Posts Tagged ‘Belt and Road’

LONDON, 19. MAY, 11:56

Chinese leader Xi Jinping trumpeted his foreign policy vision – the Belt and Road – to great fanfare this past week.

Yet a consistently discordant note was heard from European reporting around the event, with officials talking to press about their lack of understanding of the project. While some of their concerns were understandable, there was an element of missing the point.

  • The symbolic first arrival of a Chinese train in Germany (Photo: DB Schenker)

Xi Jinping may talk in terms of a project, but in reality what we are seeing laid out is a grand vision: one that Beijing is using to re-shape its engagement with the world.

For Europe, it is important to figure out exactly what this means. Otherwise, it could both miss out on an opportunity, and create a series of potential problems with a relationship that will continue to be important going forwards.

First, it is important to dispel what the Belt and Road is not. It is not a giant aid project. Nor has China particularly ever pretended that it was.

Leadership will get caught up in grandiloquent language about how the project is a great gift to humanity. However, in reality, it is a vision of re-connecting the world in a manner that will support Chinese trade flows and help Chinese companies go out into the world.

At its core, it is about helping to develop China’s underdeveloped regions – parts of the country that are deeply disconnected from its bustling ports.

Second, it is important to understand what is actually happening. Not all of the strands of the Belt and Road are new, nor are they all the same.

What has been happening in Central Asia for almost two decades, re-branded as Belt and Road, is not the same or as important domestically to China as newly advanced projects in parts of Africa or Eastern Europe.

At the same time, some corridors seem to be advancing far more slowly: the Bangladesh-China-India-Myanmar Economic Corridor (BCIM) is one that has been talked about since the late 1990s, but has only now actually moved into clear action across its entire route.

The point is, while the Belt and Road is discussed by Beijing in the same light, the reality on the ground is very different in each and every case.

Third, it is a vision with a long timeline. China is thinking to a very long horizon. In typical fashion for a centrally planned economy, it is considering things into the future and not the short- to medium-term eye-line with which most Western governments operate.

So, when the country looks to build train links across the continent that make little economic sense now, it could be that the lens we are looking at them through is too short.

Once China is able to develop its western regions and create industrial and manufacturing bases out there, it might suddenly become more economically sensible to put goods on trains across the continent.

Fourth, not everything is expected to work – this is a leadership vision and not a project.

The Belt and Road was first christened by Xi during a set of speeches in Astana and Jakarta. Laid out then, they were outlined as a pair of concepts that would slowly catch on and become the defining foreign policy concept that Xi Jinping would offer the world.

Conceptual Nature

The illogical nature of a Belt being over land, while a Road went to sea highlighted the conceptual nature of what was being laid out. In fact, the seeds of the concept could already be found in previous administrations – Jiang Zemin had his “Develop the West” concept, and Hu Jintao’s administration was the one that started up the idea of refocusing on Xinjiang and developing its relations with its neighbours.

Both of these served as ideological godfathers to the Belt and Road, which in essence took this model and internationalised it.

But the point is that none of these were specific projects. They were rather broad policy directives that were launched out of Beijing which were then followed up and pushed out by the many institutions in China, to varying degrees of success.

The BCIM was born under Jiang Zemin and went nowhere, and while the Hu Jintao initiative with Xinjiang and Central Asia was more successful, there are a few projects along the route that have failed to deliver as they were intended.

None of this is that surprising, as, ultimately, the leadership’s announcements should be assessed as a central policy direction rather than detailed plans.

Initially, when the speeches were delivered, there was no specific policy planning behind them.

Now that the concepts have firmly caught on, almost everything has become Belt and Road – in part this is because the concept is so broad (so everything fits under it), but also it is a way for everything to try to connect with the bright vision laid out by the leadership.

This includes ideas and projects that have a very limited connection to the actual Belt and Road – there is an almost inexhaustible list of Chinese regions that have defined themselves as the crucial points on the Belt and Road.

Within this, not everything is going to work (because it never does). But this is not a concern, as ultimately what has been offered is a concept rather than a project, meaning that it will not ultimately fail, as no specific parameter for success has been laid out.

EU Engagement

All of this is essential for European policymakers and thinkers to understand.

