BELT & ROAD – CHINA’S GREAT EXPECTATION
In the wake of China’s coronavirus, it is vital that Australia reassess its relationship with China. Agreements, such as the Belt & Road Initiative should be taken off Victoria’s table pending further investigation.
Part 8 covers;
8.1 What is the BRI?
8:2 Nations that have signed the BRI
8:3 What are the benefits of the BRI?
8:4 A new ‘Silk Road’ or ‘Debt-Trap’ diplomacy?
8:5 What are the dangers for Five Eyes Nations?
8:6 Victoria’s Secret
8:7 BRI – already embedded in Australia?
8:8 The impacts for China of huge BRI global investments
8:9 Who will challenge China’s BRI?
9:0 Conclusion and references
De-coupling from China in the area of trade, is counter-intuitive, however continuing to ignore the CCP’s increasing cyber and trade attacks is unacceptable. The West cannot change this totalitarian regime into a Western Liberal Democracy simply by engaging or trading with them. Neither should the West change their system to conform to China’s communist system purely because Xi Jingping demands compliance and obedience. Our democratic western values that were won and defended at great cost, must NEVER be sold or traded away!
A transparent assessment of trade, politics, research projects, loans, sister cities agreements, education implants and social relationships is necessary.
In previous articles of our 10-part series “ Globalization in the time of Corona” we looked at global supply and demand, the origins of COVID-19, conflicts of loyalty within Australian Governments, Sister Cities agreement and Confucius Institutes in universities, and now we turn attention to China’s Belt and Road Initiative ( BRI), and ‘Victoria’s Secret’ deal with China.
8:1 What is the Belt and Road Initiative ( BRI) ?
The Belt and Road Initiative (BRI, or B&R), formerly known as One Belt One Road (OBOR) is a global development strategy which was created by the Chinese Government in 2013, involving infrastructure development and investments now in almost 140 countries and international organizations. It is considered a centerpiece of Xi Jinping’s foreign policy (1)
A brief history of BRI is included in this short video:
Essentially the BRI or OBOR was created by China to facilitate the movement of goods and people throughout the European, Asian and Oceania regions. Completion date for the BRI is 2049 with a cost of $1trillion Euros or $1.25trillion USD, to coincide with the 100th anniversary of the People’s Republic of China.
The ‘belt’ in the BRI refers to the overland routes for road and rail transportation, called the Silk Road Economic Belt The ‘ road’ refers to the sea routes, or the 21st Century Maritime Silk Road. The BRI was incorporated into the constitution of the People’s Republic of China in 2017.
The BRI is designed to address an ‘infrastructure gap’ and has the potential to accelerate economic growth across the Asia Pacific area, Africa and Central and Eastern Europe. (2, 3)
The BRI/OBOR emphasizes five key areas of cooperation:
- coordinating development policies
- forging infrastructure and facilities networks
- strengthening investment and trade relations
- enhancing financial cooperation and
- deepening social and cultural exchanges.
A report from the World Pensions Council (WPC) estimates that Asia, excluding China, requires up to US$900 billion of infrastructure investments per year over the next decade, mostly in debt instruments, 50% above current infrastructure spending rates. The urgent need for long term capital explains why many Asian and Eastern European heads of state gladly expressed their interest to join this new international financial institution focusing solely on ‘real assets’ and infrastructure-driven economic growth.
Projects receive financial support from the Silk Road Fund and Asian Infrastructure Investment Bank while they are technically coordinated by the BRI Summit Forum.
BRI Land corridors (The Belt) include:
- Western China to Western Russia through Kazakhstan
- Northern China to the Russian Far East
- Western China to Turkey
- Southern China to Singapore
- China to Pakistan – the ‘buckle in the belt’ providing links to the worlds’ energy reserves
BRI Sea Corridors (The Road ) from East China ports include:
- Hanoi – Vietnam
- Kuala Lumpur- Malaysia
- Jakarta – Indonesia
- Kolkata – India
- Colombo – Sri Lanka
- Nairobi – Kenya
- Athens – Greece
- Venice- Italy
While the CCP calls the initiative “a bid to enhance regional connectivity and embrace a brighter future“, some observers see it as a plan for Chinese world domination of a China-centered global trading network.
