A globalized version of Marco Polo

A globalized version of Marco Polo

Paul Sullivan | Professor, NDU. Georgetown NCUSAR
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A preview of the new number of World Energy (37), "China: The Overtake". China's aim in constructing a modern Silk Road stretching from Southeast Asia to Europe, as part of its One Belt One Road project, is to consolidate its global geopolitical and economic influence

The One Belt, One Road (OBOR) project is a massive undertaking driven mostly by China. It involves gigantic investments in energy, transport, communications, water, and many other infrastructural, industrial and other projects. OBOR is changing the faces, economies and even politics of many countries, and not just throughout Asia (but especially South Asia, Southeast Asia and Central Asia), but also in Latin America, Africa and Europe. It will also have significant effects in North America, Australia and in the Pacific Basin. Indeed, there could be very few areas of the world not affected by it if it goes as planned, and the money is still available to complete, maintain and build upon OBOR projects. That is, its influence will continue if the internal politics of China and the countries it is investing in, and, according to some, imposing itself on, do not go sour.

OBOR can also be a flexible concept, and deciding whether a project is part of it or not can sometimes be an art form. There are already indications that some projects have been slowed down or even just plain stopped due to anti-China sentiments in some countries, or because the Chinese have not been hiring enough local workers. There have also been complaints in some countries of shoddy work on sometimes major infrastructure and energy projects. These shoddy results have not helped relations between the local governments, the local people and the Chinese government and the companies the Chinese government contracts to execute the projects. Not all is happy in OBOR land, but there are massive changes happening, and some are positive, across the globe.

Turning the tables after the "Century of Humiliation"

Why is China doing this? There are numerous reasons, some of which are public and many, my guess, which remain in the shadows – and may remain there for some time. A psychological one is that China wants to recover from what they call the “century of humiliation”, when China was controlled and exploited by the western powers and Japan. China was at times in the deep past one of the largest and richest economies on the planet, along with the area that is now known as India. For many in China, its recent return to the top of many world measures of economics, technology, energy and other realms seems right, given their position in the past. The Chinese name for China is not China, but Zhoughgou, which means “Middle Kingdom.” In the past, the Chinese often saw themselves as the center of the planet, surrounded by barbarian states. They ruled the center, and the rest followed. History, of course, has shown things to be a bit more complex; consider the Mongol conquests of China, and the century of humiliation, as well as in-fighting and other sources of weakness, including the civil war that lead to the creation of the People’s Republic of China. Nonetheless, the Chinese are looking to regain what they see as their rightful place in the world. Others may see a difficult path. China’s economy has been slowing down in the last few years. Its trade balance has not been as good as it has been since the heady years after they joined the WTO in 2001. There is considerable overcapacity in the Chinese trucking, steel wire and construction industries, as well as in other industries intended as a big part of OBOR, such as energy. Chinese consulting and engineering companies that built up during the economic race of the early 2000s now need to branch out even more so internationally. Each year there are about 13 million new Chinese born, so the Chinese need to create millions of jobs each year. With a slowing economy that has become more difficult than in the recent past. China has some restive regions, such as the Xianjiang region to the northwest, where the Uyghurs can be found, and Yunnan Province in the south, one of the country’s poorest regions. China is hoping to develop these two areas and others they see as vital for their economic and national security by tying them to the regions near them economically and through infrastructure. For Xianjiang it is through Central Asia, with its vast mineral and energy reserves and wind and solar energy capacity, as well as its countries in need of economic development and wealth. For Inner Mongolia, Gansu, and Heilongjiang, China wants to connect them with the countries to the north and west in a cross-China, inter-regional economic plan to improve life in these regions. For Yunnan it is a focus towards Southeast Asia, and most particularly Myanmar and Laos. Vietnam is a tougher business to develop given the difficult history between China and Vietnam, including some disputes about the South China Sea. One could even link developments in the South China Sea and East China Sea with OBOR, given that most of Chinese trade goes across these seas.

