Category Archives: China-Central Asia

One Belt, One Road To Rule Them All

Belt and Road International Forum, Beijing, May 2017. Photo credit: The Russian Presidential Press and Information Office. Licensed under Creative Commons.IT IS NOT just General Secretary Xi Jinping’s ‘Thought’ that has been inscribed in the Party’s constitution. So, too, has his grand vision and signature policy, the Belt and Road Initiative, or OBOR for its original designation, One Belt One Road.

This will give political longevity to the ambitious scheme Xi announced in 2013 to transverse the Eurasia landmass and beyond with a network of roads, railways, ports, pipelines and other infrastructure projects carrying China’s surplus industrial and services capacity westwards and food and energy resources in the opposite direction. Opposing or obstructing it, just as with opposing or obstructing Xi, will henceforth equate with betraying the Party itself.

Few, if any infrastructure projects can boast either such prestige or protection. As Xi indicated at the Party Congress just concluded, OBOR will be central to China’s development until at least 2050, the date Xi has set by which China is to be a leading global power (neatly coinciding with the 100th anniversary of the founding of the People’s Republic on October 1, 1949).

So great is the ambition of this combination of commerce, construction and capital that it is impossible to put an accurate cost or timetable on it.

Bloomberg counts more than $500 million the China has so far spent or committed to OBOR. There is a $40 billion Silk Road Fund and much of the $100 billion Asian Infrastructure Investment Bank (AIIB) will be directed towards it. No doubt some of the $300 billion National Pension Fund will find its way to OBOR projects as will investment from state-owned banks and enterprises and dutifully patriotic private companies.

The US investment bank Morgan Stanley has suggested that $1.2 trillion will be spent on OBOR-related infrastructure over the next decade. However, so loosely is it defined and so ambitious its scope that you can just about put any price tag on it, as long as it is in the many trillions.

Beijing lists 68 countries as OBOR partners spanning Asia, Africa, the Middle East, Europe and Oceania. They already account for one-third of global GDP and trade, two-thirds of the population and one-quarter of global foreign direct investment. The management consultancy McKinsey & Co.reckons they will contribute 80% of global economic growth and add 3 billion to the global middle class by 2050. Any number is going to be large.

For all the trillions of dollars of hard infrastructure that will be built — and as we have noted before, if even only a fraction of what is being talked about gets completed, it will still be huge — OBOR is also a geopolitical project. Whether you see that as 21st-century merchant hegemony writ large or the world’s largest platform for regional collaboration and future engine of trade and investment growth, there can be little argument that it will potentially give Beijing vast sway over a large part of the world.

It is a part of the world with lots of risks, however, both geopolitical and financial. One measure of both is that state-owned insurer China Export & Credit Insurance Corp. said it has paid out $1.7 billion in claims since 2013 on $480 billion of exports and investments it has insured in OBOR countries. The sort of risks the insurer covers are things like government seizures, nationalisation and political violence.

More than half of China’s outward OBOR investment since 2013 has been in countries whose sovereign credit rating is below investment grade — ‘junk’ in the jargon. Of the 68 OBOR countries, only 27 of them are not rated as junk.

It is easy to assume that the Chinese state and its own and private (and dutifully patriotic) companies will be pouring a lot of good money after bad. However, many of the OBOR countries have trade and growth potential that can be released by infrastructure development, especially on the scale and interconnectedness envisaged. That would generate some of the growth necessary to provide some return on the investment.

It will also give China a huge sphere of influence far beyond its near abroad, in which today’s superpowers will be marginalised.

The ‘America First’ economic and political nationalism of the Trump administration, which has caused the stalling of the TransPacific Partnership (TPP) and disengaged the ‘Asian pivot’ of its predecessor Obama administration, has given Beijing an unexpected window of opportunity to advance OBOR and its alternative arrangements to those that have governed the international order in the era since World War II.

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Even A Small Belt And Road Would Be Huge

Chinese President Xi Jinping delivers a keynote speech at the Belt and Road Forum in Beijing, May 14, 2017.

ONE BELT, ONE ROAD is ambitious. A network of roads, railways, ports, pipelines and other infrastructure that will crisscross China and Central Asia connecting to Europe and Africa via land routes (the Belt) and shipping lanes (the maritime Road).

