Regular contributor to The Saker, Andrew Korybko, attended the second-annual Yangtze River International Forum Summit 2015 last month that brought together China’s political, economic, and social elite (to see the full program, click here). The day-long event saw the participants discuss the One Belt One Road project, which is the world’s largest-ever connective endeavor. Having received the hard-to-get permission of the Chinese government to operate at this closed-door event as a journalist, Andrew is now sharing with us the exclusive information that he has learned from this high-level gathering. The below are summaries from some of the select speakers’ presentations made during that time:
Mr. Zhao Xiaojiang, Mayor of Lianyungang
Lianyungang held an ancient role along the old Silk Road, and it took the initiative in repeating history by inaugurating the New Eurasian Land Bridge in 1992. At that time, the city waUKs the first one in China to send a train all the way to Saint Petersburg, and this is commemorated by a statue in the city’s port demarking it as the route’s eastern terminus. Therefore, the city is intricately interwoven into fabric of the New Silk Road (officially known as One Belt One Road or OBOR), with the first project being the creation of a China-Kazakhstan logistics base. In 2013, President Xi offered to make the port’s facilities available to all SCO members, thereby making the city the organization’s maritime base. An international logistics park project complements this policy.
Mr. Temirbek Sultanbaev, Deputy Secretary-General Of The SCO
The SCO’s main goal is to retain world peace and order, and OBOR is the perfect vehicle for this. In fact, the project features prominently in the SCO’s 2025 action plan that was passed during the Ufa Summit. The economic fluctuations in the world today have created a risk for the organization and its primary goal, so it’s necessary to prioritize OBOR even more than before to act as a proper counterweight to any potential problems. OBOR will rejuvenate the Silk Road through transport and infrastructure developments and thus make bilateral and multilateral assistance within the organization even stronger, which works out to the ultimate benefit of each of its members.
Mr. Zhao Quansheng, Professor of International Relations and Chair of the Asian Studies Research Council at The American University
China divides OBOR into four parts, with only one of them being the popularly discussed economic component. To begin, it’s understood that OBOR will expand China’s market and make use of the overcapacity in its economy. Capital, technology, and markets were the essential building blocks for China’s earlier rise, and it’s for these reasons that the country’s earlier economic affiliation was with North America and Europe after Deng Xiaoping’s reforms opened the country up. Nowadays, however, China needs to shift towards Central and Southeast Asia to satisfy its market requirements, so it accordingly needs to create a series of institutional norms and rules to help with returning its investment in these areas.
The second OBOR category is security and diplomacy, and it’s noteworthy that Chinese projects have encountered some resistance as of late, especially in Myanmar for example. This reflects on how changing diplomatic realities (i.e. Myanmar’s ‘democratic transition’) can have economic consequences when it comes to bilateral relations along OBOR. On the security front, one need only recall how China had to militarily evacuate its citizens from Libya and Yemen, with the country losing millions of dollars of investment in the former. That instance actually happened to be the first time that the People’s Liberation Army was active in the Mideast, and it created a precedent for China to safeguard its overseas citizens in the future. On the topic of security, it’s also important to address how the island disputes in the East and South China Seas can impact on OBOR.
Concerning the third component of OBOR, this one deals with culture. China is spreading its Confucius Institutes all across the world, and this cultural initiative is important in helping other people to better understand the country and its people. The integration of different cultures is very important, as it’s a necessary prerequisite for world peace. The spreading of Chinese traditions also strengthens Chinese civilization, and it helps to reinforce it against invasive South Korean and Japanese pop culture. In the interest of equality and solidarity with people, it’s highly encouraged that Chinese working overseas learn the local languages and cultures of the countries in which they work, as this can help to mitigate misunderstandings and create a positive image of China abroad. Something that can help with this is for Chinese academics and specialists to travel to the areas that they study and actually live inside the native cultures for some time. The experience that they gain and bring back to their students is instrumental in teaching them about the countries that they might one day realistically work in. This has to happen more often, as should the acquiring of genuine understanding about local religions such as Islam.