- The Bank of China has stated that the BRI clearly intends to make the Renminbi the main trading and investment currency in the countries involved.
- The BRI is further intended to facilitate online retailing and the collection and use of big data across BRI countries. ( one reason for the constant cyber security attacks on Australian Governments, businesses and Universities)
- The BRI requires the overseas Chinese Diaspora to promote BRI projects. ( explains CCP members in Dan Andrews Government)
- The use of CCP controlled telecommunications company Huawei is a key component of the BRI. ( wisely Australia’s Federal Government kept Huawei out of the Australian 5G network)
- Required visits to China by journalists from BRI countries and publishing arrangements with newspapers abroad. These are expected to promote CCP’s views over a broader sphere.
8:2 Nations that have signed the Belt & Road Initiative (BRI)
As of the end of January 2020, 138 countries and 30 international organisations had signed onto China’s BRI. A complete list can be found ( Google Translate will assist with the English) in this link. (4) Infrastructure projects include ports, railways, highways, power stations, aviation and telecommunications -all built by Chinese state-controlled companies using Chinese workers.
Across the African, Asian, European, Oceania, South America and North American continents the BRI has built an impressive network of infrastructure projects. Still to be determined is their operational and economic success.
While in Australia enterprises, banks and law firms were promoting the BRI / OBOR initiative as an economic opportunity for the country and, with Chinese endorsement, an Australia-China OBOR Initiative was established to promote Chinese engagement in the Australian economy. Unmentioned but expected, also would be political influence from China.
In 2016 ( pre-COVID), DFAT set up a working group to facilitate opportunities thru the BRI program. It stated that: ‘The Australia China One Belt One Road Initiative is a not-for-profit and non-government organisation. Its objective is to enable Australian and Chinese industry leaders to articulate practical collaboration opportunities available through One Belt One Road’ (5,6)
In addition it was intended that China would utilize the BRI concept to promote its growing economic engagement with northern Australia. It should be noted that China currently holds a 99-year lease of the Port of Darwin. This agreement has come under intense scrutiny after China’s deceptive response to the COVID-19 global pandemic that originated in Wuhan, China, and subsequent trade threats to Australia.
Another avenue for encouraging Australia’s further engagement with the BRI was China’s funding and support of various related local academic conferences, seminars and the arts community. (7, 8)
As of 3rd July 2020 the Federal Government has NOT signed any BRI deal with China!
8:3 What are the benefits of the Belt & Road Initiative (BRI)?
Global reactions to China’s BRI have been varied; (9)
- Ethnic Chinese business figures in Southeast Asia and their political representatives have generally been enthusiastic about the business possibilities.
- Malaysia has been active in accepting and promoting the idea, with a 162-member Malaysian delegation heading to Beijing in July 2015 to participate in BRI dialogue.
- Pakistan and Sri Lanka have also been particularly welcoming of Chinese capital and infrastructure projects, as have the various Central Asian states.
- Vietnam, meanwhile, has expressed grave doubts about the initiative.
- With few exceptions, India has been stridently suspicious of the overall BRI program and has repeatedly expressed its concerns about China’s growing economic and strategic power.
- Russia needs funding assistance for developing its resources and appears to see the BRI as an avenue for this.
- In Australia, the former Minister for Trade and Investment, Andrew Robb said in July 2019, that the BRI would be beneficial for trade for all countries, however the Morrison Government does not recommend signing onto China’s BRI.
Former Trade Minister Andrew Robb left Parliament to work for the Chinese company Landbridge. He helped negotiate the 99-year lease of the Port of Darwin (for Landbridge) prior to his leaving politics.
Andrew Robb is now an advisory board member of the Australia-China Belt and Road Initiative – an Australian government-supported policy institute.
He told Xinhua in a telephone interview before the release of the Belt and Road Initiative-Commercial Relevance report to the Australian Agriculture Sector; (10)
“I am very optimistic about what the Belt and Road can contribute to the region,” he said. “There are many countries that have not got the level of development, and the BRI, I believe, can make quite a difference to the growth rates of their economies, the quality of life of people, and the reduction of poverty in those countries.”
A 2017 report by Begin-Sadat Centre for Strategy Studies for the Greece, Israel BRI Initiative included some interesting observations. (11)
- ‘The Chinese leadership sought to make it clear that the country would not pose a threat but would seek to be a constructive and compliant member of the international community.
