Belt and Road Page 11
Finally, fibre-optic connectivity between China and Pakistan will prepare the ground for new digital television services disseminating Chinese culture, and electronic monitoring and control systems ensuring the security of the project. The safe city project will deploy explosive detectors and scanners to cover major roads and crowded places in urban areas to conduct real-time monitoring. The plan envisages a terrestrial cable across the Khunjerab pass to Islamabad, and a submarine landing station in Gwadar, linked to Sukkur. From there, the backbone will link the two in Islamabad, as well as all major cities in Pakistan. China’s telecom services to Africa need to be rerouted in Europe, a “hidden security danger” or a digital version of the Malacca dilemma—Western powers could block traffic or use it for intelligence gathering—which new links through Pakistan will eliminate. Huawei is installing the Pakistan-East Africa Cable Express, which will connect Gwadar to China’s new military base in Djibouti by 2019. The project has a total length of 13,000 km and will connect South Asia and East Africa, with a northern expansion to Egypt and further southern expansion from Kenya to South Africa.
Both governments set up a joint working group “to supervise and promote the implementation of major projects, to provide background support, to regularly discuss project progress, to address challenges that may be encountered, and to put forward coping strategies.” Remarkably for a plan prepared by a Chinese government agency and a Chinese development bank, “it is suggested that Pakistan adopt the government-led mode of development.” This means that the government makes an investment in building industrial parks and attempts to integrate all government functions in some industry cluster areas, and establishes unified but relatively independent government regulatory agencies to take overall charge of all affairs concerning industrial areas and financing as well as part of the administrative functions of local governments, and introduce industrial development projects through policy support, tax preference, investment promotion and land transfer. The public and private sectors have different roles, with the government setting the pace and direction for the initiative but leaving most practical details to individual companies. As we discussed in a previous chapter, finance holds the structure together: “International business cooperation with Pakistan should be conducted mainly with the government as a support, the banks as intermediary agents and enterprises as the mainstay. First, it is necessary to give full play to the government’s influence, establish good relationships with local banks and businesses. Second, overall business objectives can best be achieved by giving full play to local banks’ advantages in market knowledge and local enterprises’ operating conditions, to provide loans in various forms, such as credit grants and syndicated loans, and other financial services.”
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“International industrial capacity cooperation” is China’s way of preserving state guidance in a globalized world. Different countries cooperate on the basis of their comparative advantage and patterns of specialization, but without renouncing the ability to guide the economy in particular directions using a broad array of policy tools. That this does not result in robust economic nationalism and protectionism is predicated on the creation of platforms for widespread cooperation in the development of national economic strategies. One could say that under the Belt and Road, countries open their policy-making processes to other countries before and above opening their economies to foreign companies. For example, in 2018 China asked Kyrgyzstan to export 400,000 tons of honey, a task the Head of the State Inspectorate for Veterinary and Phytosanitary Safety described as unfeasible (the annual world output of honey in 2016 was 1.79 million metric tons). More detailed negotiations are expected to follow.
The initiative and final strategic vision always lies with Beijing. In Kazakhstan, to give another example, Chinese companies and the Chinese state have invested in the development of industrial clusters intended to sell titanium dioxide, silicon dioxide and vanadium pentoxide to China for use in the aircraft and aerospace industries. Recent industrial projects include Kazakhstan Aluminum, the Kaz Minerals copper mine in Aktogay, and Petrochina’s petcoke project in Pavlodar, all of which are at least partly funded by Beijing’s policy banks, China Development Bank and the Export-Import Bank of China. These are part of the fifty joint Kazakhstan-China industrial capacity cooperation projects agreed in 2015, worth $25–30 billion over five years, and intended to create industrial cluster cooperation zones in transport infrastructure, manufacturing, construction, and agriculture.