If they are to properly engage with the vision, they need to first understand it in granular detail – something that is eminently doable through the numerous reports that have been published, or by undertaking research themselves.

They then need to appreciate what the vision actually is and the timelines to which it is operating, and then finally focus on which aspects do correspond with their specific interests.

China’s biggest problem with this vision is that it requires considerable support, consent and contributions from the countries along and at the end of the routes, and those that are more likely to succeed are those with supportive partners.

Consequently, Europe can choose which aspects it wants to engage with and simply ignore the others. This will not necessarily stop them from happening, but they are not realities Europe has to engage with if it does not want to.

The key in all of this is for Europe to decide exactly what its strategy towards China is going to be, and what it is that it wants to do to engage with this century’s rising power. In the Belt and Road they are facing Xi Jinping’s foreign policy legacy.

Given that the conceptual outline is focused on the Eurasian continent, Europe has an opportunity to re-craft its relations with China in a way that connects with the leadership and potentially has a game-changing impact across the continent the two powers share.

It is not enough for European officials to simply tell the press they do not understand the Belt and Road – the vision is clear enough, but the point is to decide how to engage with it.

Raffaello Pantucci is director of international security studies at the Royal United Services Institute,a think tank in London

A short blogpost for a new outlet, the rather impressive China Policy Institute Analysis blog which is linked to the University of Nottingham. Touches on a couple of topics which are going to be a focus for the immediate future, the ‘Belt and Road’ and the BCIM in particular. As ever, much more on these topics to be found at China in Central Asia.

How New is the Belt and Road?

Chiang Sheng Yang, Presenter, Phoenix Satellite Television Holdings, Hong Kong SAR, Zhang Bingjun, Corporate Chairman, Tianjin TEDA Construction Group, People's Republic of China, Ian Bremmer, President, Eurasia Group, USA; Young Global Leader Alumnus; Global Agenda Council on Geo-economics, Jin Liqun, President, Asian Infrastructure Investment Bank, Beijing, Li Daokui, Dean, Schwarzman College, Tsinghua University, People's Republic of China; Global Agenda Council on Global Economic Imbalances and Benedikt Sobotka, Chief Executive Officer, Eurasian Resources Group, Luxembourg at the World Economic Forum - Annual Meeting of the New Champions in Tianjin, People's Republic of China 2016. Copyright by World Economic Forum / Sikarin Thanachaiary

 Copyright by World Economic Forum / Sikarin Thanachaiary

Written by Raffaello Pantucci. 

Back in the late 1990s, then-PRC President and Communist Party leader Jiang Zemin noticed that the country was facing an imbalance. Deng Xiaoping’s economic reforms had opened up the coastal cities, transforming them into beacons of international industry and development. Cities like Shanghai, Shenzhen and Guangzhou were on their way to becoming international hubs. And yet looking inland, the difference was stark, with parts of the centre or border regions with neighbouring Southeast, South and Central Asia remaining poor and underdeveloped. Seeking to rectify this, and in part to help Chinese companies go out, Jiang Zemin instigated a ‘Develop the West’ or ‘Great Western Development’ strategies.

Academics like Zheng Xinli came back from their travels along China’s borderlands with southeast Asia with ideas of developing multilateral institutions that would help address one of the key problems in the region, a lack of infrastructure to help accelerate trade between parts of the world that were already deeply economically interdependent. To China’s west, the problems were political and had a security bent to them thanks to the proximity of Afghanistan, historical conflicts with Russia and an angry resident Uighur population. As the Soviet Union fell apart, China accelerated a process of border demarcation going on between itself, Russia, Kazakhstan, Kyrgyzstan and Tajikistan into a process called the ‘Shanghai Five’ – named after the city in which they met. The priority was largely to define what China’s borders were, with a later attempt to move the discussion towards other economic and political goals.