Finally, the last part of OBOR deals with Great Power competition, and it’s obvious that the US is the root cause of the island disputes in the East and South China Seas. In fact, the US creates problems all across the world, and not just against China. For the future, the US and China need to enter into win-win cooperation, but this might be difficult for the US to accept. China is currently asserting its influence through OBOR and the Asian Infrastructure Investment Bank (AIIB), and this leads to the US being afraid that it might eventually be squeezed out of the Asia-Pacific. China is already establishing new rules, norms, and institutions in the international community and has no intention to marginalize the US (it wants to cooperate with it in the interests of common development), but the US refuses to listen to China and has rejected its cooperative outreaches. It’s curious to many in China how the US wanted to make Japan a place of peace after World War II, but that it’s now supporting the trend towards remilitarization, which raises fears that this might be projected against China and its Asia-Pacific integrational projects. In fact, it’s clear at this point that the US built two platforms for power in the aftermath of World War II, and these are NATO and the EU in the West and Japan, South Korea, and Taiwan in the East.
Mr. Wu Shichun, President of the National Institute for South China Sea Studies and Vice President of the Institute of Boao Forum for Asia
OBOR has had many successes since its official announcement in 2013. Governmental mechanisms, both at the highest and lowest levels of Chinese administration, have been rolled out all across the country, and high-level trips and project agreements/MOUs with neighboring countries and regions have been signed (e.g. the China-Pakistan Economic Corridor). Also, capital guaranteeing mechanisms for future infrastructure projects such as the Silk Road Fund and the AIIB have been unveiled. Last year China made outbound investments worth around $100 billion, and in the first half of this year, it’s already made $52 billion of such commitments.
There are challenges, too, however, and some of them are that certain countries like Vietnam doubt the importance of OBOR, but this view has so far only remained a minority one. Different opinions in the international community do pose a challenge for the project’s implementation, however, and shouldn’t be completely ignored. Another issue is that there are inevitably going to be local and central government problems in applying the endeavor, and this needs to be recognized in advance. In particularly, local enterprises need government support, preferential policies, and investment protection in order for outbound investment to continue to grow. Some of China’s partners also have political, economic, and social risks that could unexpectedly lead to economic consequences such as the cessation of bilateral projects, and China needs to prepare for this and ensure the safety of its investments.
Another thing about OBOR is that China can learn a lot from the Marshall Plan, although it must be stressed that they are two different things and that OBOR isn’t a ‘Marshall Plan for Asia’. What’s important is for China to pick up various techniques for how to establish multilateral coordination and communication mechanisms and track the progress of its overall endeavor. Due to the political sensitivity that some countries have towards being labelled as OBOR partners, China shouldn’t advertise every single project as being part of this overall framework. For example, if the OBOR label is omitted, then some countries might accept a project that they would have otherwise rejected out of concern for how it would look. Lastly, China could learn from the UK’s 19th-century system of free trade and peaceful development in order to lead China from being a regional major country to a global one. Jiangsu Province (where Lianyungang is located and the event is being held) has a strong tradition and history of international trade and exchanges and is thus a logical place for OBOR to begin.
Dr. Lu Qingcheng, Vice President of the China-Africa Development Fund (CADF)
OBOR is a detailed roadmap for outbound investing enterprises, and it’s in this capacity that it’s related to PADF. The Fund was created in 2007 in order to deepen trade between China and Africa, as Beijing has an interest in the low-cost labor that the continent can provide for its overseas companies. Many State-Owned Enterprises (SOEs) have major projects in Africa, and they need guarantees for the investment environment there. CADF thus helps provide them with development banks, insurance companies, and capital for accessing this vast market, and was actually the first such Chinese organization to do so. Entrepreneurs use the Fund for capital, local expertise (i.e. specialization in the French and Portuguese languages), suitable project match-ups, and intermediary functions in helping African companies find Chinese partners.
In its 8 years of existence, CADF has been involved in 80 projects in around 35 different countries, amounting to a total of $16 billion in investment. Because of its success, CADF can be a model for other development funds that target different regions. The direct capacity model can transfer Chinese overcapacity to Africa, such as the Chinese steel mills that have now been built in South Africa and the forthcoming ones in Algeria, and it’s integral that African and African-based companies continue buying Chinese-produced equipment for their factories and other industrial endeavors. The Egyptian-based steel plate plant was a $700 million investment along the Suez economic and trade park corridor, and China wants to build an industrial cluster there in the future. Investing in Africa isn’t just affordable, but it’s also geo-economically convenient, since many African states are involved in free trade agreements with the EU and US, the latter being de-facto in some spheres due to the African Growth and Opportunity Act (AGOA). This means that Chinese plants there can get around restrictive trade barriers that they otherwise wouldn’t be able to avoid if they were based in China itself. In order to capitalize as much as possible off of this opportunity, China should create industrial chain strategic alliances, with one possible starting point being the Suez investment corridor.
