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BRI Weekly Update June 11

Belt and Road Updates: June 11, 2019

Eurasian Economic Union and Belt and Road Unite

  • Eurasian Economic Union and the Belt and Road Initiative Create Synergies: On June7, China's President Xi Jinping and his host at the St. Petersburg International Economic Forum (SPIEF), Russian President Vladimir Putin emphasized the importance of closer coordination between the China-initiated Belt and Road Initiative (BRI) and the Russia-initiated Eurasian Economic Union (EEU). This would create the largest economic area on the planet both in number of nations and geographical outreach. The Shanghai Cooperation Organisation (SCO), which will have its summit meeting on June 14-16 in Bishkek, Kyrgyzstan, will bring together many nations of both groupings, but also significantly India, which is neither a member of the BRI nor EEU.
  • President Xi Jinping: The Belt and Road Initiative addresses the Crisis of the century: Speaking at the Plenary session of the SPIEF on June 7, President Xi Jinping opened by saying that the world is facing “profound changes unseen in a century,” and that “China stands ready to make joint efforts with the international community to create an open and pluralistic world economy, a happy society that is inclusive and benefits all, and a beautiful homeland with harmonious coexistence between humanity and nature, and explore a new path of sustainable development,” reported Xinhua.

Xi said when he announced the Belt and Road Initiative in 2013, the concept was intended to advance “win-win cooperation and common development among countries,” and that the BRI was “highly compatible with the UN 2030 Agenda for Sustainable Development in terms of goals, principles and implementation approaches, has received positive response and support from the international community.” He further stated that the Belt and Road “shares a similar philosophy with the Greater Eurasian Partnership proposed by President Putin,” and that the two initiatives can “support each other, facilitate each other and advance together to forcefully promote regional economic integration and realize common sustainable development.”

Indirectly referring to the attack on Huawei, Xi said that China “is willing to share with the rest of the world its latest research and development results, including the 5G technology so as to jointly cultivate new core competitiveness.”

On the environment, he focused on cleaning up actual pollution: “China will uphold the concept that clear waters and green mountains are as valuable as mountains of gold and silver, strive to win the battles against air, water and soil pollution, encourage the development of green industries and renewable energy, and promote economical use and recycling of resources.”

He addressed the global tension as follows: “Unprecedented inadaptation and asymmetry are emerging between the global governance system and the changes of the international situation, as emerging-market economies and developing countries are rising at an unprecedentedly high speed, and the new round of technological and industrial revolution is leading to unprecedentedly fierce competition. As the world is standing at a crossroads of history again, pooling wisdom and efforts of everyone to cooperate and achieve win-win outcomes is the right choice to address changes in the world.” He called sustainable development the “golden key” to solving global problems.

In the discussion following his speech, he said that “the few anti-globalization movements that have emerged in the world cannot stop the tide of globalization. We should not fear problems in globalization,” and stating that “countries should not resort to protectionism and unilateralism, nor should they adopt a selfish beggar-thy-neighbor approach.” He said, as his host, Russian President Vladimir Putin also said in his presentation, that the world should “firmly uphold the multilateral trading system, and that instead of starting something entirely new, we should improve the existing international system.” It is to be hoped, when Presidents Donald Trump, Putin and Xi meet on the sidelines of the G20 in Osaka on June 28-29, that they do, in fact, discuss “something entirely new” rather than simply reforming the British Imperial institutions running the world today.

Xi depicted his notion of such “improvement”: “On the basis of fairness and equality, we should enhance the representation and voice of emerging-market countries and developing countries in multilateral institutions to make the governance structure and benefit distribution more balanced and reasonable.”

He said that “China is committed to being a builder of the international community, not a destroyer, and being a bridge-builder rather than a trench-digger.” He further declared that “China is committed to expanding the circle of friends,” that China and Russia are comprehensive strategic partners, and that “China has also become a partner with Asian, European Union, African, Latin American and South Pacific countries.” In the last six years, he said, the BRI “has won positive response and support from across the world, and the scope of the participants has far exceeded that of the Belt and Road countries in history, fully demonstrating that this initiative has strong cohesiveness and is not China’s wishful thinking. The Belt and Road Initiative stresses the principle of extensive consultation, joint contribution and shared benefits, and is by no means a contemporary Marshall Plan as some people have claimed. Neither is the initiative a so-called Chinese colonial plan,” Xi said, pointing out that China has no history of colonizing other countries.

