September 7, 2021 will be the eight years anniversary of the establishment of the Belt and Road Initiative (BRI), which has accomplished remarkable achievements. From 2013 to 2019, China invested US$117.31 billion in BRI countries. Although the COVID-19 in 2020 affected the stagnation of the international economy, However in the first half of 2021, the investment of Chinese companies in the countries along BRI increased by 8.6%.

Furthermore, BRI has received both widespread “attention” and “hostility” from the world’s major powers. In order to counter China’s BRI, US President Joe Biden launched the “Build Back Better World (B3W)” plan at the G7 summit. Its purpose is to provide an alternative plan to invest in developing countries. Immediately afterwards, on July 12, 2021, the EU foreign ministers agreed to launch a global infrastructure plan, the so-called “A globally connected Europe”. The strategic plan is an attempt to connect Europe and the world as from 2022 to contrast China’s influence.

Biden wants to reshape the United States into a World leading country, and hopes this will increase the attractiveness of B3W. But whether the B3W plan can be realized remains a question mark. The world is more willing to sign BRI projects based on national interests than to choose the B3W project with the United States. So far, approximately 140 countries have signed a memorandum of cooperation on the BRI with China.

The BRI has become the “flagship” project of China’s overseas investment in the past eight years. According to Refinitiv, a data provider under Thomson Reuters, new infrastructure has been built under the framework of BRI, including railways, ports, highways, etc. As of July 2020, there are more than 2,600 projects related to BRI, with a total project valuation of approximately US$3.7 trillion.

In the last eight years, China has mainly increased investment in Central Asia, Southeast Asia and South Asia, and gradually looked towards Central and Eastern Europe.

According to China’s investment in Central Asia is concentrated in Kazakhstan and Uzbekistan. In the ten years from 2009 to 2018, China invested US$12.7 billion and US$3.246 billion in Kazakhstan and Uzbekistan, respectively. The investment in both countries is mainly concentrated in energy and minerals. But with China’s commitment to COP 21, energy investment in Central Asia is expected to slow down. Southeast Asia and Central Europe will become the next stage of China’s investment focus in implementing the “high-quality” BRI program.

Since signing the RCEP, China’s investment in Southeast Asia has gradually increased, but it has a long way to go to catch up with Japan’s investment. China’s investment in Malaysia reached an average of 3.9 billion MYR per year between 2012 and 2016. Since 2016, China has been the largest source of foreign investment in Malaysia’s manufacturing sector. In 2019 and the first half of 2020, Malaysia successively approved 32 projects from China for a total value of US$45243 million. It has been observed that Malaysia’s economic growth rate rose by 1.31% in 2014 after the implementation of the first Malaysia-China project under the BRI framework. However, the growth rate in 2018 and 2019 was less than 5%. Chinese investment has little impact on Malaysia as a whole: the start-up time of China-Malaysia cooperation projects is too short, and its economic effects are not easy to see. In addition, Malaysia’s economic growth is also affected by many external factors, such as tensions caused by geopolitics including the trade war. This is also a mirror of Southeast Asia.

Relatively speaking, China’s investment in Central and Eastern European countries has become a bright spot in recent years. From 2010 to 2019, China’s total investment in Central and Eastern Europe increased from US$310 million to US$14.69 billion, with an average annual growth rate of 53.4%. In 2017, the China-Central and Eastern European Banking Consortium was formally established. The China Development Bank(CDB) provided 2 billion Euros in financial cooperation loans to this region. The second phase of the China-Central and Eastern Europe Investment Cooperation Fund raised US$1 billion to be invested in Central and Eastern Europe. Strong policy support continuously which indicates that China’s investment in the region will grow rapidly in the future.

Generally speaking, China’s investment in Central and Eastern Europe presents the following typical characteristics. Firstly, as far as investment entities are concerned, China’s early investment in Central and Eastern Europe has been dominated by state-owned enterprises. Secondly, in terms of industry distribution, China’s cooperation projects in Central and Eastern Europe are largely concentrated in the energy and chemical industries. Third, China’s investment in Central and Eastern Europe is extremely unbalanced in terms of geographical distribution. Hungary and Serbia are the countries that receive the greatest contribution from China, and the two countries account for 1/2 of China’s total investment in Central and Eastern Europe.