It already covers two-thirds of the world’s population, one-third of global GDP and about a quarter of the world’s trade in goods and service.  China, President Xi Jinping announced at this weekend’s Belt and Road forum in Beijing (seen above), proposes to throw $124 billion at developing his vision of the next great engine of global trade.

Those monies would be a downpayment on what is estimated to be $900 billion of related investment, financed by a variety of Chinese or China-backed banks, funds and investing and development institutions. One Belt, One Road will, depending on your point of view, be 21st-century merchant hegemony writ large or the world’s largest platform for regional collaboration.

Leaders from 29 countries, the heads of the International Monetary Fund, World Bank, the UN, and a host of other dignitaries attended the forum this weekend, including most notably Russian President Vladimir Putin (absentees include the leaders of the United States, Japan and India). All the attendees, no doubt, will have had their private fears and hopes about the scale of this project to redraw over many decades the geoeconomic, and likely, the geopolitical map of Eurasia.

Whether China will hold the course, especially under Xi Jinping’s successors, is one question about the project. There are also legitimate concerns that some investment gets misallocated and ends up on being spent on ‘highways to nowhere’ and other projects that never should be built in the first place. Moreover, private and non-Chinese investment will be needed as well (and be a bellwether of global acceptance of the idea).

However, such is the scale of One Belt, One Road that even if only a fraction of it materialises, it will make Eurasia look a very different place.

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China’s Domestic Counterterrorism May Fail Against Global Jihadis

‘RESTIVE’ IS THE adjective favoured in the popular prints to qualify Xinjiang. President Xi Jinping’s call for the far western autonomous region to be surrounded by a ‘great wall of iron’ suggests the presence of a greater threat.

As does Cheng Guoping, state commissioner for counterterrorism and security.

He says that the Uighur separatists that comprise the East Turkestan Independence Movement are the China’s ‘most prominent challenge to social stability economic development and national security’.

Xi and Cheng’s comments follow the most recent show of force in Xinjiang’s capital Urumqi and other cities such as Kashgar, involving some 10,000 paramilitary police with accompanying armoured vehicles and attack helicopters.

China has been fighting a sporadic and low-level civil war with Uighur separatists for decades that on occasion erupts into deadly terrorist attacks across China. These attacks, usually involving a car bomb or knifings, have become more frequent, dispersed and indiscriminate since 2012, though the number, as far as can be determined, is small.

A May 2014 attack in Urumqi killed 43 and wounded 90. The province simmers with unrest as the now minority Muslim population bristles under what it considers to be culturally and religiously repressive government by ethnic Han Chinese.  Yet there is little on the surface to suggest that the local threat level has suddenly escalated to the degree these actions and Xi and Cheng’s comments would imply.

However, Beijing now sees external as well as internal threat. That is challenging its notions of how to deal with ‘terrorists’.

Three recent videos, purportedly made by the Islamic State group and an al-Qaeda affiliate, raise the spectre that China could import the radical Islamic extremism that it has so far avoided. Beijing has long used the bogeyman of radical connections between Xinjiang separatists outside and the Muslim Uighur minority within to exert repressive domestic control.

The 30-minute video that surfaced in February, in particular, gives some weight, at last, to those warnings. It shows Uighurs training in Iran and threatening that blood would ‘flow in rivers’ in China — although also in Russia and the United States.

There are well-documented reports of Uighurs having gone to Afghanistan, Syria and Iraq to fight for radical Islamic groups. The numbers of Chinese ones — 100-150 on the estimates we have seen — scarcely seem to justify the extraordinary reaction of authorities, although one of the Islamic State videos includes what is thought to be the first instance of Uighur-speakers declaring allegiance to Islamic State and its self-proclaimed caliphate.

One question is whether Beijing’s fears are overblown and its response proportionate; another is whether it can adapt a counterterrorism approach developed in response to domestic concerns to international terrorism.

China, unlike the United States and Russia, has little by way of a military footprint in West Asia thanks to its profession of non-interference in the affairs of other countries. It is not involved in either the US or Russian/Iranian-led actions against Islamic State in Syria or Iraq, the usual prerequisite of Islamic State acts of terror against a country.

