Newsletter 31/May-June 2024

Renovation of the World Order

Uwe Hoering, June, 2024

“Many of the current institutions and principles for international governance were designed for a world very different from today’s,” notes an UNDP report on the “Rise of the South”. However, many defenders of the old world order are unwilling to accept the necessary adjustments to a changed world. And so the resulting conflicts escalate. But the need to mediate these conflicts in a changed international order is widely accepted. Zum Beitrag (in German)

Eastern Wind in Central Asia

Uwe Hoering, June 30, 2024

East wind in Central Asia The primary target of infrastructure development in Central Asia is no longer Europe. The war in Ukraine and the ongoing geopolitical bloc formation have shifted the focus to the region itself. For Russia, India, Iran and China, this allows them to further diversify their supply and trade relations and thus reduce their dependence on Western sanctions of all kinds. Zum Beitrag (in German)

Invitations to the 9th ChinAfrica-Forum

Preparations are underway for the ninth summit of the Forum on China-Africa Cooperation (FOCAC), which is scheduled to take place in Beijing from 3 to 8 September 2024. Chinese diplomats have distributed invitation letters to African heads of state. However, official confirmation from the Chinese side is still pending. At FOCAC summits, which take place every three years, the Chinese government makes funding pledges, mainly for infrastructure projects, with a recent downward trend: in 2015 and 2018, the equivalent of 60 billion US dollars was announced, in 2021 it was only 40 billion. In view of widespread criticism of projects and debt and the increased competition with Western financing offers, Beijing has promised to focus more on ‘high-quality development projects’. Observers therefore expect cooperation to be extended to other areas such as agriculture, industrialisation and local processing of raw materials.

BRICSplus: Further candidates for membership

The attraction of BRICS in the geopolitical poker game for the stronger battalions continues unabated, at least at the level of announcements: as reported by the China Global South Project (CGSP), the Foreign Minister of Bangladesh, Masud Bin Momen, expressed the aspiration to join BRICS during recent talks in Beijing.

Thailand’s government is already one step closer to deciding to apply for membership and, if successful, would be the first member from Southeast Asia. At least 21 countries have reportedly expressed an interest in joining the club of ten. The most recent BRICSplus meeting of foreign ministers in mid-June in Nizhny Novgorod, Russia, was attended by representatives from Turkey and Cuba, among others. Russian President Putin once again announced the establishment of an international payment system that is independent of the US dollar. Other topics included standards for artificial intelligence and trade harmonisation. According to editor-in-chief Eric Oleander of CGSP, the bloc is less a comprehensive alternative to Western institutions than “a powerful warning to elites in Washington, London, Paris, Brussels, and Tokyo that a lot of people are fed up with the status quo.”

See also the post ‚Renovierung der Weltordnung’, June 20, 2024

China’s new Man in the World Bank

The appointment of Wencai Zhang as Managing Director and Head of Administration of the World Bank Group in mid-February 2024 is grist to the mill of criticisms that multilateral institutions are being infiltrated by China. He is responsible for the institution’s strategy, planning, budget, information technology and sanctions systems. Like his predecessor Yang Shaolin, he would thus assume a key position in the approval of World Bank projects. Wencai Zhang previously worked at the Asian Development Bank (ADB), the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB), among others. China is the third-largest shareholder in the World Bank behind Japan and the USA, the latter of which traditionally fills the post of president – so it will be some time before China can capture it.

