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RWR Advisory: Belt and Road at a Glance

RWR Advisory Group 

Top Developments

Malaysia Election Casts Doubt on Chinese Investment
On May 10, Mahathir Mohamed emerged as the confirmed victor in theMalaysian general elections. Mahathir’s victory could spell trouble for major Chinese projects in the country, as the now former Prime Minister Razak Najib’s aggressive courting of Chinese investment (including transactions that appeared designed to bail out his scandal-ridden 1MDB sovereign wealth fund) was an issue that was front-and-center during the campaign. During his campaign, Mahathir indicated that Kuala Lumpur “may” renegotiate some terms of Chinese deals that he and his coalition partners view to be unfavorable to the host economy and creating unhealthy economic and financial dependencies. For example, the East Coast Rail Link is one project that was advocated for by Najib, despite consistent controversy over its increasing costs, potential negative environmental implications, significant project delays, and, recently, its exemption from Malaysia’s controversial goods and services tax.Chinese Consortium Acquires Stake in Bangladesh’s Premier Stock Exchange
On May 15, a Chinese consortium comprised of the Shenzhen Stock Exchange and the Shanghai Stock Exchange acquired a 25% stake in Bangladesh’sDhaka Stock Exchange (DSE), becoming strategic investors in the country’s premier bourse. The Chinese entities were unanimously selected by DSE in February 2018 over a competing bid placed by the Indian National Stock Exchange. Although the 25% stake was valued at $53 million, the Chinese consortium paid $125 million in addition to offering $37 million in promised “technical assistance,” raising questions over whether the Chinese bid was driven by strategic, rather than commercial considerations.China Three Gorges Corporation Initiates Bid for Controlling Stake of Energias De Portugal
On May 11, state-owned China Three Gorges Corporation (CTG) announced plans for a $10.8 billion bid to acquire a 77% stake in Portugal’s primary energy utility, Energias de Portugal SA (EDP). If successful, this would be one of the largest Chinese foreign acquisitions ever and allow CTG to gain complete control of Portugal’s largest electricity producer, distributor and supplier. The acquisition would give the Chinese a platform in the European power sector similar to other opportunities they have pursued, such as the stake in Germany’s 50Hertz that State Grid Corporation is still targeting. EDP operates in several European Union countries including SpainFranceItaly, and the United Kingdom as well as the Americas (BrazilMexico, and theUnited States).Guinea Approves $2.9 Billion TBEA Bauxite Deal
On May 15, Guinean lawmakers backed a $2.9 billion deal with China Tebian Electrotechnical Company (TBEA) to develop a bauxite-alumina project. Theproject involves a new bauxite mine, aluminum refinery, aluminum smelter, port, railroad, and power plant. Local authorities estimate the project will generate $406 million in annual revenue. Guinea holds about one third of the world’s bauxite reserves, but political instability has hindered output. The country also presently lacks the facilities needed to transform bauxite into more lucrative aluminum. The mine is expected to enter operation in 2019, the refinery in 2021 and the smelter in 2025. Iran: CNPC Could Replace Total on South Pars Deal
On May 17, Iran’s Oil Minister Bijan Namdar Zanganeh announced that state-owned oil giant CNPC could replace Total as the lead contractor at the South Pars oil field, if the French energy company fails to secure an exemption from renewed U.S. sanctions and is subsequently forced to withdraw. Total started work on the $4.8 billion project in July 2017. South Pars is the world’s largest natural gas field. Total claims to have spent less than $47 million on the South Pars project, which it runs with CNPC subsidiary PetroChina.Sinosteel Invests $1 Billion in Zimbabwe Power Plant
The current trend of Chinese engagement with Zimbabwe continued its forward trajectory on May 14, when Chinese state-owned metals company Sinosteel announced plans to invest $1 billion in building a power plant as part of a plan to increase ferrochrome output. The power plant, a 400MW coalbed methane plant, will be constructed in the west of the country. Sinosteel also plans to build three additional furnaces at its subsidiary Zimbabwe Mining and Smelting Company (Zimasco)'s plant to increase production.Chinese Fish Farm in Polynesia Raises Airport Concerns
China’s Tianrui Group will build a fish farm in French Polynesia, reportedly funded by China Development Bank. The facility, based in Hao Atoll, aims to produce 50,000 tons of fish annually, most of which will be directed to the Chinese market. While the project will contribute to China’s food sustainability goals, it has also raised security concerns. Hao Atoll is home to a 4-km runway that served as a launching point for French nuclear tests over the Pacific. French Polynesia’s Minister of Development Jean-Christophe Boissou said this past week, “The airport today is owned by the French Polynesian government. There is no deal possible about leasing an airport.” While Mr Boissou said Tianrui would invest $1.5 billion over the project’s first decade of operations, earlier reports indicated that the project would only be worth $320 million.CCECC Wins $6.8 Billion Nigeria Railway Project
On May 15, the Federal Government of Nigeria announced that it had agreed to a $6.68 billion contract with China Civil Engineering Construction Corporation for a new rail line linking Ibadan in the west of Nigeria with Kaduna in the north, part of a larger plan to establish an up-to-date connectionbetween the commercial capital of Lagos and Kano in northern Nigeria. The railway may form part of a long-discussed east-west transport corridor across the African continent.China to Help Uganda Build Nuclear Power Plants
Chinese and Ugandan officials are in preliminary talks to build and operate a nuclear power plant in the country. President Yoweri Museveni said his government is keen to exploit the country’s uranium deposits to support nuclear energy development. A framework agreement signed by the Ugandan government and China National Nuclear Corporation on May 11 identified eight potential sites in central, southwestern, and northern regions of Uganda. In June last year, Uganda signed a similar agreement with Russian state atomic energy firm Rosatom.

