Friday, January 19, 2018

King of the road

http://www.theaustralian.com.au/life/weekend-australian-magazine/chinas-new-silk-road-is-it-a-oneway-street/news-story/501af0f1f70c66d2896b3f5b3bfb1545


China is sinking billions into a modern Silk Route linking east with west. But is it a one-way street?

By PETER FRANKOPANFrom The Weekend Australian MagazineJanuary 20th, 201812 min read

Containers on Yangshan Harbour, East China Sea. Pic: Getty Images/Yifei Wang

If asked to name one of the world’s fastest-growing ports, few people would come up with Khorgos. Set in the heart of Asia, on the border of Kazakhstan and China, Khorgos could not be in a less promising location for a harbour — given it is one of the furthest places on Earth from the sea.

Khorgos is a different kind of port, though, built for a different age. It is “dry”, handling goods shipped not by sea but by land. Work began four years ago to build a hub that switches containers being carried by train from the narrow gauge of Chinese railways to standard gauge, which allows them to be transported across what used to be the Soviet Union to other parts of Asia and deep into Europe.

The first shipment of goods from Yiwu in eastern China reached a freight depot in Barking, East London, early in 2017, having travelled through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France before passing through the Channel Tunnel into the UK.

The volume of goods shipped from China is mind-boggling, as are the projected rates of growth of the shipments. In 2012, 2500 containers were sent from China to Europe by train. Some estimates suggest that by 2020 about 7.5 million containers will leave cities such as Yiwu in southeast China — the Christmas gift and decoration capital of the world — bound for living rooms thousands of kilometres away. Finding goods not stamped with the words “Made in China” will become increasingly rare.

Trains at Khorgos, near the Kazakhstan border. Picture: Theodore Kaye/Alamy Stock Photo

Khorgos plays a fundamental role in this new connectivity. Its giant yellow cranes already lift more than 6500 containers a month. In due course they will be able to handle nearly 10 times that number. According to Chinese officials, goods worth $8 billion already pass through Khorgos each year, while an estimated 30,000 traders a day flock to do business in the free-trade zone that straddles the border. Khorgos is a perfect symbol of the dramatic shift of global economic and political power. An oasis rising from the sands, it reprises a historical model of new hubs expanding to service demand and match it with supply. The Silk Roads shaped history. Today, they are rising again.

The past three decades have seen dramatic change across Asia. It is not the birth of a new world, but the revival of connections that ­dominated the past. They were first called the Silk Roads by the German geographer Ferdinand von ­Richthofen (uncle of World War I flying ace the Red Baron) to describe the trading routes that brought goods from Han dynasty China 2000 years ago into other parts of Asia. There was never a single route, or one Silk Road; rather, the term referred to a wide, inclusive and vague region ­linking China’s Pacific coast with the heart of Asia, the Indian Ocean, the Gulf, the Red Sea, and the ­Mediterranean of Europe and North Africa.

New Silk Road: China’s Belt and Road initiative

A vast area is on the move again — but it is not just about the emergence of China. The collapse of the Soviet Union in the early 1990s had a ­dramatic impact on the fortunes of countries such as Azerbaijan, Turkmenistan, Kazakhstan and Uzbekistan, which are rich in natural resources such as oil and gas, and in some cases uranium, silver and gold. India has seen rapid change, as have Turkey, South Korea and Southeast Asia. Even the traumas of Iraq, Syria, Saudi Arabia and beyond are part of the wider transformation of the world.

The effect of the wealth that has flowed into Asia is obvious — from the hi-tech airports that serve the capitals to the monuments built over the past 20 years to show off the glories of the leadership. Whole new cities have been built, including Astana in Kazakhstan, risen from the plains of Central Asia and adorned with Norman Foster-­designed buildings and a 100m tower in the shape of a tree in which nestles a golden egg. Visitors are encouraged to place their hand in a mould of that of President Nazarbayev and make a wish.

Then there is Ashgabat in Turkmenistan, a nation low on the index of press freedom and human rights; simply getting into the country can be a challenge. The city boasts several dubious ­distinctions; it features in Guinness World Records as home to the largest number of white-marble-clad buildings in the world, lined with an estimated 4.5 sqm of white marble, as well as the largest indoor Ferris wheel on the planet.

