Thursday, May 25, 2017

Quantifying One Belt One Road may be a fool’s game

Quantifying One Belt One Road may be a fool’s game

Turloch Mooney, Senior Editor, Global Ports | Mar 22, 2017 7:58AM GMT

China’s One Belt One Road (OBOR) programme continues to generate high levels of interest in the global shipping community. Its unprecedented scale and heavy focus on trade and transportation infrastructure make it a front-runner among policies that will affect the industry the most over the decades to come.

The potential impact of OBOR is closely related to its scale and getting an accurate picture of the real size of the programme in terms of projected investment levels and the eventual reach of its development projects is a focal point of watchers of the key global trends that are shaping the future of shipping. 

For many, beyond the headline numbers of multibillion dollar investments, OBOR is an opaque concept, and industry actors from port operators to tanker owners are in the dark over how and to what extent the programme will affect their businesses, and how to develop and implement strategies to benefit from it.

For those watching closely how the programme evolves, the fact that direct investment by Chinese enterprises in OBOR countries actually shrank in 2016 came as something of a surprise. Despite its high profile as a cornerstone of Beijing’s economic policy, official figures from the central government show direct investment by Chinese enterprises in OBOR countries reached just USD14.5 billion in 2016, down from around USD14.8 billion in 2015. 

This is well below 10% of China’s total overseas direct investment (ODI) last year and a good place to begin busting a few myths in terms of how OBOR investment and project implementation really works and why it is such a challenge for anybody to forecast its potential scale with a useful degree of accuracy.

“There is this sense with regard to One Belt One Road that Beijing is implementing some sort of grand plan but it really doesn’t work like that,” says Tom Miller, a senior China watcher with global economic research company Gavekal and author of the newly published ‘China’s Asian Dream’.

Miller spent the past three years studying and picking apart the overseas expansion of Chinese companies and the policies behind it, including visits to many OBOR countries and project sites.

“There are often question marks when it comes to official figures out of China but the figure for ODI in the Belt and Road countries for 2016 is relatively low and it does not look exaggerated to me.”

The figure is low because it is deals outside of ODI that make up what is by far the biggest segment of projects categorised under the OBOR programme.

In addition to the USD14.5 billion in ODI, Chinese companies last year signed contracts with entities in OBOR countries valued at USD126 billion, an amount more than 50% higher than its equivalent in 2015.

A large portion of this amount involves Chinese construction companies signing contracts to build infrastructure such as the large port projects, industrial zones, and linking trade and transport systems that are behind those multibillion dollar headlines. 

These contracts are typically financed by loans from Chinese banks and directly achieve one of the main policy goals of OBOR: to provide markets abroad for capital goods and new business for Chinese construction companies.

“The largest part of OBOR activity by a long way involves individual commercial companies going overseas and sourcing deals,” says Miller. “There is certainly good diplomatic backing and support for those deals, but they are essentially commercial projects arranged by individual Chinese companies rather than state projects.”

As commercial projects, they are subject to all of the normal challenges you would expect from commercial deals in what are often very poor countries. This means, for instance, they may or may not come to fruition, and many of them will change substantially in terms of both scope and value before they are completed.

According to Miller, this makes it very challenging if not impossible to come up with accurate projections for investment values for even single OBOR projects let alone the entire programme.

“Making projections about the potential size of OBOR investments is not too far from meaningless,” he says. 

An important example is Gwadar port in Pakistan and the related China-Pakistan Economic Corridor (CPEC), probably the highest profile ongoing OBOR project. In addition to extensive port infrastructure, the CPEC includes a 3,000 km network of highways and railways from western China running the full length of Pakistan as far as the sea and a series of energy projects including solar, wind, and coal-fired power stations.

Gwadar is located in Baluchistan, which is home to an ethnic nationalist insurgency as well as operations by sectarian militants with links to Islamic State. The day before a ceremony in November to mark the opening of the newly refurbished Gwadar port, a bomb in another part of the province killed over 50 people in an attack claimed by Islamic State.

Pakistan has deployed a dedicated security force thought to be over 10,000-strong to protect the CPEC projects and the port, including troops to guard workers and Chinese employees, and to escort trucks carrying import and export goods through the volatile province.

“These issues can end up resulting in project price tags rising exponentially, or ultimately result in big changes in the nature of projects,” says Miller.

The significant downsizing of planned port and transportation projects in Myanmar is another high profile example of the fluidity of developments under the OBOR programme.

A planned deep-water port at Maday Island and oil and gas pipelines linking the port at the town of Kyaukphyu in western Myanmar with China’s Yunnan province was eventually successfully completed. However, a more ambitious plan for a USD20 billion railway and highway system to support the import and export of commodities besides oil and gas and other goods is on hold and is quite likely to be scrapped completely.

“This was a deal that was actually done at elite level when the military junta was in power in Myanmar,” says Miller. “As soon as the junta began to allow the country to open up, there was a popular backlash against the Chinese developments that disrupted plans massively.”

Miller points out that while certain projects run into big challenges such as these, making it difficult to quantify outcomes with any real accuracy, many projects proceed relatively smoothly and bring the expected benefits to local economies and industry as well as commercial success to the individual Chinese companies involved and support the government’s goals for the overall policy.

The China Merchants-invested Colombo International Container Terminal, where annual container volumes handled passed the two million teu mark in 2016, is a modern and efficient facility that successfully filled an infrastructure gap to support the trade growth of both Sri Lanka and India.

Unless we have a black swan-type event, Chinese companies will continues to invest in infrastructure overseas such as ports, and will do so with the blessing of the government. Not only do you have investment from Chinese companies, the programme is also incentivising investment in infrastructure from other countries such as Japan,” says Miller.

“Ultimately this is good for infrastructure in Asia as well as the other emerging markets where investments are taking place.”

Tom Miller’s ‘China’s Asian Dream’ is now available from Zed Books

How the Silk Road plans will be financed

Jin Liqun, AIIB president © AFP

   Financial Times

May 9, 2016 9:00 pm by James Kynge

“If you want to develop, build a road,” runs the Chinese phrase. Beijing’s grand design to construct transport links between China and Eurasia represents the export of this simple philosophy. Beijing believes that building roads, railways and other infrastructure will help create a market in Eurasia for its goods.


Beijing’s estimate of investment in the ‘New Silk Road’ strategy

“The Chinese experience illustrates that infrastructure investment paves the way for broad-based economic social development, and poverty alleviation comes as a natural consequence of that,” says Jin Liqun, president of the Asia Infrastructure Investment Bank (AIIB).

But potential problems abound with financing the planned $890bn in investments. The payback period is often long, construction delays are common and political instability is widespread in the 64 countries embraced by the “New Silk Road” strategy.


Investment planned by AIIB in 2018

The AIIB, a China-led multilateral institution with 57 member countries, is part of the potential solution. However, it plans to increase operations gradually, investing $1.5bn-$2bn in infrastructure this year, $3bn-$5bn next year and around $10bn in 2018, Mr Jin says.

The financing mother lode for the “One Belt, One Road” (OBOR) initiative — as the Silk Road project is known in Beijing — will continue to come from bilateral lending by the Chinese policy banks, analysts say.

“China will most likely have more impact operating through the usual bilateral mechanisms such as the policy banks, including the Export-Import Bank of China and the China Development Bank,” says Sarah Lain, research fellow at the Royal United Services Institute, a London-based think-tank.

Related article

China seeking to revive the Silk Road

Beijing’s initiative has led to both welcoming and wary reactions

The Export-Import Bank of China, which promotes foreign trade and investment, lent more than $80bn in 2015. By comparison, the Asia Development Bank lent $27.1bn. More than 1,000 projects financed by the ExIm Bank were in 49 countries involved in the OBOR initiative, according to Xinhua, the official news agency.