Some examples of CADF’s projects are as follows:
* port construction in Nigeria
* the Africa World Airlines (AWA) project in Ghana
* railroad and airline connectivity across the continent
* Togo projects worth $200 million
* the proposal to create direct China-Africa flights instead of using the Dubai airport as a halfway point
But there are some challenges that Chinese investment in Africa must go up against:
* poor existing infrastructure
* difficulty for smaller countries in financing certain projects
* the need to cultivate international talent
* finding more Chinese to go abroad to Africa
* Chinese companies need international investment experience and strategic guidance for outbound investment
* protecting bilateral investment in risky markets
* the central government’s allocation of proper resources to outbound investing companies in Africa
Chinese-African economic cooperation complements each party, but they need industrial clusters and strategic alliances in order to really take off and reach their full potential.
Mr. Pang Zhongying, Trustee of the Jiangsu Association of Friendship and International Exchanges (JAFIE) and Professor at the School of International Relations at the China’s Prestigious Renmin University
The key element of OBOR is connectivity, and since the 20th century, the world has witnessed three important trends: interdependence, globalization, and connectivity. All three of them form the theoretic foundations of OBOR, but connectivity is certainly the main component. Once implemented into practice, OBOR will become a global free trade road map that ushers in a New Trade Order (NTO) and the next generation of global economic governance. Since 2009, the US has been pushing the Trans-Pacific Partnership (TPP) that conspicuously excludes China, while the 2013 OBOR project makes no direct mention of the US. It can be seen that China is somewhat responding to the US, although it still holds open the possibility of cooperating with it and the TPP in the future. In fact, it’s predicted that this grand integrational intent is precisely what President Xi might speak about with Obama during his visit to the US.
The 2014 APEC Summit in Beijing produced a roadmap for an organizational free trade agreement, and OBOR might actualize this with time and eventually integrate the US. China needs a new multilateral framework for the global economy and governance, and it also needs a new way in which to approach US-Chinese relations. China favors increased coordination and interconnectivity between countries, and the 2014 G20 Summit in Brisbane saw an agreement to strengthen the WTO, which is something that China surely wants to assist with. It’s also exciting that China will host next year’s G20 Summit, which incidentally will be very close to Jiangsu Province. One thing that should be mentioned at this point is how China’s ambition to strengthen multilateral institutions such as the G20 and WTO is ultimately to its grand interests, such it goes back to how the country wants to create a global free trade road map that benefits all countries.
Speaking of which, China wants to enter into an economic alliance with the EU, and this somewhat explains one of the reasons for OBOR. It would like to connect to other free trade organizations in the future, too, but it needs more seminars with such regional organizations like the EU and ASEAN in order to actualize this. OBOR is literally a global project, and it belongs not to China, but to every country that chooses to participate in it. China wants to promote world peace and the sovereignty of states, and it intends to achieve this by integrating the global economy into OBOR and vice versa. China’s deep embeddedness in the global economy allows it to enter the world, and conversely, for the world to enter China, and after the past 40 years of the world changing China, OBOR creates the opportunity for China to change the world.
One of the ways this is happening is through the Russian-Chinese Strategic Partnership, because both countries have a large geographic area and natural economic compatibility, which thus forms the basis of OBOR’s mainland component. OBOR is the realistic demand of current geo-economics, and China is connecting with the strategic development initiatives spearheaded by its partners, such as Pakistan. On a more local level, Jiangsu is obviously the key to integrating everything, as it has a very high GDP and advanced technology. In many ways, it’s equivalent to medium-sized country and has the capabilities to behave as such on the world market. Due to its infrastructural geography, it can connect to Pakistan, the EU, and the African Union, but more seminars are needed on these topics so that the province can play the leading role in OBOR and help forge a community of common destiny between all of its global partners.
