2019 OCT 01 China’s Path Forward Is Getting Bumpy

 

A Chinese flag is seen at the Khorgos border crossing point.SHAMIL ZHUMATOV / REUTERS)

KHORGOS[1]Khorgas, officially known as Korgas, also known as Chorgos, Gorgos, Horgos and Khorgos, formerly Gongchen, is a Chinese city straddling the border with Kazakhstan. It is located in the Ili Kazakh … Continue reading, Kazakhstan—To better understand the future of China’s role in Central Asia, and the world, you need to come here, the middle of nowhere.

Straddling the Kazakh-Chinese border, a collection of cranes, railways, and buildings rises out of a barren stretch of desert surrounded by towering mountains to form the backbone of the Khorgos Gateway, one of the most ambitious projects in China’s Belt and Road Initiative, or BRI, Beijing’s sprawling infrastructure project. 

BEIJING – “DRY PORT”
KAZAKH TRAINS (5,000-plus-mile to) EUROPE

Beijing hopes the “dry port” here—where Chinese freight will be reloaded onto Kazakh trains to make the 5,000-plus-mile journey to Europe—will expand land-based trade across Eurasia. Beyond the logistics hub, the Kazakh project also consists of a special economic zone to attract investors to build factories and warehouses, and a free-trade border zone that aims to increase commerce with China. On the Kazakh side of the border, a purpose-built village, Nurkent, houses the area’s workers, with ambitious plans to grow it in the coming decades to complement its sister city in China, also called Khorgos, which already features shopping malls, hotels, and a population of more than 100,000.

Only in operation since 2015, the facilities are still taking shape in Kazakhstan, whose government is trying to maximize its geographic location to benefit from China’s flagship foreign-policy effort. Yet along the way, Khorgos has become emblematic of the immense promise and problems associated with the Belt and Road Initiative.

Since BRI was launched, in 2013, China has sunk hundreds of billions of dollars into ports, railways, and energy projects across Asia, Africa, and Europe. The goal is to not only expand infrastructure, including in many developing countries, but also win over local populations and governments by funnelling investment, jobs, and economic growth in their direction.

The path forward has been bumpy, though.

Questions regarding the commercial value of certain projects and concerns over the initiative being a backdoor for more sinister geopolitical ambitions have undercut Beijing’s official rhetoric of “win-win” cooperation and illustrated the uncertainty surrounding its plans.

As Beijing marks the 70th anniversary of the founding of the People’s Republic of China, questions over the implementation of BRI are among several facing the country regarding the limits of its power—from protests in Hong Kong to the escalating trade war with the United States.

“There is a reason that lots of these gaps in global infrastructure that China is trying to fill exist in the first place,” Andrew Cainey, a China expert and an associate fellow at Chatham House, a London-based think tank, told me. “It’s because they are not so commercially appealing.”

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• EXPECTATIONS
• SUBSIDIES
• WASTE & FRAUD

This tension—between the expectations surrounding BRI and the challenges of fulfilling them—is on display here in Khorgos. The project has posted impressive overall growth numbers, and Kazakh officials are keen to talk up plans to develop the area. The dry port processed 44 percent more cargo, as measured by so-called 20-foot-equivalent units, in 2018 compared with the previous year, according to data provided by the authorities here. Kazakh officials were also keen to point to the area’s potential for growth.

A 2017 study commissioned by the International Union of Railways estimated that trade volume between China and Europe via rail would increase sharply over the next decade, with Kazakhstan becoming the key crossroads.

Similarly, officials mentioned new investments from Chinese companies to build facilities and factories in the special economic zone on the Kazakh side as a sign of the area’s growth.

Khorgos is about turning Kazakhstan into Central Asia’s transit hub,” Nurlan Toganbayev, the director of the commercial department at the KHORGOS GATEWAY, told me. “We know this is no easy task, but we’re growing, and we take great pride in that.”

Yet even these touted successes point to future problems for the project.

Rail transport is still only a small percentage of global trade; sea and air routes, which are cheaper and faster, respectively, form the bulk of goods moved between China and Europe.

The land route has also been criticized for waste and fraud.

Many of the cargo containers returning by rail from Europe to China through Kazakhstan are empty, officials admit, due to a trade imbalance, but the problem may run even deeper.