New Project Locations

Data from IntelTrak, May 8 - May 22

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What They're Saying

MAHATHIR MOHAMAD, MALAYSIAN PRIME MINISTER
Responding to This Week in Asia at a press conference

"As far as the leaders from China and the Chinese are concerned, we have made it clear that we are going to look into all these contracts again because they are very costly for the government and will incur huge debts which we cannot pay. But we will respect all agreements."

KARU JAYASURIYA, SRI LANKAN SPEAKER OF THE PARLIAMENT
Comments on Belt and Road projects, as quoted by the Chinese Embassy

"Certain external forces provoke unfounded speculation on our joint mega-projects to disrupt cooperation and make mischief between China and Sri Lanka for their own interests."

WEI JIANGUO (魏建国), VICE CHAIRMAN
CHINA CENTER FOR INTERNATIONAL ECONOMIC EXCHANGES
Recapping recent U.S.-China trade discussions in Beijing

"Even though the U.S. government is worried about the [Belt and Road Initiative], U.S. companies want to know more about it."

TAKESHI KIHARA, JOURNALIST
NIKKEI ASIAN REVIEW
Article on private Belt and Road financing

"China's Belt and Road Initiative has begun luring international investors and financial institutions that view the foreign policy venture not only as a business opportunity, but also as a way to buy Beijing's goodwill before the country relaxes foreign ownership restrictions."

GREGORY MOORE, HEAD OF INTERNATIONAL STUDIES
UNIVERSITY OF NOTTINGHAM IN NINGBO
Speaking to South China Morning Post about Belt and Road

"That’s how China does business: all business through politics. China uses trade and business deals for political purposes."


By the Numbers

Data from RWR's IntelTrak tool

Data from RWR's IntelTrak tool

Domestic Developments

Public Engagement

May 16-17: The China International High-Tech Expo (CHITEC) was held in Beijing, where the annual expo’s flagship China Financial Summit took place. The theme was “Fintech, A Driver of Real Economy,” and topics included global economic integration, international macro economy, and supply chain finance. Representatives from Chinese and overseas financial institutions, multilateral institutions, international exchanges, private companies, and universities were in attendance.