To China’s south, the scenario looked different. In the absence of a collapsing superpower with which China had fought conflicts, Beijing instead found itself confronted by a series of underdeveloped nations (including ones with which it had fought conflicts in some cases) that nonetheless had deep economic and ethnic links back and forth across China’s equally underdeveloped borderlands. In August 1999, over one hundred academics and experts from China, India, Burma and Bangladesh gathered together in Kunming for a conference at the Yunnan Academy of Social Sciences (YASS). The outline for the conference was laid out as:

  1. Practical and strategically significance for the regional cooperation among China, India, Bangladesh and Burma;
  1. Feasibility of cooperation in the economic, trade and technological cooperation among China (Yunnan), India, Bangladesh and Burma (including industry, agriculture, tourism and finance);
  1. Study on the construction of communication channels and networks among China, India, Bangladesh and Burma (including the opening and reconstructing roads, air lines, water routes and railways);
  1. Prospect and basis for the economic cooperation among China, India, Bangladesh and Burma;
  1. Open-door policies and trade and investment environment for China, India, Bangladesh and Burma;
  1. Construct the framework for regional cooperation in China, India, Bangladesh and Burma.

Its conclusions were similar and thus was laid out the framework for the Bangladesh-China-India-Myanmar Economic Corridor (BCIM), or the ‘Kunming Initiative’. Focusing on improving infrastructure and opening markets, the BCIM was dreamed up as a way of developing China through opening of markets, building infrastructure, and enhancing cooperation between China and its border nations.

The vision was one that was actually suggested a few months earlier in March 1999 at the 9th National Party Congress in Beijing by President Jiang Zemin. Crystallized in speeches delivered later in the year and put on the front page of the People’s Daily on June 19 1999, the ‘Great Western Development Strategy’ was a vision that suggested the ‘time was ripe’ to speed up the development of the central and western regions’ and that this ‘should become a major strategic task for the party.’

In other words, the Chinese Communist Party was to throw itself into working to develop the left behind ‘western’ (put in parentheses as the logic of ‘west’ was substantially stretched to anything not on China’s coast), and the ‘Kunming Initiative’ was to push this concept out as a trade and economic corridor that swept through Myanmar and Bangladesh to India.

All of which sounds a lot like the current vision that is being advanced for the ‘Belt and Road’, where we see Beijing pushing out trade and economic corridors in every direction as a way of helping not only China’s companies go out into the world, but also to help develop China’s under-developed ‘western regions’, be this in central China, Xinjiang, Tibet or Yunnan. Given the problems in Xinjiang, it is maybe unsurprising that the Central Asian strand of the ‘Belt and Road’ – the ‘Silk Road Economic Belt’ that Xi Jinping christened when he visited Astana in September 2013 – has found itself front and center, but it is also the one which is building on a well-established political track which Beijing had been laying since the collapse of the Soviet Union.

There is an additional problem with the BCIM which is that it ends with a power, India, with which Beijing continues to have tense relations that are complicated by China’s intimate embrace through another strand of the ‘Belt and Road’ with India’s persistent enemy Pakistan (the $46 billion China-Pakistan Economic Corridor). This tension alongside the persistent problems of development, governance and criminality that are encountered in Myanmar and Bangladesh, all serve to illustrate why China has had a harder time of things in Southeast Asia.

But the BCIM and its history do serve to illustrate that the ‘Belt and Road’ vision that is on its way to becoming the signature foreign policy initiative of the Xi Jinping administration is not in fact as new as it may sound. Rather, it is a case of an old model being re-attempted in a new cast. And as the ‘Belt and Road’ continues to remain a nebulous vision rather than a specific project, its conceptual embrace becomes ever tighter and it drags in historical projects like the BCIM into its all-encompassing horizon. During their July 2015 meeting on the fringes of the joint SCO and BRICS meeting Russia hosted in Ufa, Presidents Narendra Modi and Xi Jinping confirmed the proximity of the two visions. As reported in the official Chinese read-out of the meeting:

‘Both countries should also join efforts to promote the construction of Asian Infrastructure Investment Bank (AIIB), New Development Bank (NDB) of BRICS nations and the Bangladesh-China-India-Myanmar Economic Corridor (BCIM), and discuss on effectively connecting China’s initiative of the “Belt and Road” with related initiatives of India, so as to achieve mutually beneficial cooperation and common development.’

The BCIM has therefore been brought into the broader ‘Belt and Road’ vision, highlighting the degree to which its goals are interchangeable with the approach being practiced by Beijing in the modern ‘march west’ strategy as laid out by Xi Jinping. Thus bringing in full circle the repetition that is inherent within the current vision and the historical one, and showing how this approach is in fact one that China has attempted before. Whether this one will succeed where previous have not is unclear at this point, but when one considers the vast sums that Beijing is able to muster and deploy under the auspices of the current approach, it seems that the current ‘Belt and Road’ will leave an indelible impression. One that may even help imprint the BCIM onto Southeast Asia in its wake.