Reciprocal investments in China, on the other hand, continue to be limited, with Chinese authorities blocking every attempt by Kazakh conglomerates to raise capital on the Shanghai or Hong Kong stock markets. Capital must be used in ways that further China’s industrial transformation and should not be squandered elsewhere. Interestingly, these same conglomerates are encouraged to work with Chinese companies in third countries. Eurasian Resources Group, a Kazakh company, has partnered with China Nonferrous Metals Industry Group, Export-Import Bank of China, Industrial and Commercial Bank of China and China Export & Credit Insurance Corp to complete an $800 million copper and cobalt project in the Democratic Republic of Congo’s Katanga district. The project came online in 2018 to supply China with 20,000 tons of cobalt, its single biggest supplier, enough to make batteries for 500,000 electric vehicles.
Kazakhstan’s ‘bright path’, ‘100 concrete steps’ and ‘strategy 2050’ industrial policies have been planned to intersect with China’s industrial plans since the outset of the Belt and Road in 2013. In Central Asia, many states retain partially functioning or unclosed industrial complementarity loops, a heritage of their position as peripheral nodes in the Soviet continent-wide state industrial planning. Present-day water resources, transport networks, energy networks, and a variety of traditional industrial bases remain dysfunctional or isolated due to the economic decoupling from Moscow. Thus China is well positioned to move into the empty space and reactivate the old reciprocal links.24
The economic geography bringing all these projects together is one where the Congo occupies the bottom segments of the supply chain, Kazakhstan moves to the middle and China occupies the top, reserving for itself both the most lucrative segments of production and the organizing role. Western companies are—in this case—nowhere to be seen.
4
THE BELT AND ROAD AND WORLD POLITICS
Commander Kulbhushan Jadhav, now condemned to death by a Pakistani military court, had an uneventful childhood as a police officer’s son growing up in Mumbai. He burst onto the national and international limelight in 2016 when Pakistan announced the arrest of an alleged Research and Analysis Wing (R&AW) Indian spy in its restive Balochistan province. Officials released a spliced and edited tape in which Jadhav is seen confessing to having been a spy for more than a decade. Recruited by R&AW in 2013, he had since been directing various activities in Balochistan and Karachi at the behest of the Indian intelligence agency with a view to engaging Baloch separatists to target infrastructure work on the China-Pakistan Economic Corridor.
According to the taped confession, Jadhav was trying to cross into Pakistan from the Saravan border in Iran on March 3, 2016, when he was captured by the Pakistani authorities. The Pakistani Army claims he used an Indian passport under an assumed name, Hussein Mubarak Patel.
“His goal was to disrupt development of the China-Pakistan Economic Corridor (CPEC), with Gwadar port as a special target,” Pakistan Army chief Qamar Javed Bajwa said, adding, “This is nothing short of state-sponsored terrorism. There can be no clearer evidence of Indian interference in Pakistan.” The Indian government categorically denied the allegations.
In late 2016 several scholars from my think tank at Renmin University in Beijing, the Chongyang Institute for Financial Studies, traveled to Pakistan on a field trip along the China-Pakistan Economic Corridor, during which they investigated the events surrounding the Jadhav arrest. In a report published soon after, they claimed that Jadhav secretly infiltrated Pak
istan’s Balochistan province at the end of 2013. Operating under the code name “Monkey”, his main activities in Pakistan were to penetrate the Balochistan nationalist party and deliberately increase Pakistan’s internal conflicts and divisions over the construction of the China-Pakistan Economic Corridor, to liaise with Baloch separatists and terrorists and to fund terrorist activities and provide combat training for insurgents in activities that undermine Pakistani law and order. The main targets were Gwadar and Karachi.1
The report went on to provide some context for the Jadhav spy story. India believes that the China-Pakistan Economic Corridor is a major threat to its national security. Not only will China’s military power appear simultaneously in its east, north and west flanks, but Pakistan will also be able to completely cut off India from Iran. The Arabian Sea and Central Asia provide access to oil and gas energy sources, increasingly under China’s control. It is a high stakes game but—the Renmin University report concluded—India’s strategy to deal with Pakistan is not limited to a destructive one. In late May 2016, Indian Prime Minister Narendra Modi visited Iran. As the most important outcome of this trip, India will invest $500 million to build Chabahar Port in the province of Sistan-Baluchistan in the southeast of Iran, a direct rival and competitor to China’s flagship project in Gwadar. The port allows India to bypass Pakistan and reach land-locked Afghanistan and Central Asia. India, Iran and Afghanistan have signed an agreement to grant preferential treatment and tariff reductions at Chabahar to Indian goods headed toward Central Asia and Afghanistan and the first consignment of wheat from India to Afghanistan was sent via Chabahar in October 2017.
