New Silk Road and China’s Expansion for Global Predominance

via della seta cina
  • This year, China celebrates the 70th anniversary of the birth of the People’s Republic and last April Beijing welcomed the 2nd Belt and Road Forum for International cooperation  (BRFI) with the participation of some forty Heads of State, including President Putin as a guest of honour, the Premier Conte for Italy, top international leaders, the Secretary General of the United Nations, the IMF, a total of more than five thousand participants from 150 countries,The BRI  – Belt and Road Initiative –  known in the West as New Silk Road  – constitutes the global investment program infrastructure, announced 6 years ago by Xi Jingping , to implement economic integration in the interior and exterior of the Euro-Asian continent, also involving the African continent and Latin America.

    According to data provided by the China Development and Reform Commission, there are 126 countries (in Asia, Africa, Oceania, Latin America, Europe) and 29 international organizations that have so far signed cooperation agreements relating to the BIS. Among these countries there is also Italy, for which the Premier Conte during the visit to Rome of Xi Jingping last March 4 signed the Memorandum of understanding  (mou), which is the usual format proposed by the Chinese side in the matter.

    The signing represented a huge diplomatic success for the Chinese leader, but at the same time has aroused reactions and controversy within us but especially from the EU and USA, Italy being the first country of the G7 to join the initiative, although the Italian Government has presented the same as a purely commercial agreement.

    The main US concern – inviting Italy not to support the boastful  Chinese project – is inherent in national security problems, related to the possible sharing with the Chinese by Italy of the mobile networks  (network 5G of which China thanks to Huawei could be the main supplier world-wide) and to the Chinese cyber threat for sensitive data available to Italy within NATO.

    The consequence of the event is that in the international comments there is a departure of Italy from its historical European and Atlantic allies, which consider absolutely divisive the move of Italy , with the risk of a double isolation from Europe and the United States. Comparison is made of the limited economic benefits achieved, compared to orders of 40 md. in the same trip as Xi Jingping.

    For our exports, China represents the ninth destination market and the first in Asia. Despite sales of 13 billion euros (2018) Italy, importing about 31 billion euros, recorded a deficit. You can remember how ChemChina (China Chemical Corporation) with an investment of 7 billion, is the first shareholder of Pirelli since 2015. The merger of ChemChina with Sinochem will create in the sector an international group with a turnover of 120 billion dollars. Superior to the industry leader like BASF.

    The BIS is currently the expression of the political line taken by Xi Jingping to reaffirm China’s strong role as a function of global dominance.

    One of the various manifestations is also the speech from the same held in January 2019 on the long-standing issue of relations with Taiwan and with the principle One China Policy or Principle of the Unique China, asserting the inevitability of unification, including Taiwan’s strength with the PRC. The principle of the only China dates back to 1979 when the United States ceased diplomatic agreements with Taiwan recognizing the Chinese government. At the same time, with the “Taiwan Relations Act the United States itself predicted that any attempt by the Chinese Government to forcibly annex the island would pose a threat to the security of the United States.

    The accentuation of a hard line is also evident from the demonstrations that are taking place in Hong Kong, with over a million people in the streets, the largest protest against Beijing after the return under Chinese rule. Under the pressure of Beijing the Loyalist government has in program a law on the extradition that would come to affect the particular status of Hong Kong (“a country, two systems agreed to the passage from Great Britain to China.

    With the ambition to become in 2049 “ first centenary of the birth of R.P.C. “ the first industrial power of the world the Chinese President launched in 2015 also the Plan “Made in China 2025which aims to radically restructure industrial production by promoting its technological development, gaining its leadership in various related strategic sectors such as robotics and artificial intelligence, information technologies, aeronautics, new telecommunications networks. The need for an industrial model of the German industrial type 4.0 has been accepted.

    The BIS consists of an investment plan, potentially in the order of $1 trillion (but within a time frame not yet defined), 900 projects, involving more than 4 billion people, 40% of global GDP and 75% of known energy reserves.

    China holds a share of 25% of the global manufacturing value added, with 28 percent of cars, 41 percent of ships, 80 percent of computers and is the leading steel producer.

    He’s the world’s largest exporter and second largest importer. The data of the WTO (2016) indicate a total volume of exports and imports of 3.690 billion dollars. China has been part of the WTO since 2001.

    Despite the slowdown due to the program of economic readjustment – with a greater weight of domestic demand than exports – and the decline of investment, the Asian Development Bank (BAD) predicts a growth of the Country of 6.3% for 2019 (6.4% according to IMF) and 6.1% for 2020. Various sources predict that in the three years 2020-2022 growth will not be less than 6%.

