China and the Falklands

October 29, 2015, by editor

Written by Alex Calvo.
Reports on Chinese Leader Xi Jinpings state visit to the United Kingdom have centered to a large extent on
bilateral economic relations, including FDI (foreign direct investment) and the Citys role as RMB offshore trading
centre. However, no look at Anglo-Chinese relations is complete without an examination of national security issues,
and this includes Beijings policy in the South Atlantic. Beijing is key partner for Buenos Aires, both in the economic
and defence industry arenas, while providing diplomatic support for Argentines claims to the Falklands.
Growing trade and investment, and financial support for Buenos Aires
Chinas thirst for commodities and Argentinas extensive natural resources are the main drivers behind expanding
bilateral trade. According to a report by Argentinas Chamber of Commerce, it hit a historic record in 2014,
amounting to 11.5 percent of the Latin American countrys foreign trade and having multiplied by 16 since 1994.
China is also playing an increasingly important role in Argentine infrastructure construction, geared towards the
exploitation of the countrys significant natural resources. An example are the Nestor Kirchner and Jorge Cepernic
dams in Patagonia, which prompted President Cristina Fernandez de Kirchner to refer on 1 August 2015 to the
comprehensive strategic partnership established between China and Argentina, describing it as an example for
strategic relations around the world. China is providing USD 4.7 billion euros to finance the dams, built by a
subsidiary of Chinese engineering and construction conglomerate Gezhouba Group.
Beijings provision of RMB swaps is also very important for Buenos Aires, given her difficult relations with the
international financial markets. The US Council on Foreign Relations has noted that Last year Argentina activated
the swap line, and has since drawn a reported $2.7 billion of an available $11 billion. Under the agreed terms, the
RMB may be freely converted into dollars. This is significant for Argentina, whose dollar reserves have plummeted
from $53 billion in 2011 to $31 billion today. As such, the swap lines are being used less to settle Chinese goods
trade than as a palliative for those unable to rely on the U.S. Federal Reserve, or in Argentinas case most of the
international banking system.
Chinese diplomatic support for claims to the Falklands
Beijings tradition policy is to explicitly support Buenos Aires claims to the Falklands. In December 2011 then
Chinese President Hu Jintaos special envoy Jiang Shusheng, and chairman of the Standing Committee of the
National Peoples Congress, said solidarity with Argentina on the Malvinas issue is an invariable position of Chinas
foreign policy. China is keen to emphasize the alleged parallels, in her view, between the Falklands and Taiwan.
Both Beijing and Buenos Aires believe the wishes of the population involved to be no bar to their territorial claims.
The PRC may also be interested in the natural resources, oil and fisheries, found around the islands. In addition,
China may also see the Falklands through the prism of her growing interest in the Antarctic.
Defence industry cooperation: the key to Buenos Aires rearmament?
Following the 1982 Falklands War and fall of the ruling military Junta, successive civilian governments let the
Argentine defence budget shrink, with most funds devoted to personnel expenses and most hardware not properly
maintained. While the extent to which Buenos Aires is ready to invest to recover her lost military capabilities, we
can note that China plays a growing role in the countrys defence procurement. The most significant deal in place is
the provision of five offshore patrol vessels, provocatively labelled Malvinas Class, a version of Chinas Shipbuilding
Industry Corporation (CSIC)s P18 export corvette. According to Brazilian web magazine Naval Power the deal may
involve building two ships in China and co-producing three in Argentina. These vessels are 95-meter-long, displace
1,800 tons, and have a maximum speed of 25 knots. Their armament can include a 76 mm main gun, two 30 mm
cannons, up to eight anti-ship missiles, and two triple torpedo launchers. They can also carry a helicopter.
There has long been speculation about the possible acquisition of Chinese FC-1/JF-17, with Defence Minister
Agustn Rossi publicly confirming it was on the cards in March 2015. The JF-17 Thunder, co-developed with Pakistan,
is replacing the US-made F-16 as the latters air force workhorse. Janes describes it as Powered by a single
Russian-designed but Chinese-built Klimov RD-93 (RD-33 derivative) turbofan, it has a top speed of Mach 1.6 (at
altitude); a radius-of-operation of 648 n miles (1,200 km) as a fighter and 378 n miles (700 km) as a ground
attack platform, adding that it has seven underwing/fuselage hardpoints, and is equipped with an internal GSh23-2 twin-barrel cannon. Weapon options include up to four PL-5, -7, -8 or -9 short-range air-to-air missiles
(AAMs) or four PL-12/SD-10B medium-range AAMs; two C-802A anti-ship missiles; two anti-radiation missiles; five
500 kg bombs; twin launchers for up to eight 250 kg, MK-20, GBU-12 or anti-runway bombs; single 1,000 kg

bomb or GBU-10; or up to three mission pods.

There have been some speculation about a naval variant of this plane, and if confirmed it would multiply its potential
value for Buenos Aires. Other possible areas of cooperation in the defence industry are the co-production in
Argentina of the Norinco VN1 wheeled armored personnel carrier (APC) and co-operation in building a new icebreaker, naval tugboats, mobile hospitals. In 2011 the Fbrica Argentina de Aviones (Argentine Aircraft Factory:
FAdeA) signed a deal to start co-producing Chinas Changhe Z-11 light helicopter.
Cooperation in space: purely civilian?
China is building a space tracking station for lunar exploration in Neuquen (Patagonia), which is scheduled to start
operating in 2016. Although Argentine official sources stress its purely civilian nature, not everybody accepts this
view at face value. For example Richard D. Fisher Jr. (Senior Fellow, Asian Military Affairs, International Assessment
and Strategy Center) told the U.S.-China Economic and Security Review Commission on 18 February 2015 that A
Chinese-armed Argentina with access to Chinese space ISR may be able to better threaten war to take the Falkland
Islands.
Conclusions
China has become one of Argentinas top trade partners, while providing much needed investments in a number of
areas, including infrastructure. In addition to project finance and FDI, Beijing has also made available to Buenos
Aires RMB swap facilities, part of Chinas drive to internationalize her currency and of vital importance to Argentina
given her troubled relationship with foreign investors and international financial institutions. Beijing remains a
steadfast supporter of Argentine claims to the Falklands, underscored by their shared political culture and Chinese
interest in the regions natural resources. Chinas shadow also looms large in Argentine military procurement, as
clear from the purchase of five offshore patrol vessels and continued speculation over the FC-1/JF-17 warplane.
Therefore, there are powerful reasons for the UK to carefully follow Chinese policy towards the South Atlantic, since
Beijing may provide Buenos Aires with the economic, diplomatic, and military, means to change the balance of
power in the region. Thus, while bilateral anglo-chinese economic relations are indeed important, they should not
monopolize the attention of analysts and policy makers to the detriment of national security.
Alex Calvo, is a guest professor at Nagoya University and a member of Taiwans South China Sea Think-Tank and
CIMSEC (The Center for International Maritime Security). He tweets @Alex__Calvo and his work can be
found here.Image credit: CC by Ministerio de Cultura de la Nacin Argentina/Flickr
Posted in ChinaInternational Relations

http://blogs.nottingham.ac.uk/chinapolicyinstitute/2015/10/29/china-and-the-falklands/