- Academic debates interpreting China’s role in the world have flourished in the West, centering on the core international relations theories of realism and liberal institutionalism. The first considers Beijing’s pursuit of its mercantilist, nationalist, and foreign policy agendas as a threat; while the second portrays China as transitioning to a market democracy within the nexus of global interdependence’.
Nations support the BRI for varying reasons, but predominantly for the investment of Chinese money into national infrastructure. The BRI offers low-interest Chinese loans which are difficult to access elsewhere due to many projects being deemed ‘not commercially viable’ by other lenders.
To be successful the BRI should:
- Have agreements with clear objectives ( and parameters)
- Create additional local jobs
- Result in a reasonable ‘return on investment’ for both parties
- Increase bi-lateral trade
- NOT create ‘debt-traps’
- NOT threaten national security
8:4 A new ‘Silk Road’ or ‘Debt-Trap’ Diplomacy?
Not all reactions to China’s BRI have been enthusiastic. Former World Trade Organization chief, Supachai Panitchpakdi, has stated that the BRI initiative and, specifically, its projects along the Mekong River, all serve China’s own interests.
On the economic front, China has been criticized for using its massive financial assets to dominate smaller economies through long-term control of infrastructure, natural resources and associated land assets, and through offering less than desirable (or noncompetitive) credit terms for infrastructure loans.
In addition, the ‘production capacity cooperation’ which China lauds as an integral aspect of the BRI often involves the transfer of Chinese production capacity to countries where production is cheaper and markets are closer. Such processes can result in China exerting control over local markets, labour and export policies.
Despite the claimed ‘economic nature’ of the BRI, critics see it as simultaneously being a strategic geopolitical program.
China clearly portrays the BRI as both being premised on, and further validating China’s claims to the islands of the South China Sea, while on the other side of the Indian Ocean, Djibouti is providing China with both a trade port as well as its first overseas military base.
It has been repeatedly noted in China that the BRI is also intended as a regional security mechanism, and the future role of the People’s Liberation Army in protecting China’s BRI facilities abroad.
Broader concerns relate to the longer-term aims of China, with the possibility that the BRI is aimed at creating a Eurasia-wide, China-led bloc to counter the US.
At the June 2016 Shangri-La Dialogue in Singapore, Professor Xiang Lanxin, director of the Centre of ‘One Belt and One Road’ (BRI) Studies at the China National Institute for SCO International Exchange and Judicial Cooperation, spoke of BRI as being an avenue to a ‘post-Westphalian world’. As such, some see this initiative as a profound challenge to the current global political and economic status quo.
Concerns about the nature of Chinese investments under the BRI are valid with many BRI projects financed through Chinese public financial institutions such as the Export-Import Bank of China. They offer low borrowing costs and interest rates that enables them to lend on favorable terms to Chinese companies, who can then significantly undercut foreign companies for infrastructure bids. (12)
Another concern is that Beijing is engaging in “debt trap diplomacy” by extending excessive credit to countries that will struggle to pay it back. This is the experience of Sri Lanka. (13)
‘Over several years of his leadership, every time Sri Lanka’s president, Mahinda Rajapaksa, turned to his Chinese allies for loans and assistance with an ambitious port project, the answer was yes. Yes, though feasibility studies said the port wouldn’t work. Yes, though other frequent lenders like India had refused. Yes, though Sri Lanka’s debt was ballooning rapidly’.(13)
The China Harbor Engineering Company (one of Beijing’s largest state-owned enterprises) built the Hambantota Port Development Project in Sir Lanka – that has distinguished itself mostly by failing – as predicted.
With tens of thousands of ships passing by along one of the world’s busiest shipping lanes, the port drew only 34 ships in 2012.
President Rajapaksa was voted out of office in 2015, but Sri Lanka’s new government struggled to make national loan repayments to China. Under heavy pressure, the government handed over Hambantota Port to China, plus 15,000 acres of land around it for 99 years in December, 2018. The transfer gave China control of territory just a few hundred miles off the shores of a rival, India, and a strategic foothold along a critical commercial and military waterway.
- Though Chinese officials have insisted that China’s interest in the Hambantota port was purely commercial, Sri Lankan officials said that from the start, the intelligence and strategic possibilities of the port’s location were part of the negotiations.
