China, Geopolitics, and the Global South
CONTENT: Posts: Power struggles in Kazakhstan: Putting out the fuse / Military coup in Myanmar 1: Triple Catch-22 for Beijing / The „Digital Silk Road“ in Central Asia (Guest post) // News: China’s Foreign Minister as a fire fighter / Military coup in Myanmar 2: Foreign investments // Reviews: ‚Less brown’: Two reports on Green BRI Investment.
The situation in Kazakhstan these days is rather obscure: Popular discontent and/or prelude to a ‘colour revolution’ and/or “foreign terrorists” and/or internal coup and/or ….? One thing, however, is clear: After Myanmar, Kyrgyzstan and other countries, they show once again how vulnerable China is. And the fossil economy plays a key role: Oil and gas remain explosive. More
Guest post: The „Digital Silk Road“ in Central Asia, January 13
In 2015, the People’s Republic of China proposed the so-called “Digital Silk Road” initiative (DSR) in 2015. The scale of Chinese investment is testament to the government’s immense interest in the project. According to data gathered by the International Institute of Strategic Studies, China is currently participating in digital infrastructure projects in around 80 countries, and has already invested some 79 billion US dollars in DSR schemes worldwide. More
Military Coup in Myanmar: Triple Catch22, January 26
One year after the coup in Myanmar, the brutality of the military regime is growing, but so is armed resistance. And civilian protests are also still going on. For Beijing, the situation is becoming increasingly uncomfortable: comments and assessments on the anniversary show that the Gordian knot has, if anything, become even more tangled. More
News
Quote of the Month
„The debate over whether sanctions or engagement would be the best way to influence the generals (in Myanmar – U.H.) has once again begun. There is, however, a simple answer to that question: neither is effective.“ Bertil Lintner, in: The Irrawaddy, 20 August 2021
China’s foreign minister as a fire fighter
It has been a good old custom for over thirty years for China’s foreign minister to make his first outbound tour of the new year to Africa. This time, in the first week of January 2022, this goodwill routine was more like a fire brigade mission. Besides diplomatic niceties and announcements of common intentions, Foreign Minister Wang Yi was confronted with issues that could affect Belt&Road.
For example, the Kenyan government confronted him with the desire to reduce the burden of debt servicing. This is because BRI projects such as the railway line from the port of Mombasa to the capital Nairobi are not generating sufficient revenue as promised. This may be partly due to Corona, but mainly to inadequate feasibility assessments. Also in Sri Lanka, an important building block of the Maritime Silk Road in the Indian Ocean, the government asked Wang Yi at a stopover on his way back from the Horn of Africa to restructure payments in view of an impending state bankruptcy. China is Colombo’s main bilateral creditor and Sri Lanka a much-cited example of the risks of China’s ‘debt diplomacy’.
But Beijing’s willingness to provide debt relief and/or new loans appears to be waning in the meantime. A possible new strategy is illustrated by a test balloon by Lin Minwang, professor at Fudan University in Shanghai: “Debt restructuring is a corporate act, and should operate according to market behaviour”. In other words, the over-indebted governments in Colombo, Nairobi and elsewhere should come to an agreement with the companies involved, and the Chinese government would be off the hook.
Creating peace
While in Kenya, China’s top foreign policy official also put forward the proposal for a peace conference in the Horn of Africa and announced that a special envoy from his ministry would be appointed to support it. Because the conflicts in the region threaten China’s investments and Belt&Road plans: Eritrea, which joined BRI last November and offers an alternative to the harbour in Djibouti with its ports on the Red Sea, and Ethiopia, which is supposed to be a model for transferring Chinese economic successes to Africa, are embroiled in the war over the Ethiopian province of Tigray. Standing shoulder to shoulder, Wang assured both governments of Beijing’s support against the Western sanctions imposed on them because of this.
Wang Yi’s offer as a peacemaker indicates a cautious turn in China’s foreign policy, says He Wenping, Senior Fellow at the Charhar Institute, which is “committed to promoting progress in China’s foreign policies”: The move is “a first in China’s Africa diplomacy, fully demonstrating that it is now more proactive and dynamic than ever”.
But Beijing is not relying on diplomacy alone. A symbol of the belief that economic development and political stability go hand in hand is the fibre-optic submarine cable network PEACE (Pakistan East Africa Connecting Europe) being promoted by the internet giant Huawei, which will stretch from Pakistan to East Africa and through the Red Sea to France. With a length of 12,000 kilometres, this ‘peace project’ is a core component of the Digital Silk Road, which aims to improve infrastructure for investors in the region and reduce dependence on US cable networks.