Readings

The Belt and Road and dynamics of structural transformation

Headlines about China’s plans, agreements and projects are flooding the media channels. However, there are remarkably few analyses of what has actually resulted from them, what contribution they actually make to structural transformation (ST), what consequences they have and what may have caused them to fail. As an attempt to close this information gap, Linda Calabrese, Lorena Lombardozzi and Rhys Jenkins edited a special issue of The European Journal of Development Research on ‘China’s Belt and Road Initiative and dynamics of structural transformation: „This project stemmed from our observation that while there is a lot of discussion about the Belt and Road Initiative (BRI) and international development, they rarely engage meaningfully with key development themes – a gap we wanted to fill.“

Drawing on case studies from Africa (Angola, Ethiopia, Nigeria), Sputheast Asia (Malaysia), Central Asia (Kyrgyzstan, Uzbekistan, and Kasakhstan) and Latin America (Bolivia), the authors of the seven articles within this special issue „explore the drivers and channels through which the BRI can promote structural transformation, investment, development finance, knowledge transfer and upgrading. They also assess whether the BRI has achieved or fallen short in delivering transformation in host countries, taking into account the political economy dynamics at play.“

As many of these countries are commodity producers and exporters, the impact of BRI investments on the resource sector is a focus of the contributions. Since the early 1970s, these countries have been striving to free themselves from post-colonial dependence on industrialised countries through a New World Economic Order (link), for example by means of local processing and integration into global value chains. The infrastructure expansion through Belt and Road is creating the preconditions for this – but nothing more. It is China’s own interest in the supply of raw materials, be it fossil fuels or strategic minerals, for the processing of which it has long since established a dominant position, that plays a central role in such a system transformation. At the same time, there are increasing indications that Chinese investments are building up processing industries in the countries of origin. The success of these investments will also determine the significance of China in countries of the Global South – whether it accelerates neo-colonial ‘extractivism’ or can open up development prospects as promised.

China is playing a somewhat ambivalent role here: „Infrastructure development, central to the Belt and Road Initiative (BRI), is crucial for facilitating structural transformation. However, numerous critics contend that the initiative serves as a tool for China to engage in debt-trap diplomacy, which fails to deliver actual development. Therefore, assessing whether BRI projects will facilitate the necessary structural transformation in these countries requires meticulous analysis. Given the extended project cycle typical of infrastructure development, evaluating the overall socioeconomic impacts of the BRI is challenging. Nonetheless, these projects are likely to be implemented as part of the expansion of China’s existing model for overseas infrastructure projects. This model is characterized by a reliance on concessional loans and credit facilities for financing, and state-owned enterprises as contractors.“

Weiping Li and Saite Lu employ econometric analysis to assess the impacts of China’s existing infrastructure projects on ST at the macro level in Africa. „Contrary to the debt-trap diplomacy narrative, our findings, based on panel data and staggered difference-in-differences analysis, indicate that Chinese projects have positively impacted multiple aspects of Africa’s structural transformation process.“

Christina Wolf also „looks at the impact of infrastructure projects in Africa. She analyses Chinese construction projects in Angola, Nigeria and Ethiopia, the countries that registered the highest cumulative value of construction projects completed by Chinese firms in sub-Saharan Africa between 1998 and 2018. Wolf’s article also shows that domestic political economy dynamics determine the nature of the accumulation processes and thus affect the ST process. In each of the countries, the domestic distribution of power shaped the way the gains were sustained and distributed, demonstrating the importance of industrial and other economic policies and the maintenance of political stability.“

Yunnan Chen’s article on railways in Ethiopia „finds that backward and forward linkages from Chinese rail projects have been weak. While Chinese development finance brings a more holistic package of technology transfer, this has also been limited, posing barriers to long-term capacity building and autonomous infrastructure development. The failure to achieve all the potential benefits from the projects in terms of stimulating industrialization and ST reflects specific policy decisions by the Ethiopian government regarding local content, the low level of local technological capabilities and political instability and civil conflict.“

Linda Calabrese „takes a broad view of Chinese involvement, including loans and Foreign Direct Investment, FDI, as well as projects specifically identified as part of the BRI in her study of the Kyrgyz Republic. She finds that, „while the BRI could potentially support industrialisation, in practice it has failed to do so. The reasons for this are to be found in the role played by the Kyrgyz government which, in contrast to the government of Ethiopia, lacked a strong commitment to industrialization.“