- When Sri Lankan officials tried to renegotiate the loan terms the Chinese refused and demanded handing over equity in the port rather than allowing any easing of terms.
- Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever!
Sri Lanka is a reminder of China’s ambitious use of loans and aid to gain influence around the world — and of its willingness to play hardball to collect. But Sri Lanka is not alone in debt-distress to China.
Pakistan, Mongolia, Tajikistan, Montenegro, Maldives, Djibouti, Laos and Kyrgyzstan, have all been flagged as failing to meet their debt obligations to China….and there may be many more to come!
The ‘debt deal’ has also created some of the harshest accusations about President Xi Jinping’s signature Belt and Road Initiative…. that the global investment and lending program amounts to a debt trap for vulnerable countries around the world, fueling corruption and autocratic behaviour in struggling democracies.
8:5 What are the dangers for Five-Eyes Nations?
If China’s BRI was solely about business and trade, there should be no conflict or danger for Five Eyes Nations wishing to participate. We know, however, that China uses business to achieve political ends, whereas the West uses business to create jobs, returns on investment and opportunities to grow economies.
It, therefore, came as no surprise when US Secretary of State, Mike Pompeo raised concerns about Victoria’s BRI aspirations and the integrity of the Five-Eyes Agreement as there are increasing concerns that China’s ‘peaceful engagement’ contains military and geopolitical goals.
While not members of ‘Five Eyes’ China has signed up ALL ten South Pacific island-nations to the BRI. These include; Cook Islands, Solomon Islands, Micronesia, Fiji, Niue, PNG, Samoa, Tonga, Vanuatu and Kiribati. Some of these agreements include ‘Pacific Language Teaching’ courses in China, and ‘Fishery Agreements’ with PNG – interesting inclusions’ in any BRI agreement! (14, 15, 16)
A recent Lowy Institute paper’s key findings of China’s BRI interest in the South Pacific noted that; (17)
- China has not been the primary driver behind rising debt risks in the Pacific, although a continuation of business as usual would risk future debt problems in several countries.
- There is scope for a new Australian infrastructure financing facility to provide loans to the Pacific without causing debt problems, particularly as it has adopted key sustainable lending rules.
- Pacific nations have an opportunity to obtain more favorable financing from official development partners, but care must be taken to avoid overly geopolitical aid.
Could China’s BRI investments in the South Pacific impact the region’s security?
While President Xi Jinping assures the world that the BRI is a “peaceful economic project” recent experience with their handling of the COVID-19 pandemic and BRI outcomes in Pakistan and Sri Lanka would suggest the need for extreme caution!
Mr. Pompeo said while he was not aware of the detail of Victoria’s agreement, it could impact his nation’s Five Eyes intelligence-sharing partnership with Australia. In an interview with Sky News, Mr. Pompeo warned the Belt and Road agreement with the Andrews Government increased the Chinese communist regime’s ability to do “harm” (18)
(Mike Pompeo on Vic. Signing the BRI)
But the state of Victoria has ‘gone it alone’ in Australia, signing up to the infrastructure initiative, with Premier Daniel Andrews inking a Memorandum of Understanding with China in 2018 and committing to deepen the state’s involvement in 2019.
Queensland’s Premier Annastacia Palaszczuk, however, has broken ranks with her Labor colleagues. As Bill Shorten defended Daniel Andrews’s move as part of “normal day-to-day work” for a state government, Ms. Palaszczuk sensibly rejected suggestions Queensland join Victoria in going behind Canberra’s back. (19)
Ms. Palaszczuk said state governments should instead forge relationships with sub-national governments, such as Queensland’s 30-year sisterhood with Shanghai. Alarmingly Ms. Palaszczuk seems unaware of the direct interference from the CCP in Chinese Sister Cities arrangements! Dealing with Sub-National Chinese Governments is the same as dealing with the CCP. Rite-ON! covered this truth in Part 6 ‘ Sister Cities in the Chinese Year of the Rat (2020) (20)
New Zealand’s Prime Minister, Jacinta Ardern has broken away from her western intelligence allies with an offer to support China’s contentious global infrastructure and investment project. (21)
In 2015 the Northern Territory Government signed a 99-year lease for the Port of Darwin with Chinese company Landbridge at a cost of $506 million. Seen now in the context of a post-pandemic and more unstable world where China is clearly using the BRI program for geopolitical goals, this agreement should urgently be reviewed given Landbridge’s close links to the Chinese Communist Party. (22,23)
We are concerned that successive Australian Governments have already compromised the integrity and security of the Five Eyes Partnership – and on many levels.