A hostage taking and killing in 2015 is the sole known case involving targeting a Chinese citizen, although seven Chinese were among the 20 killed in a bomb attack on Bangkok’s Erawan Shrine and three Chinese citizens were among the 27 who died during an attack on the Radisson Blu Hotel in Mali’s capital, Bamako, both the same year.

However, China’s growing global footprint and expatriate labour force, and especially the expansion of ‘One Belt, One Road’ across Eurasia, makes it almost inevitable that it would eventually be unable to avoid coming into harm’s way from international jihad.

As we noted recently, China and Afghanistan share a short border through which the forces Beijing so fears could enter the country directly. China border-police controls are keeping it under close surveillance in the event that, as Islamic State loses territory in Syria and Iraq, the group falls back to being an insurgent guerrilla force and its leaders and others of global jihadist movements relocate to Central Asia and Afghanistan, far too close to China for Beijing’s liking.

However, the capacity of Islamic State to coordinate and stage large-scale attacks inside China will be limited. Furthermore, Beijing’s already-fierce repression in Xinjiang and tight censorship everywhere mitigates the caliphate’s strategy of inspiring lone wolves and affiliated terror groups through a radicalising narrative of domestic marginalisation of Muslim minorities.

This has had some success in Europe and the United States, but beyond the difficulty in having the message penetrate the Great Firewall, disaffected Muslim minorities do not exist in China in the widespread urban pockets they do in, say, France, Belgium and Germany.

Hitherto, China has dealt with the threat of domestic terrorism, which it considers one and the same as separatism and extremism, with a three-pronged strategy: enhancing regional economic growth; stronger internal security; and strict controls over ethnic and religious activities. All have been heavily applied in Xinjiang with the additional factor of ethnic Han inward migration.

Beijing’s likely response to the new external threat that it sees to its emerging core national interests will be to crack down even harder on the one place it knows there are a lot of Muslims. Already law regulates and constricts religious practices and public life in Xinjiang, such as growing beards, wearing the veil and fasting during Ramadan — all symbols, the authorities say of “Islamic extremism” (like in the US, ‘Muslim’ and ‘terrorist’ will quickly become conflated).

Since last year Xinjiang residents who have a passport are required to turn it into local police, to whom they must reapply for its return if they want to travel abroad. There were reports last year of another Muslim minority, Kazakhs living in border districts of Xinjiang, being told to give DNA samples and fingerprints when applying for travel documents. Uighurs who speak in favour of greater political freedoms risk imprisonment.

These measures are likely to be both more tightly enforced and extended, in the name of “maintaining social control” in the resource-rich western marches that give onto the key overland routes through Central Asia to the Middle East and Europe.

However, the One Belt, One Road dimension and the need to protect the growing numbers of Chinese citizens abroad is evolving Beijing’ security interests. Its responses will have to follow suit. It has been exchanging information on Islamic State with the United States, with which it also cooperates on technical matters to counter terrorism such as port security and anti-money laundering.  (Whether and how that will continue with the Trump administration remains to be seen.)

China has also been talking to Pakistan and the Afghan government about ways to promote stability in Afghanistan, and within the Shanghai Cooperation Organization’s Regional Anti-Terrorism initiative. More controversially, it has also pushed for groups it considers to be terrorist to be added to international and national terrorist watch lists.

Beijing slowly recognises that many of the terrorism challenges that it faces have roots beyond its borders and thus will need it to participate in international counterterrorism efforts. However, its has so far shown that it prefers bilateral attempts to apply its three-pronged strategy with economic, policing and security aid to other countries, but that at best has to be done at arm’s length or get China involved in the internal affairs of countries in ways that run counter to its non-interference doctrine.

As it tries to figure that out, its instinctive reaction will still be to over-react at home by doing more of what it knows how.

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China and Afghanistan Draw Closer On The Roof Of The World

 

wakhan_corridor

CHINA’S BOUNDARY WITH Afghanistan is short; less than 100 kilometres arcing around the end of the Wakhan Corridor, a high mountain valley, seen above, on the ‘roof of the world’ that once provide a narrow imperial buffer between the Russian and British empires. Today it separates Tajikistan to the north and Pakistan to the south and looks on maps like a panhandle of Afghanistan whose territory it is.

Though it is an ancient trade route, spilling into Xinjiang through the Wakhjir Pass, it has long been closed at the Chinese end for fear of the drugs, Uighur separatists or other extremists that might flow through it.

