New Internationalist

Made in China

Issue 423

China has merged capitalism with communism to form a powerful new economic system. All countries now feel its impact. Chris Richards reports from the South Pacific.

All photos by Chris Richards.

Ruth Kapi points to the devastation created by the Chinese-led Ramu Nickel mine project.

The mango tree spreads large and lush. Standing at the centre of this village, it has pride of place. Huts on stilts surround it. Under its branches, protected from the sun, the villagers of Lalok in Papua New Guinea (PNG) collect to talk and make decisions together. Like the tree, their community is strong – democracy is growing.

It looks like paradise here. Children run across the beach laughing to greet our six-metre dinghy after its sea-crossing. Tall palm trees swaying softly on the edge of the beach rim the rainforest. Yet living in paradise has its price.

The villagers miss the opportunities that education could bring. They want to increase their income by selling their cocoa and coconuts, bamboo and bananas, taro and yams. They want the longer life that doctors can offer. A road could provide the missing link to schools, hospitals and markets. It need not be long – it is only around 35 kilometres to Madang, the regional capital. And, says the Coastal Landowners Association Chairperson, John Yong Botti, the Chinese should pay to build it.

The other villagers, seated in a circle around the mango tree, nod in agreement. It is only fair. Over the next 20 years the Chinese plan to take significant resource wealth from this part of PNG. The $1.37 billion Ramu Nickel mine will produce 31,150 tonnes of nickel and 3,300 tonnes of cobalt each year for the next 20 years.1 From the mine-site in Kurumbukari, they will send the ore down a 135-kilometre pipeline to a processing plant on the coast, then load it on ships bound for China.

The route of the mine’s pipeline concerns John Yong Botti (top); PNG workers at Basamuk face menial work (middle) with strict camp rules (bottom).

Unbalanced trade

This is China’s largest investment in the South Pacific, just one in a global empire of mining ventures feeding its appetite for growth. As the world’s biggest consumer of stainless steel (using more than the US and Japan combined) nickel alloy is critical. Nickel is also a key component of rechargeable battery systems used in electronics, power tools and transport – important as the share of China’s exports shift from textiles, clothes and shoes to more profitable hi-tech products.

For Papua New Guinea, the Ramu Nickel venture is its biggest construction project, adding an estimated eight to ten per cent to the national economy every year.2

But for the people of Lalok it’s hard to see the benefits. The pipeline passes over their land, cutting through fruit trees and vegetable crops. Each clan has been paid up to 400 kina ($146), but it is not enough. ‘How much compensation should be given for this?’ asks John Yong Botti as he points to the mango tree. ‘They are giving a lousy 10 to 20 kina ($3.66 to $7.32). If the mango tree is there, we will continue to sell the fruit and get the money. But if the tree goes, that income goes with it.’

As they talk in the sunshine, it is clear that they have been left in the dark. When they raise their concerns with the mining companies, they are told to ask the Government. But the Government isn’t answering.

Then there are the environmental concerns. I’m no expert but the waste disposal method proposed by the project’s managers sounds laughable. After the nickel and cobalt are processed, five million tonnes of tailing waste each year will be siphoned into pristine Astrolabe Bay. Sinking to a depth of 150 metres, the exposed waste will lie in a deep ocean basin. A report commissioned by the Mineral Policy Institute in Sydney, Australia, concluded: ‘While it is remotely possible that the discharge of 100 million tonnes of mine tailings into Astrolabe Bay may have no impact at all, this is exceedingly unlikely.’ Following public outcry, governments have commissioned another study to make this system safer. But in an area prone to earthquakes and high seas, locals fear that whatever improvements are made the waste will find its way to their shores. The impact on marine life – and therefore on human health – could be catastrophic; fish are a major source of protein for more than 80,000 Papua New Guineans whose lives depend on the sea.3

Come with me and see, says Letani Robin, a community facilitator for Lalok village.

The route of the mine’s pipeline.

Red smiles

Letani takes me by boat to the end of the pipeline at Basamuk, where the processing plants are being built. As we walk up the road from the once beautiful coastline, the dirt road disappears under a curtain of limestone dust each time a truck goes by. Coughing, Letani worries for the workers and local residents. By 2002, an estimated one million Chinese were suffering pneumoconiosis – the debilitating work-related lung disease caused by the inhalation of dusts.4 This problem is being exported to Basamuk’s shores.