An unprecedented plan in the history of modern trade

Part of the OBOR is by land. Part is by sea. Both parts expand well beyond the borders and lands and seas near to China, but they also begin at the edges of China, are developing for China, and will change the geo-politics and geo-economics of the globe for a long time to come. As noted above, few countries will be unaffected by this project that some describe, with some accuracy, as the biggest infrastructure-trade-public diplomacy project ever conceived. The U.S. response to OBOR has been tepid at best, and counter productive at worst. Tossing out the Trans-Pacific Partnership (TPP) was a huge win for China, and a big loss of increased prestige and strategic leverage for the U.S. The TPP would not have improved the U.S. trade balance or employment much, but the TPP was mainly a strategic document that would have allowed the U.S. to have more say on many aspects of trade across the Pacific Basin. This would also have meant greater leverage on other issues in that vital region that holds over 40 percent of global GDP, and includes some of the fastest growing regions in the world. The Chinese recently developed the Asian Infrastructure Development Bank (AIIB), which now has 80 countries signed up for it – and many are not in Asia. The Chinese developed the Silk Road Fund, their massive EXIM Bank, the China Development Bank, and other truly gigantic banks that have helped them expand internationally in the past, but now are likely to be some of the biggest enablers for OBOR. The World Bank and IMF may be institutions of the past as China emerges, and the world realizes that these two organizations are not keeping up with the changes. The Chinese are developing new international organizations directed at trade, investment, and even new security infrastructures and agreements, such as the Shanghai Cooperation Organization, which grew out of the Shanghai Five. Like the OBOR from past trade and investment ideas this group grew from a close regional organization to one that cuts across many areas, including into the Middle East, South Asia, West Asia, Central Asia, and Russia. Combining China’s quickly increasing defense and security budgets, its expanding into, and development of, new international strategic and economic organizations, and the OBOR and related projects it is easy to conclude that the China juggernaut of power and influence building is far from ending. But it is changing directions and focus and will be an even greater challenge to the US, Japan, South Korea, and Europe in the future, more than ever before. China’s geo-strategic and geo-economic influence is heading in many powerful directions, whereas the U.S. is becoming more insular. This should be a concern for all of us. It is time for the U.S., Japan, and many others to wake up to what is happening and what the OBOR and other activities can bring their way. Japan is in competition with China in funding energy and other infrastructure projects in many parts of the world, but it is often in a weaker position given that China has the massive advantage of its growing economy and developing diplomatic and military influence in many parts of the world, which Japan cannot match. This is happening even in countries nearby to Japan, such as Vietnam. The U.S. State Department is in some turmoil these days, and staff is being cut, not increased, as China builds global power. USAID is being cut back. Other U.S. development institutions seem in a state of depression, and not just in funding. As the U.S. weakens its diplomacy and aid institutions, China powers forward with theirs. China is developing resource influence by tying itself, its economy, and its people to resource sources globally. It is also developing energy influence by connecting with energy resources in many parts of the world, and selling, constructing, and managing energy facilities, infrastructure, and technologies globally.

A project with vast implications

In a short article it is not possible to even list all the OBOR projects happening now, in the pipeline of development or being considered. The AIIB web site has partial lists of such projects, but these just touch the tip of the iceberg. OBOR has a focus on Central Asian energy for uranium production, electricity production, transmission and even distribution (and that electricity will be produced by oil, gas, coal, solar, wind, hydropower and more). Natural gas and oil are very important aspects of this, most particularly Kazakh oil, and Turkmen gas. Sometimes the energy project flows are from Central Asia to China. Other times the flows are from China to Central Asia. Rail, road, and air networks being developed with Central Asian states are also energy-related given that the energy equipment, people, and even the energy itself must be transported via rail and road. Air networks improve not only transport of vital expertise and some energy technologies between one and the other, they also improve communications. Communications networks in some parts of Central Asia are also being improved by China, for example, cell towers and networks. Energy systems are embedded within other systems connected with other systems nested in still other systems—and the Chinese know this very well. Energy developments in Central Asia by China also affect other systems’ developments, such as those related to water, transport, communications, finance, governance, and so much more. With energy developments, many Central Asian countries can move forward, but in the end, they will owe China for this improvement. This debt may result in a loss of some national freedom of movement in some international and national projects and policies. China is not doing all of this out of pure altruism, or even just for the profit motive. Many of its OBOR investments in Central Asia result from cold strategic calculations across many realms, including military and diplomatic.  China’s “march west” through Central Asia and beyond is an anti-terrorism project at the same time it is an economic and energy development project. Khorgos and Kashgar are not chosen for their great governance and infrastructure, but for the leverage their development could bring to lessening pressures causing extremism in China’s northwest and neighboring regions. The Karakoram Highway linking Pakistan to China over massive mountains is certainly a fantastic feat of engineering, but the infrastructure of roads, pipelines, hydropower facilities and other energy facilities, the Port of Gwadhar, etc., are there to improve trade, investments and relations between China and its complex partner Pakistan. The China-Pakistan Economic Corridor is a very big deal in the region, and will be a factor globally if this works out and changes some of the economic and political balances and imbalances within Pakistan and some of its neighbors. China is also there to help develop restive and potentially restive parts of southwest China and dangerous and truly restive parts of Pakistan. China’s energy and related projects in Pakistan are being done to increase  Pakistan’s connection to China and thereby counter India’s power in the region. They are also a bit of a snub to the U.S.  The port of Gwadhar is also there to link China more to the rich oil and gas resources of the GCC, Iraq, and Oman. The port could take in large LNG carriers and oil tankers, which will offload their cargoes to storage facilities built by China and send these energy resources north to parts of Pakistan, but also to China, so China could have another route to bypass the Malacca Straits, through which about 80 percent of China’s energy imports travel. The relatively new oil and gas pipelines and energy ports in Myanmar have also been set up for China to bypass the Malacca Straits. Hydropower and other energy facilities being built in Myanmar could also be nominally tied to OBOR, even though some started, like Gwadhar in Pakistan and the Kyaukphyu Port energy connections in Maynamar, before Mr. Xi even announced OBOR. But many of these past energy and energy-related projects are part of the same idea of a greater China via international expansions, which is the real spirit of OBOR.

