Belt and Road Page 7
A quiet fishing village may soon become a major cosmopolis, a new Dubai. What better image could one find of the transformative power of the Belt and Road?
The Road
The Vision and Actions document proposed two routes for the Maritime Silk Road. The East Route would start from China’s coast through the South China Sea to the South Pacific. The West Route would pass through the South China Sea and terminate in Africa and Europe. This scheme was slightly modified in a 2017 document entitled Vision for Maritime Cooperation under the Belt and Road Initiative, where three separate routes are envisioned. First, the China-Indian Ocean-Africa-Mediterranean Sea Blue Economic Passage linking the China-Indochina Peninsula Economic Corridor, running westward from the South China Sea to the Indian Ocean, and connecting the China-Pakistan Economic Corridor (CPEC) and the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC). Second, the “blue economic passage” of China-Oceania-South Pacific, traveling southward from the South China Sea into the Pacific Ocean. Another passage is also envisioned leading up to Europe via the Arctic Ocean. With perfect symmetry, both the Silk Road Economic Belt and the Maritime Silk Road now encompass three routes each.
The initiative will focus on jointly building smooth, secure and efficient transport routes connecting major sea ports along the Eurasian littoral. A number of opportunities for cooperation along the route have been identified, including maritime transport and infrastructure, resource development, marine scientific research, joint law enforcement, and maritime security. Exchanges and coordination with relevant countries are encouraged. Closer cooperation will be carried out to improve the market environment for international transportation and to facilitate maritime transportation. China is willing to enhance customs cooperation with countries along the Road, and to promote information exchange, mutual recognition of customs regulations, and mutual assistance in law enforcement. Chinese enterprises will be encouraged to participate in the construction and operation of overseas ports, something already well under way. According to research conducted by the Financial Times, nearly two-thirds of the world’s top sixty container ports had received some degree of Chinese investment by 2015. During the first half of 2017, Chinese companies unveiled plans to buy or invest in nine overseas ports, five of which are in the Indian Ocean. Four separate initiatives are set for Malaysia, with Chinese company investments scheduled for the $7.2 billion Melaka Gateway, the $2.84 billion Kuala Linggi Port, the $1.4 billion Penang Port and the $177 million Kuantan port projects, according to company announcements.
Since the turn of the century Chinese companies have been involved in the construction, management and expansion of numerous port facilities, from Hambantota in Sri Lanka to Gwadar in Pakistan, Kyaukpyu in Myanmar and Doraleh in Djibouti. A principal category covers hub ports, servicing huge container ships and transshipping them onto smaller vessels to connect with regional ports. A second category, as David Brewster describes it, should not be overlooked and is perhaps more significant: ports such as Gwadar and Kyaukpyu are meant to connect the Indian Ocean with China via overland transport corridors.17 Pakistan and Myanmar may become China’s California, granting it access to a second ocean and resolving the Malacca dilemma. Access to the offshore gas fields in the Bay of Bengal was always central to the Kyaukpyu project. The gas pipeline will carry up to 12 billion cubic meters of gas annually. The oil pipeline—running in parallel and with a capacity of 22 million barrels of oil per year, about 6 per cent of China’s 2016 oil imports—was built to transport oil from the Middle East and Africa directly to China, avoiding the Malacca Strait and cutting shipping distances by 1200 km. Even more dramatically, using overland pipelines connected to Gwadar will reduce the distance from the Persian Gulf to just 2,500 km—but the pipeline will depend on ultra high-power pumping stations as it has to pass through the Karakoram Pass, at an altitude of 5,000 to 6,000 meters above Gwadar or Kashgar. On existing routes via the Malacca Strait, oil tankers need to travel more than 10,000 km for two to three months to reach China. While ports such as Hambantota are close to existing shipping lines, others such as Gwadar presuppose a significant redrawing of those lines in the future.
Another central driver of the Road concerns the growing trade links between China and India. Given their size and proximity, the two countries are bound to develop the world’s largest trading relationship. In turn this will have to be based on gigantic infrastructure projects along the Indian Ocean coast or by train through Myanmar and Bangladesh. It was not surprising, therefore, to find that the port of Kolkata featured prominently in the original plans for the Road, with the Indian city appearing on the famous map of the initiative published by Xinhua. The port could be an important conduit in developing value chains connecting Chinese and Indian manufacturers, but more recently it has been dropped from all official references, as India increasingly distanced itself from the Belt and Road. Much of the success of the initiative depends on whether this can be corrected in the future.
Other inefficiencies may in time be eliminated. By enhancing port infrastructure in the Mediterranean, it should be feasible to transport cargo from China and Asia via shorter shipping lines. Antwerp, Hamburg, London, and Rotterdam are the main ports where containers are discharged today and the cargo distributed all over Europe. With its engagement in Mediterranean ports like Piraeus and potentially Trieste, Venice or Istanbul, China may hope to start changing the spatial pattern of the container shipping system. For decades, we have been discussing a possible shift of the traditional dominance of Northern European ports to Southern Europe. The Road may make it a reality.