Not all projects financed by Chinese policy banks are driven by commercial logic, says Tom Miller, an analyst at Gavekal Dragonomics, a research company. A $46bn plan to finance an “economic corridor” through Pakistan, linking the port of Gwadar on the Arabian Sea to north-west China, is motivated partly by the need to find an alternative route for oil imports from the Middle East to avoid rising tensions in the South China sea. Mr Miller says Chinese officials privately admit they expect to lose 80 per cent of their investment in Pakistan, 50 per cent in Myanmar and 30 per cent in central Asia.

Related article

Ancient trade routes were founded on tax and credit

The ‘One Belt, One Road’ plan would have been familiar in China 2,500 years ago

Notwithstanding such forecast losses, Chinese lenders are starting to syndicate participation in OBOR projects to international private sector investors and lenders.

“We are seeing a shift among the Chinese institutions in the OBOR projects toward syndication to international pension funds, insurance companies, sovereign wealth funds, private equity funds and others,” says Henry Tillman, chairman and chief executive officer at Grisons Peak, a London-based investment bank.

He says institutions are increasingly seduced by the promise of long-term returns of 6 to 8 per cent on OBOR infrastructure. Even some government agencies appear keen. IE Singapore, the state-owned trade development board, has agreed to a partnership with China Construction Bank to finance OBOR projects, with about $22bn in funding envisaged

Where Will China’s ‘One Belt, One Road’ Initiative Lead?

Mar 22, 2017


As advertised by Beijing, the “One Belt, One Road” (OBOR) initiative, China’s grand scheme for knitting a network of roads, ports, railways and other links from East China through Southeast and South and Central Asia all the way to Europe exceeds both in scope and ambition the Marshall Plan used to rebuild Europe after World War II.

The “belt” of land-based links is paired with a 21st century “Maritime Silk Road” stretching from Australia to Zanzibar. Chinese President Xi Jinping launched the OBOR initiative in 2013, two years after then-U.S. President Barack Obama initiated the Trans-Pacific Partnership (TPP) trading bloc across the Pacific region. Now that Obama successor Donald Trump has carried out his pledge to withdraw from the TPP, the expectations are that Chinese-backed strategies like the OBOR will gain momentum. China experts say that this is a positive development, but there is skepticism over whether Beijing will follow through with the gargantuan amount of funding needed, whether big debt-financed projects bankrolled by China will benefit the recipient countries, and whether those projects will actually make sense in the long run.

For many countries in the region, China is by far the biggest source of financing: Beijing’s Export and Import Bank of China alone lent $80 billion in 2015, compared with more than $27 billion from Asian Development Bank. Chinese involvement in building railways, ports, roads, dams and industrial corridors is helping to expand its economic and geopolitical sway across Asia, the Middle East, Europe and Africa.

China experts and economists say that the initiative makes sense and that it will accelerate as the U.S. turns more insular under Trump. “It is unfortunate that many U.S. diplomats and members of the previous administration worked for nearly a decade to push toward the TPP and now it is torn apart,” says Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. The U.S. is turning its back on the rest of the world at a time when the world needs an open and engaged America, he says. “It is very likely and understandable that China … will try to fill those gaps with this initiative, and that is very logical — it’s something the U.S. will later deeply regret,” Kuijs says.

The OBOR effort has not gotten the degree of attention it deserves, says Pieter Bottelier, visiting scholar of China studies at Johns Hopkins School of Advanced International Studies in Washington, D.C. “I am concerned that its significance is underrated in the U.S. and in the West in general. It is a very positive initiative and a major vision of how China can collaborate with countries in its neighborhood, Europe, Latin America and Africa in a way that is in the long-term interest of China and [the global economy],” Bottelier says.

“I am concerned that its significance is underrated in the U.S. and in the West in general.”–Pieter Bottelier

The geopolitical aspects of the OBOR initiative could eventually draw attention from the Trump administration, given its strong stance on national security. “It is an economic initiative, but along the way China will expand its military bases and so forth,” says Wharton emeritus professor Franklin Allen, who also is a professor of finance and economics at Imperial College in London. “On the sea routes they will develop their military capability and on the land routes, too.”

From Kuijs’ point of view, Beijing views the OBOR initiative as a strategy needed to support its growing economic might. “Many outsiders are skeptical and do not know exactly what it is, but it is taken very, very seriously by the Chinese government and we should take this very seriously,” he says. “The Chinese government is thinking, ‘We are the second-biggest economy in the world, and it may take 10 years or 20 years but we will be the world’s biggest economy at some point.’”

While it is sweeping in scope like the stalled TPP, which aims to create a trading bloc around the Pacific Rim, the “One Belt, One Road” plan is not a free trade agreement. It’s more of a blueprint for integrating China’s trading partners by developing their infrastructure — ports, roads, airports and railways — in a way that complements Beijing’s own interests. Infrastructure-led development worked well for China, in Beijing’s view, and now it wants to expand that approach internationally, Kuijs says.

The “One Belt” refers to a “Silk Road Economic Belt” from China through Central Asia to Europe. The “One Road” refers to Beijing’s concept of a “21st century Maritime Silk Road” to connect China to Europe via the South China Sea and Indian Ocean. The initiative involves developing six economic “corridors”: 1. a China-Mongolia-Russia corridor; 2. a new Eurasian “Land Bridge”; 3. a corridor from China to Central Asia and Western Asia; 4. a China-Indochina peninsula corridor; 5. a China-Pakistan economic corridor; and 6. a Bangladesh-China-India-Myanmar economic corridor.

Chinese President Xi Jinping said in his speech at the World Economic Forum in Davos, Switzerland in January that more than 100 countries and international organizations have given warm responses and support to the initiative and that more than 40 countries and international organizations have signed cooperation agreements. So far, Chinese companies have made more than $50 billion of OBOR-related investments and launched a number of major projects in the countries along the route, he added. At least 65 countries are included in the OBOR initiative.

Unanswered Questions

While the grand vision is laudable, there are many unanswered questions: How would it be done? And what would be the project, environmental and engineering standards implemented under this umbrella?

“There would be serious doubts over protection of minority populations and environmental concerns,” Bottelier says. As for the scale of OBOR, there’s no consensus over how many projects it would involve at what cost and in what time frame. “It is pretty obvious that there is no limit to the amount of infrastructure that is needed in those countries.”

The Japan and U.S.-led Asian Development Bank says infrastructure development in Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. In a recent report, “Meeting Asia’s Infrastructure Needs” issued in February, the estimate rises to more than $26 trillion, or $1.7 trillion a year when costs for climate change adaptation and mitigation are included. “This is a grand vision, and it may take a decade, but there is no rush. You cannot really put any number on the total investment,” says Rajiv Biswas, Singapore-based Asia-Pacific chief economist at IHS Global Insight.

“One Belt, One Road is relevant for Europe since China wants to link its rail to Europe. So, China wants Europe to be part of [OBOR], but not as a key driver.” –Rajiv Biswas

The China-led Asia Infrastructure Investment Bank, or AIIB, is seen as a linchpin for OBOR financing. So far, however, it has provided only $1.73 billion to support infrastructure projects in seven countries, including Pakistan, Bangladesh, Tajikistan, Indonesia, Myanmar, Azerbaijan and Oman since it was launched in January 2016.

Noriyoshi Ehara, chief economist at the Tokyo based Institute for International Trade and Investment, says the financial infrastructure for OBOR is gradually taking shape. Apart from AIIB, China also has a US$40 billion Silk Road Fund and a New Development Bank to fund the OBOR initiative. “There has been good progress in getting these frameworks in place,” Ehara says. Ultimately, he adds, Beijing may not limit OBOR to infrastructure but may make it the foundation for regional and bilateral free trade areas (FTAs). “We are not sure if China will succeed, but the world is changing, and more and more countries are joining this initiative,” he says. With the TPP in trouble, OBOR is getting more attention.