Regional Developments

Southeast Asia

May 9: Hutchison Ports Thailand introduced its new $600 million Terminal D project at the Laem Chabang port in Thailand. The project is part of Thailand’s Eastern Economic Corridor under the Thailand 4.0 sector-specific industrial policy. Once completed, the container terminal will handle large ocean vessels and be fully equipped with remote control technologies.May 9: China’s Macau Special Administrative Region (SAR) and Phuket,Thailand signed a memorandum of understanding on increasing cooperation in trade and tourism. Thailand is a key regional partner in the Guangdong-Hong Kong-Macau Greater Bay Area development initiative.May 10: Metallurgical Corporation of China subsidiary Jingye Engineering announced that it signed an agreement with Indonesia’s MNC Group to build a theme park in Lido, outside Jakarta. The park is part of the MNC Lido City development project, which will include a Trump Organization golf course, residential buildings, and a luxury resort. The project is expected to receive $500 million in loans from the Chinese government, but MNC Group hasdenied all allegations that it will receive Chinese funding.May 10: China donated 20 mobile clinics to Cambodia, which will be allocated to health departments in cities and provinces across the country. A team of Chinese medical experts will soon arrive in Phnom Penh, Kampong Cham, and Battambang to provide medical checkups and treatment alongside their Cambodian counterparts in rural areas. An additional 20 mobile clinics are to be delivered in October.May 13: The China-Laos economic and trade cooperation committee met for the ninth time in Vientiane. The two sides agreed to enhance Belt and Road large infrastructure project cooperation, including on the China-Laos railway. Other projects discussed include the Mohan-Boten Economic Zone, Saysettha Comprehensive Development Zone, Vientiane-Vang Vieng Expressway, and the Contemporary Agricultural Cooperation Demonstration Park.May 14: Puzhen Bombardier Transportation Systems, a joint venture of CRRC Nanjing Puzhen and Bombardier Transportation, secured a contract fromThailand’s Mass Rapid Transit Authority (MRTA) to manufacture and deliver driverless monorail trains for the MRTA Yellow Line and Pink Line projects. The Yellow Line will run from Bangkok to Samut Prakan and the Pink Line will run from Bangkok to Nonthaburi.May 14: The first ministerial meeting on law enforcement cooperation between China and Laos was held in Vientiane, where China’s Minister for Public Security Zhao Kezhi held talks with Laos’s Minister of Public Security Somkeo Silavong and Minister of National Defense Chansamone Chanyalath. The two countries pledged to increase cooperation on law enforcement and regional security. In particular, the countries plan to increase joint border patrols and law enforcement along the Mekong River and will establish a security cooperation mechanism to safeguard Belt and Road projects, institutions, and personnel.May 15: The 2018 China-Laos Tourism Cooperation Forum took place in Vientiane. The Laotian Minister of Information, Culture, and Tourism noted that as the number of transportation routes between China and Laos increase and become more convenient, the scale of bilateral tourism exchange is expanding as well.May 18: The Sambor Hydropower Dam Alternatives Assessment, commissioned by Cambodia’s Ministry of Industry, Mines, and Energy and conducted by U.S. think tank Natural Heritage Institute, found that the 2600 MW dam, to be built on the Lower Mekong, would “generate large power benefits to Cambodia,” but destroy fisheries and affect the Tonle Sap Great Lake food chain. The dam was designed by China Southern Power Grid Company and is estimated to cost $4.9 billion.May 18: The inaugural Cambodia-China tourism forum was held in Phnom Penh, with the theme of “Embracing the Opportunity of Tourism Development on the Silk Road.” Cambodia’s Ministry of Tourism called for strategic cooperation with China to facilitate annual increases in Chinese investment and tourism.May 21: Beijing and Phnom Penh signed an agreement to become “sister cities,” and will carry out a range of exchanges in areas including science and technology, tourism, health, education, and trade. The Cambodia-China General Chamber of Commerce was established in Phnom Penh on the same day.

