Eden Building to Stock Exchange

Published:  01:03 AM, 30 July 2017 Last Update: 01:21 AM, 30 July 2017

Belt and Road initiative and Chinese interest

Belt and Road initiative and Chinese interest

China's economic growth has achieved great progress with double digit growth. Being branded as 'global factory' it has become the world's largest merchandise trading nation. Its economic growth is slowing which requires further development of economy. Its comparative advantages in manufacturing, such as low labor costs, have begun to disappear. For this reason, the Chinese leadership demands to capture the higher end of the global value chain. It is reflected in the so-called Made in China 2025 strategy, drafted by the Ministry of Industry and Information Technology (MIIT).

According to the Industrialization of the Belt and Road Countries Report published by the Chinese Academy of Social Sciences, the BRI will extend across up to 65 countries, accounting for more than nearly two-thirds of the world's population, one-third of global GDP, 75% of known global energy reserves and around one quarter of world merchandise trade. They already share good economic and trade relations with China, mainly in the form of exports of raw materials and natural resources in exchange for the import of manufactured goods. Therefore, reducing trade barriers and opening to new trade routes will likely increase bilateral trade with China.

China has excess fund for investment and wants to use Belt and Road Initiative (BRI) as a platform to address the country's chronic excess capacity. It is more about migrating surplus factories than dumping excess products. One of the least understood aspects of BRI is its desire to use this initiative to export China's technological and engineering standards. Chinese policymakers see it as crucial to upgrading the country's industry.

It has inequality among the provinces. One of the overriding objectives of BRI is to address China's deepening regional disparity as the country's economy modernizes. Beijing hopes its transnational infrastructure building program will spur growth in China's underdeveloped hinterland and rustbelt. BRI will open global market to less developed provinces and upgrade their life. The initiative will have a heavy domestic focus. 

The Belt and Road is comprised of two main parts: a series of land-based economic corridors that China refers to collectively as the Silk Road Economic Belt, and the Twenty-First-Century Maritime Silk Road (MSR). The vision of the MSR is to connect the littoral Chinese provinces with the South China Sea and the Indian Ocean and from there to Eastern Africa, via the Horn of Africa and the Mediterranean to European ports by means of a network of port infrastructure, including deep sea ports, industrial zones, oil and gas storage facilities and railway connectors from where cargo can be shipped inland.

The China- Mongolia- Russia economic Corridor (CMREC) is focusing on Landlocked Mongolia is lodged between two giants: China and Russia. To date, economic exchange among the three Northeast Asian countries has been modest. But with China's growing need for raw materials both Mongolia and the under-developed eastern parts of Russia are gaining importance. China is interested in developing the Tavan Tolgoi coal mine in southern Mongolia, one of the world's largest untapped coal deposits.

It also relies on Mongolia for food imports, primarily beef and mutton. From Russia, China seeks a stable supply of natural gas for its northeastern and western provinces. Mongolia depends on mining for 86 percent of its export revenues. It therefore needs access to new export markets via Chinese and Russian ports. Russia sees the trilateral relations as another way to break away from its isolation in the west and to diversify its energy exports away from the stagnant European market.

The China -Pakistan Economic Corridor (CPEC) is to build and modernize a land passage from Xinjiang in western China to the Arabian Sea via the forbidding Himalayas. China announced that it would finance one 1,800 mile superhighway, one rail line and an oil pipeline connecting the two countries. The corridor will be supported by a $1.5 billion solar power plan, the world's largest, and a hydro power plant worth $1.6 billion. 

The second pillar of the CPEC is the deep port of Gwadar in the Arabian Sea. This strategic location will not only allow China to export cargo from its western provinces and cut over 5,600 miles of the distance for oil and gas imports from Africa and the Middle East to China. It will facilitate Middle East oil to flow directly into western China instead of via the busy Strait of Malacca and China's congested coastal provinces could surely benefit China's energy security.

In 2015, China acquired rights to over 2,000 acres of land adjacent to Gwadar for industrial development. The land will be used for terminal operations, marine services, a free trade area and an airport.  Bangladesh-China-India- Myanmar Economic Corridor (BCIM-EC) referred to as "an international gateway to South Asia," the BCIMEC will essentially be an expressway and high-speed rail link between the Chinese city of Kunming in Yunnan Province and Kolkata in India via Mandalay in Myanmar and Dhaka. In addition to the land bridge the four countries have also agreed to build air and water ways connecting each other as well as power transmission lines and oil pipelines. The corridor will connect a collective market of over 400 million people including Hunnan province, Bangladesh, West Bengal and other 8 states of India.

