About 5 months ago, I posted an article, The Loss of Soft Power, about how China’s rise in soft power would eventually meet the same problems that the United States had to deal with decades ago.  Namely, that in times of duress, China would come first, and that Chinese companies would either have to back out of their riskier investments, or China would have to send in military forces.

Well, a recent Department of Defense study entitled “Military Power of the People’s Republic of China 2009” says that China does not have the capacity to send troops abroad anytime within the next decade, so China won’t be sending soldiers in to protect their investments anytime soon.  Because of that, Chinese companies are starting to back out.  Here are some key sentences:

China has backed away from some of its riskiest and most aggressive plans, looking for the same guarantees that Western companies have long sought for their investments: economic and political stability.

China espoused a new model for African investment: mutually beneficial trade between sovereign nations with none of the meddling so common among Western donors and investors, with their demands for labor and environmental standards, as well as respect for democracy and human rights….  Chinese and Angolan officials trumpeted this partnership as a model for Chinese investment in the continent, a win-win relationship benefiting both countries….  But that formulation has proved problematic in an economic downturn.

Guineans are increasingly suspicious of Chinese investment. Many people see Chinese companies as being just as exploitative as Western ones, if not more so.

China has long been a master of saying one thing and doing another.  For example, “According to Reuters, Chinese government officials said Tuesday that they did not know about YouTube being blocked.” As someone who lives in China, I can tell you that it most definitely is being blocked.  For many Chinese negotiations, there is the attitude that talk is cheap and means very little.  China rarely signs very substantive agreements, preferring much vaguer language about win/win or mutual cooperation.  Such language is easily reinterpreted to benefit China whenever a deal might not be to their advantage.

“In Guinea, China has backed away from what Guinean officials portrayed as a done deal to build a much-needed $1 billion hydroelectric dam….  ‘The dam is not a gift; it is an investment,’ said Mr. Huo, the Chinese ambassador. ‘That is what win-win means.’ ”

China is more than happy to turn things like this into outright “gifts” when it’s to their advantage—i.e., they can use the “gift” to help secure lucrative mineral rights—but when the going gets tough, China looks after its own interests first.  What we are seeing here is the beginning of the disillusionment of China’s former allies, and the realization that while, on the surface, China’s aid carries no strings (at least, none involving transparency and human rights), any aid given must translate into a direct benefit for China.  That is the hidden string and the bottom line.

And, as anyone who is familiar with the way Chinese corporations do business, no deal is done until it’s done.  And sometimes not even then.