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In June 2017 Chinese troops were spotted extending a road through a strip of land disputed between China and Bhutan. India perceived this as an unacceptable change to the status quo and crossed its own border—in this case a perfectly settled one—to block those works. The Doklam plateau slopes down to the Siliguri Corridor, a narrow strip of Indian territory dividing the Indian mainland from its North Eastern states. Were China able to block off the corridor it would isolate India’s North Eastern region from the rest of the country, a devastating scenario in the event of war.
Colonel Vinayak Bhat served in the Indian Army for over thirty years. He was a satellite imagery analyst, stationed in high altitude areas, where he also attended border personnel meetings as a Mandarin interpreter. I asked him why he thought Beijing was so determined to establish control over the Doklam plateau. After all, these border areas are far removed from any population center, and in many cases the actual border is difficult to determine—the demarcation goes back to old treaties between the Qing Empire and the British Raj and outdated, hand-drawn maps. Does it matter who gains an advantage here? “It matters,” Bhat told me emphatically. “If the Chinese control Doklam, especially South Doklam, they will be able to threaten the Siliguri Corridor. After the Doklam plateau it will all be downhill. You need anything from nine to sixteen battalions in these high altitude mountains for each defensive battalion. So that changes the calculations.”
The Doklam standoff ended with a choreographed disengagement on August 28. India agreed to withdraw its troops in a designated two hour period before noon and the Chinese did the same in a similar window that afternoon. The withdrawal was monitored from New Delhi in real time. By agreeing to discontinue construction works on the road, China seems to have met India more than half way, but it also used the occasion to state that it would exercise its sovereign rights in the future. More than a resolution of the crisis, the negotiation was meant to avert the risk of an accidental conflict. Troops from both countries remain in the area, but are now separated by a few hundred meters. Indian Army Chief Bipin Rawat quickly warned, “As far as the Northern adversary is concerned, flexing of muscles has started. Salami slicing, taking over territory in a very gradual manner, testing our limits or threshold is something we have to be wary about. Remain prepared for situations that are emerging gradually into conflict.”
India’s rejection of the Belt and Road may have triggered the confrontation that developed later in the summer. One month before the Doklam standoff, China had gathered about thirty national leaders at its first summit devoted to provide guidance for the Belt and Road. India announced just one day before the event that it would not be participating, explaining that in its current form the Belt and Road will create unsustainable burdens of debt, while one of its segments, the economic corridor linking China and Pakistan, goes through the disputed areas of Gilgit and Baltistan in Pakistan-occupied Kashmir and therefore ignores Indian core concerns on sovereignty and territorial integrity. A statement released on May 13, 2017 by India’s Ministry of External Affairs explained: “We are of firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality. Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities; balanced ecological and environmental protection and preservation standards; transparent assessment of project costs; and skill and technology transfer to help long term running and maintenance of the assets created by local communities.” The journalist Ashok Malik from the Times of India called the boycott the third most significant decision in the history of Indian foreign policy, after the 1971 decision to back the independence of Bangladesh and the 1998 nuclear tests.