Beijing and Kabul have a 2015 border policing agreement that involves joint patrols, but of late there have been reports that Chinese forces have been operating on the Afghan side of the border.

Map showing location of Wakhan Corridor in AfghanistanThis is a remote part of the world, so supporting accounts are scant. The Defense Ministry has confirmed that counter-terrorism and anti-cross-border crime operations have occurred but has dismissed Central Asian and Indian reports of Chinese military vehicles patrolling inside Afghanistan.

Pictures published last November show what look like Chinese-made armoured patrol vehicles inside the Wakhan Corridor. While the vehicles can be made out, what cannot is who is driving them — PLA soldiers, Chinese armed police, Chinese private security firm personnel, or someone else altogether, such as Afghanistan border police.

Relations between the two countries have been gradually growing closer since the establishment of Afghanistan’s National Unity government in 2014.

Afghanistan has agreed not to provide sanctuary for the East Turkestan Islamic Movement, the Uighur separatist group that has been fighting a long and sporadic war for Xinjiang’s independence. For its part, China is training Afghan police and supplying the force with equipment and has pledged $70 billion in military aid as the policing relationship expanded to the defence side (though this hasn’t yet extended to heavy weapons). Bilateral exchanges on both fronts are increasing.

None of this is yet any substitute for Afghanistan’s dependence on the West. However, for Beijing, always worried about insecurity on its Western marches, a close relationship with Kabul will also be essential to the success of One Belt One Road, especially if security concerns about the China-Pakistan Economic Corridor worsen.

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The China-Aligned Movement

PRESIDENT XI JINPING’S will be arriving in Indonesia for the 60th Anniversary of the Bandung Conference by way of Pakistan. There could be no more apt metaphor for how China’s place in the world has changed.

At Bandung in 1955, Zhou Enlai and India’s Jawaharlal Nehru bestrode the emerging movement of African and Asian leaders summoned by Indonesia’s President Suharto to come together in ‘non-aligned’ anti-colonial solidarity — a “meeting of the rejected” as the American author Richard Wright who attended the conference described it.

Six decades on, Xi arrives having just announced $46 billion in Chinese investment in Pakistan, partly for energy but also to construct transport, energy and communications links between the western Chinese city of Kashgar and the blue-water port of Gwadar.

It is just one leg in the southern corridor of a grand Chinese scheme to create a new network of land and sea routes between East Asia and Europe. This New Silk Belt and Maritime Economic Road is such a central part of Xi’s foreign-policy initiative that the Politburo has set up a leading team to oversee its implementation .

As this Bystander has noted before,

to Beijing, Pakistan looks a lot like a corridor from the high plateau of China’s western reaches to the blue water ports of the Arabian Sea and thus access to shipping routes to the Middle East, Africa and Europe. The distance is relatively short, less than 1,500 kilometers as the crow flies, but at the northern end the terrain is difficult, the weather harsh, borders unsettled and security uncertain.

Road and rail links are patchy, particularly north of Pakistan’s capital Islamabad, and frequently disrupted. Nor is there yet a motorway connecting the capital to the southern port city of Karachi, let alone to Gwadar on the Gulf of Oman close to the border with Iran and where China is developing a deep-water port and naval base.

Xi described his trip to Pakistan, his first, as being like visiting his brother’s home. The two countries don’t seem familial allies, even if they have been discussing turning Pakistan into an energy pipeline for China since at least 2006. Not that they couch it in such terms: Xi calls it an “all-weather strategic partnership of cooperation”.

In the meantime, Beijing has been dancing delicately with its regional rival, Delhi. Xi’s bounteous trip to Pakistan, though, will make Indian prime minister Narendra Modi’s visit to China next month — a reciprocal visit for Xi’s trip to India last September — an uncomfortable one. It will be telling to see whether China is more a bestower or receiver of gifts on that occasion.

Modi has been taking a more assertive line with China than his predecessor, particularly in the Indian Ocean. He has also aligned India more closely with the U.S., signing a strategic agreement with Washington during President Barack Obama’s visit earlier this year.

Beijing blatantly cosying up to Pakistan will sit ill with India. Non-aligned no more — on either side. Bandung in 1955 seems not only a very different time, but a very different world.