Raffaello Pantucci is Director of International Security Studies at the Royal United Services Institute (RUSI). He is also the co-creator of http://www.chinaincentralasia.com and is currently working on a number of projects looking at the Belt and Road through a number of different lenses. Image credit: CC by World Economic Forum/flickr.

New piece for an outlet to which I haven’t contributed for some time, The National Interest. This time looking at trying to explain China’s enhanced engagement and interest in Syria with Michael Clarke of Australian National University. We are hopefully working on a longer writing related project along these lines in the future, and the topic is undoubtedle one there will more on.

China Is Supporting Syria’s Regime. What Changed?

Michael Clarke | Raffaello Pantucci
Beijing’s motivations are close to home.

china_syria

On August 14, Guan Youfei, a rear admiral in China’s People’s Liberation Army Navy, visited the Syrian capital of Damascus, escorted around the city under heavy guard. Guan’s visit reportedly included meetings with senior military officials and Russian officers, as well as pledges that the Chinese military would provide medical training for Syrian medical staff. The question is why China is increasing this engagement now.

Admiral Guan’s engagement contrasts with previous Chinese behavior during the Syrian crisis. While China has been one of the few powers to maintain an embassy in Damascus throughout the current crisis, Beijing’s engagements have been fairly limited, and mostly focused on attempts from the Chinese Ministry of Foreign Affairs to insert itself into peace negotiations and occasional expressions of concern around individual nationals who appear on the battlefield (either as hostages or fighters). The approach has been driven by a mix of motives, including Beijing’s long-standing principle of “non-interference,” aversion to what China sees as largely Western-led regime change in the guise of humanitarian intervention and a Chinese desire to insulate its growing economic interests in the Middle East from the continuing consequences of the Arab Spring.

That dynamic may now be about to change. China has started to become a participant in the many international discussions around countering terrorism, and ISIS in particular. China has participated in the Global Counterterrorism Forum and hosted sessions about terrorists’ use of the internet, while engaging in discussions at home about contributing more to the fight against ISIS. Last year, a decision was made to alter national legislation to allow Chinese security forces to deploy abroad as part of a counterterrorism effort, and China has sought to establish overseas bases in Djibouti. In neighboring Afghanistan, it has established a new sub-regional alliance between Afghanistan, Tajikistan, Pakistan and China to discuss and coordinate the fight against militancy and terrorist groups in the area. All these actions highlight the degree to which China is slowly pushing its security apparatus out into the world in a more aggressive posture than before. Seen within this light, Admiral Guan’s visit to Damascus is another piece in this puzzle, and the most ambitious yet in many ways for a power that has historically preferred to play a more standoffish role in addressing hard military questions.

Looking to the Syrian context in particular, there are two major reasons for China’s apparent decision to begin playing a more forward role in engaging in Syria. One is China’s concern at the numbers and links of Uighur militants from its restive province of Xinjiang participating in the Syrian conflict. The other is its desire for geostrategic stability in the Middle East as it seeks to consummate its “One Belt, One Road” strategy.

Of particular importance on the first count is the presence of the Turkistan Islamic Party (TIP) on the Syrian battlefield. TIP is a successor organization of sorts to the East Turkestan Islamic Movement (ETIM), a group that Beijing has blamed for violence linked to Xinjiang after 9/11. Beijing has claimed that Al Qaeda directly “funded and supported” ETIM, and while the scale of Al Qaeda’s direct support of ETIM has been widely disputed, the relationship between TIP and Al Qaeda has only grown closer since, with TIP garnering more Uighur recruits from 2009 onward and Al Qaeda leader Ayman al-Zawahiri praising Uighur contributions to the global jihad in a recent message.