China-Indochina Peninsula Economic Corridor (CICPEC)  Also known as Nanning-Singapore Economic Corridor, the CICPEC aims to connect eight major cities-Singapore, Kuala Lumpur, Bangkok, Phnom Penh, Ho Chi Minh City, Vientiane, Hanoi and the Chinese city of Nanning. From there, additional connectivity nodes would be extended to the major economic hubs of Guangzhou and Hong Kong, thus forming a web connecting ten cities with cumulative population of over 50 million.

China -Central and West Asia Economic Corridor (CCEWAEC) would run from Xinjiang via Alashankou, on the China-Kazakhstan border, to join the existing railway networks of Central Asia and Middle East. The corridor covers the Central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan and Afghanistan as well as Iran and Turkey. An extension of the line could be added to run to Ukraine via Azerbaijan, Georgia and Russia. Once competed, a train ride from eastern China to Iran will take less than half the time of an alternative trip via the port of Shanghai. This provides an impetus to ship low end and short shelf life Chinese goods via land.

CCWAEC also has an energy dimension as it corresponds with the backbone of China's gas supply from Central Asia. As it is, the China-Central Asia Gas Pipeline is the world's longest. It starts at the border of Turkmenistan and Uzbekistan, runs through Uzbekistan and southern Kazakhstan, and ends at Khorgos on the Kazakhstan-China border. From there it will be connected to China's second West-East gas pipeline, which is under construction. Another pipeline will connect Tangiz and Kashagan large gas fields in the Caspian with Shymkent in south Kazakhstan. From there the Chinese market can be fed from one of the world's largest gas deposits.

North-South International Transport Corridor (NSTC) aims to connect South Asian countries with North and Western Europe having distance of 7,200 miles. The NSTC will run from Russia's Finish border to Azerbaijan and Iran with tributaries to linking it to Armenia, Belarus, Ukraine, Greece, Bulgaria, Georgia, Kyrgyzstan, Tajikistan, Kazakhstan, Pakistan, Iraq, Oman, Syria and Turkey. Other than facilitating a North-South flow of goods across the Russian Federation the main benefit of the initiative is that it reduces the need for transit via the Suez Canal.

The NewEurasian Land Bridge (NELB), also known as the Second Eurasia Land Bridge, aims to foster uninterrupted connection between major Chinese cities like the Jiangsu province port of Lianyungang, Lanzhao, Wuhan, Chongqing, Xian, and Urumqi to west European cities like Rotterdam and Duisburg in Germany. Chinese goods will be funneled into Xinjiang via China's internal rail system and from there the route will traverse Kazakhstan, Russia, Belarus, Poland and the Czech Republic all the way to the Atlantic shore. Just like other BRI projects traversing territories of the former Soviet Union, the NELB attempts to promote cross-national cooperation by strengthening railway connectivity and addressing the problem of railway gauge differences between the Russian railway gauge and the Chinese and European gauge.

The NELB is part of a more ambitious project to connect Moscow to Beijing via a 4,350 mile high speed rail that would cut the journey time from six days on the Trans-Siberian line to just two.
The less stated goal is to save the Chinese economy from a precipitous decline which would rob large swaths of China's population, particularly those from China's poor inland regions, of the chance to fulfill the so-called Chinese Dream.

To rejuvenate the slowing Chinese economy, China aims to use its massive current account surpluses and its infrastructure building capabilities to stimulate consumption in neighboring markets, creating new markets for Chinese goods and services.

The BRI would also provide life support for China's struggling banks and state-owned enterprises. Its state-owned Engineering, Procurement and Construction (EPC) companies are an extremely important part of the economy and the socio-political fabric, and they are all craving projects. The BRI would also boost the usage of the renminbi as a vehicle to raise capital in overseas financial centers.

China hopes to use its vast foreign reserves to offer loans to developing countries, which would in turn contract Chinese enterprises for major infrastructure projects. Without infrastructure, there is no connectivity. Without connectivity, there can be no economic exchange. Without economic exchange, there can be no growth. Without growth there is no prosperity. Without prosperity infrastructure cannot be funded. And so, goes the cycle. The other nations involved in BRI can take the advantage of development of infrastructure, transfer of technology and development of new market availing in the improved communication and manufacturing facilities.

The writer is a Legal Economist.  He can be reached at: mssiddiqui2035@gmail.com

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