Moreover, Beijing is experiencing mounting headwinds in the geopolitical competition for Africa to push back its influence: The US and Europe are developing their own competing projects to Belt&Road with B3W and Global Gateway, while India and Japan are in turn building bridges such as the Asia Africa Growth Corridor. With the proposal for a ‘China-Indian Ocean Council’, which Wang Yi brought along in his luggage, Beijing is trying to integrate the countries into a new regional cooperation format, including the other two stops on this trip, the island groups Maldives and Comoros in the Indian Ocean.
It is not yet clear which countries Beijing has on its list, but with such a declaration of intent alone, it is once again snubbing India, which regards the Indian Ocean, including eastern and southern Africa, as its region of influence. But more and more countries are flirting with Belt&Road and China, or even trying completely different, adventurous options: Bangladesh, for example, is according to Russia Briefing distancing itself from the South Asian community by applying for membership in the Russian-dominated Eurasian Economic Union (EAEU).
Translated with www.DeepL.com/Translator (free version)
One year after the coup: Foreign investors in Myanmar
It is being hailed as a major success of public pressure by human rights organisations: Just in time for the anniversary of the military coup, French energy giant Total and US corporation Chevron declared their withdrawal from the Yadana natural gas project, citing the ‘deterioration of the human rights situation’ or rather vaguely referring to the “circumstances” in Myanmar respectively. This is a major blow to the junta, as natural gas is Myanmar’s biggest foreign exchange earner. Thailand’s national energy company PTT takes 70 per cent of the production.
Since the coup, quite a number of foreign investors have left the country, stopped their activities or shut down. This is because the military’s seizure of power not only damaged their reputation, but also their operations. Among them are Benetton, H&M and Metro. The Japanese brewer Kirin declared to withdraw from the joint venture with the military-owned Myanmar Economic Holdings Limited (MEHL) group. Thailand’s Amata real estate group announced it had halted work on a major project in Yangon, the largest city. About 11 per cent of more than 180 Japanese companies surveyed responded that they had suspended operations because of difficulties, the Japan External Trade Organisation (JETCO) reports.
But that is not the whole picture. The same report says that about 70 percent of the Japanese companies surveyed are counting on continuing or even expanding their activities in the next one or two years. Many companies from other countries are also waiting to see if the situation will improve, even if business is worse at the moment. This is because even a withdrawal would be complicated and would cause considerable costs and losses in some cases.
The junta, on the other hand, is trying to spread optimistic news: The Directorate of Investment and Company Administration, DICA, announces that Myanmar has received direct investments of more than 3.76 billion US dollars between October 2020 and June 2021, including from companies in the Thilawa Special Economic Zone. Among them were reportedly at least 13 Chinese companies with 172 million US dollars. In any case, it looks like large Belt&Road projects are continuing. But also investors from Vietnam, Thailand or Singapore do not seem averse to staying or even expanding despite the uncertain investment and business environment.
For most companies, the elimination of democratic conditions and human rights violations seem to count less for their decisions. The values guiding their actions are rather the prospects for profits. One year after the coup, however, the situation does not look as if the ‘business climate’ is improving any time soon. Perhaps this will bring new momentum to the divestment trend, which now has two new ‘flagships’ with Total and Chevron. Whether a withdrawal is made out of fear of scratches on the image or out of business calculation is ultimately irrelevant.
Translated with www.DeepL.com/Translator (free version)
Reviews
‚Less brown’: Green BRI Investment Reports
It is difficult to say whether and to what extent the Green BRI Center’s analyses and reports are influenced by wishful thinking or proximity to government institutions. In any case, it consistently and clearly strives to present Belt&Road in a good, green light. The institute in Beijing is only one of the many Chinese ‘green’ institutions within the framework of Belt&Road. It is part of the International Institute of Green Finance (IIGF) at the Central University of Finance and Economics in Beijing. This again is a member of the Belt and Road Initiative Green Development Coalition (BRIGC), established in 2019 and supervised by the Chinese Ministry of Ecology and Environment. Besides Chinese organisations, many international organisations have joined it like Environmental Defense Fund (EDF), International Institute for Sustainable Development (IISD), International Union for Conservation of Nature (IUCN), the UN Environment Programme UNEP, the World Business Council for Sustainable Development, the World Resources Institute (WIR) and the World Wide Fund for Nature (WWF).