Chinese suppression in Xinjiang, especially after the interethnic riots and violence in the capital, Urumqi, in July 2009, has resulted in the development of what Chinese state media has dubbed an “underground railway” of Uighurs seeking to flee the region. Some of those have ultimately found their way to Turkey and onward to Syria to fight with TIP and other jihadist groups. By 2015, TIP had established a well-documented presence on the battlefield in Syria, with the group releasing a number of videos detailing its combat role fighting alongside Jabhat al-Nusra, until recently Al Qaeda’s affiliate in Syria. (TIP does not fight alongside ISIS; its leadership has released statements in which it condemns ISIS’s activities.) TIP is increasingly showing itself to be an effective force, participating in many major fights (including the breaking of the Aleppo siege) and showing off its skill, manpower and equipment.

Historically, China has not had much economic interest in Syria, a country that prior to the civil war was more closely linked economically to its region, Iran and Russia. And more recently, China has continued to play a second-tier role. While it has had numbers of nationals join ISIS, others kidnapped and killed by the group, and the group has threatened it in some of its rhetoric, it does not appear to be much of a focus for the group. On the non-ISIS side fighting the regime, the numbers fighting alongside TIP seem to be quite substantial, whilst the group’s leadership and a core of the group continues to fight in Afghanistan. And, according to Kyrgyz authorities, this connection may have now matured into the attack that took place in late August against the Chinese embassy in Bishkek.

This threat from TIP in particular is one that is therefore becoming of much greater concern for Beijing. Yet it is not clear who is focused on fighting TIP on the ground in Syria. Western powers fighting in Syria are for the most part focused on ISIS and less focused on the groups fighting against the Assad regime, like TIP. Turkey’s historical proximity to the Uighur cause has raised concerns with Beijing; Uighurs are a people whose culture and language are very close to Turkey’s, and Uighur flags and symbols are regular features during AKP rallies. Erdogan himself has expressed support for the Uighur cause, and back in 2009, in the wake of rioting in Xinjiang that led to some two hundred deaths, he referred to Chinese activity on the ground as “a sort of genocide.” Since 2012, Uighurs have been found traveling on forged Turkish passports in transit countries like Malaysia, Indonesia and Thailand, raising questions of Turkish complicity. Leaked ISIS documents show a consistent flow of individuals through Kuala Lumpur, as well as other Southeast Asian routes to Turkey.

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On the second count, Beijing faces multiple challenges in the current Middle East for its “One Belt, One Road” strategy. In brief, OBOR is Beijing’s attempt to facilitate Eurasian economic connectivity through the development of a web of infrastructure and trade routes linking China with South Asia, Central Asia, the Middle East and Europe. Key parts of this project, such as the $45 billion China-Pakistan Economic Corridor and the proposed Yiwu-Tehran high-speed rail link, according to James M. Dorsey, “illustrate the politics of its One Belt, One Road Initiative. Xi Jinping believes that he can achieve Chinese dominance through investment and interconnected infrastructure.”

The current fracturing of the Middle East as a result of the Syrian crisis, however, poses a central roadblock to China’s ability to make this vision a reality. In this context, Beijing views the United States’ approach to Syria as driven by Washington’s desire to use the civil war as a pretext to overthrow the Assad regime in order to weaken Iran’s growing power and influence in the Middle East. In contrast, Russia has been firm in its commitment to root out what it calls the “terrorist” threat there in support of the regime in Damascus, and Beijing has been impressed by the manner in which Russia’s decisive moves have had an effect that years of attrition on the battlefield failed to achieve.

So Beijing may now have arrived at the conclusion that supporting Assad and taking sides with Russia is the most viable option to effectively combat the growth of TIP. Increasing its involvement in Syria via military-to-military cooperation can also be seen in the wider context of a PLA keen to develop its overseas experience, in areas from peacekeeping to antipiracy missions to counterterrorism.

David Shambaugh eloquently argued in 2013 that China remained a “partial power” whose diplomacy “often makes it known what it is against, but rarely what it is for” and that this made its foreign policy in many regions of the world “hesitant, risk averse and narrowly self-interested.” This calculus is now changing under pressure from developments in the Middle East and Afghanistan that directly threaten core Chinese interests and are metastasizing into the very terrorist threat that China has long said it is concerned about. The response from China is relatively predictable—an outward security push. The question that remains, however, is how deeply China wishes to plunge into troubled waters to defend these interests.

Dr. Michael Clarke is Associate Professor at the National Security College at Australian National University. Raffaello Pantucci is Director of the International Security Studies at the Royal United Services Institute (RUSI).