The Chinese government provides significant subsidies to encourage use of the rail links, and a recent report by the Chinese Business Journal found that many exporters transported empty containers from China to Europe just to receive those subsidies.

China Railway, the government operator of the rail line, admitted to the state-run Global Times that the problem existed, but said that it has been eradicated. Not only does the episode illustrate the commercial limits of large-scale shipping by train, but it calls into question the viability of the Khorgos project.

These concerns may be part of a broader pattern.

CORRUPTION

Beijing has “zero tolerance”

At the second annual Belt and Road Forum, in April, the Chinese leader Xi Jinping signalled that his government would move to tighten oversight of the opaque network of infrastructure projects that makes up BRI and discussed taking on more high-quality and sustainable deals, saying that Beijing had “zero tolerance” for corruption.

This came on the heels of several instances that have sullied the initiative’s brand. The $62 billion CHINA-PAKISTAN ECONOMIC CORRIDOR has been scaled back amid Pakistan’s increasing debt problems, while a major port deal in Myanmar was slimmed down from roughly $7 billion to $1.3 billion.

A port in Sri Lanka garnered global headlines after the government couldn’t repay its loans and granted a state-owned Chinese company a 99-year lease on the port as a form of debt relief.

Elsewhere, projects have been tarnished by corruption: 

China has built a sprawling Surveillance State and Internment-Camp System up to 2 million people

The new Malaysian government renegotiated a major rail project at a significantly reduced cost and cancelled $3 billion worth of plans to build new pipelines following a graft scandal. The Maldives is seeking debt forgiveness following corruption allegations connected to Belt and Road projects green-lit by its previous government.

These scandals come as a slowing Chinese economy could lead to a more cautious approach to investment in the future. According to Cainey, from Chatham House, Beijing is still fine-tuning BRI and trying to learn from a spree of large-scale projects in countries with poor governance and weak rule of law.

“The Chinese have taken the same approach they took at home, where they have lots of experience managing the risks of large infrastructure projects,” he told me, “but as they are now seeing, things work differently overseas.” 

China has become the largest investor in Central Asia, and its patronage has been embraced by local governments, especially in Kazakhstan, where Xi announced BRI in 2013. But China’s expansion also stirred fears among everyday citizens of vassalage[2]a position of subordination or submission (as to a political power). to Beijing.

Concerns over China’s intentions are not new, but they have increased as its economic footprint has deepened. These worries have grown in recent years, as China has built a sprawling surveillance state and internment-camp system to target its Muslim population: mostly Uighurs, but also ethnic Kazakhs, Kyrgyzs, and other groups in its western Xinjiang region, which shares a 1,100-mile border with Kazakhstan.

It’s unclear how many people are in some sort of detention, but the U.S. State Department estimates that 800,000 to 2 million people have been detained since 2017.

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In Zharkent, a Kazakh city of about 33,000 people that sits 22 miles from the Khorgos Gateway, this reality is on display.

The city was the site of the high-profile trial of Sayragul Sauytbay, an ethnic Kazakh Chinese national who worked in the camps and then fled to Kazakhstan because she feared internment herself. Sauytbay became a local celebrity for her firsthand testimony about China’s camps when she was tried for crossing the border illegally through the Khorgos free-trade zone. (She was granted asylum in Sweden in June.)

The internment camps also overlapped with the broader Khorgos project in December 2017, when Askar Azatbek, a former Xinjiang official who became a Kazakh citizen, was allegedly taken from the Kazakh side of the free-trade zone to China, where he has since been detained.

“China is trying to win hearts and minds,” Philippe Le Corre, a nonresident senior fellow at the Carnegie Endowment for International Peace who studies China’s global rise in Europe and Eurasia, told me, “but it’s an almost impossible task when you look at what’s happening to the Muslims of China.”

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Markets and bazaars in Zharkent are full of Chinese goods, and rumors of Chinese encroachment are prolific in trading stalls and tea houses. But criticizing China publicly is still a sensitive topic in authoritarian Kazakhstan, and during a recent visit, many people were wary of speaking on the record.