What is striking about the state-of-the-art concert halls, airports, shopping malls and multi-lane highways is their ubiquity. They are symbols of wealth, but also signs of ambition. The Louvre museum in Abu Dhabi, the astonishing Museum of Islamic Art in Doha, and the English private schools mushrooming across China, the Middle East and southeast and Central Asia speak of a world not so much in transition as on the move.

Nor is the expenditure limited to potentates keen to show off their countries’ prominence, or super-rich oligarchs grown wealthy as a result of the boom of the recent past. In Tehran, for example, there is something of a golden age in architecture, with projects such as the Tabiat Bridge, and design studios such as TDC Office producing apartment blocks for clients wanting to combine contemporary lifestyles with the latest sustainable technologies. When apartments sell for $10 million in the Iranian capital, as they have recently, it is time to recognise that what we think about countries east of Venice might be in need of revision.

Change is never easy. One of the prices to pay for rapid urbanisation and rising levels of industrialisation and output has been pressure on the ­natural environment. Nowhere is this felt more keenly than in India, which is now home to 10 of the 20 most polluted cities on Earth, and in China — especially in the north — where recent studies ­suggest the impact of poor air quality reduces life expectancy by as much as five years. Pressure on resources is acute, to the point where cities such as Bangalore, India’s tech hub, teeter on the edge of collapse. The city’s population almost doubled between 2001 and 2016, putting enormous pressure on road infrastructure, energy supply and water. The city survives thanks to tankers bringing in tens of millions of gallons of water every day. “Our groundwater levels are approaching zero,” said PN Ravindra of the Bangalore Water Supply and Sewerage Board in 2016.

Rapid growth and expansion can create problems that are insurmountable. Being sustainable (and even viable) needs long-term planning, and that is exactly what the Chinese have been doing.

In September 2013, President Xi gave a speech in Astana focused on the Silk Roads that noted not only how important trade had been, but also that the region connecting east and west had been able to coexist, co-operate and flourish despite “differences in race, belief and cultural background”. He announced that the time had come for a “Silk Road economic belt” to be built across the spine of Asia, linking countries, peoples and economies.

Since then, about $1 trillion has been committed to infrastructure projects, ranging from pipelines to highways, deepwater ports and energy plants. Building the new Silk Roads — referred to in China as the Belt and Road initiative — has become Beijing’s signature foreign and economic policy, closely linked to Xi’s vision for China and its future.

Chinese President Xi. Picture: Greg Baker-Pool/Getty Images

At the Belt and Road Forum in May 2017, the president called the regalvanisation of the Silk Roads “the project of the century”. The resources and attention being lavished now and promised in the future through Chinese banks, joint-venture funds and multilateral banks such as the newly created Asian International Investment Bank make it hard to doubt either the scale or ambition of what Beijing is trying to do.

The motivations are not hard to understand. China wants to secure resources for its own long-term future, ranging from food consumption patterns to energy demands likely to treble by 2030. Then there are surpluses in materials (such as steel), but also in expertise in road and high-speed train building, that can be exported to other countries, opening up new markets. Only 3 per cent of households in India have microwaves, for example, and 29 per cent have refrigerators — which makes producers of whitegoods salivate, given the estimated combined population of 1.7 billion people in India, Pakistan and Bangladesh alone. And then there is the wider question of how China could or should invest its massive financial reserves in a way that is more rewarding than holding low-yielding US treasury stocks.

Finally, the fact that the US is opting out of a global leadership role offers a golden opportunity too good to miss. With Donald Trump pulling out of the Paris climate accords, withdrawing from the Trans-Pacific Partnership and talking of Making America Great Again, China senses its moment has come. “What’s wrong with the world?” ran one video at the Belt and Road Forum in May 2017. “What can we do? China has a solution.” As in Davos earlier in the year, where President Xi spoke about corporate responsibility, climate change and co-operation rather than confrontation, it was hard not to be impressed by his commitment to a future in which “exchange will replace estrangement, mutual learning will replace clashes and coexistence will replace a sense of superiority”.

The message of collaboration, co-operation andwin-win is music to the ears of most — but not all — of China’s neighbours, at least in public. Speaking earlier this year, for example, President Nazarbayev of Kazakhstan talked of the Belt and Road initiative as having become “a new paradigm of regional and global development, a new scheme for co-operation”. The theme has been taken up by other leaders across the region too, with President Mirziyoyev of Uzbekistan’s opening talk at a recent conference in Samarkand being on Central Asia’s “Shared past and common future”.

