China's Gulf Policy Cost It Key Contracts

CHINA has so far paid a high price in hard currency for its refusal to support the use of force to oust Iraqi troops from Kuwait. Unlike more than 100 companies worldwide, China's state-run companies have failed to bag some of the $50 billion in contracts being offered to rebuild Kuwait, say Chinese officials.

China must yield to countries that helped rout Iraqi President Saddam Hussein's military before it can win such lucrative contracts, says Shukri Naser Al-Shraim, a Kuwaiti diplomat.

``China is trying to get a piece of the cake. But of course Kuwait will favor countries that joined the military'' campaign against Iraq, says the Beijing-based diplomat.

Wary of antagonizing some of its Arab friends, China endorsed all the United Nations resolutions against Iraq except the use of force to expel Saddam's Army from Kuwait. China also opposed the UN coalition's ground offensive that liberated the emirate.

Because of this policy, China has apparently undermined its standing in a market that had accounted for some $530 million, more than one-fifth of China's $2.5 billion in overseas labor and engineering projects.

``So far, Chinese companies have not been included in the 100 or more companies that have been offered contracts to rebuild Kuwait,'' says Tang Zhixin at the Ministry of Foreign Economic Relations and Trade (MOFERT).

Beijing has strenuously sought foreign earnings in the past 20 months to repay a high external debt and address huge economic problems at home. It already has lost a total of at least $2 billion in trade and service contracts throughout the Gulf region because of the war, according to MOFERT.

Before the Iraqi invasion last August, China had sent about 20,000 laborers to Kuwait and held lucrative construction contracts in the emirate, says MOFERT.

Almost all the residential buildings, hospitals, power stations, and oil refineries in Kuwait were built by companies from China, says Chen Yongcai, the director of MOFERT's foreign economic cooperation department.

In fact, Mr. Chen told the official newspaper China Daily that since the cease-fire, Kuwait has made an ``increasing request'' to China for help in the emirate's reconstruction.

However, Mr. Al-Shraim says that in recent weeks the emirate has neither met with China's construction companies nor issued visas to their employees. ``I believe China may get subcontracts for projects in Kuwait.''

Both MOFERT and the Foreign Ministry declined to say on Thursday whether China has discussed new projects with Kuwait.

But Hu Mouhai, a spokesman for the China State Construction Engineering Corporation, says, ``So far there have been no new contracts and no contacts between the corporation and Kuwait.'' According to MOFERT, it has lost $856 million because of the war.