Alexander, a resident of Zharkent who gave only his first name, told me that he makes his living shuttling Chinese goods, and that there has been a change of attitude in recent years when locals interact with Chinese merchants and officials. “They look down on us now,” he said. Another man, Bolat, told me he feels that grand projects like Khorgos bring “no benefit to the local community.”

Still, despite limited goodwill for China and various difficulties with its marquee Belt and Road projects, developments like Khorgos hold too much symbolic political value for China and Kazakhstan to be allowed to fail. Beijing has fuelled its global infrastructure push with subsidies and investments, but as China enters a new phase shaped by tighter budgets and oversight, Khorgos and other BRI projects may need to adapt.

“There are lots of local people that would like for Khorgos to be a success story,” Le Corre said. “But given everything else going on at the moment, it’s becoming more difficult for China to sell this new Silk Road.”

Original Source: Date-stamped: 2019 OCT 01 | Author: by Reid Standish  | Article Title: The Khorgos Gateway was once touted as one of the most ambitious projects in the Belt and Road Initiative, but it has come to represent the limits of Beijing’s global push. | Article Link: theatlantic.com


Hashtags: #4cminewswire, #BRI, #XiJinping, #China, #KhorgosGateway, #Malaysia, #Maldives, #SriLanka, #Kazakhstan, #Pakistan,  #Uighurs, #Kazakhs, #Kyrgyzs, #4cminews, #4CM2019OCT01

Tags: 4cminewswire, BRI, Xi Jinping, China, Khorgos Gateway, Malaysia, Maldives, Sri Lanka, Kazakhstan, Pakistan,  Uighurs, Kazakhs, Kyrgyzs, 4cminews, #4CM2019OCT01


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References

References
1 Khorgas, officially known as Korgas, also known as Chorgos, Gorgos, Horgos and Khorgos, formerly Gongchen, is a Chinese city straddling the border with Kazakhstan. It is located in the Ili Kazakh Autonomous Prefecture of the Xinjiang Uyghur Autonomous Region. SEE URL: https://en.wikipedia.org/wiki/Khorgas
2 a position of subordination or submission (as to a political power).

2019 MAY 24 The Debt Trap of One Belt, One Road: The Price of Following China

 

Chinese workers help to build a new train station in Beliatta, Sri Lanka which is Chinese managed and designed on Nov. 18, 2018 (Paula Bronstein/Getty Images)

Commentary 

Countries that abandoned Beijing after the initial “One Belt, One Road” (OBOR) summit in 2017 have re-congregated under the Chinese flag in mutual support of its second summit event.

This includes new member Switzerland, as well as Malaysia and Myanmar, which previously complained to the United States and the International Monetary Fund (IMF) that investing in China caused them to fall into a “debt trap.”

Countries Submit Their Allegiance

Compared with the first summit in May 2017, the second summit has several points of attraction.

First, countries have adjusted their expectations of the Chinese Communist Party (CCP). Although there is a general expectation for large amounts of CCP funding, the estimates are far more realistic than the 2017 target.

During the first summit in 2017, China’s foreign exchange reserves were falling sharply, and on May 4, Zhou Xiaochuan, governor of the People’s Bank of China, published an article in a Chinese financial magazine.

YUAN

The Main Points WereInvestment and financial cooperation for OBOR isn’t unilateral financial support, but requires all parties to jointly build a common-interest community to share the expenditures, risks, and benefits. At the same time, emphasis must be placed on market-based financing and active use of the Chinese yuan to generate more in local savings and international capital.

To put it bluntly, China said that future investment should make the Chinese yuan the main source of capital and OBOR partners should make joint investments. That was disappointing to countries that came with hopes of seeking the support of the U.S. dollar. That sparked a 2017 international incident: OBOR countries called for an end to the Chinese project, claimed to the IMF that China had increased their debts, demanded that the IMF provide assistance, and finally, convinced the United States to support a narrative that OBOR created a “debt trap” for participating countries.

With these experiences, the expectations of participating countries for the second summit weren’t as high as the first, with many countries just testing the waters. The attitude of Italy is typical: as long as China has money, it’s fine.

ITALY and SWITZERLAND

The second summit also included a number of important new members. Two European countries, Italy and Switzerland, attended. Italy is the first G-7 member country to participate in the OBOR program, and the symbolism is self-evident.

