Newsletter 8/December 2021

CONTENTS: Posts: Dual Circulation Strategy: China’s „new development model“ / Numbers mystique at ChinAfrica Forum // News: Europe’ response to Belt&Road: Global Gateway / 20th Anniversary of China’s accession to the World Trade Organisation / Debt debate: Highway to Disinformation? / Frigate ‚Bayern’ demonstrates to Beijing where the hammer is hanging // Readings: Changes in Beijing’s economic involvement: Adaptation and Agency.

Blog Posts

Numbers mystique at ChinAfrica Forum

If the 8th Forum on China Africa Cooperation at the end of November was an indicator of the intensified competition between the United States, Europe and China for Africa, Beijing kept a fairly low profile. The limited media attention given to the meeting, which was scheduled only at the ministerial level, gives the impression that most observers wanted to quickly and graciously spread the cloak of silence over FOCAC8 and its results. Although the meeting came up with all the key words of the Chinese development narrative: Partnership, Sustainable Development, Shared Future in a New Era, …. More

Dual Circulation Strategy: China’s „New development model“

With the ‘Dual Circulation Strategy’ (DCS), the government in Beijing has once again thrown a stone into the water to test the effects of the announcement. However, after a few critical articles, the international discussion has remained surprisingly quiet. Yet the deliberations could have far-reaching implications for further globalization and China’s leading role in it. More


Global Gateway: Europe’s response to Belt & Road

After the US government presented its own alternative proposal to B&R in July 2021 with the B3W initiative, which was backed by the group of Western industrialised countries (G7), the European Union has now followed suit: The ‘Global Gateway Strategy’ “stands for sustainable and trusted connections that work for people and the planet” and will focus on digital infrastructure and energy projects, especially hydrogen and battery value chains. For countries in the Balkans and Turkey, where the Trans-European Transport Network is to be expanded, and in Africa, the ‘to do list’ offers in particular transport infrastructure to contain China’s influence. In addition, there are health and education projects. Up to 300 billion Euros are envisaged for this purpose till 2027. As a contribution to the “systemic competition”, not only geopolitical and economic interests are to be considered, but also sustainability, democracy, human rights and the rule of law are to be promoted – currencies whose practical value is to some extent under threat in many Western countries themselves. How much fresh money will flow into the project also remains unclear: It will “provide an umbrella brand for the already extensive EU investment in infrastructure worldwide”, it says, in other words better coordination of existing projects. A few billion Euro in subsidies, money from the current EU budget and the EU Reconstruction Plan are promised – combined with the expectation that private investors will also participate. The first comments are rather cautious, speaking of a “paper tiger”, of “a step in the right direction” or of the expectation that the “EU will be judged on results, not the rhetorical repackaging of initiatives”.

20th Anniversary of China’s accession to the World Trade Organisation

The tour of the small museum in the Pearl River Bay northwest of Hong Kong, which commemorates the gunboat policy of the Western colonial powers and the heroic sacrifice of the defeated Chinese troops during the so-called Opium Wars in the mid-19th century, ends somewhat surprisingly with a huge photo on the occasion of China’s accession to the World Trade Organisation (WTO) in 2001 – a pointer to the fact: We are back to take up the fight with you – this time in economic battleground. A few years later, the capitalist countries of the West are at least battered with their own weapons. The 20th anniversary was therefore the occasion for numerous retrospectives on this historic revenge. Here is a more or less random small selection:

The journalist He Huifeng in the South China Morning Post, December 17, 2021: ‘China’s WTO membership reshaped the country and global supply chains, but progress belies a future rife with uncertainty.

The Chinese global TV station CGTN, December 15, 2021: ’20 years in WTO: China’s transformation into world’s second-largest economy’.

The neoliberal CATO Institute, December 9. 2021: ‘China Marks 20 Years in the World Trade Organization. We Should Celebrate It’.

Debt debate: A Highway to Disinformation?

In early summer, the news made waves that Montenegro was unable to meet its repayment obligations to China and therefore asked the EU for financial assistance (See: ‘My borrowers, your borrowers’). The China Africa Research Initiative (CARI) has now published a Briefing Paper that critically examines the media coverage at that time: ‘Montenegro, China, and the Media: A Highway to Disinformation?’ CARI Briefing Paper No 7/2021.

Update: ‘Bayern’ demonstrates to Beijing where the hammer is hanging

The frigate ‘Bayern’, which embarked on a mission of “symbolic significance” in early August 2021 (See: ‘Indo Pacific: Europe’s geopolitical ghost ride’), is now on its way back and has passed through the disputed South China Sea. In Singapore, the Inspector of the Navy, Vice Admiral Kay-Achim Schönbach, announced on 21 December an increased engagement of the German Navy in Indo-Pacific waters – subject to approval by the German government, he added. In order not to “come down with the hammer” right at the first deployment in that region after 19 years, Schönbach said, the frigate had refrained from a provocative passage through the strait between mainland China and Taiwan. But the next mission could be different. With the headline “Germany’s fight for security and prosperity now already begins in Southeast Asia”, the Swiss newspaper NZZ, in its report on the mission for ‘freedom of navigation’, recalls the parallel to the infamous announcement made by former Defence Minister Peter Struck in 2002 in the run-up to the Afghanistan mission: “Our security will also be defended at the Hindukush”.