Image: Chinese tanks in formation at Shenyang training base in China. Wikimedia Commons/U.S. Air Force

Catching up on another late post, this time for the Financial Times Beyond BRICS blog looking in some detail at the question of how the ‘Belt and Road’ has had an impact on Xinjiang-Central Asia trade. Trying to look at this as a case study for the bigger question lots are asking. Am immensely grateful to the excellent Anna Sophia for doing some excellent digging to get the numbers for this. As ever a topic that will get more coverage as we go forwards, and check out China in Central Asia for more on this larger topic.

Xinjiang trade raises doubts over China’s ‘Belt and Road’ plan

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The vast Chinese northwestern frontier region of Xinjiang may serve as a useful early indicator of how Beijing’s much-touted “Belt and Road Initiative” (BRI) is supposed to work – and how successful it may become.

The region, which is home to several muslim minority peoples, has been wracked by ethnic turmoil for decades, prompting Beijing to seek to nurture social stability by driving economic development through hefty investments.

But for this strategy to gain traction, Beijing realised that it needed to boost development in the region around Xinjiang by building commercial corridors to neighbouring Central Asian countries such as Kazakhstan, Tajikistan, Kyrgyzstan, Uzbekistan and Turkmenistan. Thus, Xinjiang was key motivator behind the BRI concept.

But so far the results have been underwhelming. In the three years since the forerunner of the BRI was launched, Xinjiang’s trade volume has not increased and it still constitutes an unchanging portion of total Chinese trade with Central Asia (see chart). This discrepancy between action and results raises questions about whether the BRI is a turning point in Chinese economic policy or simply old wine in a new bottle.

The Xinjiang Uighur Autonomous Region government is an active player in the BRI. Under its auspices, Xinjiang’s major energy companies are expanding Chinese energy trade with Central Asia.

Following its promotion as one of seven national centers for the development of Chinese wind power in 2014, the Xinjiang-based wind turbine company Goldwind won contracts to build plants throughout Central Asia in 2015. In addition, the Tebian Electric Apparatus Stock Company, one of China’s major power transformer companies located in Xinjiang, announced in 2015 plans to build a power transformation line in Kyrgyzstan and a power station in Tajikistan.

Xi Jinping, the Chinese president, called the power station in Tajikistan a symbol of the growing “friendship” between China and Tajikistan, highlighting Xinjiang’s importance to the political and economic objectives of the BRI.

In addition to this corporate activity, the Xinjiang Communist party leadership has represented Beijing in Central Asia. Zhang Chunxian, Communist Party Secretary in Xnjiang, has formalised trade partnerships initiated by Mr Xi with Tajikistan and Kazakhstan. These include deals on agriculture, infrastructure and trade with Tajikistan after Mr Xi’s 2013 visit and a $2bn trade deal with Kazakhstan. Thus, Xinjiang is serving to implement the leader’s vision.

These BRI deals, however, do not in fact represent a departure from Xinjiang’s trade history. Special trade relationships with Central Asian states existed before the initiative was announced, and energy and commodities were already important in its regional trade.

The Kashgar Special Economic Zone was established in 2010 and is intended to deal primarily in regional commodities exports. Likewise, plans for the Kazakhstan Khorgos Border Cooperation Center, where duty-free trade between Kazakhstan and Xinjiang could occur, were already announced in 2011, though construction did not begin until 2014. The point being that many of the projects now tagged as BRI are in fact pre-existing projects that are being re-branded.

The lack of change in Xinjiang’s trade volume since the BRI was announced calls the connection between the broader vision and the deals into question. In 2015, Xinjiang’s trade volume with Central Asia declined more rapidly than the national volume, while experiencing a reduction in trade with every Central Asian country aside from Turkmenistan, which was involved in building a new pipeline to the region.

Xinjiang’s textile exports have increased in 2016, according to the Global Trade Review. However, textiles were already a significant part of Xinjiang’s trade to Central Asia, so the rebound may merely be the result of a weak 2015 base.

The discrepancy between Xinjiang’s visibility in the BRI and its steady proportion of China’s total trade with Central Asia suggests that – so far – the initiative is simply publicising trade relations that existed before, instead of changing China’s trade patterns.

