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.”
Pakistan’s
example
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 salmansheikh.ss11.sr@gmail.com
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