Cultures are colliding here. To the outrage of the people of PNG, media and locals report that Chinese workers for the Ramu project have been brought into the country illegally in shipping containers along with ‘comfort women’ to service them. Standing at the main gate of the workers’ compound, we read the sign of ‘welcome’– the company rules for all those who pass through its gates. No alcohol. No drugs. No women. No families. No littering. No removing company property. No betelnut. Betelnut is a staple for PNG people. Once the green nut is peeled and chewed it turns the mouth, lips and teeth red. ‘It makes us feel happy and tell stories,’ explains Letani.

Red is the colour of health, happiness and prosperity in China. I wonder what the Chinese here make of the red smiles of welcome from people like Ruth Kapi. Ruth is a storeholder at the Basamuk market. She’s married to a landowner but her relatives work here, building the factories for the nickel to be processed. When I ask her about the benefits of the plant, she strides off, waving me to follow. ‘They employ our people doing menial work for 170 kina ($61.90) a fortnight,’ she scoffs. And – despite promises to the contrary2 – these locals have not been hired to do the more lucrative contract work. The equipment, materials and pipelines used on the site are all stamped ‘Made in China’.

Ruth points to the sides of what looks like a pit and explains that it used to be a mountain. She takes us to the flats where the mountain’s rocks are now being crushed to make concrete blocks for factory walls. It gives the phrase ‘taking their land’ new meaning. Ruth points to the crusher and explains how the machine has eaten the leg of one of her relatives. He now has a stump below the knee. The company paid him 500 kina ($182) compensation.

Then she shows us the factory foundations – acres and acres of steel frames. The Chinese workers are uniformed and hard-hatted. The PNG workers mix concrete by hand to bolster a steep retaining wall. They wear no protective gear. When I ask Ruth why, she starts laughing with the workers below, throwing betelnuts at them in a makeshift game of catch.

‘So what is in all this for the people of PNG?’ I ask Letani. He says that in exchange for its riches, PNG wants tangible returns – roads, bridges, infrastructure. Instead he points to the local workers’ housing, row upon row of pre-fabricated dormitories, easily disassembled to take away. The only economic opportunity that remains for the people is to be paid a reasonable price for their land and resources. There’s no sign of this happening.

Mining through paradise: Truck after truck of Chinese workers build the processing plant on Basamuk’s coastline

Collateral damage

Clan leaders from Kunumbukari – where the resources will be prised from the ground – stand to lose everything to this mine: their land; the drinking water, fish, prawns and turtles in the river; and the birds of paradise, wild boar and vast source of natural medicines in the rainforest surrounding it. Yet the Land Titles Commissioner – appointed four years ago by the Government to validate and prioritize claims – has just started to hear evidence from the seven clans claiming ownership of the land where the mine is situated.

Only a handful of landowners have been given access to the Memorandum of Agreement signed in 2000, which sets out their rights. They are to receive 65 per cent of all government royalties.5 But 65 per cent of nothing is still nothing. China Metallurgical Construction Corporation (MCC), one of the largest and most profitable of China’s state-owned enterprises – together with three Chinese steel companies – effectively own 85 per cent of Ramu Nickel. Rather than sell the minerals on the market, the owners may simply absorb them into their own production. No revenues means no royalties.

Letani Robin and Uaya Bodick point out the path of the pipeline through the rainforests linking Basamuk to the mine, which – like so much of the equipment used for the mining development – is stamped ‘Made in China’.

Government sell-out

The Memorandum of Agreement commits the Chinese to contributing an astonishingly low $731,000 to local infrastructure. While the companies say publicly they will spend $2.93 million2, this is still a pittance considering the 20-year lifespan of the project. How many schools and hospitals can be built with an amount like this? Taxing the Ramu Nickel project could have produced a firm support for infrastructure funding. But in addition to receiving a 10-year income tax holiday, the project is exempt from a range of other taxes – even the excise on fuel has been waived.6 And what will local landowners think when they read that the PNG Government – not Ramu Nickel – has signed up to build the all-important road from Basamuk to Madang? With no taxes from the mine, how will the Government fund the route?

Could corruption have been sitting at the negotiating table during the Ramu Nickel deal? That’s what the locals are saying. Why else would any government strike such a bad deal, they ask? They are good questions.

Outcomes like this are not new. They have surrounded the mines built by Western corporations in developing countries with weak governments for decades. In this, China is acting like any good capitalist. Sixty years ago China proclaimed itself communist. Thirty years ago the country opened its economy to world trade. Today, its ‘capi-communist’ approach combines strong influences of both.

China is driven by naked self-interest – the hallmark of capitalism. One only needs to look at the balance sheet to see China’s phenomenal economic success. The country holds $1.9 trillion in other countries’ currencies. It exports much more than it imports. And it owes no significant debt. Western Europe and North America – traditionally leaders of the capitalist world – look pale in comparison.