“China would never force any country to participate in the Belt and Road initiative if it was too skeptical and nervous to do so,” an article in the Chinese state-run Global Times quickly responded. “It is regrettable but not a problem that India still maintains its strong opposition to the Belt and Road, even though China has repeatedly said its position on the Kashmir dispute would not change because of the CPEC.”
The truth of the matter is that the Belt and Road poses a number of seemingly intractable challenges for India. Most obviously, it threatens to turn Pakistan’s occupation of part of Kashmir into a fait accompli. If the area becomes an important economic corridor for China, the conflict is no longer capable of being resolved within the limited sphere of relations between Pakistan and its much larger neighbor. Just before the May 2017 summit Beijing made one last effort to convince India to attend. In a speech in Delhi, its ambassador to India floated the idea of renaming the China-Pakistan Economic Corridor. The suggestion was that the new name would no longer imply that the economic corridor ran only through the two countries, implicitly denying Indian claims to territory occupied by Pakistan. Left unsaid was what the new name might be and how it might avoid raising objections in Pakistan. Indian authorities never took the suggestion very seriously anyway, convinced as they are that the problems raised by the Belt and Road and its segment in Pakistan have more to do with increased Chinese presence than purely symbolic matters. When I asked Subramanian Swamy, a leading figure in the ruling Bharatiya Janata Party, how his infatuation with the project of dividing Pakistan in four was compatible with his warm feelings towards China, he answered that India would be able to convince China that a war between India and Pakistan would not interfere with the Belt and Road. I was not persuaded.
Economically, the challenge is, if anything, even graver. As a major economy hoping to remain on a trajectory of fast economic growth, India needs to develop deep international links and supply chains, most immediately in its neighborhood, but the Belt and Road may well force it into new forms of economic isolation, this time involuntary, as opposed to the years of Indian economic autarchy. New Delhi may even see in the Belt and Road a form of rewriting history by rebuilding trade and economic links between Europe and Asia while ignoring the Indian subcontinent, historically a meeting point for such trade and cultural networks.
The view from Beijing is just as cynical. While India remains for the time being a much weaker economy and state, it seems to have the forces of the future on its side. Chinese commentators have grown comfortable comparing Ch
ina’s economic vigor with the slow decay of the ruling powers in Europe and North America. This mental framework has made conflict improbable, since China feels time is decisively on its side. With respect to India the power equation is examined in a different way. Perhaps China will be inclined to act against a rival if the relation of forces can only deteriorate in coming decades. Naturally cautious, Chinese state media outlets have not avoided talking openly about the possibility of a war with India. That China and India are growing strong simultaneously is an entirely new fact, one carrying significant risks.
Certain economic anxieties play into this dynamic. As China’s economic growth is tabling out, and slowing down as the numbers of young people in its work force dwindle, India will jostle for the place of global economic success story with its rewards in international prestige and investment flows. Its advantages correlate directly with China’s weaknesses: the demographic dividend of a young population—even if that young population also poses serious challenges—and a public culture much more comfortable with experimentation and the exposure to different cultural influences. Its information technology strength continues to rival that of China.
If we limit ourselves to measures of economic or military power, China’s edge is obvious, but things look very different when we turn to that most elusive of power metrics: soft power, the ability to project your way of life abroad and attract global audiences. The West’s superiority in this area is still so massive that China and India are forced to compete for a limited space. India is winning. Bolstered by its familiarity with the English language and the freedoms granted by a democratic society committed to some version of the rule of law, the Indian cultural and entertainment industries have captured global attention in ways that China can only dream about. More worryingly for Beijing perhaps, they have started to appeal to Chinese audiences and to do so under the radar of Chinese anti-Western control mechanisms. Appearing in movie theaters just before the Doklam standoff, the Bollywood movie Dangal collected over $190 million at the Chinese box office, capturing the imagination of viewers young and old with an uplifting story of female empowerment and the collective pursuit of happiness—better, presumably, than anything produced in China.