South Asia

May 14: China’s government approved a $1 billion loan from the Export-Import Bank of China to fund construction of the first phase of Sri Lanka’s new central expressway, linking Colombo and Kandy, which has been delayed for over two years due to lack of foreign funding.May 15: The Shanghai Stock Exchange and the Shenzhen Stock Exchange officially jointly acquired 25% of the Dhaka Stock Exchange for about $125 million. Representatives from the three exchanges met in Dhaka, Bangladeshat an event organized by the Policy Research Institute of Bangladesh, where the two sides agreed to establish a bilateral think tank cooperation platform. The platform will facilitate data sharing and research collaboration to support sustainable capital market growth.May 22: A Chinese technical team led by China Railway First Survey Design Institute Group has begun conducting a preliminary feasibility study of the 121-km Rasuwagadhi-Kathmandu railway in Nepal. The team arrived earlier this month alongside Chinese officials. An earlier study was conducted to determine the possibility of constructing a railway line, whereas the new study will focus on project feasibility.

Middle East and North Africa

May 9-10: The European Bank for Reconstruction and Development’s 2018 Annual Meeting, themed “One Belt One Road,” was held in Amman, Jordan. Government officials and business representatives in attendance took an opinion survey, which found that a majority consider international trade to be the most important aspect of the Belt and Road Initiative.May 11: China’s GCL Group and Egypt’s Military Production Authority signed a memorandum of understanding on the construction of a $2 billion solar cell industrial complex. The complex will produce solar panels from Egyptian quartz, with annual capacity of 5 gigawatts.May 14-15: A delegation from China’s Civil Aviation Administration held talks in Cairo with Egypt’s Air Transport Civil Aviation Authority on bilateral civil aviation cooperation. The two sides signed a memorandum of understanding on the expansion of air traffic arrangements.May 15: The China-Tunisia Economic and Trade Forum, hosted by the Chinese Embassy in Tunis and the Tunisian Federation of Industrial, Commercial, and Handicraft Industries, took place in Tunis. At the forum, China’s Ambassador to Tunisia welcomed Tunisian companies to participate in the China International Import Expo to be held in Shanghai in November.May 16: China and Oman signed a memorandum of understanding on the Belt and Road Initiative during Omani Minister Responsible for Foreign Affairs Yousuf bin Alawi bin Abdullah’s visit to Beijing. Representatives from Omani financial institutions including the Board of Governors of the Central Bank of Oman and the State General Reserve Fund met with representatives from Chinese financial institutions including the Central Bank of China, China Development Bank, and China Banking Regulatory Commission to discuss financial cooperation between the two sides.May 17: Iran’s Ministry of Petroleum stated that China National Petroleum Corporation (CNPC) will replace French energy giant Total on the South Pars natural-gas field project, if Total withdraws from the deal over U.S. sanctions. CNPC subsidiary PetroChina is currently Total’s partner in the project.