China’s Deep Pockets

Already, more than US$900 billion in projects are planned or underway, Fitch Ratings says in a report titled “China’s One Belt and One Road Initiative Brings Risks.” It says most funding will likely come from China’s policy banks, the Export and Import Bank of China, China Development Bank and its largest commercial banks. “We estimate that outstanding loans from Chinese banks total US$1.2 trillion, and a large portion of that has financed infrastructure projects involving Chinese state-owned enterprises,” the report says. China also has other major financial resources such as its sovereign wealth fund and foreign exchange reserves.

One project that got a head start was construction of a railway link from the port of Piraeus in Greece to Eastern Europe. Piraeus is a gateway to Europe for Chinese products, and major Chinese companies have been using the port to enter the European market. China, through its China Ocean Shipping Company, bought a 67% stake in the port’s Pier I from the Piraeus Port Authority SA in January 2016.

The European Union (EU) is welcoming OBOR, but cautiously. “China basically owns Piraeus Port close to Athens and this railroad is meant to link up all the way up to Budapest in Hungary, which also is an EU member,” notes Kuijs. “The EU is now looking at this project, which clearly is projecting China all the way into Europe, to see to what extent it is compatible with EU rules and principles.”

Apart from questions over whether Chinese-led projects might conform with global standards on such issues as environmental protection and labor rights, some economists question if a massive, policy-led OBOR push on infrastructure development will turn out to be economically sound. “Let’s see what kinds of projects they are getting in the next couple of years and what kinds of returns they are getting,” Biswas says. “Because in the end, if they are not delivering on the returns, then the banks that are lending will eventually say we need to be careful and we cannot keep doing this without any returns because it has to be commercially viable.”

“It is quite likely that China will succeed in this initiative, though it may take a half-century.” –Franklin Allen

A flood of lending to smaller countries lacking strong foreign exchange reserves might not be able to repay the loans if projects fail to generate revenue as expected. Fitch warns in its report on OBOR that some of the loans are large enough to have an impact on borrowing countries’ public finances, if debt-servicing from project proceeds becomes a problem.

That problem already is surfacing in Sri Lanka, where China signed a deal in late 2016 to further develop the strategic port of Hambantota and build a huge industrial zone nearby. China has spent almost $2 billion so far on Hambantota and a new airport. But hundreds of Sri Lankans clashed with police at the opening of construction in January of the industrial zone in the south, saying they would not be moved from their land. It was the first time opposition to Chinese investments in Sri Lanka turned violent. Newly elected Sri Lankan President Maithripala Sirisena had said the new port deal with China was unfair in his campaign, but after taking office approved an agreement to lease an 80% stake in the port to the China Merchants Holdings for 99 years in exchange for US$1.1 billion in debt relief.

Concerns over the ability of smaller developing countries to protect their own interests underscore the need for involvement of Western countries, especially from the EU, since Japan and the U.S. have continued to shun the AIIB. “You have weaker institutional capacity and weaker governments like in Cambodia and Central European countries. They may be persuaded by Beijing on take on large debt to finance projects. They and other developing countries in the past ended up with large debts incurred to finance dubious projects that do not help their economies. That is the risk for countries that do not have the capacity to independently make cost-benefit analyses,” Kuijs says.

While there’s nothing wrong with investing more in poor countries, and in increasing economic interactions between poor countries and China and the rest of the world, “it would be beneficial for Western countries to take this initiative very seriously and to become its counterparts in this rather than having China sort it by itself,” he says.

Of course, that begs the question of whether China would welcome their involvement. “This is China’s initiative, but this is not the AIIB. They want the rest of Asia to be part of it, but more on a bilateral level,” says Biswas. China’s vision is of a partnership with other developing countries in Asia. “Having Europe be part of it is a different story,” he says. “One Belt, One Road is relevant for Europe since China wants to link its rail to Europe. So, China wants Europe to be part of [OBOR], but not as a key driver,” Biswas added.

China’s Slowdown Is a Catalyst

One of the main factors driving the OBOR effort is the slowdown in China’s own economy. The Communist Party is striving to transition away from growth led by investment and exports to development led by domestic consumer demand and services, and to keep growth at more sustainable levels than in the past. The government set a growth target of 6.5% in 2017 at the National People Congress in March, down from a 2016 target of 6.5% to 7%. In a sense, China is seeking to export the investment-led part of its economy, to help its own overbuilt heavy industries and provinces.

But Kuijs doubts OBOR projects will do much to help China with its huge overcapacity problems in many industries, especially steel, glass and cement. Compared to the size of China’s steel industry or other industries, it would take a very long time for demand from the projects to be big enough to make a difference, he says. “Many of the projects are far away from China, and some types of steel are worth transporting but not all kinds of steel. It would not help reduce excess capacity of cement because it is not economically viable to transport cement over such long distances,” Kuijs says. Bottelier, also, sees overcapacity as only a marginal factor in the OBOR plan.

Looking back at how far China has come since it launched its market-oriented reforms and opened its economy, there’s reason to hope the OBOR strategy will have a significant impact over time, Allen says. “It is quite likely that China will succeed in this initiative, though it may take a half-century

Historic treaties and engagements relating to Baluchistan

Part 4 of the PDF link below contains treaties and engagements relating to Baluchistan:


Alternative link

An historic overview of the region and its districts, including British involvement in Baluchistan, organised by the Kalat [Kelat] Agency , Sibi Agency , and British Baluchistan and its territories;The treaties and conventions listed for Kelat, agreed between the years 1839 and 1925, include: an engagement between the British Government and the Khan of Kelat (1839), the Khan of Kelat’s allegiance and submission to the British Government (1841); various agreements for the protection of the Indo-European telegraph line; cession of lands for the Kandahar Railway (1880), Mushkaf-Bolan Railway (1894) and Nushki Railway (1906); demarcation of the boundary between Persian Baluchistan and Kelat (1896);The treaties and conventions listed for Sibi and British Baluchistan, agreed between the years 1884 and 1897, including: cession to the British Government of rights to petroleum and other mineral oils (1885); agreement on the Bargha and Largha boundary line (1895), grazing fees for animals and responsibility for good behaviour within the British border at Zhob, signed by the Suliman Khel Ghilzai (1897).


Alternative link

Moodys cut China's credit rating debt condern

A team of window washers descend on ropes as they clean the titanium dome of the National Centre ...more

Andy Wong, AP

The Chinese government criticized the downgrade, calling it "inappropriate," according to the Chinese state news agency Xinhua. "These viewpoints, to some extent, overestimate the difficulties facing the Chinese economy and underestimate the capabilities of China to deepen supply-side structural reform and expand overall demand," China's Ministry of Finance said.

Moody’s last cut China’s sovereign rating in 1989 when the country’s economic momentum was stunted by the government’s violent reaction to the Tiananmen Square protests.

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows," said Moody's, which changed its outlook for China to stable from negative.

Despite its booming domestic economy, Chinese officials continue to emphasize exports to sustain growth. The policy has led to stimulus programs and continued borrowing by state-owned enterprises. China's debt — including debt owed by the government, households and non-financial companies — has grown to more than 250% of its gross domestic product, triggering some comparisons to the U.S. before the financial crisis in 2008.

"While such debt levels are not uncommon in highly-rated countries, they tend to be seen in countries which have much higher per capita incomes, deeper financial markets and stronger institutions than China's," Moody's said.

Still, Moody's upgrade of China's outlook to "stable" reflects its assessment that the decline of China's credit profile will be "gradual" and eventually be contained as reforms deepen, it said. With its manufacturing still robust and exports growing, China's GDP will continue to grow and likely "stay strong," it said.

But that growth rate — while still higher than developed nations — has slowed, sinking to 6.7% in 2016 from a peak of 10.6% in 2010.