However, the political risks within the Central and Eastern European countries have become the primary issue facing China’s investment projects in the region. The Czech Republic, Slovakia, Slovenia, Croatia, Romania, and Bulgaria have many parties are marked by frequent regime changes, with the ruling coalition often clashes due to differences in policy tendencies. In addition, the long-term sustainability of economic growth in Central and Eastern Europe still presents great uncertainties. Although countries in Central and Eastern Europe have experienced strong economic growth in recent years, in the long run, there is a risk of an economic decline. The “middle income trap” has become a real threat to all these countries.

China’s investment in countries along BRI mainly relies on state-owned and private enterprises. And the problem is that the proportion of state-owned enterprises’ overseas market revenue has increased significantly, but the level of internationalization has not followed suit. On the other hand, private enterprises show a two-tiered trend, with low overall profitability and weak investment sustainability.

When it comes to the choice of investment destinations for enterprises, state-owned enterprises will continue to invest in key areas of the BRI such as Southeast Asia, West Asia, Africa, and South Asia; while private enterprises and foreign-funded enterprises are currently investing more in developed countries such as the United States and Europe, but in the future , forecasts indicate they might increase investment in Southeast Asia, South Asia and other regions. Companies will also be paying more attention to safety, profitability and liquidity.

Regarding the question of whether the BRI is a strategy or an initiative, Chinese scholars express different opinions. Personally, I think it can be defined as a strategic initiative. In view of the long repayment period of the infrastructure investment and the limited debt repayment ability of various countries, it may be considered as an assisting instrumental Road Map. What is certain is that China needs to have an economic foundation if it wants to gain recognition from other countries. Extending it then to the political and diplomatic fields on this basis will be a long-term process. After all, if China cannot balance economic cooperation and obtaining strategic benefits (political influence), then China’s plan to promote the BRI will also be faced with greater risks.

L'articolo Infrastructure investment: the core instrument of BRI proviene da InsideOver.

The New Silk Road, also known as the Belt and Road Initiative (BRI) or One Belt One Road Initiative, was launched by President Xi Jinping in 2013. Designed with the goal of promoting Chinese geopolitical and economic ties with countries west and south of China, the project aimed to connect Asian, European, and African continents and strengthen trade and infrastructure development in the region. So far, over 60 countries have agreed to take part in the initiative, making up over 66% of the entire world population and affecting over 40% of global GDP.

While China has invested an estimated 4-8 trillion USD in 118 projects to date, success of BRI has been mixed, including both high profile successes and more controversial projects which have failed to live up to expectations.

Resounding BRI successes include the China-Pakistan Economic Corridor, the China-Myanmar Economic Corridor, and the Jakarta-Bandung high speed rail project. They have created significant work opportunities for local labor, filled critical infrastructure gaps, and either already demonstrated economic gains or are expected to do so for recipient countries.

Officially launched in April 2015, the China-Pakistan Economic Corridor (CPEC) involves construction of highways, oil pipelines, railroads, and power plants from Khunjerab to the Arabian Sea. Creating over 70,000 jobs for Pakistanis, China’s plans in Pakistan have already contributed to an estimated “two-percentage points in GDP growth”. Along with construction of the Gwadar airport, CPEC has led to the completion of Pakistan’s first electric-powered public transportation system, positioning Pakistan for future economic growth and more integration into the global economy.

The China-Myanmar Economic Corridor connects China’s Yunnan Province to Myanmar. In addition to road and rail transportation, construction on gas and oil pipelines began in 2008, finishing in 2013. With the capacity of carrying over 12 million tons of crude oil every year, these pipelines provide a more direct path for Chinese crude oil imports rather than using the Malacca Strait; the project has been crowned one of the major successes of BRI given its strategic importance for trade and economic security.

The Jakarta-Bandung high speed rail project was announced by Indonesia in 2015. Following a fierce financing competition by China and Japan, Indonesia announced the joint venture between Indonesian state-owned companies and China Railway International in October 2015, of which Indonesia has 60% interest in the joint venture and China owns the remaining 40%. The project will connect Indonesian capital Jakarta to the textile hub of Bandung via a 150 km long railway traveling up to 250 km/hr, effectively cutting down travel times from the original 3-5 hours to just 36 minutes. China and Indonesia plan for the railway to be fully operational by end of 2022; the project has already created over 40,000 jobs in just construction alone.