Switzerland’s participation is even more important. An article published by the BBC a day before the summit has a clear understanding of this. First, Switzerland has the most prestigious financial services industry in the world; secondly, Switzerland is home to numerous international organizations. For China, Switzerland’s unique “neutral” political status is of paramount importance to OBOR. While Germany is dissatisfied with that, its problem with Italy isn’t so much in its participation. Rather, Germany insists on maintaining a position as a European leader, controlling the EU’s collective bargaining power.

Economic Cooperation in line with International Regulations

Third, the Chinese government has been very tactical in placing its focus on economic cooperation, and has promised to be in line with international regulations. These statements have given participating countries very good reasons to cooperate.

China launched the “One Belt, One Road” initiative in 2013. According to Refinitiv, the total value of the project is $3.7 trillion, spanning dozens of countries in Asia, Europe, Africa, Oceania, and South America. At the first OBOR summit, China had a sense of expansion, propagating the Chinese model, and espousing that China will become the new leader of globalization. That raised alarm in some countries.

During the trade war, the United States raised various criticisms questioning China’s “red expansion,” which also caused some OBOR countries to waver.

During the second summit, Beijing softened its tone and shifted its focus to resolving the doubts in various countries. For example, it proposed to conduct a joint study with the World Bank on environmental and social standards of OBOR. “Building a framework for debt sustainability analysis to prevent debt risk” was its explanation for concerns regarding OBOR’s transparency and ideology export.

The draft communiqué also clearly stated that the 37 global leaders attending the April 25-27 summit would reach an agreement on project financing issues, comply with global debt targets, and promote sustainable development.

DEBT TRAP

Since October 2018, Malaysia and several other countries accused China of leading them into a “debt trap,” a criticism the United States shares. On Oct. 3, 2018, the U.S. Senate approved the Investments Leading to Development Act of 2018 (BUILD) by a vote of 93-6. Under the measure, the original Overseas Private Investment Corporation (OPIC) and other development aid agencies will be integrated to form a new U.S. International Development Finance Corp.

The new agency, which is to receive $60 billion in funding, is responsible for providing assistance loans to developing countries for infrastructure projects, such as energy, ports, and water supply.

However, when it comes to using state resources, democratic countries are a lot more restricted and far less efficient than authoritarian states such China (efficiency that’s due to a disregard for people’s livelihoods).

Therefore, U.S. investment is only part of a plan, but China has actually put in real money. Countries all over the world are now facing a common problem; domestic unemployment.

ITALY’S PORT of VADO LIGURE

For example, while Italy’s employment rate is now at its lowest in seven years, its youth unemployment rate at the end of 2018 was as high as almost 31 percent. The youth unemployment rate in Greece in January 2019 also remained at nearly 40 percent. To each country’s respective leader, what’s important isn’t helping rid the world of tyrannical rule, but solving its own employment problems.

Amid opposition from the EU’s major powers, Italy chose to cooperate with China unilaterally, an attitude based on realistic considerations: “From the windowsill of one’s home, this (China’s construction in the Italian port of Vado Ligure) is certainly not beautiful scenery, but it can bring jobs. So it is a good thing.”

For Vado Ligure, a town with a population of 8,000, Chinese investment has brought about 400 jobs, which has pleased both the local government and its residents. The mayor told Deutsche Welle that a strong investment partner is able to bring new opportunities and new capital.

At the same time, under the control of a series of treaties, contracts, and regulations, there is no need to worry that Chinese capital will cause issues of debt or labor rights violations. “The Chinese are not a problem. They bring money, and are greatly welcomed,” the mayor said. It’s the same principle for Croatia, Nigeria, and other countries. Money is the most important link for China in maintaining relations with countries.

SRI LANKA’S PORT of HAMBANTOTA

Two years ago, Sri Lanka, due to an inability to repay Chinese loans related to the construction of the port of Hambantota, leased the entire port to China for a period of 99 years.

This incident has been criticized as a classic case of the OBOR debt trap, and it appears that countries seem to have forgotten the market principle of debt repayment. Actually digging back, this kind of thinking has its roots.