If this pattern holds, it will be important for countries that deal with China to look beyond the visionary rhetoric of the BRI and engage instead with concrete and bankable projects. This requires a focus on what made sense before the BRI was announced.

Raffaelo Pantucci is director of international security studies and Anna Sophia Young is a research intern at the Royal United Services Institute (RUSI), a think tank based in London.

And now a longer report with Sarah for our institutional home RUSI looking at the Tbilisi Silk Road Forum a conference we attended last year and are keen to try to engage with more. It sketches out some of the ideas to emerge from the event, and some ideas about how to take the project forwards. More on this general topic to be found on China in Central Asia. Finally, I also co-edited with Aniseh, this longer report looking at Iran’s relations with Syria for RUSI, as seen from a number of different angles. Am not re-posting it in its entirety here, as it was largely authored by others. But I would encourage everyone to read my colleagues excellent work!

Tbilisi Silk Road Forum: Next Steps for Georgia and the Silk Road

Raffaello Pantucci and Sarah Lain

RUSI Publications, 2 August 2016

baku-tbilisi_railways

This workshop report provides a number of recommendations which aim to capitalise on the success of the Tbilisi Silk Road Forum and place Georgia at the heart of Eurasian connectivity

The Tbilisi Silk Road Forum which took place 15–16 October 2015 – co-hosted by the Georgian and Chinese governments – was a clear endorsement by Georgia of China’s proposed Belt and Road policy. It also provided an opportunity to showcase Georgia’s position at the heart of a changing Eurasia. At a time when Iran is opening up, there is a surge of Chinese investment following the Belt and Road vision; numerous other proposals for Eurasian connectivity are being advanced by outside powers. As a country with strong connections to the east and west, Georgia is well placed to benefit from this web of connectivity and to offer examples of best practice to those nations that are still formulating their own responses to this regional development. This report details the key findings that emerged from the two-day conference, suggests ways in which it can move beyond being a one-off event and outlines some ideas for how Georgia can establish itself as one of the key hubs of Eurasian trade and commerce.

Some belated posting of which I have a bit to do, this one for the Telegraph about the furore around the Hinkey Power Plant deal and China-UK relations. A difficult topic which is still in a very complex phase. Been trying to finish some very delayed writing projects that is keeping me busy and has some angry editors after me. Apologies to them. A spate of China related material which reflects something there is going to be an increasing amount of over the next period.

How to avoid nuclear fallout and become equal partners with China

Last week’s announcement delaying the decision on the Hinkley C nuclear power plant project has turned into a running commentary on the changing nature of the UK’s relationship with China. While Downing Street has been at pains to highlight that the decision is not linked to Beijing, much has been read into statements through the public news agency Xinhua that seem to foreshadow a veiled warning about the UK’s “golden age” with China being under threat. These proclamations need to be tempered by reality, however, and a realization that China is a pragmatic actor which will continue to seek the best deal it is able to achieve rather than pursuing an entirely quixotic foreign trade and investment agenda.

This is not say that China is not prone to publicly punish countries that have displeased it. Norway has faced a barrage of mostly symbolic sanctions since in 2011 the Nobel Prize Committee gave an award to incarcerated dissident Liu Xiaobo. In the wake of David Cameron’s meeting with the Dalai Lama in 2012, the UK faced a similar slap-down with diplomats’ lives in Beijing made more difficult and the Prime Minister having a number of visits postponed. In 2010, a pair of German researchers undertook a study using UN data from 1991 to 2008 on the “Dalai Lama effect”, whereby they identified an 8.1 per cent drop in exports to China in the two years after a nation’s leader met with the Dalai Lama.

Yet these numbers do not appear to tell the whole tale. During the period of Norwegian “punishment” (which according to some accounts continues today), the majority government owned oil company Statoil was still able to explore shale gas projects in China, and opened a research center in Beijing. In the UK’s case, it is inconclusive whether there was a definitive drop in trade figures during this period, though it is noticeable that in the immediate week after the fateful meeting between the Prime Minister and the Dalai Lama, a deal worth £50 million was signed between the UK and China to export pig offal and trotters for consumption in China.