China has taken some measures to alleviate the pressure, such as encouraging private investment and entrepreneurship, promoting domestic consumption and cutting back excess capacities at its state-owned factories.

"While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government," Moody's said.

With China's economy maturing and facing some unique challenges, Moody's expects the country's growth potential to decline to close to 5% over the next five years.

Foreign and local investments in enterprises could decline as the economy slows. The working-age population began to fall in 2014 and that trend will accelerate. And productivity remains a concern despite corporate expansions, more foreign investment and rising skill levels.

“There are concerns that as China’s economy slows, pressure will mount on both corporate and governmental sector and their ability to service their outstanding debt,” said Arthur Dong, professor at Georgetown University’s McDonough School of Business. “The ability of China’s policy makers to prop up the construction and infrastructure sectors have come by way of heavy doses of additional credit.”

Citing China's mounting debt, S&P Global Ratings, a competitor of Moody's, maintained its negative outlook on the country and said it may consider a downgrade.

The negative outlook reflects our view of gradually increasing economic and financial risks to the government’s creditworthiness, which could result in a downgrade this year or next,” S&P's report said

China’s Navy Can’t Beat US Navy in Combat; Won’t Become World’s Most Powerful Navy

By Arthur Dominic Villasanta | May 22, 2017 11:24 PM EDT

J-15 fighters on the Liaoning. (Photo : PLAN)

Given their current capabilities, there is little doubt the U.S. Navy will easily defeat the People's Liberation Army Navy (PLAN) should there be wars over the South China Sea and East China Seas, according to Chinese military experts.

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The qualitative and quantitative inferiority of the PLAN is the most marked in the weapon that will dominate all future sea battles -- the aircraft carrier.

The experts conclude PLAN can't beat the U.S. Navy even decades into the future and will never become the world's most powerful navy.

PLAN currently operates one obsolete aircraft carrier -- the CNS Liaoning (CV-16) -- which it considers a training carrier unfit for combat. PLAN last month launched its second carrier, CNS Shandong (CV-17), which is expected to see service by 2020. It's building a third carrier.

"A sole aircraft carrier cannot become a fighting force because it needs the presence of other warships to form a strike group, as well as the protection given by other vessels," said Li Jie, a leading researcher at the People's Liberation Army Navy Naval Military Studies Research Institute.

He's also a retired Senior Captain of the People's Liberation Army Navy (PLAN). The institute is PLAN's think tank.

Li said China's carrier strike group air crews are still far below international standard.

"An aircraft carrier needs regular large-scale maintenance. China should have more than four carrier groups if it wants to fulfill escort missions on the high seas and safeguard its overseas national interests," said Li.

The US Navy operates 10 Nimitz-class carrier strike groups worldwide. An 11th carrier, the USS Gerald R. Ford (CVN-78) will be commissioned in June, giving the U.S. Navy 11 active aircraft carriers.

A severe PLAN inferiority is in the number of naval fighter pilots in the PLAN Air Force. PLAN only has 37 pilots qualified to take-off and land the Shenyang J-15 multirole fighter on the Liaoning, said Li.

In contrast, a single U.S. Navy aircraft carrier has anywhere from 48-60 single seat McDonnell Douglas F/A-18 E/F fighters.

The naval and air wing crews that man the Liaoning are just "kindergarten students," said Li, compared to the U.S. Navy whose carrier fleet has more than a century of operational experience in combat at sea.

"It's still a long way to go for Chinese carrier strike group crews to catch up their U.S. counterparts," said Antony Wong Dong, a military observer based in Macau.



Ahead of 'Modern Silk Road' build, China credit downgrade worrisome

Ahead of 'Modern Silk Road' build, China credit downgrade worrisome



The recent announcement that Moody’s Investors Service, one of the leading global credit ratings agencies, downgraded China’s credit rating, contradicts the official narrative promoted by China that things are great, and its economy is on solid footing. Chinese policymakers have consistently justified the high debt-to-GDP level arguing that its economic model can both safely and reliably service such large amounts of debt, so long as the economy continues growing at a healthy pace.

For Moody’s, the assumptions on which China is predicating its growth has it most concerned. For roughly the past 10 years, China’s growth has come by way of two areas — investment in infrastructure, commercial and residential real estate and exports of manufactured goods.

With regard to the former, since 2008, China has embarked on a building spree unlike anything witnessed in world history. In fact, more concrete was poured in China from 2011 to 2013 than all concrete poured in the United States during the 20th Century. The building of roads, tunnels, bridges and high-rise buildings has put a lot of people to work and kept factories humming with construction-related materials.


Regarding exports, it is apparent that China has been very successful in manufacturing products of all kinds and selling them in the world’s most important consumer markets, such as the United States and the EU.

The challenge China is confronting is the sustainability of its growth model and its ability to continue its reliance on investment- and construction-driven growth, as well as diminishing competitiveness in its manufacturing sector.

On the construction side, all funding came by way of debt. Chinese corporations and local governments borrowed heavily to construct state-of-the-art highways, transportation facilities, shopping malls and residential towers. The problem is, what if the projects fail to meet revenue expectations and, if so, how will the debt be repaid? 

On the export side, China is also getting squeezed — the cost of manufacturing in China is going up. The cost of labor and inputs have all risen, making it increasingly difficult to compete against places like Vietnam and Sri Lanka. To address this, Chinese factories have been heavily investing in automation and robotics to offset the rising cost of labor. 

At the same time, global demand for manufactured goods has been less than the global increase in manufacturing productivity, leading to a glut of supply and not enough demand to absorb all of the built-up capacity within China.

Realizing that China’s go-go days of growth may be behind it and that it’s mountain of debt casts a shadow on its future prospects, its policymakers are looking to revive its fortunes through the One Belt One Road (OBOR) initiative. In fact, OBOR is the centerpiece of President Xi Jinping’s blueprint for China’s economic future. 

In a nutshell, under OBOR, China wishes to link the entire Eurasian continent by way of an extensive land (rail) and sea (sea ports) network that will represent the modern recreation of the ancient Silk Road connecting East with West. The intended benefit would be to facilitate long-term multilateral trade between China and all of the nations that OBOR will traverse.

China envisions the unification of the Eurasian continent, from Western Europe, through Central Asia and Russia, all the way to China and South Asia. It represents one of the most ambitious and massive infrastructure projects ever conceived, covering a distance equivalent to three United States, end-to-end. 

To fund this undertaking, China has created its own policy bank, the Asian Infrastructure Investment Bank, and bankrolled it with an initial capital worth $50 billion. It has been estimated that the total cost of building OBOR may exceed $3 trillion, meaning China will have to rely on global capital markets to answer the need.

Given the staggering amount of capital to build out OBOR, the $50 billion allocated is but a drop in the bucket. China is particularly incensed that the United States has stayed on the sidelines regarding OBOR.

Given the massive infrastructure needs within the United States, capital providers would have a hard time justifying investing in OBOR and funding China’s ambitions when there is such glaring need at home. The OBOR is more than just an “If we build it, they will come” project. The OBOR entails a multitude of risks — security, operational, geopolitical and economic.

The risks call into question whether or not OBOR will be economically viable and whether or not the intended benefits of OBOR will materialize as assumed. Moreover, Moody’s downgrade will only make borrowing costs in China rise as the perceived risks become more apparent. 

Arthur Dong is a professor of strategy and economics at Georgetown University’s McDonough School of Business. He specializes in legal and business engagements between China and the United States

Debunking myths on CPEC

By Ahsan Iqbal

Published: May 25, 2017

Recently, quite a few stories have appeared on the China-Pakistan Economic Corridor (CPEC) in both local and international publications. A lot of traction was gained by the cynics of CPEC by reporting factually incorrect information. Consequently, myth spurring on CPEC is on the rise. I am going to take this opportunity to debunk these myths by stating the facts.

