As America fights, China gets contracts

(MoneyWatch) In November 2007, the China Metallurgical Group Corp., a state-owned conglomerate, signed a $3 billion contract with the Afghan Ministry of Mines and Petroleum to mine copper from a barren, mountainous region southeast of Kabul.

The mine sits atop the ruins of an ancient Buddhist city in Logar Province. The area is also a Taliban stronghold. But that's not stopping the Chinese from promising what would be the largest foreign investment in Afghan history. In fact, the company has even said they will build a railroad -- the first in Afghanistan -- to the mine from Pakistan.

After a war that has cost the lives of more than 2,200 Americans and over 17,000 Afghans, not to mention a bill of upward of $642 billion, it has been China, not the United States, that may commercially conquer Afghanistan. The situation is a replay of what has happened in Iraq, where Americans have suffered 4,486 casualties. In June, the New York Times reported that, since the 2003 U.S.-led invasion, Iraq has become one of the world's top oil producers and that China has become its biggest customer, buying almost 1.5 million barrels a day, almost half of what Iraq produces.

Many Americans might wonder why, after shedding so much blood and treasure, American companies aren't able to benefit from the U.S. presence there. Reflecting the thoughts of many, Jon Stewart asked on "The Daily Show," "Don't you have to be in a war to win it?"

Why the U.S. needs China

It may seem surprising, but the U.S. needs China in Afghanistan. As America and its allies withdraw their forces and the vast amount of money supporting their involvement, fears have mounted of an economic crisis, which would lead to yet more violence. China, an ally of Pakistan and an antagonist of India, is the only nation with the power to force Pakistan to curb the Taliban factions it supports. China can also serve as a valuable counterweight in the region to Russia.

From the perspective of many Afghans as well, a strong presence by China, which along with India is a regional superpower, is a positive thing. And there are ideological sympathies as well -- not all support of communism died with the ouster of the Soviet Union.

'We have many Afghans who are Russian communists, and we have Chinese communists, Maoists, allied with China," said a prominent Afghan journalist in Kabul who asked not to be identified. "There are Maoists in [Afghan President Hamid] Karzai's Cabinet. Keeping these people there satisfies the Chinese, and it's one reason why the Afghan government gave the contract to the Chinese."

China's commercial victories in Afghanistan are many, varied and of huge potential value. They include mineral deals such as the copper mine in Logar, and the rights to explore for oil in the Amu Darya basin, on the northern Afghan border. China National Petroleum Corp. (CNPC) began production there last October. Meanwhile, China has signed contracts to build a railroad through the Wakhan Corridor, the sliver of land northeast of Afghanistan jutting up against Xinjiang, China's far western province, through which long-haired Bactrian camel caravans once brought tea and other precious goods to Afghanistan.

In June, Chinese President Xi Jinping and President Barack Obama met in California in what President Obama called "unique" and "enormously important" talks. China is now the world's biggest trading nation -- $3.87 trillion last year alone -- quite an accomplishment for a nation whose economy is 12 times smaller than that of the U.S., on a per capita basis. 

For those Americans who feel that the U.S. and not China should benefit from these two wars, the U.S.-China Business Council, a group representing more than 200 companies doing business in China, has a simple argument: The U.S. "has a significant stake in seeing the Chinese economy grow." It argues that U.S. manufacturing, agriculture and services will grow along with China's economy and as more Chinese become affluent. China is America's third-largest market.

The bazaars in Afghanistan are filled with an array of Chinese goods, from plastic sandals to electronic gadgets -- yet there has been only $234 million in trade between the two countries. The U.S. and its allies want that to grow. They see China, which has its own Islamist problem, in Xinjiang, and with its historical ties to Afghanistan, as the only nation that can stabilize Afghanistan after they leave.

Foreign aid, domestic corruption

China, which needs energy to fuel its growing economy, is moving cautiously in Afghanistan, in part because of obvious concerns over security. The Taliban have already attacked Mes Anyak, and Chinese workers have fled. In June, then-Chinese President Hu Jintao and Karzai upgraded their ties to a strategic partnership. In September, Chinese security chief Zhou Yongkang visited Kabul, the first visit by a leading Chinese government figure in 46 years, followed by the announcement that China would train 300 Afghan police officers.

The World Bank estimates that 97 percent of Afghanistan's GDP comes from foreign aid and the money that foreigners spend locally, about $15 billion annually, a form of dependence that cannot be sustained. Meanwhile, Afghanistan's biggest export is opium. The Taliban are involved, but so are government officials. According to the CIA, in 2012 Afghanistan made $376 million -- 1/17 the value of its imports -- exporting fruit and nuts, carpets and semiprecious stones.