     

    According to the International Monetary Fund, in terms of share of global GDP (Chinese GDP is the second largest in the world) the gap between the two Chinese and US economies will be only 5 percentage points in 2023, down from around 27 points in 2000.

    In the world scenario, the BIS on the one hand leads to considerable interest in view of the large size of infrastructure investments and not only, but on the other hand creates serious environmental concerns, transparency and sustainability in one with fears of further massive expansion of China into the world economy.

    Thanks to the current American unipolarism, to the internal divisions and problems of the Eurozone, including brexit, China is now proposed as an actor in the defense of globalization, but in function of its leadership and therefore of a Chinese-style globalization.

    The lack of interest shown by the Trump Administration for Africa and the lack of European ability to oppose Chinese actions in Africa, have favored the continuation of the expansionist design of China in that Continent, become the first basin – to the detriment of Europe and the United States – where Chinese companies find favorable ground for their massive entry into infrastructure and mining.

    According to Chinese sources no less than 500 infrastructures have been or are being built with Chinese support and more than a million Chinese work in Africa.

    According to EU estimates there are no fewer than 2500 Chinese companies, medium and large, authorized to operate in the mining sector to ensure strategic supplies in the long term.

    The total volume of Chinese loans between 2000 and 2017 is estimated at 136 billion dollars.

    Since 2000 the Forum on China-Africa cooperation FOCAC has been founded, involving 53 African countries.

    The BIS meets with the African Union’s Agenda 2063 (AU), another ambitious project to redefine Africa’s place in the world, which has recognized the BIS’s complementarity with its own goals.

    > Global concerns about Chinese hegemony appear to be well founded when considering the size of foreign reserves ($3.5 trillion) with which the Chinese Government is financing the realization of the infrastructure of the countries where they are inserted, with loans that can thus determine for some of the countries with weaker economy (e.g. Laos, Cambodia, Montenegro, Mongolia, Maldives, etc.) an increase in indebtedness and economic and political dependence on China, obliging them to cede control of strategic infrastructure (e.g. tlc, ports)as the outcome of what has been called the diplomacy of the debt trap

    In fact, the OECD has identified investments related to the BRI in 29 economies classified under investment grade and 14 without any rating, as the Chinese Government favors the strategic aspect even if the investment would not be economically advantageous.

    As an example of the debt trap is generally presented the case of the port of Hambantota in the Ski Lanka, in a strategic position on the marine way between the Narrow of Malacca and the Suez Canal, linking Asia to Europe. The impossibility to face to the service of the debt contracted with the Chinese Eximbank for the realization of the port, in order to lighten the traffic on the port of Columbus, has forced the Government to transfer in counterpart 70% of the control of the same port to China Merchant Port Holdings Company.

    For the financial aspects and the management of the massive investments related to the BIS, was created by Chinese in December 2015 a new multilateral bank, operating from 2016, Asian Investment Infrastructure Bank  (AIIB), headquartered in Beijing and an endowment of 100 billion dollars (of which 28.7 md. from China) also involving foreign capital, including Italy that was one of the first Western countries to join. There are two categories of participation: regional members (75% of voting rights) and non-regional members. The largest voting rights compete with China (28.7%) followed by India (8%). Italy has 2.66% and is the tenth shareholder.

    The AIIB, antagonist of the World Bank and also of the BAD -Asian Development Bank and the IMF, by now counts – despite the non-accession and opposition of the United States with attempts to dissuade against its European and Asian allies – 93 acceding countries.

    Between 3.4 and 4.5 billion dollars are previewed in the course of 2019 investments, in 15-20 plans.

    Under the control of the Central Bank was established a dedicated Fund,  the Silk Road Fund with an endowment of 40 billion dollars, which channel the resources of large companies and commercial banks in China. Other financial interventions come from Industrial and Commercial Bank of China, the world’s first for active, with over 200 projects and related exposure for over 200 billion dollars; from the Chinese Eximbank, from China Development Bank, from China Construction Bank of China. In essence for the BRI mobilizes the entire banking system of the country.

    In the Report 2019 CER – European Research Centre on the impact of the BIS on international trade, presented last April at the CNEL, three main objectives are identified which are addressed by the Chinese authorities:

    -a) securing energy supplies and raw materials, through a diversification of energy sources, facilitating access to Russian and Iranian oil and gas.

    Since 1993 the country is a net importer of oil, but coal is still the raw material used;

    -b) achievement of the internal economic rebalancing, reducing the regional imbalances caused by the speed of the country’s economic development and massive urbanization; which has resulted in the presence of more than one hundred urban areas with more than one million inhabitants.

