Newsletter February 2022

CONTENTS: Posts: Going out responsibly / Empire building with DCS? / China imperial? / Ukraine: Wenn Russland und China zusamm’ marschier’n … // News: Green BRI with Nuclear Power / Nepal: An offer, that can’t be declined // NEW: Protests against Belt&Road: Hun Sens Airport in Cambodia / Conflicts in Peru’s copper mining // Reviews: A New Development Paradigm in the Making?

Posts

Empire building with DCS?

February 4, 2022: In the West, China is currently seen as an important driving force behind the global economic recovery after the Corona crisis. But can it continue to fulfil this role – or is “the future of globalisation with China at stake”, according to the European Chamber of Commerce in China? The background to this apprehensive question is the “new economic model” that state and party leader Xi Jinping announced in May 2020, the ‘Dual Circulation Strategy’, DCS. More

China imperial?

3. Februar 2022: Im Westen gilt China derzeit als Zugpferd der weltwirtschaftlichen Erholung nach der Coronakrise. Doch kann es diese Rolle auch weiterhin ausfüllen  – oder steht „die Zukunft einer Globalisierung mit China auf dem Spiel“, wie die dortige Europäische Handelskammer meint? Hintergrund dieser bangen Frage ist ein wirtschaftspolitischer Strategiewechsel in Peking: Bereits im Mai 2020 kündigte Chinas Staats- und Parteichef Xi Jinping ein „neues Wirtschaftsmodell“ an. More

Going out responsibly

February 8, 2022: As Chinese companies go global, allegations of social and environmental violations related to their activities overseas have surged in number alongside China’s expanding economic footprint and influence across continents and sectors. A recently published report analysed publicly recorded allegations of human rights abuses linked to overseas Chinese business operations between 2013 and 2020. More

Ukraine: „Wenn Russland und China zusamm’ marschier’n, kann Österreich kapitulier’n“

24. Februar 2022: Bereits im vergangenen Jahrhundert beschrieb der Chansonier und Kabarettist Georg Kreisler in einem seiner schwarzhumorigen Lieder die gegenwärtige Stimmungslage in Europa: „Wenn Russland und China zusamm’ marschier’n, kann Österreich kapitulier’n“. Die Konstellation ist in der Tat der Albtraum aller Apokalyptiker: Die beiden neuen Reiche des Bösen, Russland und China, stehen in der Ukraine-Frage anscheinend Seit’ an Seit’, in „grenzenloser Freundschaft“. More

News

Green BRI with Hualong One

Part of a strategy to engage with Latin American countries by China is using its advanced clean renewable energy. It has already made significant investments in the sector. China’s top turbine maker Goldwind has acquired five wind farms, which are already in commercial operation. The Cauchari solar plant, which opened in 2020, financed to 85 per cent by the Export-Import Bank of China, could power mining operations for lithium and magnesium, of which large deposits are close by. Giant Chinese battery company Ganfeng already has foothold in the door to use it.

For China, renewable, clean energy includes nuclear power plants, which is one of the key pillars of BRI, marketing China’s own advanced technologies to the global market. End of January, the China National Nuclear Corporation (CNNC) signed a contract with Nucleoeléctrica Argentina to construct the Atucha III nuclear power plant. The project with a total investment of USD 8 billion will be using China’s Hualong One (HPR1000) reactor, a pressurised water reactor. Construction is expected to begin at the end of this year. Financing comes from Chinese banks. Days later, Argentina agreed to join BRI, being the first major Latin American country to do so, und announced that China would finance about $24 billion in infrastructure projects.

But some Chinese energy projects have already come up against opposition from residents and environmental groups. One of them is an earlier plan to build a Hualong One nuclear power, which was opposed by civil society groups and finally banned by a law passed by the province. A US$ 4.7 billion hydroelectric project in Santa Cruz, in the South, has been widely criticized for its negative environmental and social impacts, till the financing agreement was suspended and work on the dams has been halted. Obviously, local residents’ opposition can be quite strong in Argentine. And it possibly could also stop the Atucha III nuclear plant.

See: Echo, Xie, China is building a nuclear power plant in Argentina as it looks to Latin America. In: South China Morning Post, February 13, 2022

An offer, that can’t be declined

On Feb. 10, the Kathmandu Post reported that Donald Lu, the U.S. assistant secretary of state for South and Central Asian affairs, has sent a warning to lawmakers in Nepal: Washington will initiate a review of relations with Kathmandu if it doesn’t ratify a $500 million infrastructure assistance package signed in 2017 with the Millennium Challenge Corporation. Of course, this assistance is not altruistic, neither are similar Belt & Road projects. MCC clearly states that its grants are intended to “enhance American interests” and “create an enabling environment for private sector investments”.

For nearly five years, political leaders in Nepal have refused to ratify the grant for fear that it would ensnare Kathmandu in Washington’s deepening competition with Beijing. The grant proposal has triggered protests in Kathmandu, Nepal’s capital. Among other points, there is the suspicion of ‘dual use’, of civilian and potential military use of the planned transmission lines and improved roads in Nepal. Calls for amendments are strictly rejected by the USA with the reference to the fact that the treaty was concluded five years ago.

