Lebanese leaders’ camaraderie with Xi Jinping: An East shift for the Lebanese economy

  • + The IMF doesn’t seem to be the solution for Lebanon’s deep recession.
  • + Xi Jinping’s government has its sight set on Lebanon.
  • + Hassan Nasrallah has declared his preference to strengthen economic ties with China.
Source: Mideast Discourse

Why are Lebanese leaders in camaraderie with Xi Jinping?

Answer: A series of donations and commitments have been made in recent months, which prepare the path for a closer partnership.

Lebanon is suffering its worst-ever financial crisis – the Lebanese pound has lost 75% of its value-, one which is questioning the maintenance of its citizens’ way of life. Poverty has taken Beirut’s streets. While protests are taking place all over the country, talks between leading politicians from Hassan Diab’s government, such as Alain Bifani or Henri Chaoul, and the IMF are getting rough. Moreover, both politicians resigned in June, as they described as unacceptable the reforms and restructuring that must be implemented in exchange for IMF’s aid.  

Xi Jinping has seen the lack of progress in the negotiations between Kristalina Georgieva – IMF’s managing director – and Diab’s government as an opportunity to deepen his ties with Lebanon.

At the beginning of July, Hassan Diab took the step that other Lebanese leaders were already asking for and invited the Chinese ambassador to a meeting with the main representatives of Lebanon’s government. The first step towards an economic solution without taking into account Western and Arab positions and the conditionality required by the IMF.

Indeed, it seems that a bailout from Beijing is going to take place in Lebanese territory through an entrance of Chinese firms in Lebanon’s markets. This would mean a huge investment in strategic market areas, such as railroad, waste management, or even energy supply. 

In September 2017, Lebanon officially was integrated into the Silk Road project, at the same time that a bilateral partnership was signed between both governments. Since that moment, the Lebanon-China financial and economic relations have increased, and there is thus a relevant Chinese presence in the Lebanese market.

Apparently, we are witnessing the development of a Chinese strategic movement that started some decades ago. The camaraderie between Xi Jinping’s government and Lebanese leaders is a point of start for a further Chinese influence on the Mediterranean area, and Lebanon’s economic recovery without imposed structural reforms. 

What do Lebanese leaders want?

Answer: A solution for Lebanon’s deep economic crisis without undertaking the reforms that the IMF economic aid requires. 

Lebanon is currently under an urgent need of money, as its poverty is fuelling social unrest. The financial crisis is affecting the stability of an already damaged country, since it is the territory where millions of Syrian and Palestinian refugees live. 

Moreover, the negotiations for the IMF bailout are not developing as Hassan Diab expected. This has resulted in the resignation of two of his most powerful politicians in financial matters. Indeed, the failure of Diab’s government talks with Georgieva has been translated as weakness in his term. There is an urgent need for other answers to the situation his country is experiencing. 

As a consequence, the offer of Xi Jinping to invest in strategic market fields is attractive. Despite Diab’s good relationship with Western partners such as the EU whose backup is needed in the Lebanon-Israel energy conflict, the IMF conditions to be economically rescued are not compatible with his political priorities. It must be stated that one of these conditions is to restructure the banking sector

So far, the IMF-Lebanon dialogue is frozen, and Chinese investments seem the path to follow to unlock the Lebanese financial crisis. Furthermore, Hassan Diab needs to give its people and partners an answer if he wants to stay in power. 

On the other side, Hezbollah’s leader, Hassan Nasrallah, who wants to win political control over Lebanon’s territory, has publicly advocated for looking into Chinese investments. As the US has imposed sanctions on Lebanon under the Caesar Act, he has stated that there are alternatives to Western economic sources. 

In this way, several Lebanese policymakers have seen the Chinese solution as the one to follow. This puts pressure on Diab’s government, as his opposition is defending publicly a choice that doesn’t fit with the IMF interests, and which would mean a new chapter in Lebanon’s history.

What does Xi Jinping want?

Answer: To deepen and strengthen his political influence over the Middle East, including Lebanon.

Hassan Nasrallah and the Trump Administration have had war words for months. Taking into account the dependency of the Lebanon bank system on the US dollar, a move towards China might be the end of the strong relationship that characterised the Beirut-Washington alliance. This, together with the already mentioned Caesar Act, leaves free the path towards a Sino-Arab dialogue on the economy. 

Xi Jinping has seen these circumstances as an opportunity to expand Chinese influence on the Middle East. Moreover, the geographical location of Lebanon is a strategic corner stone of the region, as it allows maritime transport through the Mediterranean, as well as the presence in the reconstruction of Syria. 

The above goes along with Xi Jinping’s political guidelines. The supreme leader of China’s Communist Party wants a strong position for his country in the world. Lebanon is not an exception to this ambition, but a meaningful territory for Chinese global influence. 

As it was mentioned in a previous article on Chinese expansionist ambition and the EU, Xi Jinping and his government are building their sphere of influence through global trade and commercial policies. And in the case of Lebanon, Xi aims to do the same. 

The Belt and Road Initiative, of which Lebanon has been a part since September 2017, is the vehicle whereby to expand the Chinese influence. Along with this project, the Xi Jinping approach to the economically hurt territory would allow him to reach his government’s aspirations in Lebanon, a country traditionally under US influence

What is Xi Jinping doing?

Answer: Several diplomatic and economic arrangements to get Lebanese leaders’ attention.

Within his expansionist ambition, Xi Jinping is developing a series of key investments through Chinese companies in order to extend China’s influence on world politics. In Lebanon, these investments have been focused on strategic sectors. 

In May 2020, both countries signed an agreement on cultural creation, which looks for further exchanges in this field. Moreover, during the COVID-19 pandemic, China donated army medical supplies to Lebanon’s army. Both gestures aim to consolidate the image of China as an ally for Lebanese leaders. 

Furthermore, last year, some Chinese businessmen went to Beirut in order to offer investments on several projects. This happened in a moment when Lebanon was starting to face its financial recession and helped to build the future alliance between Xi Jinping and Hassan Diab. 

But China’s government has also shown interest in Hezbollah, whose leader, Nasrallah, has made public statements in which he defends the role of China in the country. The fact that Chinese companies are willing to invest in electricity plants, railway structures, and other structural fields, is important. Xi Jinping is offering a solution for Lebanon’s problems in a sector vital for Lebanese citizens – fact that will increase China’s support within Lebanon.  

All these actions taken by Xi’s government are fundamental in order to reach his ambition of real influence on Lebanon’s politics and the decay of the US.

Who is winning and what about you?

Answer: All the political leaders involved in this closer relation are winning – Xi Jinping and the Lebanese.

Nasrallah took the first step towards a China-Lebanon closer relationship with the public statement he made on television last June. But Diab’s government, after some failures in the IMF negotiations, has seen the promise of Chinese investments as a solution to social unrest. For this reason, the three parts involved are taking advantage of the situation. Especially Xi Jinping, whose influence on the region would presumably increase.

This increase of the Chinese influence of the Middle East, specifically on a region near Syria, would have a huge impact on geopolitical strategy. So, every country with interests in the region such as the EU, Russia, US must keep an eye on the issue. Furthermore, for us, citizens of the world, it can be translated into new trade agreements, with an effect on what we can buy or sell. For Lebanese citizens, a strong investment in their country would mean an escape from the poverty situation in which they are currently living. But it is also a way to avoid the necessary reform of a financial system which favours foreign interests and not its own people.

Claudia María Yáñez Sangil

Research and Analysis Intern