For more readings: China, Russia agree to upgrade relations for new era,  Developing nations build strategic ties

  • Huawei Rolling in 5G Contracts from Dozens of Commercial Firms in 30 Countries:  June 10 - To all appearances, China will have the last laugh at the United States’ attempt to limit Huawei’s customer base. The Press Trust of India (PTI) reports that Huawei has obtained 46 commercial 5G contracts, so far, in 30 countries, and has shipped more than 100,000 5G contracts globally, according to a statement the company issued on June 6.

China has emerged as a top player in the race for setting up the super-fast telecommunications system, despite the U.S. ban on its 5G services, alleging that Huawei systems could be manipulated by the Chinese government to spy on other countries and disrupt critical communications.

The Financial Times of June 9 carries a very frank report that the major Ibero-American nations are going ahead with 5G wireless technology, despite U.S. Secretary of Commerce Wilbur Ross’s having essentially tried to order Mexico not to do so. “Brazil is leading the resistance,” writes the FT, and quotes Vice President Hamilton Mourão, saying, “Huawei is established in Brazil and will make more investments.” Chile’s President Sebastián Piñera told Huawei chairman Liang Hua met in Shenzhen, where the company is headquartered, “Huawei is welcome to participate in public tenders in Chile,” for 5G and fiber optic cable projects.

Huawei also signed a deal on Wednesday with Russia's largest telecoms supplier company MTS to develop a 5G network in Russia over the next year. The agreement was signed on the sidelines of a meeting between Chinese leader Xi Jinping and Russian President Vladimir Putin in Moscow.

According to Mexican President Andrés Manuel López Obrador’s chief of staff Alfonso Romo, Ross instructed them: “We don’t want very active participation of Chinese investment in Mexico, especially not in strategic projects.” But the FT then quotes Ricardo Salinas, “a media mogul close to” López Obrador, as saying: “I have nothing but good things to say about Huawei. I think it’s a disgrace what these Americans are doing to put them down.” Telecom networks in Mexico are “deeply dependent” on Huawei equipment and technology, reports FT, citing Ernesto Piedras, CEO of Competitive Intelligence Unit consultancy that even “AT&T in Mexico has Chinese DNA,” which six years ago got into the Mexican market by purchasing local networks, which were “totally Huawei.”

FT cites analysts who, in the words of the City of London daily, consider “there is no U.S. supplier able to compete with them [Huawei] in Latin America.”

In short, opines FT, “The Trump Administration’s efforts appear to have come to nothing—at least for now.”

 

  • The Financial Times is taking particular notice of an MOU between the African Union and Huawei: The MOU reportedly extends an existing partnership agreement with the AU for another three years. The FT notes that this is despite the media-fomented hysteria over the alleged "hacking" of the AU headquarters by the Chinese company.
  • Zambia to teach Chinese in schools: after Kenya, Uganda and SA — to introduce Mandarin at its schools. The Zambian government announced earlier this month that it would roll out Mandarin classes from grades 8 to 12 at its 1,000-plus secondary schools from 2020 — the largest such program in Africa. It’s a move that the government says is underpinned by commercial considerations: it’s thought the removal of communication and cultural barriers will boost co-operation and trade between the two countries. Read full report here!
  • Want proof of China's hard-earned spot at the top of the global construction pyramid? Look no further then that most fundamental of construction materials: cement. This report by industry watch-dog Global Cement gives some astonishing details!
  • Financial Media Concede China Is a Good Creditor To Have: An article in the financial news website Quartz Africa, although intended to have just the opposite effect, reveals that China is actually a good creditor to have. Entitled, “Ethiopia and Kenya Are Struggling To Manage Their Chinese-Built Railways,” the article opens with the following: “In the wake of the Belt and Road Initiative (BRI) Forum in Beijing six weeks ago, Ethiopia gained another Chinese debt-concession ... [and] also received a cancellation on all interest-free loans up to the end of 2018. This was on top of previous renegotiated extensions of major commercial railway loans agreed earlier in 2018,” wrote author Yunnan Chen.