A pointless controversy was created on the Long Term Plan (LTP) by a recent article featured in a local English-language newspaper. The report published as ‘LTP’ in that article was an initial draft by the China Development Bank (CDB) and not a part of the agreed LTP. That article basically cherry-picked information from different sources to present a distorted picture of the LTP. The fact is that the government of Pakistan has prepared its own plan after multiple stages of consultation with provinces, federal ministries and their respective technical groups. The LTP has been prepared to develop Pakistan in line with the seven pillars of Vision 2025 which are predicated on the notion of inclusive and sustainable development. The main pillars of LTP are connectivity, energy, industries and industrial parks, agricultural development and poverty alleviation, tourism, cooperation in areas concerning people’s livelihood and financial cooperation. It was shared with the Chinese authorities following approval by the cabinet.

The Chinese side has given its approval in principle, however, its formal approval is expected by the end of this month, as our Chinese counterparts were occupied by the Belt Road Forum. As soon as we get the official approval from the Chinese side, we will put the LTP on the CPEC website.



One of the biggest myths propagated on CPEC is that Pakistan might become a colony/province of China. Any historian would tell you that colonialism and imperialism are legacies of countries of the global north. China has never invaded any country nor harboured any imperial designs. Cynics point out towards rising trade deficit with China as a reason to show concern on CPEC. The reality is that China’s competitiveness in exports is universal and not idiosyncratic to Pakistan. Pakistan’s current trade deficit with China is $6.2 billion. In comparison, India’s trade deficit with China stands at $47 billion. The US trade deficit with China is $347 billion. Based on these trade deficit numbers, is it appropriate to infer that the US or India are becoming colonies/provinces of China? Certainly not. Similarly, it is ludicrous to make such claims about the Pakistan-China relationship. Both countries respect the sovereignty of each other and CPEC is based on the shared vision of both countries: Vision 2025 and OBOR.

At present, only a few thousand Chinese nationals are living in Pakistan and making a positive contribution towards our economy, the majority of them fall in the category of temporary labour migrants who will return back upon completion of the projects. In contrast, around 8 million Chinese are living in Malaysia, 400,000 in France; 600,000 in Japan; 900,000 in Canada and over 2.5 million are living in the US. Therefore, to say that Chinese are overtaking Pakistani society is nothing but a farce. Chinese nationals working in Pakistan are our national guests as they are helping us to build a developed Pakistan.

Another myth spread on CPEC is that China is dictating terms to Pakistan and the federal government is not consulting the provinces. The reality is quite the opposite. China and Pakistan work jointly in making an overall planning for a unified development of CPEC projects. In this regard, the Long Term Plan, Transport Monographic Study and respective MoUs guide the policy for CPEC.

All provinces have been consulted and invited to all meetings within Pakistan and abroad for their recommendations and review of CPEC projects. Earlier this month, the chief ministers of all four provinces under the leadership of PM Sharif attended OBOR Summit in China. On 29th December 2016, all CMs participated in the 6th JCC meeting which was held in Beijing. For institutional arrangement and development of CPEC, the National Development and Reform Commission (NDRC) of China along with the Planning, Development & Reform Ministry of Pakistan have constituted subsidiary working groups of the Joint Cooperation Committee (JCC) on planning, transport infrastructure, energy, Gwadar and industry cooperation.

Since the signing of the MoU in July 2013, six meetings of the JCC have been held. The highest officials of every provincial government are represented in JCC meetings. It is impossible to hide or misrepresent any information on CPEC from provinces. Information on ongoing and agreed CPEC projects is available on the official website of CPEC. Moreover, the planning ministry is always available to address any queries regarding CPEC. All the Chinese companies involved in CPEC projects are nominated by their government. Therefore, there is no question of favouritism on the part of the government of Pakistan.

Another myth propagated around is that Pakistan is not going to gain any economic benefits from CPEC and it is tantamount to the 2006 Free Trade agreement (FTA) with China. First of all, let me explain that an FTA works out on the basis of demand and supply of market forces. China enjoys a competitive edge in exports vis-à-vis all other economies of the world, including Pakistan, whereas CPEC is qualitatively different from an FTA. It provides necessary stimulus to kickstart the processes of industrialisation in Pakistan. Without sufficient electricity and adequate infrastructure, it is not possible to carry out industrialisation.

CPEC brings $35 billion investments in energy projects. Alongside coal, clean and renewable energy projects are part of the CPEC energy portfolio. The existing energy policy was made before the CPEC MoU was signed between China and Pakistan. Prior to CPEC, nobody was interested in making investments in our energy sector. At that crucial time, China took a lead and demonstrated to the world that Pakistan is a reliable and secure destination for foreign investments. Energy investments under CPEC will remove a major bottleneck that is in the way of realising high economic growth. It will reinforce the main grid structure, power transmission, distribution network, and improve power supply. Currently, 14 energy projects are in the implementation stage. Through CPEC projects, 10,000MW of electricity will be added to the national grid. Only 16,000MW was added to the national grid from 1947 to 2013. Moreover, energy projects under CPEC are not funded by Chinese loans instead they are undertaken in the IPP mode regulated as per NEPRA tariffs. Average cost of these projects is lower than the current cost of production of energy.

Under CPEC, new road and rail networks are to be built in all four provinces to enhance and improve connectivity within Pakistan. In addition to economic benefits of connectivity, social and regional cohesion will increase within Pakistan and in the region. Once energy and infrastructure bottlenecks are addressed, it is estimated that GDP will at least increase by more than 2 per cent from its current trend.

Similarly, one of the important components of the CPEC framework is industrial cooperation. Nine industrial zones were included in it with equal representation of all provinces. The cost of production is steadily increasing for many industries in China due to increase in wages. It is estimated that 85 million jobs will be relocated and countries in the Far East, Asia and Africa are competing for these jobs. Pakistan wants to secure a big share of the relocation of these industries and jobs. Once relocated, this will create a huge demand for labour in Pakistan and enormous employment opportunities will be available for Pakistanis.

In the current projects of CPEC, two thirds of the workforce is Pakistani and only a critical mass of labour force comes from China. This is a great opportunity for the Pakistani workforce to learn and update their skills from their Chinese counterparts. Already a boom in steel, cement and construction industries has created multiplier effects in the overall economy.

Economic benefits of CPEC are net positive for Pakistan. CPEC is a golden opportunity for Pakistan to undo the mistakes of the past and we, as a nation, cannot afford to be complacent about it.

Published in The Express Tribune, May 25th, 2017

Pakistan operationalises Naval Station in Balochistan

KARACHI:  Pakistan  Thursday operationalised a Naval Air Station which will provide the navy with the much needed depth, flexibility and reach to counter emerging challenges of deterring terrorism at sea, curbing piracy and carrying out maritime security operations, according to a statement

Defence Minister Khawaja Muhammad Asif was the chief guest of the ceremony that was also attended by Chief of the Naval Staff Admiral Muhammad Zakaullah and other officials.  

Speaking on the occasion, Khawaja  Asif highlighted that this major Naval facility will boost Pakistan Navy’s capability for the defence of motherland, enhancing the Naval power over the Arabian Sea and especially its strategic reach westwards.

He said that the dual utilization of Naval Air Station Turbat will accrue dividends both for the maritime defence and in the economic sector by yielding best value for money.

The defence minister said the development of Naval Air Station Turbat would definitely provide a vital link for air transportation and as a Base for Naval Operations besides providing required support to CPEC project.

“ With the realization of intra-regional connectivity, Balochistan will act as a gateway to Pakistan,” he said.

The Chief Guest also lauded strenuous efforts of Paksitan Navy for operational pursuits and for contribution towards socio-economic uplift of the area by providing quality education, healthcare facilities and employment opportunities for the local populace.