8:6 Victoria’s Secret
Should we be concerned about Victoria’s Secret? In short – YES!
While Victoria’s Secret conjures up images of high-end lingerie worn by international models; similarities can be drawn between the lingerie-label and Dan Andrews ‘secretive’ deal with China.
Andrews kept his deal ‘undercover’ and refused to expose the structure which is critical to strength and stability.
So, it was not surprising that the Belt & Road Initiative Memorandum of Understanding (MOU) Dan Andrews signed on the 26th October 2018, was full of ‘motherhood statements’ and devoid of detail. (24)
Here is an extract from Victoria’s BRI agreement: The parties will work together within the Belt and Road Initiative, with the aim of promoting connectivity of policy, infrastructure, trade, finance and people, so as to seek new opportunities in cooperation and inject new momentum to achieve common development to strive to develop an open global economy, jointly combat global challenges and promote the building of a common future.
Dan Andrews kept his Victoria’s Secret ‘under wraps’, until public pressure forced his hand just days prior to the state elections in November 2018. (25, 26)
Dr Graeme Smith from the School of Asia Pacific Affairs at ANU said:
“Mr. Andrews promised the BRI would deliver jobs, investment and economic growth but on virtually any measure, it hasn’t delivered anything.
Professor John Fitzgerald, a China expert at Swinburne University of Technology said;
“The BRI does not appear to be helping with jobs, trade, or investment. Andrews has arguably placed his state in peril”.
No details of;
- Targeted infrastructure projects
- Low-interest Chinese loans
- Debt-default resolution
- Jobs for Victorians
- Critical intelligence sharing
- Technology protection
Victoria signed up to China’s BRI without reference to the Federal Government and questions are being asked ‘ why’?
The answer may lie in the fact the board of an Australian and Victorian Government-funded BRI foundation was stacked with advisers with high-profile links to the Chinese Communist Party. (27)
The Department of Foreign Affairs’ had become increasingly concerned about China’s growing influence in the Pacific after 2017, including the potential for countries in the region to be saddled with too much debt in paying for uneconomic projects. DFAT told Victoria in the months leading up to the state signing the framework agreement it was Australia’s policy not to sign on to the BRI ( according to senior government sources)
Home Affairs Minister Peter Dutton on Thursday accused Mr. Andrews of a lack of transparency and of using his relationship with China to advance his own political agenda. “I would have thought sunlight is a good thing here, but for whatever reason he decides to conduct all of this business in secret, and I just don’t think it is in the national interest,” he said.
Premier Daniel Andrews, however, declared in May 2020 it “was more important than ever” to stimulate Victoria’s post-coronavirus economy by signing up to the BRI. This statement by Dan Andrews was made after China released a virus that caused a global pandemic, followed by a global recession!
Doubling down on his Government’s ‘dud-deal’, in October 2019, Dan Andrews sent Victoria’s China-based trade commissioner using $12,500 of taxpayers’ funds, to join a three-day trade delegation in China run by Belt and Road Initiative lobbyist Jean Dong. (28)
Victoria’s State Opposition Leader, Michael O’Brien, says
‘ Victoria’s BRI deal is a dud’ and if elected he will dump the State Government’s controversial involvement in China’s Belt and Road Initiative. (29)
- “Victoria’s Secret is a dud-deal”
- Dan Andrews must release the FULL details of the BRI to the voters of Victoria
- The Andrew’s Government is not alone in signing agreements under the BRI program
8:7 Belt & Road Initiative (BRI) – already embedded in Australia?
As early as 2017, senior figures in the Immigration and Defence Departments, advised the Government NOT to join China’s BRI. They warned that the controversial trillion-dollar push by China to dominate global trade could have serious ‘strategic’ consequences if Australia formally joined it. (30)
Australia is not part of the divisive trillion-dollar BRI, but analysts have since told the ABC individual investment projects in Australia are still allowed to sign up and be part of it.
