambit works like this. By aggressively deploying military forces, maritime militia, state-directed oil rigs and the like, Beijing tries to drive up risk for energy firms that want to operate in the South China Sea, in hopes of pushing out foreign competition. Once accomplished, Beijing pushes other states to accept “joint development” with its own state-owned firms, saying “if you want to develop those resources off your coast, your only option is to do so with us.” These are gangster tactics,” he said.

Stillwell said that the United States supports nations in standing up for their sovereign rights and interests, and in resisting pressure to accept any deal whereby the PRC pushes its way into a share of offshore resources it has no right to claim.