“He also assured all out support  from government  to strengthen Pakistan Navy – “the Guardian of the Sea” to discharge onerous responsibilities in the most befitting and efficient manner,” the statement read.


Earlier in his welcome address, Commander Coast Rear Admiral Abdul Aleem highlighted strategic and economic importance of Naval Air Station. He also underlined Pakistan Navy’s efforts in providing quality education, healthcare and employment to the people of Balochistan in general and the people of Turbat in particular.

Commander Coast extended his felicitations to all PN officers who remained associated with this mega project and made untiring efforts in turning this dream into reality.

 He also thanked the ministry of defence for providing all out support towards completion of this state of the art Air Station.

According to the statement, the new runway at the Naval Station has been constructed as per modern standard and it will also have the capability to handle heavier aircraft, not only for Pakistan Navy but also of Sister Services and Civil Airlines.

Pakistan Navy P3C Aircraft, Z9EC and Sea King helicopters participated in an impressive fly past During the ceremony

China Hits Speed Wobbles Driving the Silk Road through Sri Lanka

Dániel Balázs

Dániel Balázs is a recent graduate of International Relations at Tongji University in Shanghai. The views expressed are his own and do not represent the views of his affiliated institution.

Why you need to know

🔴 'Beijing has already burnt itself in Myanmar, Thailand and Laos, where the public is becoming hostile to Chinese projects. Like a chain, the Belt and Road is as strong as its weakest link and public perceptions toward China can become an existential issue for Beijing’s ambitious initiative.'


China’s ambitious Belt and Road Initiative (BRI) sets the bar high. It strives to connect Asia, Africa and Europe with the aim of achieving mutual development. Sri Lanka, with its valuable geographic position in the heart of the Indian Ocean, is a crucial participant in Beijing’s newest endeavor.

But China–Sri Lanka ties seemed to reach a low point when in January 2017 violent protests erupted in which people expressed opposition to an industrial zone project funded by Beijing. This turbulent and unpredictable bilateral engagement provides China a valuable lesson for building the Belt and Road.

China tries its best to convince the rest of the world that it is a fundamentally different kind of great power. This idea is partly underpinned by the "Five Principles of Peaceful Coexistence" that guided China’s post-1949 foreign policy. One of the core concepts of this engagement is non-interference with other countries’ internal affairs. A further pillar of China’s self-perception of being a benign great power is "win-win" cooperation that is beneficial for all partners.

An archetypical manifestation of this thinking is the BRI. China’s proposal entails deepened financial, political, infrastructural, commercial and cultural ties between Beijing and the more than 60 other participants. The main idea is that China shares the fruit of its development for the sake of mutual progress. According to the official narrative, the BRI is not a geopolitical tool to extend Beijing’s influence and everybody is a winner under the novel cooperation framework.

Against this background, it is hard to believe that anything could go wrong. Yet in Sri Lanka — one of the BRI’s flagship participants — public discontent erupted in a violent protest. The case of Sino–Sri Lankan relations proves that if non-interference equates to an ignorance of domestic dynamics, then China’s hands-off foreign policy can cause more harm than good.

In order to make sense of the recent developments in China–Sri Lanka ties, one has to take a step back and look at the aftermath of the nearly three decades long Eelam War. The bloody conflict left Sri Lanka in ruins, forcing the little island nation to rely on external actors to rebuild itself. Sri Lanka’s post-civil war history has been chiefly shaped by the duality of the Beijing and Washington Consensus. While Washington’s helping hand comes with rigid conditionality, Chinese aid and investments seem to come with no strings attached.

In 2009, the civil war came to a brutal end at the hands of Mahinda Rajapaksa who subsequently became the subject of allegations of human rights violations, corruption and nepotism. Given its dubious reputation, the Rajapaksa regime quickly ran out of friends and the Beijing Consensus was a convenient and reliable source of funds. China–Sri Lanka relations reached new heights. Chinese signature projects such as the Mattala airport, Hambantota port and Colombo port city were built with billions of dollars of Chinese funds.

This engagement, also known as the "Colombo Consensus," was indeed a win-win cooperation. Rajapaksa could rely on the steady flow of Chinese money to solidify his power and Beijing gained access to one of the most valuable geostrategic positions in the Indian Ocean.

All of this led observers to believe that Rajapaksa had cemented his power for a very long time to come. Yet such assumptions proved wrong. In a surprising triumph of democracy, Maithripala Sirisena, a former ally of Rajapaksa, gained power and became the new President of Sri Lanka in January 2015. The novel leader’s promises included a revision of ill-famed Chinese projects, including the Colombo Port City project, a massive initiative costing more than a billion dollars.

But it is hard to keep such promises once one is bound by legal contracts. Sri Lankan debt exceeds US$60 billion, more than 10 percent of it owed to the Chinese. Beijing was irked by the new government’s attitude and played hard during negotiations over the Hambantota Port project, squeezing out a deal that would have given China Merchants Port Holdings 80 percent of the stakes in the project and control over the adjacent industrial zone covering 15,000 acres of land.

Now Beijing’s strongman approach has backfired. The new conditions of the Hambantota project met strong opposition from the Sri Lankan public. As a result, new negotiations started that decreased China’s stake by approximately 20 percent.

The case of Sri Lanka leaves Beijing with one key takeaway that is worth pondering as it embarks on an initiative that covers the majority of the planet. While there is nothing wrong with the idea of not meddling with other countries’ internal affairs, it does not mean that Beijing should be insensitive toward the domestic dynamics of its partners. Simply channeling exorbitant amounts of money into other countries is not going to be enough for realizing the New Silk Roads. The implementation of the initiative calls for something more — understanding and adapting to the internal processes of BRI participants.

Beijing has already burnt itself in Myanmar, Thailand and Laos, where the public is becoming hostile to Chinese projects. Like a chain, the Belt and Road is as strong as its weakest link and public perceptions toward China can become an existential issue for Beijing’s ambitious initiative.

The News Lens has been authorized to republish this article from East Asia Forum. East Asia Forum is a platform for analysis and research on politics, economics, business, law, security, international relations and society relevant to public policy, centered on the Asia Pacific region.

TNL Editor: Edward White

China says new Silk Road not about military ambitions


BEIJING:, MAY 25, 2017 15:11 IST

UPDATED: MAY 25, 2017 15:11 IST

China’s ambition to build a new Silk Road is not about seeking to expand its military role abroad nor about seeking to set up foreign bases, the Defence Ministry said on Thursday.

The new Silk Road, formally known as the Belt and Road initiative in China, is President Xi Jinping’s signature policy to expand links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment.

At a summit in Beijing this month, Mr. Xi pledged $124 billion for the plan, promising to forge a path of peace, inclusiveness and free trade.

But China’s ambitions have caused nervousness in some countries, particularly India and in some European capitals, which suspect Beijing of using the plan to promote Chinese influence globally, pointing to investments in ports in places such as Pakistan that could one day be used by China’s navy.

Asked whether Chinese Belt and Road investments in ports in Greece, Pakistan and Sri Lanka had a covert military intention, Chinese Defence Ministry spokesman Ren Guoqiang said such speculation was “groundless”.

The new Silk Road is about cooperation and trade, he told a regular monthly news briefing.

“The Belt and Road initiative has no military or geostrategic intent. China is not seeking the right to guide global affairs, or spheres of influence, and will not interfere in the internal affairs of other countries.”


Still, China has been building a military base in the Horn of Africa country of Djibouti that will be its first overseas naval base, though officially described as a logistics facility.

Djibouti's position on the Indian Ocean's northwestern edge has fuelled worries in India that it could join China's “string of pearls”, or military alliances and assets ringing the south Asian nation, including Bangladesh, Myanmar and Sri Lanka

Balochistan: Houses burnt, villages sieged, four dead bodies dumped by Military

(Sangar News)Awaran is once again under massive military siege by Pakistani Security Forces.