However, there have also been heavy criticisms of various BRI projects and suggestions that China has used its BRI as debt-trap diplomacy designed to coerce recipient countries into giving China concessions once they default on project debt payments. One example is the Montenegro highway project. The project consisted of a highway that would run from Port of Bar to Belgrade, a distance of 170 km. Getting a billion USD loan from China in 2014, the highway remains unfinished, with only 40 km completed. Montenegro now faces financial instability as a result of the project, with its debt now amounting to more than 100% of its GDP. Another failure is the Sri Lanka Hambantota project. The Hambantota port, started in 2007 by current Prime Minister Mahinda Rajapaksa, was leased to China for 99 years in 2017 for 1.1 billion USD following issues related to debt repayments. The country still remains in debt to China from the initial construction of the port, totaling 5.8 billion USD as of June 2020.

The reality is that while not all BRI projects have been successes, emerging economies in Africa, Asia, and Europe desperately need investment into infrastructure projects and the developing world faces a massive investment shortfall. The African Development Bank (ADB) estimates that there is an annual investment deficit of 93 billion USD annually in Africa, and 459 billion USD annually in Asia. This investment will be necessary to support future development of these emerging economies. While the US and wealthy western European nations contribute significant development funds annually, the level of investment is not enough to improve conditions sufficiently or quickly enough to support long-term growth. China’s investment is sorely needed to close the gap and to jumpstart emerging economies.

The previously highlighted projects show that when done right BRI projects can have significant positive economic impact for both China and recipient countries. However, it is also possible for projects to go very wrong and create undue economic pressure. Moving forward, it is essential for China and its partners to focus on three key areas to make BRI a long-term success.

First, China needs to take the time to truly study the long-term feasibility of proposed projects and maintain transparent, consistent oversight of projects to ensure that only the right projects are undertaken and that funds are used responsibly towards stable economic gain. This will require a greater degree of multilateral cooperation with other global lenders so that project assessments and standards are unified across organizations granting project funding. Not an easy task but one that will create better long-term outcomes for projects.

Second, given the high-profile nature of BRI and China’s desire to be more involved on the international stage as a global power, it will need to put in place stronger mechanisms to ensure renegotiations take place when necessary to restructure loan payment plans to reduce chances of defaults by host nations. To this end, China has already announced its partnership with the Paris Club, a host of twenty-two creditor nations, as well as G20’s Debt Service Suspension Initiative, an initiative that offers aid to 77 developing countries who have debt repayments due by 2020, to create a global debt relief effort alongside BRI.

Finally, China should focus on undertaking projects that emerging economies need but that also highlight China’s desire to take a leadership position in emerging technologies. This is already happening with high-speed rail projects, but China has an opportunity to massively speed up global sustainable energy initiatives. To date China has financed projects involving non-renewables 9.7 times more than in renewable energy. However, China has taken part in significant green projects, like the Karuma Hydropower Project in Uganda, generating 600 MV of electricity at full operation. Given a growing global emphasis on sustainable development and China’s desire to be a leader in renewable energy, expect to see future BRI projects that leverage China’s clean energy knowhow.

China’s BRI legacy as it stands today is mixed but there is promise around what its investments can bring to emerging markets. To make BRI a resounding success China should consider more stringent project review plans and project feasibility procedures as well as increasing focus on projects that more directly support hiring of local labor forces; this would go a long way towards improving project perception in recipient countries and lead to a higher long-term success rate for BRI initiatives.

L'articolo What are the real needs of the New Silk Road now? proviene da InsideOver.

You don’t argue with the Tatmadaw – the Myanmar Armed Forces. It’s always their way, or the highway. Since the mid-20th century, the Chinese have come to understand it quite well.

How Beijing approaches the Myanmar maze is conditioned by four variables: natural gas; water; the drug trade; and the fractious clashes between the Tatmadaw and a dizzying patchwork of over 135 ethnic minorities.

Each Myanmar ethnic group exhibits its own peculiar history, culture and language. They control vast territories, whole industries and serious militias. Myanmar’s two-third majority is represented by the Bamar – also known as the Lowland Burmese. The Tatmadaw is largely a Lowland Burmese army – in perennial conflict with that large ethnic jigsaw puzzle.