For some time now, the USA has been trying to shore up ties with Nepal to counter China’s growing influence in the country, which stems in great part from Beijing’s Belt&Road, signed by Nepal in May 2017. Now they seem to be running out of patience: Assistant secretary of state Lu said already earlier during a November 2021 visit to Kathmandu that the United States would “spend the money in some other country” if Nepal doesn’t want the grant. But his more recent comments reflect a harder line, suggesting that Washington hopes to pressure Kathmandu into ratifying the assistance package. Deadline for such a ratification is end of February 2022, combined with warnings of overall implications for bilateral ties with Nepal and multilateral aid due to ‘failure’ to honour agreements made.

See: Anil Giri, Top American offical says US will review Nepal ties if MCC compact is not ratified. In: Kathmandu Post, February 10, 2022

NEW: Protests

There are many protests against China’s economic and political presence in countries along the Silk Roads. However, reports about them are rare and mostly limited to local media. Therefore, it is not easy to verify them in every case. Labour disputes are regularly reported on by the Forum Arbeitswelten blog. This new section will highlight protests and resistance by other groups of the population as well. They are in many ways troublesome, if not dangerous, for Beijing.

Hun Sens Airport in Cambodia

It is a typical BRI project: a major international airport, one of the largest in the world in terms of area. It is designed by a star architect (Norman Foster), built by Chinese construction companies (including Metallurgical Corporation of China (MCC). The estimated cost is 1.5 billion US dollars, financed by Chinese development banks (China Development Bank). When completed, it will probably be called Hun Sen International Airport. However, there is still resistance. The local population is protesting against resettlement and meagre compensation, which is supposed to be only one tenth of the market value. Police and military are deployed to secure the earthworks that have begun.

See: Environmental Justice Atlas

Conflicts in Peru’s copper mining

The Las Bambas copper mine in Peru has already been blocked for a total of 430 days since it opened in 2016. The country is the world’s second largest producer of copper, which is important for renewable energy systems, among other things. After the announcement of new roadblocks, negotiations between local communities and the mining company MMG, which is controlled by the state-owned China Minmetals Corporation, have dragged on for months. Among other things, the protesters complain about environmental damage caused by the copper transports and demand income opportunities as subcontractors. There is similar resistance against other mining companies.

See: China’s MMG faces Peru whack-a-mole as mining protests splinter. By Marcelo Rochabrun, Reuters, February 16, 2022

Reviews

A New Development Paradigm in the Making?

Advanced railway lines are flagship projects of Belt&Road, that Beijing likes to promote financially because they promise economic development and political prestige at the same time. While both of these aspects are controversial, they are also difficult to verify due to a lack of sufficient information. The journal World Development has published two studies of four prominent examples of such infrastructure projects, two in Malaysia (East Coast Rail Link (ECRL)) and Indonesia (Jakarta-Bandung High Speed Rail (HSR)), the others being the railway line in Kenya (from the port of Mombasa to the capital Nairobi) and the one from Djibouti on the Red Sea to the Ethiopian capital Addis Ababa. The focus is on the question as to how far these projects are sustainable and fulfil corporate responsibility requirements, “guided by the rule of law and good governance standards” and “in light of the regulatory framework of the Chinese Central government and host governments”.

The two projects in East Africa have been completed by now in record time, in South East Asia they are still in an early stage. To the extent that this is possible given the limited access to information, the two papers have gathered a lot of material. They are primarily concerned with the extent to which local conditions and political circumstances in the respective countries influence implementation.

In Malaysia, with a strong central government (“concentration of authority”), negotiations went faster and smoother, and more favourable contract conditions could also be secured in renegotiations. In contrast, the highly fragmented institutions of the Indonesian state made cooperation difficult, and the diversity of interests caused delays: In this case, “checks and balances, while ideal, may come at the price of project implementation”.

Although the Chinese government is trying to improve corporate social responsibility (CSR) of economic actors abroad, according to the study on the two projects in East Africa, there seems to be little awareness among Chinese financial institutions and state-owned enterprises about the rules and regulations of their government. Therefore, civil society in Kenya, “which led Chinese contractors to source and train more local workers, for example”, and organised labour in Ethiopia had a central role in balancing profit maximisation with China’s reputation. “CSR success or failure thus depended on host-country regulations, institutional frameworks, and willingness to allow civil associations a voice.”

The attempt to answer the question of a “new development paradigm” on the basis of the analysed railway projects, however, remains stuck in the detailed analysis. A basic flaw is to regard the Belt&Road projects merely as an instrument of development cooperation, and to leave out competing interests and power inequalities. The conclusion to the hypothesis of “adaptive governance” (Carrai), which runs through the contributions, according to which Chinese actors adapt flexibly to local conditions, regulations and influence groups, is relatively trivial: “A number of findings suggest that the levels of development, institutional capacity and governance of recipient countries have a significant bearing on the final developmental outcome”, and “evidence indicates that the absence of consistent governance standards from the outset and lack of monitoring mechanisms is likely to undermine BRI’s development impact in the long run”. What this adaptation actually looks like remains very unspecified, but the manifold information and questions raised provide clues for further research.

Maria Adele Carrai, Adaptive governance along Chinese-financed BRI railroad megaprojects in East Africa. In: World Development, Vol 141, May 2021

Guanie Lim, Chen Li, Emirza Adi Syailendra, Why is it so hard to push Chinese railway projects in Southeast Asia? The role of domestic politics in Malaysia and Indonesia. In: World Development, Vol. 138, February 2021

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