Bypassing the Malacca strait by building a canal through the Kra Isthmus in Thailand—around 100 km long and 25 meters deep, it would take ten years to build—could be an even greater game changer. From a shipping perspective, it would mean shorter and cheaper—perhaps two or three days faster—shipping lanes for all, but a number of countries, including the United States, may resist the idea because it would also mean the speedier deployment of the Chinese navy to the Indian Ocean. It is unclear why Thailand should welcome a project that would give physical and symbolic meaning to the country’s division and embolden the Muslim insurgency raging in the south. The canal would necessarily be wider than the Chao Phraya River, the nation’s main north-south waterway that travels through Bangkok and by the royal Grand Palace, viewed by many as the vital ligament holding Thailand together. Political geography in the whole region would be radically redesigned, but the Chinese ambassador to Thailand has privately asserted that the Kra Canal is part of China’s vision for the Belt and Road and a Chinese construction company involved in recent land reclamation and island-building in the South China Sea has expressed interest in the project.18
Finally, there is the Arctic. In January 2018 the State Council Information Office published a white paper titled “China’s Arctic Policy,” whose main premise is that global warming will turn the Arctic into a new area for economic activity and state competition. The opening sentences in the paper are unusually frank: “Global warming in recent years has accelerated the melting of ice and snow in the Arctic region. As economic globalization and regional integration further develops and deepens, the Arctic is gaining global significance for its rising strategic, economic values and those relating to scientific research, environmental protection, sea passages, and natural resources.” As the ice melts, conditions for the development of the Arctic may be gradually changed, offering opportunities for the commercial use of sea routes and development of resources in the region. Predictions indicate that the Bering Strait will open for an extended period around 2020, the Northern Sea Route around 2025, and the Transpolar Route around 2030. The Northwest Passage will open last.19 Responding to these opportunities, China hopes to build a “Polar Silk Road” along the Arctic shipping lanes, the third main sea route of the Belt and Road. Shipping through the Northern Sea Route would shave almost twenty days off the regular passage time using the traditional route throug
h the Suez Canal. Another section of the paper focuses on how China can use the Arctic’s resources, including fossil fuels and fisheries. Among China’s main interests in the region is its major stake in Russia’s Yamal liquefied natural gas project which is expected to supply China with four million tonnes of LNG per annum.
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Just as with the land component, infrastructure development along the Maritime Silk Road is no more than the beginning of the story. The initiative does not stop at creating a dense network of ports along the Indian Ocean. It is also and perhaps primarily about boosting growth and industrialization across the region through heavy investment in infrastructure—the creation of “strategic propellers for hinterland development,” as the Vision and Actions document calls it. The mistake is to think that the new sea lines of communication are meant to connect existing poles of economic activity. China takes a much more integrated or comprehensive approach to economic development. As the name of the project indicates, the Maritime Silk Road is meant to build a new economic landscape for the twenty-first century, often considering transport as but one leg of a much broader development and industrialization project, what Chinese media and official documents call the “Ports-Park-City” model of development. When a state-run Chinese company, the Guangxi Beibu Gulf International Port Group, announced its intention to expand the capacity of the deep-water container port in Kuantan in Malaysia, the investment was to be combined with the construction of a new industrial park and steel plant.
When I went to Djibouti in December 2017 I saw how the Chinese approach involves a vast and complex network of communication arteries branching out into smaller passages. Salt deposits mined in Lake Assal were transported by truck—on a road financed by the European Union—to an expanding salt port in the Goubet from which small boats could carry it to the large Doraleh port. This had been recently constructed with Chinese capital and under Chinese management. I was shown the areas reserved for a future industrial zone and, next to the port, the first Chinese overseas military base, a dark and impenetrable fortress, hidden from prying eyes crossing the Tadjoura gulf by the walls of containers and giant cranes stationed in the port. A number of sources told the Global Times in July 2018 that the military base gives Chinese businessmen more confidence to invest in Djibouti. Whether that is because it will contribute to long-term stability in the country or because the local government will hesitate before taking decisions detrimental to Chinese interests was left unsaid.20
Like many of the projects along the Maritime Silk Road, Doraleh port is a slowly expanding project. Its initial rationale was to serve landlocked Ethiopia, a country of 100 million inhabitants where China wants to move some of its low-end manufacturing, such as footwear and apparel. For that purpose, it has financed and built a new fast railway linking Addis Ababa and Djibouti, one that—as I found out—is operated by Chinese staff. But the economic rationale for Doraleh goes far beyond East Africa. Djibouti is located on the main trade route linking Europe and Asia, so presumably it can become a trans-shipment hub, a process already under way. Some have even started to contemplate a railway linking Djibouti to Cameroon and Nigeria, transforming Doraleh into a serious rival to the Suez Canal.