    In inland China there are still large depressed areas, especially in the southwest. Xinjiang, Qinghai, Tibet and Gansu are among the main regions on which the BIS is focusing;

    -c) absorption of overcapacity in various sectors: of construction, steel (928 million tonnes in 2018) as well as logistics and transport, with the double intent  to boost internal growth and acquire foreign markets for Chinese goods.

    The BIS is divided into several economic corridors including:

    -New Eurasian Land Bridge, for connection with the Pacific and Atlantic. The corridor arrives in Holland (Rotterdam), Belgium (Antwerp) and Germany (Duisburg);

    -China-Central Asia-Western Asia, starting from Xinjiang to connect China, Arabian Peninsula, Persian Gulf and Mediterranean, reaching Iran and Turkey;

    -China-Pakistan (CPEC), addressed to an access to the Middle East and Africa; starting from Xinjiang (Kashgar) to create through the Pakistani port of gwadar the link between the land branch and the sea branch of the Silk Road. It is estimated investments for 46 billion dollars. correlated to this corridor is realized the first participation of the Silk Road Fund.

    the land corridors are flanked by the routes of the marine way. Maritime Silk Road provides a network of ports and infrastructure to connect the Chinese coasts on one side to Africa and the Mediterranean and on the other to the Pacific Ocean. A Sino-Russian agreement also provides for an ICE Silk Road across the Arctic Ocean, which would shorten the time to reach Rotterdam compared to the path through the Narcotics Strait.

    In the comparison between the train and the ship the marine way is significantly less expensive than the terrestrial way and allows the transport of greater quantities. Sea traffic is three times higher than land or air traffic and two thirds of freight traffic between China and Europe starts on the sea.

    China not only depends on the supplies of oil and gas of the Middle East, but most of these supplies start through several sea passages, as the slug in the South China Sea href=”https://lospiegone.com/2017/02/18/la-strategia-cinese-nelloceano-indiano-il-filo-di-perle/>,/strong/>a> on which China claims historical rights and subject of permanent conflict with the United States.

    Easy access to port facilities in target markets is crucial for China, also in view of economic and temporal savings where new constructions or essential renovations are needed.

    In Europe we find acquisitions harbour – generally through the COSCO (Lowers Ocean Shipping Company) – in Holland (Rotterdam), Belgium (Antwerp), Spain (Valencia, Bilbao), Greece (Pireo), Italy (Vado Ligure).

    For the investments on the European ports of call the Cina has spent so far beyond 5 billion euros through the two vehicles of the COSCO and the China merchants Group International.

    But he also brought capital to gwadar in Pakistan, Khalifa Port to Abu Dabi, to the already remembered Hambatonta Port in Sri Lanka, in Israele  (Haifa and ashdod), in Kenya (lamu), in Tanzania (bagamoyo), etc.

    In the African continent we find the settlement since August 2017 of a military base (so far the only one abroad) in the Horn of Africa, in Djibouti, with a strategic window on the Strait of Bab el-Mandel connecting Red Sea to Indian Ocean and Arabian Sea.

    In its waters pass every day almost 5 million barrels of oil (three-quarters to Europe and the rest in the opposite direction), equal to 35% of the global transport in sea of black gold. The Bab el-Mandel Strait is an inevitable transit point if you do not want to circumnavigate Africa. The Chinese bridge head does not leave the United States in complete peace, which in turn had established the largest military outpost in Africa.

    In fact, there is also a development of the Chinese military force, although according to the consensus of international analysts it is still far from that of the United States, especially technologically.

    Since 2008 the Cina has bought part of the Port of Piraeus, of which with successive purchases à holds today 67% managed by COSCO. Piraeus is the gateway to Europe for ships from Hong Kong and Shanghai, but it turned out to be less functional than expected as it is necessary to cross the Balkan containers, in lack of railways. So the Chinese focus has focused on the North Adriatic and in particular on Trieste: pointing to the Adriatic the journey from Shanghai would be reduced by about 8 days compared to Hamburg.

    In 2015 was elaborated by the North Adriatic Port Association (Napa) a project, still firm, worth more than 2 billion euros for the realization of c.d. Alliance of the five ports with the Italian co-financing (cdp) and Silk Road Fund, putting into network Venice, Trieste, Ravenna, Koper (Slovenia) and Rijeka (Croatia) as an alternative to the ports of northern Europe, Piraeus and Istanbul .

    In the within of the visit of Xi Jinping are signed by the China Construction Communications company agreements with the harbour authorities that administer respective the Ports of Trieste and Monfalcone and the ports of Genoa and Savona I go Ligure, it’s a good one. In Italy, China already has its own

    container of the Port of Vado Ligure, having acquired of it 49.9%. An interest would be also for Palermo.