Local and State Governments and businesses, continue to welcome Chinese investment under, or linked to, the BRI.
The following are a few examples:
Western Australia is now feeling pressured by China to sign up to their ambitious BRI agreement, however to date, have refused to join. China watchers say WA will continue to feel pressure to sign up, because Beijing’s most powerful tool is money and the Belt and Road Initiative is offering lots of it. ( 31)
In March 2018, China’s Ministry of Culture has listed a Chinese developer’s planned Gold Coast theme park as a “key cultural trade and investment project” that is linked to the country’s ambitious Belt and Road investment plan. (32)
Australian Legend World is a proposed theme park that will feature historical and educational performances, animal exhibits, an indoor ski field, a 3,500-seat theatre, and an adventure park. Alongside the park, there are plans for a 25-story high-rise development. The proposed park is an investment by the Chinese Songchen Group owns and operates theme parks, resorts, and hotels in China. China’s Ministry of Culture has declared the project as a key cultural trade and investment project of China’s Belt and Road Initiative.
Gold Coast Mayor Tom Tate welcomed China’s decision to list the project.
“We’re delighted the Chinese Government has included this project on their Belt and Road list,” Mr. Tate said in a statement. “Our city’s relationship with China is built on trust as well as Council’s ability to minimize red tape, while still ensuring all environmental and development guidelines are adhered to”. (33)
In November 2018, Queensland Premier Annastacia Palaszczuk attended the China International Import Expo in Shanghai with some of Queensland’s biggest investors in resources and tourism, discussing plans for Chinese ‘investment’ in the state under the BRI program. (34, 35,36)
- Fullshare Holdings Group provided an update on their plans to further develop the Sheraton Mirage at Port Douglas and the $2 billion Laguna Quays development in the Whitsundays which will attract thousands of new tourists and support new jobs.
- Songcheng talked about their proposals on the Gold Coast for a theme park and residential development.
- Yuexing provided an update on plans to upgrade the Keppel Cove Resort in Central Queensland including upgrades to the golf club resort and precincts.
- China Capital Investment Group provided an overview on hundreds of millions of dollars of investments planned for South Molle Island next year and the development of Daydream Island both in the Whitsundays
NB; Many of Queensland’s tourist resorts remain closed after extensive cyclone damage. The cost to repair is seen as ‘too high’ for potential returns. (37)
While the focus is firmly on state and federal governments, there’s more to the story of Chinese investment as part of – or linked to – China’s BRI.
Take the example of ‘Fullshare Holdings Limited’ ( see above) headquartered in Nanjing China and registered in Hong Kong. ‘Fullshare’ is invested in property, tourism , childcare and renewable energy. It holds a controlling interest in Sparrow Early Learning, a leading early childhood education provider in Australia. Sparrow Early Learning has 15 centres in Victoria and 19 centres in Queensland. (38)
It is difficult imagine where childcare and tourism fits in the BRI program to create trading and infrastructure highways across the world. However it could be an avenue for Chinese companies to access low-cost loans ( in China) under the BRI banner.
- While the Federal Government recommends AGAINST China’s BRI program, many deals linked to the BRI have been signed at STATE and LOCAL GOVERNMENT and BUSINESS levels.
- As part of the Federal Government’s increased National Security measures it is imperative a COMPLETE LIST OF CHINESE-OWNED ASSETS be compiled.
8:8 The impacts for China of huge global BRI investments
After nearly five years of helter-skelter expansion for China’s Belt and Road Initiative across the globe, Chinese officials are quietly trying to take stock of how many deals have been done and what the country’s financial exposure might be. (39)
“ There is no comprehensive picture of that yet”
said one Chinese economic policymaker, who like many other officials would speak about Chinese policy only on the condition of anonymity. Some Chinese officials have become concerned that the institutional graft surrounding projects represents a liability for China, and raises the bar needed for profitability.
While Chinese officials worry about over-reach and exposure to risk, other BRI participating nations are getting ‘cold feet’.
In February 2020, Kyrgyzstan’s BRI came to a screaming halt as locals demonstrated on the streets demanding an end to the agreement. (40)
This BRI agreement that included a $275 million ‘free-trade-zone’ on their shared borders which also included 200 hectares of land for a massive logistics centre, was not interpreted locally as a mutually beneficial win-win trans-national partnership, but as a ‘land grab’.