China has further written off a billion dollars of losses on Ethiopia’s Addis Ababa-Djibouti standard gauge railway (SGR) line, mostly caused by lower than anticipated usage stemming from a lack of inland infrastructure to connect the rail line to other urban or industrial centers. In late 2018, the Chinese restructured the terms of a loan, extending the repayment period from 15 to 30 years.

The Wall Street Journal, too, ran a June 9 column, “Who’s Afraid of the Belt and Road?” by Gerard Gayou, to argue that “Beijing has a strong preference for debt renegotiation when partner countries get in the red.” (Though Gayou does not make comparisons, Beijing is also not likely to turn debtor nations over to vulture funds and asset-seizing courts as the U.S. Treasury did—while the Federal Reserve piously wrung its hands over it—to Argentina during the Obama Administration.)

Gayou cites a Rhodium Group report in April which “found 40 Chinese debt re-negotiations with 24 countries, most ... since 2007. Together they represented around $50 billion of renegotiated debt, including write-offs, deferments and refinancing. Debt forgiveness is rare for more expensive projects, but so are asset seizures.”

But what needs to be emphasized here is that when one  examines at the totality of African nations' debt is due to European and U.S. countries and financial institutions, including the IMF and World Bank, not China. Besides, what the statistics usually miss is that Chinese loans are mostly directed towards productive investments in infrastructure, manufacturing and agriculture, in addition, of course to mining. But the majority of the Western loans are directed either to non-productive projects or mining.

  • Look for unexpected developments in the mining sector of southern Africa, as the "rare earth" elements become a target of the China/US trade war.
  • The Zambezi River Authority has given the final go-ahead for the construction of the Batoka Gorge hydropower on the Zambezi River: A consortium of three countries, the US, China and Italy has been chosen to head the US$4bn project, located in the central heart of Southern Africa, on the border of Zimbabwe and Zambia. Read the exciting details!
  • Construction of Sahofika hydroelectric plant in the island nation of Madagascar is now set to begin in December, with its almost $900mn funding provided by the African Development Bank, according to Construction Review Online.
  • A project which has been delayed for years, the Nigerian Lagos-Calabar coastal railway, which would link all six of Nigeria's ports has finally received $2.3bn funding, and is set to begin construction immediately. China Civil Engineering Construction Corporation will lead the project, to be built by their subsidiary, the China Railway Construction Corporation. Chinese banks provided $1.8bn of financing, with Nigeria putting in $500mn. Short report from Construction Review.
  • The Ajaokuta-Kaduna-Kano (“AKK”) Pipeline, an oil pipeline now under construction running north from the Atlantic coast in Nigeria, is going to be extended across the heart of the Sahara Desert, all the way to Algeria. This is a big deal, both technically and politically, as the finished line will cross three international state lines-- Nigeria, Niger and Algeria-- and conceivably be extended all the way to the Mediterranean, although that is not currently under discussion. Read about it here!
  • Tanzania and Zambia have agreed to build an "oil-products pipeline," designed to carry imported fuel from the Tanzanian port city of Dar es Salaam, across the country and into the mining region of mineral-rich, but land-locked Zambia. Reuters took notice!
  • A Chinese tire manufacturer will be opening shop in the mining region of northern Zambia, supplying the entire region from the Democratic Republic of the Congo to South Africa, according to this article in Xinhua.
  • China rehabilitating a technical center in Rwanda: Groundbreaking took place this week for a "facelift" on the Interated Polytechnical Regional Center. China has committed US$16m to the project, which will include a language center and more. Ironically, the original building was also built by the Chinese, only five years ago.
  • Kenya partners with China for hospital in rural Nyandarua County, 100 miles north of Nairobi. Kenya has signed US $42m deal with a Chinese healthcare delegation for construction of a hospital in Nyandarua County. This is in line with the Governor Francis Kimemia agenda of providing accessible health service sector that is preventive, curative, responsive, efficient and affordable. Report on Construction Review Online.
  • Egypt will spend almost US$4bn for a 100km monorail network, linking several cities to their New Administrative Capital, just east of Cairo. In a historic irony, the British Bombardier Transportation has been chosen as head contractor. The financing however is coming from China. Read more here!

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