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China this month signed an agreement to loan $1 billion to Moldova at a highly favorable 3% interest rate over 15 years with a five-year grace period on interest payments. The money will be channeled through Covec, China's construction leviathan, as project exports in fields such as energy modernization, water systems, treatment plants, agriculture and high-tech industries.
Curiously, China has offered that it is prepared to "guarantee financing for all projects considered necessary and justified by the Moldovan side" over and above the $1 billion loan. In effect, Beijing has signaled its willingness to underwrite the entire Moldovan economy which has an estimated gross domestic product of $8 billion and a paltry budget of $1.5 billion.
The Chinese move is undoubtedly a geopolitical positioning. In an interesting tongue-in-cheek commentary recently, the People's Daily noted that "under the Barack Obama administration, the meaning and use of 'cyber diplomacy' has changed significantly ... US authorities ... stirred up trouble for Iran through websites such as Twitter ... Secretary of State Hillary Clinton said that this is the essence of smart power, adding that this change requires the US to broaden its concept of diplomacy".
Moldova is a country where China has historically been an observer rather than a player. This is Beijing's first leap across Central Asia to the frayed western edges of Eurasia. Why is Moldova becoming so terribly important? Beijing will have calculated the immense geopolitical significance of Moldova's integration by the West. It would then be a matter of time before Moldova was inducted into the North Atlantic Treaty Organization (NATO), before the Black Sea became a "NATO lake" and the alliance positioned itself in a virtually unassailable position to march into the Caucasus and right into Central Asia on China's borders.
What we may never quite know is the extent of coordination between Moscow and Beijing. Both capitals have stressed lately of increased Sino-Russian coordination in foreign policy. The joint statement issued after the visit by the Chinese President Hu Jintao to Russia in June specifically expressed Beijing's support for Moscow over the situation in the Caucasus. Clearly, a high degree of coordination is becoming visible across the entire post-Soviet space.
Significantly, in another commentary, the People's Daily launched a blistering attack on US policies in fanning unrest in Xinjiang. "To the Chinese people, it is nothing new that the US tacitly or openly fans the winds of resentment against China ... the US indiscriminately embraces all those forces hostile to China ... Perhaps, it is a customary practice for the US to adopt the double-standard when weighing its interests against others. Or, perhaps, it has some ulterior motive behind to ensure its supreme position will not be challenged or altered by splitting to weaken others ... Since the end of the 1980s, the US has never moderated its intention to stoke so-called 'China issues' ... This time, in their efforts to fan feuding between Han and Uighur Chinese by harboring and propping up separatist forces, the US is jumping out again to be the third party that would, for the secret hope, benefit from the tussle."
Chinese experts have pointed out that with the easing of cross-strait tensions in China's equations with Taiwan, the scope for US meddling in China's affairs has drastically reduced and this, in turn, has shifted US attention to China's western regions of Xinjiang and Tibet.