Thursday, 9 June 2016
China’s Silk Road may not be that silky
China’s Silk Road may not be that silky
The argument that China’s Silk Road is about transforming some of the most forgotten regions of the world into vibrant and growing new economic spaces needs to be critically examined, especially with regard to its political and strategic repercussions
Investments worth billions of dollars notwithstanding, China’s Silk Road projects come with a political baggage and are creating problems in countries that are currently cheering about it.
Baluch nationalists disagree with Islamabad’s view that China-led development can lead to peace and prosperity in the most restive region of Pakistan
Militarization of the erstwhile politically unstable regions and uneven development across them are the two most important outcomes of these projects. These two issues are likely to shatter the myth over the huge success “of the Road.”
While certain political and economic repercussions are certain, the Silk Road is in trouble due to China’s inability to finance all of the projects it has announced.
Some infrastructure projects have already come to a standstill. For example, the gas pipeline project known as “Power of Siberia,” the subject of an agreement signed by Russia and China in May 2015, is on the verge of collapse. Besides, the release of funds for the construction of the Altai gas pipeline to connect western Siberia and China has been delayed indefinitely.
China’s huge domestic high-speed rail system covering 19,000 km of track and hauling more than 2.5 million daily riders is deeply in debt. Its railways extending into Central Asia and other regions may also be in debt.
Some link these problems to China’s growth rate. Chinese officials continue to assure the target countries that its slow economic growth would not impact its economic commitments to them. However, in March, they acknowledged that it is difficult to keep the country’s economic growth rate at 6.5% over the next five years while pushing hard to create more jobs and restructure state-owned enterprises.
Xu Shanda, a retired Chinese deputy director of the State Administration of Taxation, said in an online posting almost a month ago: “In previous years, China made large investments in the energy sector. Looking at it now, these investments were useful in ensuring energy supplies, though financial losses were large. If we do not go this route, external demand will shrink, which will put tremendous pressure on domestic production and exacerbate the overcapacity problem. So, despite the difficulties, we need to stick to this overseas economic strategy.”
But focus on overseas strategy creates problems. While China is trying to channelize its domestic production to overseas markets, outside regions have to deal with China’s acquisition of their assets. For instance, in Kazakhstan, Chinese companies own somewhere between one-fifth and one-quarter of the country’s oil production — about the same proportion as the national oil company, putting China’s stakes at par with the state’s own interests.
On December 17, a group of Chinese companies visiting Kazakhstan signed a number of major agreements with the world’s largest uranium producer. CGN Mining, a listed subsidiary of China General Nuclear Power Corporation, took a “minority stake” in Kazakh uranium deposits.
China’s CEFC Energy bought a 51% share in a subsidiary of Kazakh state oil and gas firm KazMunayGaz, which operates refineries and gas stations as well as fertilizer plants across Europe. And China National Chemical Engineering agreed to construct a natural gas-fueled chemical complex in Kazakhstan.
This way, will not China have a say in directing Kazakhstan’s economic policies?
Such a scenario will lead to conflicts of interest.
That China owns assets in the target countries does not necessarily mean that China has actually bought those assets. Ownership often stems from a policy that aims at forcing the target countries to play by China’s financial rules, which can be onerous. Many developing countries, in exchange for loans, pay steep interest rates and give up the rights to their natural resources for years. China has a lock on nearly 90% of Ecuador’s oil exports, which mostly go to paying off its loans.
The issue can be further highlighted.
Sarah Lain and Raffaello Pantucci, writing for the British think tank Royal United Services Institute for Defense and Security Studies, said: “Much of the historical bilateral projects have been funded through linked loans, where China provides the funding through loans that have stipulations attached to them, such as the requirement that Chinese companies implement the projects on the ground. In other cases where China’s Exim bank or the Silk Road Economic Belt CDB has provided loans to fund projects, it is unclear whether there are any short- or medium-term returns or even security on the investment.”
It is this “concern” of increasing political ingress that is likely to off-set the “bright” prospects of “the road” passing through Pakistan.
Pakistani sources say the government will place almost 60,000 additional troops in restive Baluchistan to ensure protection of China’s Silk Road. This increased militarization will certainly add fuel to the fire. One of the most important demands of Baluch separatists for engaging in peace talks with Islamabad is demilitarization.
Placement of additional troops to protect China’s interests, therefore, runs counter to the resolution of the ethno-national conflict. Many Baluch nationalists who are politically active in Pakistan tend to describe this “development” as “accumulation by dispossession” and “dispossession by militarization.”
The crucial question, therefore, is: Will China-led development, which includes hundreds of miles long roads, create peace in the most restive region of Pakistan? When such a question is posed to a nationalist, he does not seem to agree with the official narrative.
Roads, he argues, are to be used for transporting goods and for military mobilization too. How would military mobilization contribute to peace? It never has in the history of Pakistan.
Uneven distribution of projects, nationalists argue, is reinforcing regional disparities in Pakistan, thus encouraging ethno-national movements in Baluchistan and Sindh.
Hence the argument that China’s Silk Road is about transforming one of the previously most forgotten regions of the world into a vibrant and growing new economic space needs to be critically examined, especially with regard to its political and strategic repercussions.
An overwhelming focus on “economic benefits” tends to divert our attention away from questioning its actual potential as well as the notion of “mutually beneficial” projects. The “Silk Road” and its benefits need to be quantified as well as qualified.
Salman Rafi Sheikh is a freelance journalist and research analyst of international relations and Pakistan affairs. His area of interest is South and West Asian politics, the foreign policies of major powers, and Pakistani politics. He can be reached at email@example.com
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