The ethnic minorities live mostly in the hills and along Myanmar’s porous jungle borders. Myanmar is divided into seven states – named after the seven largest ethnic groups: Kachin, Chin, Karenni, Karen, Mon, Shan and Rakhine. Alliances tend to be quite fragile, but historically the Chinese have been inclined to support a few of them in their fight against the Tatmadaw.

Drug trade in Myanmar is a virtually impenetrable matryoshka – with most of these groups connected across the Golden Triangle to partners in China, Thailand and Laos, and on top of it competing against each other.

The Shan traditionally have used huge profits in the drug trade to buy an array of weapons. There is a wealth of competing Shan groups, among them the army of the late, notoriously flamboyant drug lord Khun Sa, known as “The Opium King of Burma”; the former headhunters that compose the Wa tribe; and a bunch of Kokang Chinese who form the eastern Shan State army.

The opium/heroin business – and much of the ya ba (amphetamine) trafficking – in the Golden Triangle is now largely controlled by the much feared United Wa State Army: a 20,000-strong ultra-hardcore militia, one of the most powerful on the planet, complete with their private collection of surface-to-air missiles.

And that brings us to the Chinese angle – because many of these ethnic potentates, from Khun Sa to Kyi Myint, a.k.a. Zhang Zhiming, a former head of the Communist Party of Burma, have forged very close relations with Chinese Triads.

Yet what does the central government in Myanmar have to do with the heart of the action in the Golden Triangle? Not much. The Tatmadaw may strike the odd peace deal with these unruly actors, but they usually don’t last long.

What the Tatmadaw did over these past decades was a crash course on business – learning the ropes about post-Mao China. That’s how they evolved into a major corporate empire – much more than an army.

Myanmar was already on the front line when sections of the People’s Liberation Army (PL) in China got into business. For instance, Yunnan province in southern China was the operating base for the top three heroin Triad families. So the first step was Burma linked to the Chinese triads as the logistical arm of the Golden Triangle drug trade. The next step featured China building railways to link Yunnan to Burma/Myanmar.

Oil and gas star as the next piece of the puzzle. As France’s Total started to expand their initial oil and gas exploits off Rakhine – formerly known as Arakan state – the Chinese had the foresight to invest in a long oil and gas pipeline linking it to Yunnan. From Beijing’s point of view, what really matters is this Sino-Myanmar oil and gas pipeline from the Bay of Bengal to southern China – with the Tatmadaw in charge of security.

While China invests in copper mines and dams, but arguably its key investment in Myanmar is a new deep-water port on the Bay of Bengal, with the accompanying Kyaukphyu Special Free Trade Zone. The port and the pipeline interconnect, representing the Myanmar backbone of the vitally important Belt and Road Initiative (BRI) Southeast Asia corridor.

And that brings us to the intractable Rohingya problem.

China’s absolute priority is to protect the new port plus the Special Free Trade Zone being built in Rakhine.

For quite a while the Myanmar government’s income – now controlled by the Tatmadaw – has depended on the oil/gas from onshore and offshore operations in Rakhine as well as the rail/road connectivity.

The Chinese for their part are in close touch with the Kachin Army and the Kokang ethnic group. If the going gets tough, the plan is to use them as well as the Arakan Army, active in the region, to manage the Tatmadaw in case they start having funny ideas. The only thing that matters for the Chinese is the BRI corridor and the Rohingya find themselves caught in the middle of this serious power play.

The Myanmar puzzle is made even more complex by the issue of water. The Beijing leadership knows very well how strategic Myanmar is in terms of solving China’s critical water imbalance. China, with 20% of the world’s population, can count on only 7% of the world’s fresh water. And 80% of China’s water is in the south, while over 700 million Chinese and two-thirds of its farmland are in the north.

The solution has been to build 11 of the world’s largest hydroelectric dams on the key rivers which flow towards China’s neighbors. And this has given rise to dramatic problems, especially in the case of the Mekong, where every region below the dams, in Myanmar, Laos, Thailand, Cambodia, and Vietnam, has been extremely handicapped. And the issue is far from over: 11 more dams will be built in the lower Mekong, in Laos and Cambodia.

The relationship between Beijing and the Tatmadaw was never a bed of roses. Overall, the Chinese were seen with much suspicion at the Ministry of Foreign Relations level during the NLD years, while most Tatmadaw Generals admire China’s economic power. Beijing’s immutable diplomatic law amounts to non-interference in the domestic policies of its partners – so it has refrained from weighing in on whether the military coup earlier this year was actually not really a coup, as the Tadmadaw argues.

