China’s Belt And Road Initiative Gets More Strategic

CHINA’S BELT AND ROAD INITIATIVE (BRI) has seen no new deals struck in Russia so far this year (see map above), according to a report by the Green Finance & Development Center at Fudan University in Shanghai.

This looks to this Bystander as a further example of Chinese companies’ circumspection about falling foul of Western sanctions imposed on Russia because of the war in Ukraine.

Russia and China signed deals under the BRI rubric worth about $2 billion in 2021, roughly the same level as the previous year. Pre-pandemic, the figure was more than three times as much in four of the six preceding years.

BRI investment is being redirected to the Middle East. The Center’s report says that Chinese firms signed $5.5 billion worth of mainly energy and construction deals in Saudi Arabia in the first half of the year — more than in any other country.

In general, new BRI investment has plateaued, settling at slightly lower levels. In the first half of 2022, at $28.4 billion, BRI finance and investment was 4% on the same period a year earlier, according to the Center. 

Beijing is becoming more steely-eyed about projects’ investment returns and the external reputational risks of saddling host governments with unsustainable debt. Sri Lanka and Egypt were two other countries without new BRI deals in the first half of this year, but as the map below highlights, they were far from alone.

There is also greater Western pushback over the geopolitical intent behind the BRI, particularly in Europe.

The days are over when Chinese firms could slap the BRI label on any foreign direct investment. Beijing is now more focused on the strategic value of BRI deals as it seeks to secure access to resources it will need for its new tech and green industries and the energy it needs to fuel its economy.

The Centre identifies five strategic project types:

• strategic assets, including ports:
• trade-enabling infrastructure, including pipelines and roads;
• ICT, e.g., data centres;
• resource-backed deals such as in mining, oil and gas; and
• high visibility projects like high-speed railways.

Hungary Grows As Beijing’s Peculiar Friend In Europe

HUNGARY OCCUPIES A peculiar place in China-EU relations. The country is run by a populist, right-wing government led by Viktor Orban, who is as strongly anti-communist as he is Eurosceptic.

However, If anything, his rift with Brussels is widening. Beijing is nurturing him as a wedge ally in Europe, although it portrays warm relations with Budapest as a bastion against those trying to weaken the China-EU relationship.

The strategy is meeting with some success. Hungary recently blocked the EU from issuing a statement criticising China’s treatment of Hong Kong. It was the first EU country to accept shipments of the Chinese Covid-19 vaccine, Sinopharm, against Brussels’ wishes, and has plans to produce it locally. Orban is also advocating the ratification of the EU-China investment agreement, about which many member states are now having second thoughts. He awarded a multi-billon dollar project to upgrade the railway line between Budapest and the Serbian capital, Belgrade, to a Chinese consortium.

Yet this weekend, thousands of Hungarians took to the streets to protest against Fudan University opening what would be its first European campus in Budapest. The campus is due to open in 2024 with a student body of some 5,000 and 500 faculty.

The protesters claim that any government subsidies Fudan is receiving would be better spent on Hungarian institutions. The Hungarian government intends to borrow $1.8 billion from China Development Bank to build the campus, and will contract China State Construction Engineering Corp. (CSEC) to do the construction using Chinese labour and materials, according to Direkt36, a Hungarian investigative-journalism site.

CSCE was on US President Donald Trump’s blacklist of companies deemed to have connections with the People’s Liberation Army, although not on the Biden administration’s new list.

The estimated construction cost is more than the Orban government’s annual budget for higher education. This is being reduced by converting public universities into independent non-profits. In 2017, Orban pushed through a higher education law that forced the Soros-funded Central European University to move from Budapest to Vienna to continue functioning as a US institution.

In April, the government amended the law so that foreign-based educational institutions could operate in Hungary if they do so under an inter-governmental agreement. This opened the door for Fudan. The Sino-Hungarian international agreement also seemingly lets the construction bidding be exempt from EU competition law.

A further complaint is that the campus will occupy land previously designated to house domestic university students. The left-wing mayor of Budapest has shown his displeasure by proposing renaming three streets around the campus as Free Hong Kong Road, Dalai Lama Street and Uyghur Martyrs’ Road.

That may be more to do with next year’s elections in Hungary than anything; the mayor is seeking to lead an opposition coalition to contest Orban’s Fidesz party. But the street renaming would be a provocation Beijing would find difficult to ignore.