On 19 May 2017, Pakistani Security Forces besieged Gazzi, Kohadó, Surgarr, Taraji, Tar Mah, Shash Banti and Nali areas of Jaho, district Awaran, Balochistan. The siege continues till date. All the exits and entries are blocked.

There are reports of heavy military operation in the besieged villages of Awaran, this time again.

On fourth day of this military operation, security forces dumped four dead bodies in front of a local Hospital in Badhi, district Awaran, on 22 May. The deceased have been identified as Hidayatullah, Sadam, Majid and Hussain, who, security forces said, were killed during battle.

Awaran has been one of the most affected areas of the ongoing stream of military operations by Pakistani Armed Forces in Balochistan. Many houses have been burnt, hundreds of live stocks looted and alarming numbers of civilians abducted or killed during the continuous military operations. Most bloody was the military operation started on 18 July and was continued till 17 August, 2015. Military used a large number of Helicopters in 2015’s operation, reports say.

Similarly, on 22 May 2017, Frontier Corps and other security forces started a military operation in Sholig village of Dasht district Kech, Balochistan. During the operations residents of Sholig village were all assembled in one place and Tahir Allah Bakhsh was whisked away by the forces. Four houses were bulldozed and several Huts were set ablaze, say reports from the Sholig village of Dasht, district Kech, Balochistan.

Hut Burned by Pakistani Military Forces during a Military operation.

House Burned by Pakistani Military Forces during a Military operation.

Hut Burned by Pakistani Military Forces during a Military operation.

In a separate operation in Kumbél village of the same area, Dasht, security forces burnt down Allah Bakhsh Didag’s house. Didag’s house has been targeted several times, by security forces.

All the valuables are reportedly looted by the security forces before they burnt the houses.

On 20 May 2017, Pakistani security forces attacked Karki village of Tijaban district Kech, Balochistan, abducted Master Siraj and set ablaze the house of Shakir Durra.

Forces beaten up and ill-treated the women and children during these operations, according to reports.

- See more at:

Four killed as coalmine caves in Balochistan

By Our Correspondent

Published: May 24, 2017

QUETTAFour coalminers were killed when the mine they were working in caved in on them in Sor Range Coalfield, located some 16 kilometres east of Quetta, on Wednesday.

Bakht Nawab, the president of the Pakistan Mines Workers Federation told media that rescue teams of the Balochistan mines and minerals development department reached the site shortly after receiving the information and pulled the bodies out.

They had been buried under three feet of debris, he said.


The deceased miners were identified as Abdul Qayyum, Muhammad Irfan, Ali Rehman and Kashmir.

43 dead in Sorange mine blast, no survivors

According to Nawab, the incident took place in mine 98 where about 100 people were working at the time. The mine is run by the state-owned Pakistan Mineral Development Corporation.

The bodies were sent to their native towns following medico-legal formalities.

Balochistan’s coalmines are notorious for unsafe working conditions and workers die on duty regularly.

In 2015, eight miners died at the Duki Coalfield in Loralai district when a methane buildup caused an explosion, trapping them in. It took three days to retrieve their bodies because rescue officials had to be called in from Quetta, which is around 300 kilometers away.

Similarly, perhaps in the deadliest such incident so far, more than 40 miners died at Sor Range in 2011 in a similar incident of a gas buildup explosion and subsequent land sliding

Spotlight: Belt and Road Initiative boon for socio-economic development in Mideast, Africa

Source: Xinhua| 2017-05-25 13:28:07|Editor: ZD

BEIJING, May 25 (Xinhua) -- The China-proposed Belt and Road Initiative has helped boost the overall social welfare in the Middle East and Africa, and is highly anticipated to facilitate the overall economic and social development there.

The initiative, proposed by Chinese President Xi Jinping in 2013, comprises the Silk Road Economic Belt and the 21st Century Maritime Silk Road, with the aim of building a trade and infrastructure network connecting Asia with Europe and Africa along ancient trade routes.


According to Suleyman Sensoy, head of the Turkish Asian Center for Strategic Studies (TASAM), the Middle East, despite "all the richness and strategic position," has been confronted with the fundamental "weakness in the institutional infrastructure."

"The lack of qualified human resources, of relative competitive advantage, of added value production, and of the share of the global market also deepen the development problems," he said.

Dr. Baris Adibelli from Turkey's Dumlupinar University said "the creation of prosperity depends on a sustainable development. There is a need for resources and infrastructure that support this long-term process."

The Belt and Road projects are an important platform that would meet all these needs, he noted, as they "offer an opportunity for regional countries to create their own dynamism by suggesting common trade, development and welfare rather than just offering financial help."

In the eyes of Gerishon Ikiara, lecturer of international economics at the University of Nairobi, Kenya's participation in the Belt and Road Initiative "has demonstrated its socio-economic benefits in the past five years and the years ahead."

"By being paratroopers of the Belt and Road Initiative, Kenya has received a large amount of financial resources. This is rapidly modernizing Kenya's infrastructure," he noted, adding the initiative "opens up Kenya and the region to the global trading routes."

The al-Ahdab oil field project in Iraq's Wasit province, developed by both Chinese and Iraqi companies, has grasped the benefits of the initiative and elevated its oil processing ability to 7 million tons per year, bringing 13.5 billion U.S. dollars worth of revenue to the Iraqi government and some 5,000 jobs to the local people.

According to Iraqi official statistics, the country's national unemployment rate in 2016 was as high as 16 percent and over 30 percent of population lived in poverty.


Turkey's Adibelli said China, with a profound historical friendship with the Middle East and African countries, can help improve social and educational development under the Belt and Road Initiative.

"The cooperation in education could help the countries become more conscious. It also encourages women to stand up in social life. When the transformation of economic and social order is completed, stability will come along and there will be no safe haven anymore for terror organizations," he said.

"The Arab Spring that started in the Middle East had brought neither prosperity nor social transformation. The only thing it brought was chaos," said Adibelli, "The Belt and Road Initiative, however, brings both common wealth and a future due to its win-win nature."

"Many young people here are working in this oil field and paid with relatively high incomes," said Muhammad Mahdi, an engineer of al-Ahdab project.

The 31-year-old told Xinhua that he has received systematic training after working here and been sent to study in China because of his well performance at work. "I have saved up enough money and been engaged with my girlfriend," he added.

The operator of the project, the Chinese National Petroleum Company, has served the local communities by offering gas to nearby power stations and liquefied natural gas to tens of thousands of families in Wasit, so as to benefit the local people directly and reduce poverty and joblessness, a major reason for social instability in the province.


According to Turkey's Sensoy, the Belt and Road Initiative, a "global integration project," can create "a historic opportunity for stability and development" in the Middle East and Africa.

Kenya's Ikiara also said the initiative, focusing on the development of modern infrastructure along the routes, will radically enhance "the efficiency and reliability of Kenyan and the Eastern African transport infrastructure, reduce cost of transportation by more than 40 percent and raise their products' competitiveness, therefore expand the region's share of global trade."

According to Zeyad Juburi, economic professor at Baghdad University, the Belt and Road Initiative could bring historic opportunities for Iraq, an important point along the route.

Energy cooperation is a key component of the Initiative, and Iraq has rich oil resources of 143 billion barrels, 8.7 percent of the global reserve, he said.

However, the development of the initiative in Iraq has to deal with the backward manufacture industry and agriculture, the aftermath of decades of wars, sanctions and social instability, he added.

But Iraq's need for a promising future is more urgent than ever.

"My life sucks because I still need my father's money like a kid," said 25-ear-old Ibrahim Mohamoud, who has not found a secure job since graduating from college four years ago.