New developments for South-East Asia's interstate relations

Cambodia is one of the most China-dependent countries in Southeast Asia in regard to its energy developments. China supported the Khmer Rouge, and now supports its progeny in the present government of Cambodia, as it builds many hydropower dams, transmission and distribution facilities for electricity and much more. Laos is also becoming even more dependent on China for energy investments, especially in hydropower and related transport and communications networks. There have been tense times with these developments in Laos as some Laotians see China as more of an imperialist economic power. Vietnam sees China in a darker light than many others in the region because of past conflicts with China that go deep into its history. OBOR is having a much tougher time developing energy, rail, and road networks in Vietnam than in any other Southeast Asian country. This difficulty is related to the aforementioned historical grievances, but also to tensions related to oil and gas fields off Vietnam that China covets. Sri Lanka has also invited China and OBOR to develop major port and energy facilities, amongst other things. Hambantota Port in Sri Lanka is one of the “String of Pearls” ports that will aid China’s overall trade, energy trade and development, and strategic balance with India. Others in the “String of Pearls” include Gwadhar in Pakistan, Marao in the Maldives, Kyaukphyu Port, and the Coco Islands in Maynamar, as well as Lamu in Kenya, Port Sudan, Djibouti, Hong Kong, many islands in the South China Sea and other island and ports from China to Sudan and beyond likely to be developed. This can be seen as a new “Great Game.” India seems to be accepting the challenge. The U.S., on the other hand, seems to be in the back seat watching, and this will prove to be a big mistake. The Bangladesh-China-India-Myanmar Forum (BCIM) is also developing into an enabler of energy, trade transport and other infrastructure and economic developments and is yet another subsidiary to OBOR. China was involved with energy projects in Africa well before the birth of the OBOR idea as it exists now, but, again, the development of Africa energy, infrastructure, trade, and other projects has carried the spirit of OBOR for decades. Modern China’s influence in Africa started in the 1960s with their modest help to newly independent states to bring them into the Chinese communist orbit. OBOR is a more sophisticated update of that behavior, and China has more money, knowledge, and power to pull it off now. China has shown interest in the IPO for Aramco. It has invested in developing oil fields in Iran. It has large investments in Egypt, and especially in the Suez Canal Zone. It is investing in LNG with the Russians in the Arctic. It has more icebreaker ships than the U.S.. One might expect China to develop a new “String of Ice Pearls” across the northern routes in the Arctic in the future as climate change picks up pace. China is moving investments and influence into Latin America for oil, gas, food, agricultural goods, lithium, copper, and other minerals.

To weigh more in the mosaic of the international trade

It’s also one of the largest trading partners or the largest trading partner of many countries in Asia, Africa, Latin America, Europe, North America, and globally. The choice to be a globally diverse trading partner was not entirely economically based. A diversity of trading partners ties those trades to both sides, and makes China an especially diverse and powerful geostrategic and geo-economic player. China is also a massive investor in many developing countries across the world. That gives them further influence. It also gives them more power in the international forums where important strategic and economic issues are discussed. Some would call this economic imperialism. Others see it as political imperialism. Still others see this as smart chess moves in a very long game to develop China and keep it safe from internal and external threats. It seems to be a combination of these in some way or another. Huge trade and investment accounts can buy a lot of leverage. Massive energy and other investments can eventually, possibly, weaponize capital. China wants to be a hub, the Middle Kingdom, for the spoke of energy and other sources and investments. The spokes from the hub are developing globally. This is a complex sort of hegemony, but hegemony nonetheless. However, there are some risks. China has warmed up to certain dictators and autocrats. If they are tossed out of power, then China is out of luck in those countries for some time. There is also a certain degree of corruption involved in some of the projects. That may also backfire eventually in some places. On the other hand, if China starts to determine how the energy and other businesses are accomplished in many parts of the world, that could produce another sort of path dependence and QWERTY, that some other countries could not play in the same way. The US, Japan and others need to wake up to OBOR. Being a bystander or a minor player means that China builds more influence and economic power in the world with OBOR and other activities. The results might be more startling than some may think right now. Sleepwalking into the future is not a policy. It is possible to work with the Chinese and have a give and take in the future, but one must be in the game and understand what the game is to do that.