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China Tilts Kazakhstan Away From Russia

china-kazakhstan-li-keqiang-karim-massimov at the Great Hall of the People in Beijing, China, March 27, 2015.

Prime Minister Li Keqiang (R) greets Kazakh Prime Minister Karim Massimov at the Great Hall of the People, Beijing, March 27, 2015. (Photo credit: Xinhua/Zhang Duo)

CHINA HAS NOW signed $40 billion-worth of deals with Kazakhstan in the course of barely four months. The latest tranche ($23.6 billion) was agreed during last week’s visit by Kazakhstan Prime Minister Karim Massimov, reciprocating his counterpart Li Keqiang’s trip to Astana in December. On that occasion, $18 billion in joint ventures was inked.

The two men also met at the World Economic Forum in Davos in Switzerland in January. Despite being a member of the Russia-led Eurasian Economic Union, Kazakhstan is intent on deepening its strategic relations with China, if nothing else as a counterbalance to Russia, the region’s longstanding power, and to the West, which has become more of a presence in Central Asia since the collapse of the Soviet Union.

For its part, Beijing will welcome the security of a trade-tied neighbour on its at times troubled far western marches as much as it does Kazakhstan’s exports of oil, natural gas and uranium. The Central Asian country also offers a prospective market for China’s growing defense industry while being a key leg of the new Silk Road westward overland trade corridor Beijing wants to develop, and which was so prominently touted at the annual Boao conference just concluded.

Kazakhstan is already the largest recipient of Chinese foreign direct investment among the post-Soviet Central Asia republics. Loans-for-oil-deals between the two countries date back to 2009. Beijing will use the investment funds it makes available via the Silk Road Fund, the Shanghai Cooperation Organization, and its proposed Asian Infrastructure Investment Bank to cement that position.

Kazakhstan has its own ‘Bright Road’ project to boost economic development through infrastructure projects. The spillover from Russia’s sanctions-slowed economy has made that need more urgent. The European Bank for Reconstruction and Development downgraded its forecast for Kazakhstan’s GDP growth this year to 1.5% from the 5.1% it forecast as recently as last September. 2014’s estimated GDP growth was 4.3% down from 6% in 2013.

One-fifth of Kazakhstan’s $84 billion–year of exports now goes to China, twice the share that goes to Russia. The relative positions reverse on the import account: Russia being the source of 36% of Kazakhstan’s $44 billion a year of imports; China of 18%. That gap looks set to narrow. A regular goods rail service between Lianyungang and Almaty, Kazakhstan’s largest city, started last month with the first westbound load carrying Chinese cars, electronics and household goods.

Beijing has the trade and investment clout to exploit Russia’s moment of vulnerability and so expand its influence and market power across the region at Moscow — and the West’s — expense.

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China Picks And Chooses Its Gas Suppliers

Gazprom’s decision to put off construction of a $38 billion trans-Siberian gas pipeline for a year will trouble Moscow more than Beijing. The delay is because the two countries continue to be apart on pricing for new Russian gas exports to China.

China, for all its energy hunger, is the more ready of the two to wait to get the pricing it wants on the 38 billion cubic meters of gas it has agreed to buy annually from Gazprom. Russia, on the other hand, is anxious to get its oil and gas companies selling to Asia to cut their reliance on European markets.

The International Energy Agency recently estimated that China will absorb one-third of new LNG supplies worldwide over the next five years as its demand grows by 12% a year. In June, Rosneft signed a contract to supply 2.6 billion barrels of crude oil to China National Petroleum Corp. (CNPC) over the next 25 years, with CNPC also taking its first stake in a Russian gas-export project, 20% of Novatek’s Yamal LNG fields. Novatek, as Russia’s second-largest gas producer, is a Gazprom rival. CNPC will import 4 billion cubic meters of gas a year under its deal, likely starting in 2016.

Earlier this week, CNPC secured a deal to buy more gas from Turkmenistan. State-owned TurkmenGas will up its annual sales from 40 billion cubic meters a year to 65 billion cubic meters a year by 2020. China last year imported 20 billion cubic meters from Turkmenistan. The extra 25 billion cubic meters will come from opening up the second phase of TurkmenGas’s giant Galkynysh field. CNPC will do the development which is being paid for with Chinese financing. Gazprom can wait.

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