Sub-Saharan Africa

May 8: Ugandan daily newspaper New Vision hosted a “China Night” event, where government officials were in attendance to launch several new media cooperation projects. The projects include a new monthly magazine to bepublished by New Vision and an essay competition on China-Uganda relations. The monthly magazine, New Era, will focus on Chinese culture and values to promote bilateral ties.May 9: The Chinese Embassy in Ghana and the Ghana Civil Aviation Authority jointly hosted the China-Africa Joint Research and Exchange Program’s Regional Aviation Cooperation Seminar in Accra. The theme of the seminarwas “China-Africa Regional Aviation Cooperation: Prospects and Policy Recommendations.”May 11: China National Nuclear Corporation signed a memorandum of understanding on nuclear energy cooperation with Uganda’s Ministry of Energy and Mineral Development. Cooperation will include joint design, construction, and operation of nuclear power infrastructure. Eight potential nuclear power plant sites have been identified across Uganda.May 14: The Chinese government signed an agreement to provide theSomalian government with $1.5 million in humanitarian assistance, in response to recent flooding in various parts of the country. China also pledgedto donate police uniforms to Somalian law enforcement units in June.May 14: China’s Sinosteel Corporation and Zimbabwe’s government signed a $1 billion investment agreement for Sinosteel to increase ferrochrome output in Zimbabwe. Sinosteel subsidiary Zimasco will build a 400MW coal-bed methane power plant and three new smelting furnaces in Zvishavane and Kweke. Sinosteel will supply excess electricity to the national grid in Zimbabwe.May 14: Zambia’s Ministry of Information and Broadcasting Services announced plans to launch the “village television project” with the help of the Chinese government. The project will provide public televisions and related equipment to villages across Zambia, enabling Zambians in rural areas to watch television. Zambia is currently migrating from analogue to digital television and plans to achieve national coverage by 2019.May 15: The Chinese government granted $1.2 million to the Namibiangovernment to procure anti-poaching equipment for the country’s law-enforcement units, and donated a package of wildlife protection materials including pickup vehicles, tents, mosquito nets, and binoculars. The two governments also signed a memorandum of understanding on cooperation between the National People’s Congress of China and the National Assembly of Namibia. Ugandan daily newspaper New Vision hosted a “China Night” event, where government officials were in attendance to launch several new media cooperation projects. The projects include a new monthly magazine to bepublished by New Vision and an essay competition on China-Uganda relations. The monthly magazine, New Era, will focus on Chinese culture and values to promote bilateral ties.May 15: The Center for Chinese Studies (CCS) was formally established at the University of Dar es Salaam in Tanzania. This is the first research center of its kind in East Africa. There is already a CCS in Southern Africa at South Africa’s Stellenbosch University and in West Africa at Nigeria’s Nnamdi Azikiwe University. The Chinese Embassy in Tanzania donated four laptops to the CCS during the launch event.May 15: Guinea’s Ministry of Mines and Geology approved China Tebian Electrotechnical Company (TBEA)’s $2.9 billion proposal to construct a bauxite mine, port, railroad, and power plant in Guinea for aluminum production. TBEA expects to begin raw material production in June 2019, and has plans to construct an aluminum foundry within the next seven years.May 15: The South African Bureau of Standards, Cape Town China Service Center, and Western Cape Office of the Consumer Protector jointly held a law enforcement seminar in Cape Town for local Chinese businesses on quality inspection and consumer protection.May 16: China Railway Construction Corporation (CRCC) subsidiary China Civil Engineering Construction Corporation (CCECC) signed a $6.681 billion supplementary agreement with Nigeria’s Ministry of Transport to build the Ibadan-Kaduna section of the greater Lagos-Kano railway project. The section will pass through Osogbo-Ilorin-Minna to Kaduna, and will include a monorail extension from from Osogbo to Ado Ekiti.May 17: Aluminum Corporation of China (Chinalco) announced plans to invest$163.8 million in its bauxite project in Boffa, Guinea. The total value of the project, which includes mines, ports, and barges, is about $706 million. Chinalco subsidiary China Aluminum (Chalco) Hong Kong will work with other project-related subsidiaries and independent investment entities in Guinea.May 18: The China National Building Materials (CNBM) Zambia Industrial Park hosted a China National Materials (Sinoma) product exhibition, where the company promoted new product lines manufactured by its subsidiaries including Sinoma Mpande Limestone and Sinoma Cement. Organizers also provided updates on the first phase of industrial park construction. CNBM and Sinoma are currently undergoing a merger.May 18: The Chinese government donated $279,000 worth of medical supplies to Namibia’s Ministry of Health and Social Services. The supplies will complement China's Brightness Journey program, through which Chinese eye specialists will provide free cataract surgeries to Namibian patients in Windhoek and Rundu. A memorandum of understanding on the healthcare program was signed by both governments.

