China private security to protect overseas interests in unstable regions

Ukraine war and Israel-Gaza war illustrate the dangers that Chinese investors could face in unstable, stresses ‘The South China Morning Post’.

The Ukraine war and the Israel-Gaza war illustrate the types of dangers that Chinese investors could face in the course of doing business overseas.

And such conflicts may be further reinforcing the need for Beijing to make new contingency plans to safeguard Chinese interests abroad while ensuring that trade routes continue to bring home critical goods such as valuable minerals.

However, given Beijing’s limited military presence overseas – it has only one overseas base, in the Horn of Africa; contributes to a UN peacekeeping force; and uses naval warships in anti-piracy operations in the Gulf of Aden – analysts say it appears that diplomacy and the use of private security firms will be increasingly relied on, particularly in facilitating the China-led Belt and Road Initiative.

At a seminar in early December, jointly held by the China-Africa Business Council and the China Institutes of Contemporary International Relations, participants raised the bar for Chinese security firms – pushing for them to become more internationalised, more localised with regional staff and political support, and more commercialised.

“Outbound Chinese investors face security challenges and a complex environment,” said an official statement summarising the meeting. “A tailor-made approach is needed for international security projects. It must differ depending on the industry or country.”

The African continent is one of the regions China is invested heavily in, where the number of China-invested companies accounts for 7.1 per cent of the global total.

The world’s second-largest economy has set up around 47,000 overseas firms across 190 countries or regions, mainly in energy, mining, infrastructure construction and manufacturing sectors.

They have hired a total of 4.1 million employees, including 2.5 million foreign citizens, according to a 2022 report by the Ministry of Commerce.

Outstanding outbound direct investment totalled US$2.75 trillion by the end of 2022, third-most in the world for the sixth straight year, and up from US$163.1 billion in 2021, ministry figures show.

Most of the new investment in the past decade flowed to countries included in China’s belt and road plans, despite many being relatively high-risk regions.

China is the world’s major seaborne buyer of iron ore, copper, soybeans and many other commodities, while more than 1 million Chinese students are studying overseas and tens of millions of Chinese travel worldwide every year.

For their part, private security firms in China tend to fly under the radar.

However, the seminar this month drew some of the domestic security heavyweights together, including Huayuan Security Guard; Dewe Security, a subsidiary of Hong Kong-listed Frontier Services Group; Huaxin Zhongan Group; Shanghai-listed Anbang Save-Guard Group; officials from China’s foreign ministry; representatives from the China Security Association; and dozens of other Chinese firms.

“There are ongoing traditional safety issues in regions like West Asia, Africa and Latin America,” said Li Xiaopeng, CEO of Frontier Services, one of China’s largest private security firms.

[Corporations have to] strengthen their knowledge and ability to assess risks before they go out to invest elsewhere

A Belt and Road Initiative working group issued an official document in late November highlighting the need to “hammer out the safety protection in a detailed way”, state media Xinhua reported.

“Guidelines are needed for corporations on containing risks,” it was quoted as saying. “[Corporations have to] strengthen their knowledge and ability to assess risks before they go out to invest elsewhere.”

In an online statement published last month, the Ministry of State Security also vowed to ensure the security of China’s overseas mining projects, personnel and assets.

“It is set to ensure the safety of Chinese companies ‘going global’, and safeguard the security of key mineral-resource supply chains,” it said, without elaborating on how.

The demand is high partly because many Chinese projects are operating in some of the world’s most dangerous regions, such as war-torn South Sudanese oilfields. Meanwhile, Beijing is encouraging more companies to go global.

The Chinese Ministry of Foreign Affairs issued a new high of 55 overseas security alerts last year, when the Ukraine war ignited more conflicts across the globe.

When the Israel-Gaza war began, the Chinese embassy warned that Chinese citizens should avoid travelling to those countries, while advising any Chinese in the region to leave.

“Internationally known and well-established foreign private security companies… typically would be allowed to carry firearms/weapons, which Chinese private security companies, due to domestic regulations, are not allowed to do,” said Yuan Jingdong, an associate professor specialising in China defence and foreign policy at the University of Sydney.

“Well-established foreign private security companies would also charge much higher premiums for protection.

“Chinese private security companies… on the other hand, could only compete with lower tenders or be given contracts by Chinese companies due to the ease in communication, shared culture and other factors.”

And even though some of China’s security firms are privately owned, they often have historical ties with the army or police forces.

The business potential is still quite large, as the State-owned Assets Supervision and Administration Commission (SASAC), which oversees the country’s 97 large industrial giants with combined assets of 81 trillion yuan, is becoming increasingly wary of the threats facing overseas Chinese projects, stresses “The South China Morning Post’.

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