    The international criticism of the BIS, in particular that of neo-colonialism, is being arginate by the Chinese asserting at the highest levels that, especially in African countries, the investments are aimed at unleashing the economic potential of the same and that   the BIS simply aims to establish greater global synergies for peace and development.

    The same Xi Jingpin. with a measured inaugural speech of the cited 2nd forum, has been spent in promising a BIS green, multilateral, sustainable and zero corruption.

    China continues to develop intensive contacts at the highest levels with the countries of Eurasia and Africans

    What is most noticeable is the consolidation/expansion of Sino-Russian bilateral relations. In the last two years according to Chinese sources bilateral exchanges with Russia have grown by 24% (+ 21% in 2017) with an amount of 108 billion dollars. On the Chinese side is fully shared (also with financial resources through the AIIB) the Russian infrastructural plan Meridian, that it contemplates a freeway of two thousand Km between Shanghai and Amburgo, passing for Kazakhstan and Belarus.

    It is a time when Sino-Russian relations are particularly intense also politically: in the presence of Putin at the BRI Forum did feedback from June 5 to 7 (it is the 29th meeting since 2013) the participation of Xi Jing Ping to the 23rd St. Petersburg  International Economic Forum  SPIEF, which was also the occasion for the celebration of the 70th anniversary of the establishment of Sino-Russian diplomatic relations and the signing of 23 trade agreements. According to Russian sources there were 14,000 participants (there was also an Italian delegation led by the S. Stefano Secretary of MAECI with sace, Intesa, maire tecnimont, snam, Leonardo, Regione Liguria).

    Putin in official speeches censored Trump’s position towards Huawei as an expression of the beginning of a global technological war noting: countries that used to Preach free trade with fair and open competition now .. use blatant economic raiding, intimidation, and any non-market methods to eliminate competition”.

    Among other things Huawei was present at the Forum to develop cooperation plans with the Sovereign Fund RFDI – Russian Direct Investment Fund  .

    It should however be noted that the official spokesman of the Kremlin, Dmitriy Peskov, then declared that the cooperation between Russian is not directed against other countries or groups of countries and that it would be a mistake to believe that Russia and China are coordinating against the United States ,  as each of them has its own relations with the USA: global trade and security for China and global security and disarmament for Russia.

    The fact is that Beijing does not seem to be able to reassure the rest of the world about its role.

    Particular scepticism persists in the European center: last March, few days before the visit of Xi jinping in Europe,’ the EU Commission  – that for the first time has defined China a “systemic rival- has prepared a document (EU-China-Aem strategic outlook ) containing ten proposals on how to deal with relations between the EU and China in the coming years.

    But it is also true that the difficult 21st EU-China Summit, also held in Brussels on 9 April, with the participation of Chinese Premier Li Keqiang, ended with an unexpected joint communiqué (for a stronger, safer, more prosperous world ) considered positively by EU leaders, also in light of the introduction in China of the new law on foreign investment  which will be in force from next January 1. In the context of the summit, an Memorandum of understanding was also signed for a comparison on State aid and unfair competition. Many of the topics of interest of the Italian industry have found attention, with the commitment is to reach the agreement within this year 2019 (including that on geographical indications).

    A greater prudence is found however also between the consolidated Asian partner, than at times they are induced to renounce or to resize own plans for fear of their unsustainability. This is the case of the East Cost Rail Link project (ECRL), launched in 2016 and fulcrum of the BIS in Southeast Asia, for the rail connection of the Port of Kuantan, on the underdeveloped eastern coast of Malaysia, with the ports of the western coast, financed 85% from the Chinese Eximbank and realization entrusted to China Construction Communications Company. The high cost of the project (about 20 md. of dollars) and the conscious expectation of the onerousness of the repayment of the financing had in fact induced the Malaysian government to the unexpected total block of the initiative. Only recently the project has been reconsidered and restarted, but reconfiguring the route and reducing the cost by a third.

    There is a worldwide game for a new distribution of international power, which has already marked the end of the Western centrality in the same.

    It is expressed by the trade war with China, started in March 2018 by the Trump Administration, behind which in fact there is the most current, deep and lasting competition, that is the one for the technological primacy and governance of global balances, whose final results are not yet framed – also with regard to free trade and the repercussions on the global economy and especially onEurope – given the complexity of the variables present in the competition between the two main world economic powers.

    The American approach, moving away from multilateralism, appears to be based on the assumption that bilateralism confers a strong position in trade negotiations, which is not always the case in global markets, especially in view of the lesser weight of the American position in world trade, which is no longer the only global superpower.

    This is even if Trump can now announce the positive outcome of the action towards Mexico on immigration, carried out through the instrument of duties and their subsequent suspension indefinitely, but in the next 45

Lucio M. Brunozzi

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