Some apparent attempts by China to impose economic punishments on countries that have displeased them have backfired. In 2010, there was a spat between China and Japan over a fishing boat captain whose ship crashed into Japanese vessels in disputed waters; China subsequently moved to make the export of rare earth minerals more expensive. It is a matter of speculation whether the point here was to support domestic industry over outsiders or whether this was specifically targeted at Japan, whose high tech industry relies heavily on rare earths which at the time were 97% controlled by China (or some combination of the two). Whatever the case, the result was that other rare earth sources became economically viable, destroying China’s previous market monopoly.

China is in fact a pragmatic actor in international affairs. When its companies have faced pushback due to domestic concerns, often they have continued forwards in other ways. China has quite rigid domestic restrictions about what industries outsiders can invest into, so finds it hard to overtly attack others for doing the same thing. Often the rhetoric does not match the action, and the new government in Downing Street would do well to understand this distinction and calibrate its response appropriately. The decision over a nuclear power plants is an important one with substantial national ramifications for years to come, and it makes sense the new government would want to take time to ensure they are happy with the deal. Going forwards, however, it is important to ensure that a productive relationship is maintained with Beijing, a power that is only going to grow in significance as time goes on.

In order to ensure a smooth engagement with China and Asia more broadly, a number of steps should be taken: first, the UK should be consistent and long-term. Wild oscillations in policy and approach are not appreciated by Beijing (or any other government). We should seek a relationship of working together as partners with China while setting parameters. Concerns over human rights should be raised – as they are already – and pushing back on China’s aggressive cyber activities should continue. As the United States has shown in its relationship with China, these issues can be raised whilst maintaining a productive overall relationship.

Second, it is important to realize why China likes to invest in the UK. As an open market, the UK is an attractive option for Chinese businessmen looking for opportunities overseas. According to figures published by the Mercator Institute for China Studies and the Rhodium Group, between 2000 and 2014 the UK attracted more FDI from China than any other European country. While the status of the UK market’s relationship with the EU is uncertain longer term, for the time being the UK will remain a major financial hub and discussions and deals continue. Reflecting this, the Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC) met earlier this week to discuss how financial products can work between both jurisdictions.

Third, the UK should seek to engage with China in third markets like Pakistan, Central Asia or parts of Africa where the UK has strong historical economic and political interests and China is increasing its presence. In some countries in this category, Britain and China are competitors, but in others, there is an element of complementarity. Exploring these opportunities will help British business going global, as well as improving the quality and effectiveness of Chinese investments in parts of the developing world.

Fourth, the UK should raise its game and attention to East Asian security issues like the disputes in the South and East China Seas, or the ongoing difficulties with North Korea. Currently, Britain is seen as a part-time player, second fiddle to the US in this sphere. Establishing a distinct and comprehensive understanding of these questions, the relevant relationships, as well as expressing informed views about regional problems and backing them with diplomatic heft would go a long way towards balancing the UK’s approach to the region.

Handled badly, Britain’s relationship with China could suffer in the wake of the delay to the Hinkley Point deal. However, if care is paid to engaging China in ways that are of interest to Beijing and that advance British interests, it is possible to find a way forwards in which the UK can express its concerns while continuing to attract Chinese investment and trade. Beijing is seeking partners as much as the UK is, and in the current state of global uncertainty it would seem unwise to cut off relations with another G7 power. The trick will be to establish the contours of the relationship and make sure that both sides are telegraphing each other’s intent with clarity and with a view to the long-term.

Catching up on some old posting, going to put out a few things at the same time. All looking at China in Eurasia, a topic that continues to be a major focus. Of course, all of my work on this is stored on the China in Central Asia site, and this particular piece is something that was undertaken with my excellent RUSI colleague Sarah Lain.
Proceedings of a workshop held in New Delhi in March 2016 to explore the challenges that China’s strategic Belt and Road vision to connect Central Asia hopes to address.

In March 2016, RUSI, in collaboration with the Vivekananda International Foundation (VIF) hosted a workshop in New Delhi to discuss the challenges of connectivity facing China’s strategic Belt and Road vision, which aims to connect Central Asia  and develop strategic economic corridors across the region.

The workshop covered the different economic corridor concepts initiated by China and India and their aim of enhanced connectivity in Central and South Asia, how such visions will be realised and how they could enhance the security and economic development of the region.

The report summarises these discussions and provides insights into co-operation between China and its regional partners.