Lorena Lombardozzi study of the Uzbek gas industry „considers whether the BRI has led to product, process and institutional upgrading. The BRI’s impact in Uzbekistan’s gas sector has come mainly through Chinese loans and contractors and increased trade with China rather than FDI. As a consumer, China has reconfigured the geo-economic matrix around gas, which might change regional power relations. As a lender and producer, China contributes to national infrastructure development. However, the author concludes that the BRI and economic engagement with China has only contributed marginally to organisational, skills and product upgrading in the Uzbek gas sector.“

In the case of Malaysia, Guanie Lim and Andrew Kam „find that Chinese foreign direct investment has been focused on the tertiary sector. This has the adverse effect of placing less emphasis on industrialisation. In other words, economic engagement with China has prompted ST in Malaysia, but this is geared towards an increased emphasis on services in the economy. Moreover, the services-heavy nature of Chinese investment translates to a low economic multiplier effect, while creating negative social impacts in the country.“

Nicholas Jepson and Oyuna Baldakova, „using the ‘varieties of capitalism’ framework, look at the extractive sectors in Kazakhstan and Bolivia to ask whether engagement with Chinese state capital creates greater space for industrial policy. As both Kazakhstan and Bolivia are making efforts to move into domestic downstream processing of extractive commodities, the authors find that Chinese state capital is more accommodative of local aspirations for extractive value addition than other sources of finance.“

An overarching conclusion of the three editors: The contribution to Systemic Transformation is not only determined by the Chinese projects, but also – or even more so – by internal factors. „These studies show that the patterns of ST are heavily context- and time-specific, with local political economy dynamics playing a key role. By the same token, the studies highlight the importance of local agency in the ST process. It is worth noting that in some instances, the BRI and economic engagement with China do not support ST, but rather create hindrances to the process.“ And: „The BRI has to be studied for its relational dimension rather than a top-down force in which the recipient countries hold a neutral position. Indeed, the host countries’ internal dynamics have occupied a central role in the analysis of the impact of BRI for ST. Nonetheless, within this diversified and contested political context, findings also suggest that there is more than one channel in which the BRI could support ST: either by promoting structural change, and in particular industrialisation, or by allowing technology transfer, capability building and upgrading to take place. Hence, it is important to consider the political and institutional characteristics that shape Chinese operations on the ground.“

Linda Calabrese, Lorena Lombardozzi and Rhys Jenkins, The BRI and Structural Transformation, The European Journal on Development Research, Volume 36, issue 3, June 2024

All the articles will remain free to access for around a month

Gegen den Strich gelesen

China bedroht Europa!

Die Einordnung der komplexen Rolle Chinas für die europäische Wirtschaft und Politik als “Partner, Konkurrent und systemischer Rivale“ ist längst fester Bestandteil der Kommentare. Ein neuer Bericht des Berliner Think tanks merics ergänzt jetzt die Dreifaltigkeit durch „the complex security threat to Europe and its transatlantic partners“. Begründung dafür ist das „China-Russia Alignment“. Dadurch wird die Bedrohung Europas durch Russland, die bekanntlich Standard-Rechtfertigung für die Russland- und Ukrainepolitik ist, erweitert. Die Argumente dafür: Pekings Beistand für Russland, indem es eine wirtschaftliche Rettungsleine bietet, Hilfe, die westlichen Sanktionen zu umgehen, und “unbeschränkte Exporte von kritischen Gütern mit doppeltem Verwendungszweck ” sowie “verstärkte militärische Zusammenarbeit”.