"I hope the government will attract more foreign companies to invest in my country, so that I can see more chances to find a job," he said.

(Xinhua correspondents Yi Aijun in Turkey, Jin Zheng in Kenya and Wei Yudong, Cheng Shuaipeng in Iraq contributed to the story)

Japan Inc sees better opportunities beyond China's 'Belt and Road'


Journalist take pictures outside the venue of a summit at the Belt and Road

By Tetsushi Kajimoto | TOKYO

A vast majority of Japanese companies have no interest to participate in China's sweeping "Belt and Road" initiative, seeing greater business opportunities in other international economic co-operation, a Reuters poll shows.

Only 5 percent of 220 respondents in the monthly Reuters Corporate Survey said they would participate in the Chinese project, which aims to build infrastructure and trade links between China, central Asia, Europe and beyond.

Instead, they thought a free trade agreement (FTA) between Japan and the United States, proceeding with the Trans Pacific Partnership (TPP) without the United States or economic cooperation with Russia, among others, represented better business opportunities.

"Japanese businesses basically have no clear idea about the 'Belt and Road' projects," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute, who reviewed the survey results.

"Will any projects pay? Can Japanese firms expect a level playing field when they compete with Chinese state-owned enterprises?" he asked. "A lot of questions remain unanswered. Under such circumstances, companies have no choice but to wait and see."


The survey results underscore scepticism from elsewhere about the Chinese initiative, seen by some critics as an attempt to promote Chinese influence overseas.

Some Japanese and Western officials have expressed concern about transparency and access for foreign companies to the "Belt and Road" projects.

Last weekend, Chinese President Xi Jinping gathered with 29 other heads of state to promote the modern-day Silk Road and they agreed to build an open economy and ensure free and inclusive trade under the initiative.

Japan's prime minister, Shinzo Abe, did not attend the summit. Instead, the ruling party's No. 2 official, Toshihiro Nikai, represented Japan.

The survey, conducted monthly for Reuters by Nikkei Research, polled 527 big and mid-sized businesses between May 9 and May 19. Around 220 firms, which replied on condition of anonymity, responded.


Asia shares race to two-year high as Fed signals no rush to tightenSouth Korea central bank on hold as growth outlook upgraded, fiscal stimulus expected

About a third of Japanese firms believed a bilateral free trade agreement with the United States would boost their business opportunities, the survey found.

A quarter picked the TPP, an 11-nation free-trade zone, despite the withdrawal of the United States. The survey showed 14 percent opted for Russian-Japanese economic cooperation, while just 6 percent saw opportunities in China-led infrastructure investment.

(To view a graphic on 'Japan Inc indifferent to China's 'Belt and Road initiative' click here)

(Additional reporting by Izumi Nakagawa; Editing by Malcolm Foster and Neil Fullick

The Boosterism Behind China's Silk Road Story


Beijing is downplaying certain facts to sell a heroic narrative at home and abroad.


Virginia Postrel


May 25, 2017, 3:30 AM GMT+5:30

How myths are made.

 Photographer: VCG via Getty Images

Sitting in my Hangzhou hotel room one evening last September, I caught a helpfully subtitled Chinese TV show about Song Dynasty inscriptions carved on a mountainside near Quanzhou -- the city Chinese media invariably call “the starting point of the Maritime Silk Road.” With prayers for good winds and safe returns, the carvings bore witness to China’s far-flung commercial relations during the European Middle Ages. The report was a perfectly legitimate travel feature. By calling attention to the Silk Road, however, it also served the Chinese government’s purposes.

QuickTakeChina's Silk Road

The Chinese “Belt and Road” program is more than an ambitious infrastructure drive and an opportunity for diplomatic gatherings like last week’s forum in Beijing. The initiative is certainly, as my Bloomberg View colleague Noah Feldman has written, a “bid to displace the U.S. when it comes to global leadership.” But it’s also part of a bigger story -- one that highlights certain facts, downplays others, and creates a value-laden narrative in which China is the protagonist and hero. This national myth-making is designed as much for domestic as for international consumption.

Talking about the Silk Road gives Chinese the opportunity to hear and to tell positive stories about their nation’s history and character. It gives them a “usable past,” offering an enlightened, progressive heritage to counter the colonial vision of China as backward and the Maoist repudiation of the imperial past. It reminds the world of China’s technological dominance before the Industrial Revolution and frames that history not as one of relative decline -- why the West grew rich and China didn’t—but as evidence of persisting national strengths.

“In Chinese-language media and China studies the Silk Road generally begins with China’s official diplomacy in Central Asia in the second century BCE and inserts China into an enduring world history of ‘open’ empires instead of isolated civilizations,” observes Tamara Chin, a Brown University comparative literature scholar much of whose work focuses on the Silk Road. Others versions, however, make Central Asian nations like the now-vanished Sogdians the central actors.

China’s version of the historical Silk Road also omits some crucial facts -- notably that “the” Silk Road did not exist. It’s 19th-century shorthand for a network of routes from oasis to oasis across Central Asia and, contrary to popular imaginings, few travelers or goods went very far. “The Silk Road was one of the least traveled routes in human history,” Yale historian Valerie Hansen writes in The Silk Road: A New History. Its importance was less commercial than cultural, as travelers -- and, most important, refugees -- carried their religions, technologies, and artistic motifs along with them.

The Chinese Silk Road story downplays the central role of the Mongol Empire in restoring trade routes as they conquered Eurasia in the 12th century. “The expansionary Mongol rulers acted to ensure the safety of the trade routes, building effective post stations and rest stops, introducing the use of paper money and eliminating artificial trade barriers,” writes Debin Ma, an economic historian at the London School of Economics. They also extended the sea trade. Pax Mongolica, not native Chinese rule, “marked the high stage of East-West exchange as symbolized by the famous travels of Marco Polo.”

Myth-making is always selective. The stories Americans told about themselves in the confident middle of the 20th century weren’t entirely true either -- but neither were they false. In this way, the Belt and Road initiative resembles the Marshall Plan, to which many accountshave compared it. The lavish spending serves geo-strategic interests while simultaneously creating, or reinforcing, a national self-image that appeals to Chinese pride: Here is a country that is not just strong and prosperous but generous and admired. We’re important and people like us.

That dual agenda was an undercurrent at the seemingly esoteric academic conference that brought me to Hangzhou. Textile historians and archaeologists from some 15 nations -- including back-to-back talks by Iranian and Israeli scholars -- presented their research on silk. They also dutifully posed for photos documenting the occasion. There were presentations of plaques and gifts, greetings from various muckety-mucks, and performances by Chinese artists. UNESCO’s imprimatur was frequently invoked. While it was a real scholarly conference, it was also a propaganda event, demonstrating worldwide recognition of the significance of China and its central place in the history of the Silk Road.

Or consider the brand-new buildings of the host China National Silk Museum, completed a year ahead of schedule in order to greet the G-20 Hangzhou summit. The well-curated exhibits depict the history of silk as an inspiring tale of peaceful trade, technological ingenuity, and productive cultural exchange. While including many nations, they of course position China as the story’s protagonist. And despite the museum’s focus on the history and science of sericulture, a sign outside during my visit alluded to the contemporary context: “The Silk Road Leading to a Beautiful Future,” it proclaimed.

As a product of the New South, I know boosterism when I see it.

I recognize the underlying insecurities, frequent wastefulness, and over-eager efforts to demonstrate importance. I also understand boosterism’s valid purposes and claims. Boosters have something to prove -- to themselves as well as outsiders -- but that doesn’t mean they’re wrong to make the effort. Their offended pride often drives achievements surpassing those of more established and complacent places. Jaded westerners may cringe at the video of multicultural children singing praises of the Belt and Road, but it’s hardly the worst way for an ambitious world power to assert its ascendency.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Virginia Postrel at

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Mike Nizza at