In Djibouti I could not help but be struck by the profusion of competing major ports. Literally next door to the Chinese-built Doraleh I visited the container terminal operated by Dubai-based DP World, unanimously considered the most technologically advanced container terminal in Africa. Asking whether the two ports might not be somewhat redundant, I was assured they were not competing against each other, but the truth is that just two months after my visit the Djibouti government—pressured by China—seized control of the DP World port in Doraleh. China was exercising its political and economic power to sidestep rivals in a bid to consolidate control over all the major shipping lanes in the Indian Ocean. In December 2017 Sri Lanka formally handed over commercial activities in its main southern port to the same Chinese company managing Doraleh, but Djibouti raised more delicate questions. Would the large American base established in Djibouti have secure access to supplies if the two major ports in the country were controlled by China?
China Merchants, the company running both Doraleh and Hambantota in Sri Lanka, has a long history steeped in the structures of global capitalism. Founded in 1873, its primary purpose was to compete with foreign companies that operated steamships in Chinese waters. Its founder, Li Hongzhang, saw an opportunity to draw Chinese capital invested in foreign firms to a new company. By 1877 it owned thirty steamships and could boast the highest tonnage among steamship companies in China—just the achievement Deng Xiaoping would have envied at the beginning of his efforts to modernize China’s merchant navy a hundred years later. Remarkably, having survived for almost 150 years through a number of radical transformations—in 1951 the Central Government reorganized the Shanghai Head Office of China Merchants into the People’s Navigation Company and merged it with the General Navigation Office under the Ministry of Communications—China Merchants has emerged as a core company of the Belt and Road, whose main presuppositions are those held by Li Hongzhang in the nineteenth century: the global economy embodies deep structures of power and if China wants to occupy the center of the system and infuse it with its own ideas, it needs to think and act globally and compete with foreigners on the same scale. Even the initial success of the company seemed to anticipate the Chinese economic model of our time, being the result of the combination of the government’s financial support and the merchant managers’ autonomy.21
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Maps of the Maritime Silk Road released by the Chinese media have shown the route running through disputed areas in the South China Sea, another hot spot for geopolitical rivalry. The contradiction is that the South China Sea is the geographic area where China has been developing a new, more assertive and confrontational foreign policy, and it lies at the very center of those free and safe shipping lanes evoked by every official document on the Belt and Road. There are two main ways to think about this contradiction. One could argue that the Road is meant to bring about new forms of cooperation and that these can in time replace the logic of competition now ruling disputes in the area. Alternatively, it is possible to conceive that China—shying away from open military conflict—regards the Road as a way to settle the issue by economic means and infrastructure development. Countries such as Malaysia, the Philippines and Vietnam continue to hesitate between adopting one of the two interpretations of the initiative.
In the past China has used economic aid as a powerful tool in advancing its interests in the South China Sea. When President Hu Jintao visited Phnom Penh in 2012 he promised his Cambodian counterpart economic assistance of 450 million yuan. A few months later Cambodia opposed including a mention of the South China Sea dispute in a joint statement tabled by Vietnam and the Philippines. Around the same time, Chinese quarantine authorities reportedly blocked hundreds of container lorries of Philippine bananas from entering Chinese ports. China accounted for more than 30 per cent of Philippine banana exports.
The Maritime Silk Road will advance Chinese interests in the South China Sea in different ways. First, it can further develop points of pressure and reward similar to those used with Cambodia and the Philippines in 2012. Second, cooperative projects may be relied upon to reduce tensions. Third, and equally important, strengthened institutional links are expected to foster the view that maritime affairs and disputes should be handled and resolved by directly concerned parties, avoiding the involvement of outside actors such as the United States.22
Countries in Southeast Asia are not oblivious to the geopolitical consequences of the economic project. The epochal dispute over land features and territorial waters in the South China Sea will shift in China’s favor once shipping lanes in the region grow in significance and come to be dominated by Chinese companies, while the vast majority of ports will be controlled by China and could have dual civilian and military uses. China passed a law in 2016 crea
ting a legal framework for the use of civilian assets to support military logistics operations and requiring all Chinese industries that conduct international transportation to provide supplies and aid to the Chinese navy as needed. In July 2018 a document issued by Hainan province, which administers the country’s claimed islands and waters in the contested South China Sea, announced that “any entity or individual” who wishes to develop uninhabited islands can apply and provide development plans to provincial ocean administration authorities. According to the report, the timeframe for developing the uninhabited islands varies depending on use. For aquaculture, they can be used for fifteen years, tourism and amusement projects allow for twenty-five years, salt and mineral industry projects for thirty years, public welfare projects for forty years and harbor-and shipyard-building projects for fifty years. It said developers will have to pay the government for the use of the islands, which would also benefit Beijing’s goal of building a free-trade zone for economic development.