Even the multi-tasking leader of Turkmenistan, which despite vast natural gas reserves has some of the highest levels of unemployment and lowest ­levels of per capita income in the world, is in on the act. President Berdymukhamedov is usually to be found winning horse races, driving rally cars, playing Justin Timberlake records on national TV or pumping iron in a green tracksuit. But he has found time to write a book called Turkmenistan — Heart of the Great Silk Road, which sets out similar themes of how important the Silk Roads were in enabling the building, creation, development and establishment of “friendly relations among peoples”, and how peace and prosperity have gone hand-in-hand in the past and will do so again in the future.

A question mark hangs over the degree to which such happy projections reflect reality — especially in places such as Turkmenistan. Some commentators think there is much wishful thinking, too, behind the Belt and Road initiative and China’s grandiose comments and ambitions.

Harvard political scientist Professor Joseph Nye is one leading voice who has questioned whether the plans are “more public relations smoke than investment fire”. Others have noted the high levels of risk that are inevitably associated with grand infrastructure projects, which can run over time or over budget, or simply turn into white elephants. (Federal Government frontbencher Concetta ­Fierravanti-Wells caused a storm in Australia last week when she accused Beijing of funding useless infrastructure projects in the Pacific.) Because of the scale of what is at stake, investment mistakes are about more than just money, as two cases in Sri Lanka show. Even before the announcement of the plans to reinvigorate the Silk Roads, state-owned banks and businesses were busy investing in projects and assets around the world that had long-term strategic value. A $1.3 billion port was built in Hambantota on the southeast coast of Sri Lanka, along with a sparkling new airport named after then-president Mattala Rajapaksa. Both have been spectacular flops, all but unused by the tankers, passenger ships and jets expected in the business plans. That alone caused uproar, but the government defaulting on loans sparked protests — perhaps unsurprisingly, given control of the port has now passed to its Beijing-controlled creditors.

A trader at Yiwu International Trade City, southeast China. Pic: Kevin Frayer/Getty Images

The fears that the Chinese message of win-win conceals a masterplan that envisages the construction of networks controlled by China is one that resonates in many countries in central, south and southeast Asia. In Kazakhstan, there were street protests in 2016 at government proposals to change land-ownership laws, which were widely interpreted as being a prelude to enabling large-scale Chinese investment in agriculture and loss of livelihood for Kazakh farmers. Concern about ­balancing the appeal of Chinese loans enabling expensive projects to come to fruition led to years of delays in Thailand, where approval for plans to build a high-speed rail faltered over cost, loan terms and arguments over who would actually carry out the works. As The Economist has noted, 86 per cent of projects that are part of the Belt and Road initiative use Chinese contractors.

That is a virtuous circle that, to many eyes, looks like a win-win for Beijing, but not necessarily for others, where Chinese loans enable Chinese businesses to do well and offer prize assets that fall into Chinese hands if the projects underperform.

The asymmetric approach is something Uhuru Kenyatta, Kenya’s president, talked about just before the opening of the country’s largest infrastructure project since independence — a $4 billion train line linking Nairobi to Mombasa that will eventually extend right across East Africa. Whether it can pay its way is one thing, but another, Kenyatta admitted, was that while China is keen to get access to African minerals, resources and consumers, things do not work the other way around. For the Belt and Road initiative to work, he said, “just as Africa opens up to China, China must also open up to Africa”.

The imbalance is something that prompted sour comments from EU officials in Brussels last year and a rejection of a proposed Chinese statement to mark the Belt and Road summit in May because it was “not possible to confirm our joint commitment to international trade rules and to a level playing field for all companies”. The US is no more keen on Beijing’s expansive plans — nor on the language emphasising China’s leadership role. “In a globalised world,” said US defence secretary James Mattis in October, “there are many belts and roads, and no one nation should put itself into a position of dictating ‘one belt, one road’.” Concern resonates in India and Australia, which has so far declined to sign up to the scheme (68 countries, including New Zealand, have done so).

These are still early days in the shift of power from west to east. It is tempting to look at the ­fragilities, rivalries and competition between and within neighbouring states that make future collaboration seem a distant dream. And yet there are good reasons to think that the Chinese version of the Marshall Plan that rebuilt Europe at the end of World War II is already bearing fruit. What happened along the Silk Roads shaped global ­history. What happens in the next few years will shape the future too.

Peter Frankopan is professor of global history at Oxford University. His latest book is The Silk Roads: A New History of the World (Bloomsbury).

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