Russia and Eurasia

May 17: China’s Ministry of Commerce signed an economic and trade cooperation agreement with the Russia-led Eurasian Economic Commission and member states of the Eurasian Economic Union (EEU) during a visit to Astana, Kazakhstan. The agreement covers areas including customs cooperation, intellectual property rights, government procurement, and e-commerce. This is China’s first institutional arrangement with the EEU.May 21: China’s Winta Investment Group met with Kazakhstan’s investment promotion authority Kazakh Invest to continue discussions on creating an investment fund in Kazakhstan. The two sides also discussed potential industrial projects including a trim stone production factory, new industrial parks, and a large theme park near Almaty. Kazakh Invest offered to facilitateWinta Investment Group’s registration on the Astana International Financial Center website.May 21: A Chinese delegation led by the China Export and Credit Insurance Corporation (Sinosure) met with the State Oil Company of Azerbaijan(SOCAR) in Baku to discuss potential involvement in SOCAR’s oil exploration, production, transportation, and refining projects.May 22: Kazakh multimodal company KTZ Express signed an agreement with China’s COSCO Shipping Lines to operate NC Kazakhstan Temir Zholy JSC, a COSCO Shipping Lines container fleet on the Trans-Caspian International Transport Route.

Europe

May 8: The non-profit, non-governmental Chinese Chamber of Commerce inDenmark (CCCD) officially launched in Copenhagen. CCCD will provide members with policy advice, networking opportunities, and business support. Current members include Bank of China (Luxembourg), Huawei Technologies, COSCO Shipping, Air China, Envision Energy, and Goertek Europe.May 11: China Three Gorges Corporation announced plans for a $10.8 billion bid to acquire a 77% stake in Portugal’s primary energy utility, Energias de Portugal. If successful, the purchase would be one of the largest Chinese foreign acquisitions ever and allow Three Gorges to gain complete control of Portugal’s largest electricity producer, distributor and supplier.May 15: Karl Soong, president of China’s Poly International Group, and Mladen Ninčević, owner of Croatia’s Green Tech Group, signed a $2.6 million deal with the Croatian municipality of Kula Norinska to purchase 53 hectares of land. Soong and Ninčević plan to invest an estimated $16 million to build an assembly factory for electric cars and scooters, to be sold in the European market.May 15: China’s Ministry of Commerce and Belarus’s Ministry of Economy signed an agreement to build a $63 million residential complex in the China-Belarus Industrial Park, which will be designed and constructed by SZAO Industrial Park Development Company. SZAO is a joint venture established by China National Machinery Industry Corporation (Sinomach), Minsk Regional Administration, Minsk City Administration, China Merchants Group, China CAMC Engineering, Harbin Investment Group, and Horizint Group.May 16: A delegation from China’s National People’s Congress Standing Committee met with their Serbian counterparts in Belgrade. The two sidesdiscussed ongoing projects, strategic cooperation, and the possibility of Belgrade becoming a China-Central and Eastern Europe transportation hub.May 22: The Administration of the China-Belarus Industrial Park announced plans to establish an investor services center in the park, where potential investors can receive comprehensive services without having to travel to Minsk.

North America

May 14: Alibaba Group announced plans to open its first Canadian office in Vancouver within the next two or three years. The Vancouver office will work with local businesses to provide access to Alibaba’s products, including online travel platform Fliggy. Alibaba currently has an e-commerce cooperationagreement in place with Canada’s Trade Commissioner Service.

Latin America and the Caribbean

May 14: The Argentinian government suspended Nucleoeléctrica Argentina SA (NASA)’s agreement with China National Nuclear Corporation (CNNC) to build the Atucha III nuclear power plant in Zárate, and may suspend the Atucha IV power plant as well. The companies signed a $5.8 billion agreement in late March, following five years of negotiations, and had planned to finance construction with Chinese government loans. CNNC was to provide goods and services to assist NASA with construction slated to begin by 2019. Some Argentinian media speculate that the deals will ultimately be cancelled, in a government effort to avoid incurring Chinese debt.

If you enjoy our Belt and Road coverage, consider checking out IntelTrak: RWR's visual analytic tool that tracks and maps the global activities of Chinese and Russian companies in real time.
 

RWR Advisory Group is a Washington DC-based research and advisory firm that specializes in the risks present at the intersection of global business activity and national security concerns

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