UNITED STATES & WORLD ECONOMY

Western media is left-leaning and has always placed a priority on value systems. The importance of the economy, and especially the role of the United States in the world economy has always been a little underemphasized. However, after Democrats won the majority in the House of Representatives in the 2018 midterm elections, socialist policies have become the preference of the Democratic Party, moving farther from the main topic of concern for U.S. voters.

Concerned, Western media often unconsciously cite a famous quote that Bill Clinton used to defeat incumbent President George H.W. Bush in the 1992 campaign: “It’s the economy, stupid!”

POWER of MONEY

I thus wish to use this opportunity to remind left-wing politicians around the world that only by “playing economics” can they win voters. In fact, this truth applies not only to the politics of all countries in the world, but also the reason why countries are rushing into China’s OBOR debt trap. Because only by obtaining China’s money can they have the capital to play economics at home and attract voters.

Originally, economic development was a country’s personal matter. But after World War II, the state of the Cold War between the United States and the Soviet Union caused other countries to become accustomed to a “following” approach: in addition to ideological reasons, each country (especially countries without very strong ideologies) could choose a side and receive financial assistance of a major economy.

Many small- and medium-sized countries have no methods for developing their economies, but made use of U.S.–Soviet contention to play political “seesaw.” They would stand on whichever side gave more benefits. The United States, since World War II, has assumed the public good of maintaining international order, believing it to be the embodiment of their own “soft power.” Other countries also take it for granted that this is the United States’ responsibility, and don’t feel a need to give thanks.

On the other hand, China is very aware of the power of money, and has been using it to wrestle relations within the United Nations. It has fully demonstrated the important influence money has on developing countries in human rights affairs.

Remnant of Cold War Model

According to the official statistics of the Chinese Communist Party, as of March 2019, China has signed different cooperation agreements with 125 countries. These countries account for 36 percent of the world’s GDP and 60 percent of the world’s total population. Are such strenuous efforts really just for winning business opportunities?

Of course not.

During the second OBOR summit, China did a lot of explanatory work to quell doubts of the outside world. Countries have accepted China’s explanations, believing that Beijing’s use of comprehensive transportation and infrastructure to bring the continents of Europe and Asia closer is beneficial to deepening trade and human contact.

But these countries understand the geostrategic significance of OBOR: the purpose is to establish a system with China as the core, causing countries to, in the process of cooperation with China, establish a high dependence on Beijing. Through the implementation of OBOR, China would have the right to formulate rules and regulations, and reshape the global structure.

OBOR UNDERMINES GEO-ECONOMIC, GEO-POLITICAL; BALANCE & GLOBAL HEGEMONY

OBOR UNDERMINES GEO-ECONOMIC, GEO-POLITICAL; BALANCE & GLOBAL HEGEMONY

Countries also understand that the United States has long expressed dissatisfaction with that plan. The U.S. strategic community generally believes that the CCP’s continued promotion of OBOR construction mustn’t be ignored. It not only has the potential to change the Geo-economic and Geo-political balance of Eurasia, but also poses a real threat to the United States in fields such as technological standards, military security, and international development.

It even undermines the foundation of the global hegemony established by the United States since World War II. Therefore, the United States definitely won’t tolerate China’s strong challenges in this regard. The power struggle between the two superpowers will inevitably bring opportunities to many countries in the world seeking financial support.

As for the countries vying to jump into China’s “debt trap,” they are merely making a slight change to the new thinking of “depend on China for economic interests, depend on the United States for political security” formed by Asian countries post-Cold War, making a return to the Cold War-era seesaw model.

Situations such as that of mid-October 2018, when countries such as Malaysia cried out to the IMF and the United States, will inevitably reoccur, because complaining is also a way to sell the right to follow.

He Qinglian: is a prominent Chinese author and economist. Currently based in the United States, she authored “China’s Pitfalls,” which concerns corruption in China’s economic reform of the 1990s, and “The Fog of Censorship: Media Control in China,” which addresses the manipulation and restriction of the press. She regularly writes on contemporary Chinese social and economic issues. THE EPOCH TIMES QUALIFIER: Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Original Source: Date-stamped: 2019  MAY 5/24 | Author: He Qinglian | Article Title: The Debt Trap of One Belt, One Road: The Price of Following China | Article Link: theepochtimes.com

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