China’s got some distance to cover

Paran Balakrishnan | Updated on March 09, 2018 Published on September 07, 2017

One Belt One Road The NASA perspective   -  YIUCHEUNG/shutterstock.com


Although China’s presence in the Asian scheme of things is growing, it’s still far from being the power it wants to be

Is it the grand visionary scheme of the century that will transform Asia? Or is it an overhyped dream of a government suffering from imperial overreach that will soon drown in its own $28-trillion and rising debt? Whichever way you look at it, China’s Belt and Road Initiative (BRI) is breathtaking in its audacity.

We may be tempted to scoff and say the Chinese are dreaming in Technicolor but take a look at Pakistan where 10,000MW will be added to the grid from Chinese or Chinese-aided power plants by March. Another 15,000MW is under construction or about to come off the drawing board. Chronically power-short Pakistan is now talking about an end to load-shedding in 2018. China’s looking at pouring $34 billion into Pakistan’s ailing power sector alone. The China-Pakistan Economic Corridor (CPEC) is the critical part of Chinese designs on Asia.

Enthusiastic Pakistan

Critics say China’s cash will turn into a debt trap but Pakistan’s leadership says it will give a needed fillip to a staggering economy. Pakistan’s enthusiasm for all things Chinese is such that a few years ago the government of Sindh province ordered that studying Mandarin be made mandatory in all schools. Unsurprisingly, this hasn’t worked out. Twist the globe slightly and follow the railway line the Chinese are pushing that may go all the way from Singapore to Malaysia and from there to Bangkok, and Laos, ending at Kunming, capital of China’s Yunnan province. If all goes to plan, China would like to build a further line west from Kunming to Yangon and another eastward to Ho Chi Minh City and then Phnom Penh.

Stopping in Malaysia, check out the Melaka Gateway in the south. Here, China’s looking at turning the town into a giant port in the Malacca Straits to rival Singapore. Closer home, partially state-owned China Merchants Ports Holdings recently grabbed a controlling stake in Sri Lanka’s huge Hambantota Port, pushing out the Sri Lanka Ports Authority. The Sri Lankans were arm-twisted into selling the stake after they couldn't meet payments on $8 billion borrowed for the port which has been a white elephant where, by one estimate, only 44 ships have docked between the beginning of 2015 and this July. Heading further into the Indian Ocean, China’s made its presence felt in the Maldives by building the country's main airport on Hulhule Island (after GMR was forced out). China’s also built a Male-to-Hulhule bridge.

When it comes to Chinese mega-projects, the blank spot on the map is, of course, India which rejected point-blank an invitation to attend the grand BRI Forum in Beijing in May. China’s anger at the snub may have been a contributing factor to the Doklam stand-off. India points to the fact that the highway being upgraded under the CPEC runs through Pakistan-occupied Kashmir. But one Chinese international affairs expert reckons India also views the subcontinent as its area of influence and resents China trespassing on it.

The BRI isn’t something the Chinese came up with overnight. Since the 1990s, they’ve talked about building roads and railways snaking across Asia. In 1999, the Bangladesh-China-India-Myanmar Forum for Regional Cooperation (BCIM) was launched at Kunming in China. Known as the Kunming Initiative, it gained momentum after the catchily named K2K Rally (Kunming to Kolkata) in 2013 when Chinese Prime Minister Li Keqiang visited India. Now the project’s back with a study group and India feels it should stay there though the Chinese are still pushing it.

Much motivated

The Chinese have multiple motives for their Asiawide push. For starters, there are their huge steel and cement factories. Chinese produces almost 700 million tonnes of steel annually (India’s production totals slightly over 100 million tonnes.). Right now, Chinese steel surpluses have cut the commodity’s prices worldwide. But BRI projects would create new demand for steel and cement.

Also, importantly, most BRI contracts would be awarded to state-run companies such as the China Huaneng Shandong Power Generation Company, one of the country’s top five utility giants, which is building the Sahiwal coal power project in Pakistan’s Punjab. Similarly, Pakistan’s Gwadar Port, a key element of the CPEC, is now run by the state-owned China Overseas Port Holding Company. Not surprisingly, China leans on Pakistan to ensure procurement and bidding is done in ways favouring such state-run giants.

Most crucially, as China looks to overtake the US and become the world’s top superpower, it’s also fighting to beat its own geography. In some ways China resembles Germany at the beginning of the 20th century, hemmed in by multiple neighbours. China has 14 land-based neighbours, including Russia, India and Vietnam, and several sea-based neighbours such as Japan, Korea and the Philippines with which it has disputes.

Going beyond all that, to be a great power, China has to figure ways to beat the Malacca stranglehold. The US or the Indian Navy would just have to block the narrow Malacca Straits to cut China off from West Asian oil. Many of China’s moves are to keep out the US and squeeze India, the lone other contender for big-power regional status.

Beyond all that, there’s also the fact China is the world’s second-largest country and its economic development has been extremely lopsided with coastal areas like Shanghai and Guangzhou leading the way. By contrast, the CPEC project could bring development and even wealth to other corners of the country.

Staying ahead

Can the Chinese pull it off? Sceptics note debt is building up and China’s finances are already looking stretched. However, bankers like Jim O'Neill who wrote the seminal BRIC report, say the Chinese have faced economic hurdles before and always come out ahead.

Still, Beijing’s tightening up on companies spending heavily abroad and that could impact its grand vision of building a new Asia. Take a look at Bandar Malaysia, planned as a huge railway station where trains from Singapore to Kunming would stop. In typical mega-Chinese fashion, this was planned as the world’s largest underground development and would have included offices and theme parks.

But the government has ordered Dalian Wanda, one of the key companies involved, to stop investing abroad. The project’s looking shaky and the Malaysians are now asking questions about how much Chinese investment they want. Now, with even Chinese bankers talking openly about debt default risks — China’s debt surpasses 304 per cent of GDP — the time when China rules the world may not be as close at hand as it sometimes appears.

Published on September 07, 2017
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