Central Asia was supposed to have become the keystone in China’s Silk Road Economic Belt, the overland portion of the Belt and Road. This Kyrgyz free-trade zone, however, joins a long list of other failed, downsized or readjusted Belt and Road projects that stretch across Asia and Africa.
A recent article published 15th May 2020, by Peter Zeihan, titled ‘ The Beginning of the end of China’ lays out a bleaker picture of China’s BRI project. (41)
His argument for China’s burgeoning problems is based largely on economics
Extracts from his paper:
- In the first quarter of 2020 China experienced its first recession since the reinvention of the Chinese economy under Deng Xiaoping in 1979. Blame for this recession can be fully (and accurately) laid at the feet of China’s coronavirus epidemic.
- In the United States (and to a lesser degree, in most of the advanced world) money is an economic good. This is why banks require collateral and/or business plans before they’ll fund loans. That’s totally not how it works in China. In China, money – capital, to be more technical – is considered a political good, and it only has value if it can be used to achieve political goals
- The Chinese simply don’t seem to care about the costs of the inputs or the market conditions for the outputs. This is why the One Belt One Road program has been so far reaching.
- Investment decisions not driven by the concept of returns tend to build. Conservatively, corporate debt ( excluding all other debt types) in China is about 150% of GDP.
- The CCP has long presented the Chinese citizenry with a strict social contract: the CCP enjoys an absolute political monopoly in exchange for providing steadily increasing standards of living. That means no elections, no unsanctioned protests, or never establishing an independent legal or court system which might challenge CCP whim.
- The One Child Policy means that China can never be a true ‘consumption-led system’. And that was before coronavirus gutted consumption on a global scale, presenting every export-oriented system with an existential crisis. Which means China, a country whose political functioning and social stability is predicated upon export-led growth, needs to find a new reason for the population to support the CCP’s very existence.
- China’s has a most immediate problem! Nothing about the Chinese system – its political unity, relative immunity from foreign threats, ability to import energy from a continent away, ability to tap global markets to supply it with raw materials and markets to dump its products in, ability to access the world beyond the First Island Chain – is possible without the Global Order….and the Global Order is not possible without America.
- No other country – no other coalition of countries – has the naval power to guarantee commercial shipments on the high seas. No commercial shipments = no trade / no trade= no export-led economies / No export-led economies = no China.
- With the American Chinese breach galloping into full view, Xi Jingping feels he has little choice but to prepare for the day everyone in the top ranks of the CCP always knew was coming: the day that China’s entire economic structure and strategic position crumbles.
- So, the ‘solution’ is as dramatic as it is impactful: Spawn so much international outcry that China experiences a nationalist reaction against everyone who is angry at China. Convince the Chinese population that nationalism is a suitable substitute for economic growth and security, and then use that nationalism to combat the inevitable domestic political firestorm when China doesn’t simply tank – but implodes.
8:9 Who will challenge China’s BRI?
Blue-Dot Network’ is the new ‘player’ created to counter China’s BRI geopolitical expansionism. In Nov 2019, US Commerce Secretary Wilbur Ross announced the move — led by the US Overseas Private Investment Corporation (OPIC), the Japan Bank for International Cooperation (JBIC), and the Australian Department for Foreign Affairs and Trade (DFAT) — on the sidelines of the 35th Association of Southeast Asian Nations (ASEAN) summit in Thailand. (42) Briefly;
- The Blue Dot Network was jointly launched by the US, Japan and Australia
- Its authors say it will act as a counterweight to China’s Belt and Road infrastructure fund
- US officials have likened it to a ‘Michelin Guide’ for Asian infrastructure investors
- The Blue Dot Network is in its early stages, but it will include countries committed to “sustainable infrastructure development”.
9:0 Concluding questions
- Will the BRI deliver riches or ruins?
- Will the BRI implode as some are predicting?
- Can Australia continue to trade with China -without formally signing onto the BRI?
- Will Australia have to choose between trade with China, and their alliance with America?
- China’s great vision – the Belt and Road Initiative is nothing short of revolutionary – but will it lead to revolution within China?
You be the judge!
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