Update: Following the protests, Orban’s chief of staff suggested that the Fudan University project could be put to a referendum in 18 months’ time. This co-opts an opposition proposal but would let the government defer a vote until it is too late to cancel the project. The opposition’s election campaign will likely have a strong anti-corruption and anti-Chinese theme.

Kicking Out Freedom Of Thought

THE NATIONAL BASKETBALL ASSOCIATION, the dominant professional basketball league in the United States, got into hot water politically and commercially in China earlier this year when an official of one of its teams tweeted his support of the protests in Hong Kong.

Football may not carry the same geopolitical sensitivities in this era of Beijing-Washington confrontation as US pro sports. Still, reaction to critical comments over China’s treatment of its Uighurs by Mesut Özil a German of Turkish descent who plays for Arsenal in the English Premier League and who is Muslim, has been no less quick or punitive.

Planned live coverage of Arsenal’s match against the defending league champions Manchester City last weekend was dropped by the state broadcaster, despite the club quickly distancing itself from its player’s comments, saying it was an apolitical organisation.

State and Party media weighed into Özil with both feet. NetEase, the online technology company founded by billionaire Ding Lei, patriotically removed the player from three of its video games, including the highly popular Pro Evolution Soccer 2020 Mobile.

Özil did get support, however, from US Secretary of State Mike Pompeo, who tweeted that:

China’s Communist Party propaganda outlets can censor Mesut Özil and Arsenal’s game all season long, but the truth will prevail. The CCP can’t hide its gross human rights violations perpetrated against Uighurs and other religious faiths from the world.

Less noticed was that the German club FC Cologne has finally pulled out of a deal to run a training academy in China. Stefan Müller-Römer, a lawyer who is a member of the football club’s council, told his local newspaper that ‘as a non-profit organisation that is socially active, [FC Cologne] cannot support such a brutal and totalitarian dictatorship’.

No such qualms at FIFA, world football’s governing body, which recently voted to stage its inaugural world club championship in China in 2021. Its newly-appointed head of global football development, Arsene Wenger, who when he was the manager of Arsenal signed Ozil for the club, tiptoed along a fine line, saying:

Mesut Özil has freedom of speech like everyone else, and he uses his notoriety to express his opinions, which are not necessarily shared by everybody. What’s important is that Ozil has an individual responsibility…When you make a comment about your individual opinion, you accept the consequences of it.

At least, Özil retains his freedom of speech, even in the politically sanitised world of professional sport. The charters of at least three universities in China, including the relatively liberal Fudan University in Shanghai, have been rewritten to remove or downplay references to academic independence and freedom of thought, with ‘implementing the Party’s direction, principles and policy’ and similar patriotic prescriptions superseding them.

Employers Paradise

There are 200 million migrant workers in China’s cities, with a potential backup pool of 100 million more waiting in the countryside. They see themselves treated as second class citizens at best, according to a survey by Shanghai’s Fudan University, working long hours that make them accident-prone from tiredness and too weary to study for the qualifications to get a better job. Compounding their misery, inflation is more than chewing up rising earnings.

Not that much of that is news. But this is one of the first surveys to be published since a new labor law came into effect at the beginning of this year, even though the survey’s field work was probably done last year.

The new law is meant to protect worker’s rights, simplifying a hodgepodge of laws, regulations and judicial decrees. One loophole closed is the one that let employers deny workers rights by the simple expedient of not issuing the employment contract in which the rights were enshrined; workers now get an employment contract by default.

Donald H. Straszheim, who runs the China practice of Roth Capital Partners, writes in Forbes:

What we are already seeing is the creativity of employers to find ways to circumvent the new rules to avoid being saddled with higher costs.

We are seeing new labor contracts, two half-time shifts, the use of outside “staffing companies,” the creation of “new companies” to do the same work, so-called voluntary resignations before year-end 2007 only to be rehired on Jan. 1, 2008, and the like. Talk about creativity. Not surprisingly, employers have more power than workers–even in China.

The old rules made China an employers paradise because they were laxly enforced in the extreme, especially in the private sector (state and foreign-owned enterprises largely played by the book). Will the new ones, drawn up partly in response to foreign criticism of China’s labor rights, and partly in response to growing labor unrest, fare any better? It will all come down to enforcement.