Mr. Zhu Feng, Trustee of JAFIE and Executive Director of the Collaborative Innovation Center of South China Sea Studies
OBOR is all about China going global, and in many ways it’s “China 3.0”. To explain, 1.0 began with Deng Xiaoping’s reforms that attracted capital and foreign investment, while 2.0 started with China’s admission to the WTO. The two processes that occurred were related to opening up and connecting with the rest of the world. OBOR combines the two in a win-win manner that’s more beneficial and profitable for China and the world, optimizing the successes of the previous two ‘versions’. Be that as it is, Chinese society must be well-prepared for OBOR, since this project also opens up the country’s individuals to the world. The question is, are they prepared? Does China have its own global vision, behavior, and global experience that are necessary for OBOR to succeed? What about multidisciplinary talent? OBOR starts within China, and it’s necessary for the country to consider these pressing questions.
One of the things that China must do in order to succeed with OBOR is to understand local markets, laws, regulations, and partners. Entrepreneurs must make every effort on their part to do this, such as adapting new models and methods and learning more about the local environment in which they operate, and alliances will definitely be needed. The Chinese government must facilitate business functions and help local enterprises with outbound investment. Jiangsu needs to make itself even more favorable to investment, and Lianyungang will be the focal point of these efforts as it improves its railroad and harbor connectivity. The whole world is be entering China through this city, but also, Chinese capital will be entering the whole world through it too, given the anticipated import-export role that Lianyungang will have. This will make it the forefront city, and Jiangsu the forefront province, of OBOR in the future.
Mr. Wang Cun, Director of International Investment at the Department of Commerce in Jiangsu Province
FDI in Jiangsu includes 72 different sectors, and there are 2 Special Economic Zones (SEZs) in the province. This makes the territory among China’s leaders in FDI, but the province now wants to also promote outbound investment to increase its global economic profile. From January-July of this year, total investment output jumped 7%, mostly attributable to new ventures made in Thailand, Indonesia, and Pakistan, and the provincial government will help entrepreneurs with forthcoming projects. Right now, it’s considering opportunities in Kazakhstan and Cambodia, for example. Due to its geography between the mainland and maritime portions of OBOR, it can help provide services to Chinese companies considering either form of outbound investment, aiming to help them increase international cooperation while simultaneously decreasing their transportation costs.
Ms. Zhang Mingxi, Director of Sihanoukville Special Economic Zone Industrial Park in Cambodia
Sihanoukville is the largest SEZ in Cambodia, and within its territory it produces its own electricity, communications, and water services. The country’s infrastructure and supporting services are backward so the SEZ had to build its own, but it cooperates with the Cambodian government and institutions. There are now 85 enterprises in the SEZ employing 12,000 individuals, and 27 of the companies are from Jiangsu. Some of the things that they produce are shoes, packaging, and medical equipment. It’s important for all companies to follow local laws, so therefore they hire local lawyers to help with this. Also, the SEZ engages in charity work such as donating to the Red Cross, providing locals with mosquito nets, and helping in disaster and flood areas. Another thing that they do is congratulate Cambodians on special Buddhist events. The bosses try to listen and talk to the workers and plan holiday activities, and during these times, they’ll even give them special gifts. To help with the integration of Chinese nationals into the local social environment, employees are provided with Khmer language lessons, and internal SEZ magazines help everybody network with their neighbors and other enterprises. A 2010 document was signed that laid the framework for enhanced Chinese-Cambodian cooperation, and this serves guidance for companies and provides state support for them from both sides. The grand plan is to create an industrial cluster of over 300 companies that provide work for over 100,000 employees, all the while abiding by their social responsibility to them and the local community.
Mr. Liu Jianguo, General Manager for Business Development at the China-Africa Development Fund (CADF)
Africa is a new pillar of emerging economies due to its natural resource riches, with 70% of aluminum soil resources being found in Guinea and 95% of platinum production being in South Africa, for example. Some of the Chinese Premiers’ first state visits have been to Africa, and the country has already invested $40 billion into the continent. This number is expected to spike to $100 billion by the end of the decade since China wants to transform “Made in China” to “Made in Africa”. Africa needs electricity, so Chinese companies are readily providing it. Some examples of the diverse projects that China is engaged in are as follows:
* Tin Can Island Port in Nigeria, the country’s second-busiest
* power plants, and TV and refrigerator plants in South Africa
* the Chinese industrial park in Egypt
* progress towards creating regional airlines and routes
* electricity projects in Ghana
* agricultural projects in Zimbabwe
* general support for Jiangsu companies in Africa
President Xi said to spread the Chinese voice to Africa, and that’s what CADF is doing by assisting with all forms of economic development there.