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China’s Belt and Road Initiative push intensifies



 

China’s big-ticket geo-political and geo-economic Belt and Road Initiative has come roaring back just when it seemed down and out with the peaking of the Sino-US trade war.

President Xi Jinping, during his Myanmar tour beginning Friday, will doubtlessly promise billions of dollars on scores of infrastructure projects in Myanmar, almost at par with investments made in the China-Pakistan Economic Corridor (CPEC).

Xi’s three major thrust areas will be

(a) the Kyaukphyu port and SEZ project on Rakhine coasts that connects to Yunnan by high speed rail and a six lane highway

(b) New Yangon City

(c) projects on the China Myanmar Economic Corridor (CMEC).

Like Gwadar gives China an outlet to Arabian Sea and Persian Gulf , Kyaukphyu gives the Dragon an outlet to Bay of Bengal and Indian Ocean.

“The Chinese are determined to seek the eastern and western outlets to the oceans and they will fund Myanmar as strongly as Pakistan and even reduce them to client states just to ensure they can bypass the Malacca chokepoint, through which much of foreign trade now happens. In the process, they will militarily outflank India,” says Vice Admiral Pradeep Chatterjee former deputy chief of Indian Navy.

He was the first to head India’s only tri-services integrated military formation, the Andaman & Nicobar command.

But it is not merely the CPEC and CMEC corridors, key to China’s Indian Ocran access strategy that is attracting Dragon funding.

Chinese companies signed Belt and Road contracts worth nearly $128 billion in the first 11 months of 2019, according to China’s Commerce Ministry.

That marks a 41 per cent increase over the same period in 2018.

The contracts are mostly for construction and equipment by big Chinese companies using Chinese skilled labor and loans from Chinese banks, although the projects often create jobs for local laborers as well.

The latest contracts include a subway system for Belgrade, Serbia; an elevated rail line in Bogotá, Colombia; and a telecommunications data center near Nairobi, Kenya.

“The return of Belt and Road is likely to raise tensions with the United States, which worries that China is building a globe-spanning bloc of nations that will mostly buy Chinese goods and tilt toward China’s authoritarian political model,” says Keith Bradsher.

“The initiative figures into many of the disputes between the two countries over national security and technology.”

The rush of new Belt and Road contracts follows a public pullback by Chinese officials in 2018 after projects in Malaysia, Sri Lanka, Pakistan and elsewhere were hauled up  by local officials and politicians as bloated and expensive and a prelude to a debt trap.

For example, the $ 7.3 billion Kyaukphyu project has been scaled down to one-third the original estimates.

“We will continue to follow a high-standard, people-centered and sustainable approach to promote high-quality Belt and Road cooperation with partner countries,” Xi Jinping, China’s top leader, said during a visit to Brazil in November.

Chinese officials have long presented Belt and Road as a chance to give emerging markets the same kind of world-class infrastructure that has helped make China a global economic powerhouse.

Under Belt and Road, state-owned Chinese banks typically lend practically all of the money for a construction project to be carried out by Chinese companies.

The borrowing countries are then required to repay the money, often with oil or other natural resources.

Officials in the United States and Western Europe have long criticized Belt and Road as predatory, and in recent years, some officials in developing countries began to agree.

In 2018, Sri Lanka gave its major port to China after it could not repay loans, while Malaysia halted its own costly Belt and Road projects.

Chinese leaders began to acknowledge the criticism. Vice Premier Liu He of China publicly raised concerns in early 2018 about heavy lending by Chinese banks, not just for the Belt and Road Initiative.

In the months that followed, Chinese financial regulators clamped down hard on domestic and overseas lending alike.

New Belt and Road contracts plummeted, Chinese data shows. China’s financial regulators told the country’s banks to look twice at further lending to poor countries.

Top leaders practically stopped mentioning the programme.

But the credit crunch produced a much broader slowing in the Chinese economy in 2018 than expected.

Financial regulators reversed course.

That has produced a revival of lending for domestic infrastructure projects and for Belt and Road projects alike.

Contracts started to be signed in earnest again in the final weeks of 2018, and momentum built through last year.

In recent days, two groups representing Western governments, companies and banks have raised questions about the resurgence of the Belt and Road Initiative.

A report released Thursday morning by the European Chamber of Commerce in China concluded that Chinese-built telecommunications networks and ports are set up in ways that make it hard for European shipping companies, computer software providers and other businesses to compete.

A survey by the chamber of its members also found that they had been almost completely excluded from bidding on Belt and Road Initiative contracts, which went mostly to Chinese state-owned enterprises.

“It was rather sobering to see that for businesses, it is quite insignificant what we get out of this,” said Joerg Wuttke, the chamber’s president.

The Institute of International Finance, a research group in Washington backed mainly by big Western banks, has issued a different warning as part of a broader report on global debt.

The institute’s report said that many poor countries in the Belt and Road Initiative now find themselves with sharply increased debt burdens.

Many of these countries could barely qualify to borrow money even before they took on the new debt, the report said.

The institute’s report also said that 85 per cent of Belt and Road projects involved high emissions of greenhouse gases linked to climate change.

These projects have included at least 63 coal-fired power plants.

The new reports come after a warning issued last year by European International Contractors, a trade group of construction and engineering companies.

The trade group cautioned that loans for Belt and Road Initiative projects tend to carry considerably higher interest rates than those from lending institutions like the World Bank.

The construction industry group, and also the European chamber, said that the costs of Belt and Road Initiative projects are often greatly underestimated so that they can pass muster with Beijing officials.

Poor countries then end up paying for cost overruns, they said.

European business groups, which include telecommunications equipment makers, have focused lately on Belt and Road’s emphasis on telecommunications.

Many developing countries now have national telecom networks built by two Chinese companies, Huawei and ZTE, that have been big participants in the Belt and Road Initiative.

Huawei won a contract last spring to build a large telecom data center in Kenya.

The European chamber report said the networks were designed in ways that made it hard for European companies to sell any further hardware or software in these markets.

European markets for telecom equipment, by contrast, are often more open, it argued.

Huawei, for example, has sought to provide equipment for Germany and Britain.

Alongside telecommunications, the biggest security concern in the West about the Belt and Road Initiative has involved China’s construction or expansion of extensive ports.

These ports now ring the Indian Ocean and extend up the west coast of Africa and into the Mediterranean.

The European Chamber report said that European shipping companies, which have ranked among the world’s largest since the Middle Ages, increasingly find themselves at a competitive disadvantage.

The new ports are designed and managed by Chinese state-owned enterprises that are under the same Chinese government agency as Chinese shipbuilders and Chinese shipping companies.

China has contended that economic growth has long suffered in many emerging markets from high transportation costs, and that the construction of new ports can reduce these costs.

The long and short of it — BRI is there to stay. And India has to deal with it.

BJP leader and economist Subramanyam Swamy, who often does the kite flying for his party, suggested in a Calcutta conference last week that India should consider joining BRI if China addressed its Kashmir concerns

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