Die materielle Substanz dieser Vorwürfe ist allerdings dürftig: Beijing hält sich mit offenkundiger Umgehung der Sanktionen deutlich zurück. Es bestehen erhebliche Differenzen mit Moskau, da der Angriff auf die Ukraine Chinas eigenen Zielsetzungen einen kräftigen Strich durch die Rechnung gemacht hat und tiefgreifende Konflikte über die jeweilige Rolle in Zentralasien bestehen. Und die militärische Kooperation ist 2023 und 2024 erheblich zurückgegangen, wie im Bericht selbst gezeigt wird. Geschenkt, dass Chinas Bemühungen, im Konflikt zu vermitteln, gelinde gesagt wenig wirksam zu sein scheinen. Doch es ist gegenwärtig wenig wahrscheinlich, dass Beijing einen offenen Krieg Russlands gegen Europa gebrauchen oder gar unterstützen würde.

Die Zielsetzung des Berichts ist explizit die Empfehlung, „revising Europe’s view of China to acknowledge the security threat it represents“,  und damit eine weitere Aufrüstung Europas und die militärische Arbeitsteilung mit den USA, die explizit in diese postulierte Bedrohung einbezogen werden, zu rechtfertigen. Anders gesagt: Während der Konflikt in Asien durch die wechselseitigen Provokationen zwischen Beijing und der philippinischen Regierung gerade eskaliert, würde damit die Westflanke des Konflikts ausgebaut – und damit die Möglichkeit eines Zweifrontenkriegs gegen China. Europa sollte bei diesem geomilitärischen Kalkül im eigenen Interesse nicht mitspielen!

In diese Mobilisierungsstimmung passt dann auch die Rechtfertigung für den deutschen Militäreinsatz in der Pazifikregion beim Online-Medium Table.Media am 27. März in der Kategorie ‚Analyse Geopolitik’.  Demnach vertritt Deutschland damit „seine politischen und wirtschaftlichen Interessen“, wie bereits mit der Abenteuerfahrt in den Pazifik, was durch den Verweis unterstrichen wird, dass angeblich „Reedereien eine Marinepräsenz in der Taiwanstraße“ fordern würden. Abgesehen davon, dass die Handelsschiffe weit entfernt von der Meerenge zwischen Festlandchina und Taiwan schippern, wäre eine derartige Präsenz wohl wenig effektiv, wie der Kurzzeiteinsatz der deutschen Marine im Roten Meer gezeigt hat. Erst Recht würden sich China und Nordkorea, das noch überhaupt nicht als Bedrohung deutscher Sicherheitsinteressen oder der ‚Freiheit der Seefahrt’ hervorgetreten ist, durch diese „Scharfe Warnung“ kaum beeindrucken lassen. Auch hier geht es um Aufrüstung, denn dass „die personelle und materielle Substanz“ der Bundesmarine größere Einsätze dauerhaft kaum schultern kann, ist der Autorin auch klar. Und es geht darum, eine Militarisierung als selbstverständlich darzustellen.

China-Russia Alignment: A Threat to Europe’s Security. A report by MERICS, Chatham House and German Marhall Fund of the United States (GMF), June 26, 2024

Scharfe Warnung an China und Nordkorea: „Indo-Pacific Deployment: Bundeswehrpräsenz sendet Signal an China und Nordkorea“, Table.Media am 27. März

Quotes

War in Gaza: China wins!

„All China has to do is sit back and make the occasional broad statement on Global South solidarity in the face of Western double standards. The champions of the liberal international order will take care of the rest.“

Cobus van Staden, Global China South Project, May 31, 2024

Who makes the rules?

„Global governance, never really settled, has recently been having an especially hard time. There are deep asymmetries, with the powerful countries not only making the rules but also breaking them almost at will, which raises the question: Do we even have a rules-based system, or is it just a facade?“

Joseph E. Stiglitz, Nobel laureate and a former chief economist of the World Bank, Foreign Policy, 28 April 2024,

China’s Hand in Kanaky?

„It’s a lot easier for some commentators and large swathes of the French public to believe a resource-fueled foreign conspiracy is responsible for what’s going on in New Caledonia rather than to acknowledge that colonialism in the 21st century is unacceptable.“

Eric Olander, Chief editor of Global China South Project, about reports in France, that Beijing would instigate the conflict in New Caledonia.