The Center’s report ‘China Belt and Road Initiative (BRI) Investment’ from last summer at least provides a condensed overview of the figures for the first half of 2021, but also places them in the trend since 2013, especially in the energy sector. The data comes partly from first-hand sources such as the Chinese Ministry of Commerce (MOFCOM), partly from databases such as the China Global Investment Tracker of the American Enterprise Institute. They show a sharp decline: “Chinese investments in the 140 countries of the Belt&Road show that overall financing and investments in the BRI in the first six months of 2021 was about US$19.3 billion. This is a decline of 32% compared to the second half of 2020 and a decline of 29% compared to the first half of 2020.“ The report sees reasons for this in the Corona pandemic and ensuing debt service problems, among others. Average deal size is getting smaller, dropping from US$1.3 billion in 2018 to US$0.55 billion in 2021; Various Asian and some Middle Eastern countries could increase Chinese funding during the first six months in 2021 while Non-BRI countries saw a stronger decline in Chinese investments. Additionally, the paper compares the BRI investment with global investments and gives a listing of major Chinese companies participating.
One strong focus of the paper is the financing of fossil fuels: Oil-related finance and investments in the BRI have been US$1.4 billion in the first half of 2021 alone (compared to US$1.9 billion in all of 2020); While most energy investments went in roughly equal parts into gas, followed by oil and hydropower, no coal projects received financing or investments in the first half of 2021. But surprisingly, green energy finance and investments dropped by 90% compared to 2020, while Chinese BRI financing accelerated particularly in the logistics sector.
In another report from mid-2021, published three months before Xi Jinping’s announcement that China would not build new coal-fired power projects abroad, the Green BRI Center did another greening of Belt&Road: In ‚Coal phase-out in the Belt and Road Initiative’ author Christoph Nedopil Wang notes a significant decline in Chinese-backed coal power since 2014. Some of the highlights, which he lists:
- Between 2014 and 2020, about USD160 billion of Chinese-backed coal-fired power plants were being planned or announced outside of China;
- Yet, of those projects, more than USD65 billion have either been shelved, mothballed or cancelled, with many more projects seeing delays in construction;
- Since 2015, 23 Chinese-backed coal-fired plants were shelved and a further 14 were cancelled, while 20 new Chinese-backed coal-fired power plants went into operation;
- Of the 52 Chinese-backed coal-fired power projects announced since 2014, only 1 has gone into operation;
- No new Chinese-backed coal-fired power plant was announced in 2020.
The report primarily mentions cost considerations as reason for this: „The coal-exit is likely driven by increasing competitiveness for solar- and wind-power: solar-power costs have dropped by 80% in 10 years; At the same time, financing cost for coal-fired power plants have increased by 38% compared to 10 years ago, while 64 carbon pricing initiatives around the world make coal-financing ever less competitive; Recent biddings show that the price of electricity from new coal-fired power stations is about 500% more than from new solar-power plants.“ If this is correct one wonders, why in spite of such advantages green energy finance and investments in the first 6 months of 2021 dropped by 90%.
The value of the report lies primarily in the fact that it provides data that can be a basis for further analysis and verification. And thus for a more comprehensive assessment of how green BRI actually is.
Update on BRI investment 2021, February 3, 2022
In the meantime, the BRI Investment Report for the whole of 2021 has also been published, this time published by the Green Finance and Development Center (GFDC). It confirms some of the trends of the first half of the year reported earlier: No coal projects received financing or investments in 2021, oil-related finance and investments in the BRI expanded and there has been a shift of BRI engagement towards BRI countries, especially in African and Middle Eastern countries. Other figures got a face lifting: A “sharp decline” in BRI finance and investments as a whole the first half of the year turned into a „stabilisation“ at around US$ 60 billion and green energy finance and investments in the BRI slightly increased to a new high in 2021 at US$6.3 billion instead of a drop by 90% in the first six months of 2021 compared to the same period in 2020.
Christoph Nedopil Wang, Coal phase-out in the Belt and Road Initiative’: an analysis of Chinese-backed coal power from 2014-2020. IIGF Green BRI Center, Beijing, June 2021
Christoph Nedopil Wang, China Belt and Road Initiative (BRI) Investment Report 2022, ders. February 2, 2022, Green Finance and Development Center, Shanghai, February 2, 2022