Changes in Beijing’s economic involvement: Adaptation and Agency

A common Western narrative about Belt & Road revolves around the idea that Beijing is ‘buying’ the governments of the BRIs with its economic and financial offers and thus imposing its own plans on them. The result, the popular criticism goes, is that most countries and the people in them do not really benefit from China’s involvement, but become dependent. Many observers have long recognised that the reality is more complex. Two recent studies by the Carnegie Endowment for International Peace, which launched a research project on adaptive Chinese strategies that accommodate and work within local realities, show once again that Chinese engagement has learned to adapt to internal realities, resistances and national desires and thus, in return, opens up scope for development interests in the countries themselves.

Push to localise in Central Asia …

Dirk von der Kley and Niva Yau observe in their study ‚How Central Asians pushed Chinese firms to localize’, that there „has been a sea change in China’s economic involvement in Central Asia“. While fewer large-scale transport and electricity projects like coal-fired power plants are funded by Chinese government loans and hydrocarbon exports to China continue, there are a growing number of industrial projects that seek to make value-added products that can be exported. This change has been primarily driven by Central Asian states. The region’s governments have long pushed for industrial capacity building, including the upskilling of local workers. In addition, debt concerns in Kyrgyzstan in particular have made Chinese loans less attractive and less prevalent. Chinese firms have begun adapting to these demands. And they have tried to engage local communities to earn a social license for their overseas operations. The Central Asian Analytic Network (CAAN), says Paul Goble, a researcher with the Jamestown Foundation, confirms these changes and summarizes its own conclusions, “Chinese firms now are trying to build factories, to expand the reprocessing of raw materials and to modernize local agricultural enterprises.”

Van der Kley/Yau conclude: „The views that outside observers in Washington and elsewhere harbor of China’s infrastructure investments through the Belt and Road Initiative (BRI) in Central Asia are outdated and do not reflect how much Chinese firms and eventually the Chinese government have adapted to meet local needs.“

… and to revitalize the energy grid in Argentina

Similarly in Latin America, countries in the region have sought to direct some of China’s economic and financial resources to promote their own strategic sectors. Argentina illustrates this dynamic well, particularly in the energy sector, writes Juliana González Jáuregui. Argentinian government officials and business leaders have attracted Chinese investment and finance into renewables and other types of energy to promote Buenos Aires’s goals of taking a hybrid path to an energy transition. For its part, China has seized this opportunity to advance its own development goals and to participate in Argentina’s energy transition strategy.

Interestingly, Argentina’s is no BRI-country yet, still this lack of committed engagement with the BRI has not impeded the expansion of Chinese overseas investment and financing for renewables and other types of energy projects in the country. In a clear sign of political agency, the diplomatic outreach of key Argentinian national and provincial government officials, as well as corporate players’ push for local associations, has been central in the quest to increase Chinese engagement in Argentina’s solar and wind power sectors and in other alternative energy projects. These interactions have allowed Argentinian policymakers to help shape an adaptive partnership to strengthen the alignment between Chinese investments and Argentinian development objectives.

Admittedly, this engagement has at times encountered resistance due to environmental and social risks in certain localities. Even so, these concerns are part of the learning process and set a tone for future cooperation on energy projects. Thus, local tensions are pushing both Argentinian and Chinese actors to learn from the problematic impacts of some projects and do more to address local communities’ concerns jointly.

A “new development model”?

To some extent, the Carnegie Foundation’s research project seems to be somewhat naive. Not all countries are equally able to apply the same leverage on Beijing to adapt to their local conditions and perspectives. Moreover, for all its flexibility, China is not forgetting its own long-term interests, reminds Paul Goble. Adjustments are partly a response to Sinophobia and resistance to too much Chinese influence, which can jeopardise projects, as well as to financial risks from an increasing ‘overstretching’ of Belt&Road. For some time now, a trend can be observed that Chinese policy banks are embracing more conservative lending policies globally for infrastructure projects. Currently, these changes also fit into the “new development model” announced by President Xi Jinping in the early summer of 2020: the ‘Dual Circulation Strategy’ aims at a closer integration and coordination of domestic and foreign economic policies in order to secure China’s economic and thus political stability in the face of geopolitical tensions. (See Post: ‘China’s “new development model’)

Dirk von der Kley, Niva Yau, How Central Asians pushed Chinese firms to localize. Carnegie Endowment, October 15, 2021.

Juliana González Jáuregui, How Argentina Pushed Chinese Investors to Help Revitalize Its Energy Grid. Carnegie Endowment, December 2021.

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