Facts on the ground spell out the Tatdadaw making a lot of money over the years by collecting fees and owning shares in Chinese deals struck in the ethnic regions. At the same time the Tatmadaw know that the Chinese, even indirectly, provide military support to quite a few militias. And drug kingpins are only able to operate smoothly across the Golden Triangle because the Chinese allow it.

So, the relationship is undoubtedly an uneasy one. A great deal of Chinese influence in Myanmar was somewhat restricted during the NLD government. Now the whole situation is in limbo. Yet Beijing never takes its eyes off the Big Prize: BRI corridor projects should never be in danger, and Myanmar will always be an inextricable part of the New Silk Roads.

L'articolo How Myanmar fits into China’s New Silk Roads proviene da InsideOver.

A 25-year China-Iranian strategic partnership has been on the cards for some time. Last August, Iran’s Foreign Minister Mohammad Zarif paid a visit to his Chinese counterpart Wang Li to forge a new agreement that builds upon a previous deal that was signed in 2016. Oilprice.com managed to uncover many of the secret elements of the pact at the time. According to the publication’s secret sources, the Iranian Petroleum Ministry confirmed that the deal has been signed and that Beijing has added in a new military element, with substantial global security implications.

It is a Continuation of the ‘One Belt, One Road’ Initiative

One element of the first five-year period of the new 25-year pact is that China will invest $280 billion in developing Iran’s oil, gas and petrochemicals industries. There will be another $120 billion of investment for upgrading Iran’s transport and manufacturing infrastructure. Furthermore, Chinese businesses will be provided with the first option to bid on any new gas, oil and petrochemicals projects in Iran.

The new deal also represents a continuation of China’s ‘One Belt, One Road (OBOR)’ geopolitical project as Beijing will be involved in building Iran’s vital infrastructure. Chinese manufacturing companies will build factories using cheap labor in Iran to manufacture products that can access Western markets via new transport links created by China.

Cooperation Between Iran and China will be Extended

Iran’s Supreme Leader Ali Khamenei has agreed to the extension of new military elements that were proposed by the Islamic Revolutionary Guard Corps (IRGC) that will involve complete aerial and navy cooperation between Tehran and Beijing, with Moscow taking a central role. These deployments will be accompanied by the launch of Chinese and Russian electronic warfare capabilities originally designed to neutralize NATO’s C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance) systems.

While the rest of the world grapples with the coronavirus pandemic, the 25-year agreement is a threat to the Trump administration and America’s post-WW2 hegemony for many reasons. It is a continuation of the OBOR initiative which is designed to take advantage of Beijing’s central position along the Eurasian rimland. For a long time now, China has been building up its maritime forces in East Asia and the South China Sea. The 25-year deal has extended China’s influence in the Middle East.

As The Diplomat argues, China’s geopolitical partnership with Iran is strategically important to both countries. Thanks to its large oil and gas reserves, Tehran could help Beijing withstand an American attack on its Sea Lines of Communication. The continued existence of a strong regime in the heart of the Middle East thwarts Washington’s ambitions of maintaining its hegemony in the Middle East.

Trump Finds Himself Increasingly Isolated

The 25-year agreement also challenges the Trump administration’s policy of ending the 2015 Iran Deal that Barack Obama, the current US President’s predecessor, signed. Both China and Russia are members of the UN Security Council and Beijing is using its membership of this body to call on Washington to end its sanctions against Tehran. Zhang Jun, China’s permanent UN representative, provided the Security Council with a statement that urged America to stop its “illegal unilateral sanctions” on Iran and to voice his opposition to the US’s plea that the arms embargo on Iran be extended beyond October.

As the EU continues to trade with Iran, Trump has no allies left who are willing to support his stance on the Iran deal. It is unclear whether Beijing and Moscow would support a lack of sanctions in exchange for Tehran surrendering its nuclear program, but the 25-year pact means both China and Russia have a vested interest in preventing the US and NATO from undermining their Middle Eastern ally. This makes it harder for all sides to revise the terms of the 2015 Iran deal.

It would be wise for the Trump administration not to underestimate the impact of this 25-year strategic partnership because its attention is focused elsewhere.

L'articolo China and Iran: 25-Year Agreement proviene da InsideOver.