China is not interested in expanding the land boundaries of its empire. Having learnt the rules of globalization, its primary takeover targets are corporate. Like a classic capitalist it has neglected the rights of its workforce in pursuing profit. Like a communist its justification is that the rights of an individual must bow to the collective whole – a decision made by the government in the interest of the people.

The results are mixed. China’s meteoric economic growth has pulled an estimated 300 million people out of poverty – a remarkable achievement. But to get there China seems to have abandoned the welfare of an entire generation of rural workers. Many of the 140 million people who have migrated to cities to work in factories and on construction sites have faced appalling conditions. Shrinking incomes, high taxes and corrupt local governments have hardened the lives of those that remain in the countryside.7

The pipeline through the rainforests - like so much of the equipment used for the mining development - is stamped ‘Made in China’.

In China’s image

On the international stage, China’s approach initially sounds refreshing. Unlike the interventionist stance of the United States, China does not judge the actions of other governments, and urges others to do the same. Where Western donors often tie their aid to demands for human rights and political reforms, China gives with no strings. The country’s December 2005 ‘White Paper’ stipulates aid ‘with no conditions attached’.8 Its largesse is now being felt in every corner of the world.

China adopts the pure capitalist notion that it does not make a moral judgement about where to invest – business is business. Ironically, Western capitalists have been criticized for the same amoral approach. But in China’s case, communism adds a powerful new dimension. The pages of this magazine describe a country governed by autocrats in a system wracked by corruption. Its leaders feel comfortable with despots and dictators who wield power from the top, and provide them with support.

Over the past decade regimes violating the human rights of their citizens have increasingly attracted international condemnation, and have lost diplomatic and trade opportunities as a result. China’s aid and overseas arms sales will undermine this progress. It will invigorate governments that are corrupt and autocratic by providing new legitimacy and fresh foundations on which they can grow. It will stimulate government in China’s image. Individual human rights will be the cost.

These influences have arrived on the shores of Papua New Guinea. With the Ramu Nickel mine, China is also exporting its attitudes and values: dangerous work standards; support for a system of unaccountable decision-making that undermines PNG’s interests; and an uncritical approach to a government dismissive of its people.

I experience the results when two Papuan New Guineans take me back to Madang around 30 kilometres away via the Bismarck Sea. Our boat is a six-metre fibreglass dinghy powered by a small outboard motor. Daylight is fading. I am anxious. By the time we are on the sea, the wind has changed. The further we go, the higher the waves become. As the fibreglass shell slaps against the sea, I wonder what it would take to snap it. Thunk, thunk, thunk. My bottom slaps the wooden palings. Only a sliver of a moon now lights our way. The waves are two metres high. They strap me in with a rope. I will need to slide my leg out from under it if the boat capsizes. Thunk, thunk, thunk. We are all saturated. Snot runs from our noses unchecked. The stinging salt from the water pounding my face has reduced my eyes to slits. Is that a light? Is that where I should swim when the boat capsizes?

We pitch around at all angles for two hours. Then, suddenly, the water flattens. We have arrived on the other side.

Later I ask my fellow travellers whether this has been their worst crossing. They laugh. From the village where we departed, the nearest hospital is a six-hour walk along a dirt road, wading across rivers. And if you can’t walk, you die. Without a road, these people must continue to risk their lives on the sea.

It is as if their lives do not matter. And that is the most dangerous attitude China can export.

Special thanks to all those from Madang to Basamuk who offered friendship, hospitality and information during the writing of this story – in particular Yat Paol, Uaya Bodick, Letani Robin, Martha Mabb and Barry Lalley.

  1. ‘Highlands reports Ramu is making good progress’, PNG Resources, Issue 3, 2008.
  2. Ramu NiCo Management Ltd, Ramu Nickel Project, paper presented to the 10th Papua New Guinea Mining and Petroleum Investment Conference, 1 December 2008.
  3. PNG’s Lutheran Churches Head Bishop, Dr Wesley Kigasung (deceased).
  4. Alexandra Harney, The China Price – The true cost of Chinese competitive advantage, Penguin Press, New York, 2008.
  5. Clause 3.
  6. John Garnaut, ‘A very public privacy issue’, The Diplomat, Dec-Jan 2007.
  7. Read more in Chen Guidi & Wu Chuntao, Will the boat sink the water? HarperCollins, New York, 2006.
  8. Mark Leonard, What does China Think? Fourth Estate, London, 2008.

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