China's overland Silk Road and Maritime Silk Road Thread


shen

Senior Member
The key theme of China's vision is "win-win cooperation" rather than zero-sum game.
Take for example China's plan for high speed railroad in central Asia. Soviet era transportation network obviously tied central Asian countries to Russia, thus funneling trade and resources in one direction. China obviously is keen to develop the transportation infrastructure between its western provinces and central Asia, in order to facilitate economic development and create more economic opportunities in places like Xinjiang. Central Asian countries like that too because access to China's market help them hedge against over dependence on Russia.

Now at first sight in may seems like Russia wouldn't be happy to lose influence in its former central Asian republics. That's angle some Western commentators like to play up. In relative term, yes, Russia may lose some influence as China makes some gain. In order to placate Russian concern, China's plan is to build the high speed railroad all the way to Moscow. Thus Russia also get to benefit from the infrastructure upgrade in its own territory as well as to central Asia. In this way, Russia's Euroasia vision and China's Silk Road vision are complementary rather than competitive. Compare this to the zero sum NATO encroachment on Russia's western border and it becomes obvious why Russia would rather engage with China.
 

SampanViking

The Capitalist
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Wolfie said
think the only instance will China would strongly object to the point of being willing to use arms is if foreign hostile governments engineered regime changes and coups in countries along the New Silk Road with a view of sabotaging it.
This is the nub of it. This is not about threatening force to opening the Silk Roads (that would be like waving a gun in the Bank to force being able to make a deposit).
It is to be able to say to reassure smaller and vulnerable partners about being protected from the consequences of joining the project and that reassurance being credible.
It is the sense of credibility that is a key aspect of this and the difference between well intentioned wishful thinking and the launch of a definitive action plan. China now confident that it can give this assurance and that it will be seen as credible. This of itself is a major milestone in China's military modernisation and development. In short the modern PLA is now a reality as a 1st Tier military force.

Just a quick word on the oversupply of construction and infrastructure inside of China. It is a yes and no situation. Overall it is actually a no, as there are still hundreds of millions of rural residents that need to make the transition to urban resident status. These numbers are more than sufficient to absorb many existing oversupply and demand many times more to be built in the coming decades.
This however is only part of the picture and what is missing is the underlying economic forces to facilitate the urbanisation of the remaining rural population, in a way that is meaningful, sustainable and of course distributed throughout all regions and provinces.
The New Silk roads are exactly the process required to keep and sustain that growth to allow China to build an economy big enough to absorb and raise all its people.

The same pattern will be repeated along the Silk Roads as the document talks about developing and joining up local regional hubs; both along its length and adjacent to the main corridors.
In short key hubs for onward transmission along the Roads will also become key development hubs for lateral extension into the hinterlands of the countries through which the roads pass..

In short, these will be roads for everyone and not just fenced off highways that the locals can only look at.

PS I understand that Taiwan has applied under the title of Chinese Taipei to join the AIIB.
 
Looking at the list of founding members and those who have applied to be a part of the AIIB I see some non-participants notable because one would think they would want to participate due to their geographic location:
- Turkmenistan
- Afghanistan
- Iran
- Also not a single African country signed up if we consider Egypt being really a part of the Middle East.
Perhaps the US position was heeded by more than just Japan.

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kyanges

Junior Member
Looking at the list of founding members and those who have applied to be a part of the AIIB I see some non-participants notable because one would think they would want to participate due to their geographic location:
- Turkmenistan
- Afghanistan
- Iran
- Also not a single African country signed up if we consider Egypt being really a part of the Middle East.
Perhaps the US position was heeded by more than just Japan.

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Regarding Iran, I read somewhere they weren't allowed to join from the start. Something about giving an air of credibility for the nascent organization, or some such thing. I'll have to find a link for that.
 

t2contra

Major
A short course on the background to the formation of AIIB. Pt 1

AIIB: Myths, vested interests, reality
A formidable competitor to World Bank and ADB, the new bank will benefit
developing Asian countries and also serve several objectives for China.


CECILIA TORTAJADA
ASIT K BISWAS

31 Oct
ON Oct 21, 21 Asian countries became founding members of the China-led Asian
Infrastructure Investment Bank (AIIB). These were Bangladesh, Brunei, Cambodia,
China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman,
Pakistan, Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam.
The founding members are expected to sign and ratify the articles of agreement in 2015,
and the AIIB will start functioning formally in late 2015. The authorised capital will be
US$100 billion, and the initial subscribed capital will be around US$50 million. The
paid-in ratio will be 20 per cent. The headquarters of the bank will be in Beijing. Its head
will be Jin Liqun, former vice-finance minister of China and ex-vice-president of the
Asian Development Bank (ADB).
Voting rights and its modalities of operation will be decided after consultations between
the founding members. The rights are likely to be decided on a combination of gross
domestic product (GDP) and purchasing power parity. On that basis, China will be the
largest shareholder of the bank, followed by India.
No sane individual will argue against the need for additional infrastructure funding in
Asia. According to the ADB, investments required in the Asian developing countries
during 2010-2020 for national infrastructure alone are US$8 trillion, or US$800 billion
per year. The ADB lends only about 1.5 per cent of this amount. Thus additional funding
from the new bank should be welcomed. Furthermore, as the middle class across Asia
continues to grow significantly, this educated and affluent group will demand
increasingly better standards of living and quality of life, all of which will require more
and better infrastructure.
The new bank has seriously ruffled the feathers of the American and the Japanese
governments and created turbulence in the cosy and smug world of the World Bank and
ADB.
31/10/2014 AIIB: Myths, vested interests, reality, Opinion - THE BUSINESS TIMES
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This should not be surprising. Exactly 70 years ago, in 1944, following World War II, two
international financing institutions - the World Bank and International Monetary Fund
(IMF) - were created following Bretton Woods' discussions. Each member country
received a quota, or financial contribution, depending on their share of global economy as
measured by GDP. This quota represented the country's voting power in the World Bank-
IMF group.
SEA CHANGES
The world has undergone sea changes during the last 70 years. Consequently, the current
global governance does not reflect the changing dynamics of economic and political
power. China now has a bigger economy than France, Germany and Italy combined. Yet
its voting power in the Bretton Woods institutions is only 5 per cent, even though it
accounts for nearly 10 per cent of global GDP. The United States has nearly 17 per cent
voting power, which allows it to block any reform for which an 85 per cent majority is
needed.
Countries such as China, India, Brazil and Turkey feel that there has been a democratic
deficit in the governance of these organisations, and the current situation does not reflect
the fundamental changes that have been taken place in global economic and political
power since their establishment.
Group of 20 finance ministers agreed on a reform to rectify this situation in 2010. This
proposal was based on the size of the country's economy at the end of 2008. This would
have doubled the IMF's capital to US$720 billion and transferred 6 per cent of voting
power to the emerging powers. The US Congress has failed to ratify this revision,
primarily because it feels this would reduce its influence in the Bretton Woods
institutions. It is really moot that even if this revision was approved, the US would still
have maintained its veto power. Also, the Chinese economy is now nearly twice the size of
what it was at the end of 2008. The system was unfair in 2008, but it is even more so at
present.
Unwilling to accept a continuing Western domination of the international financial
situation, and in response to the critics, especially the US which has long argued that
China should assume greater global responsibilities in areas such as climate change and
arms proliferation because of its growing economic and political clout, Chinese President
Xi Jingping surprised his Indonesian hosts during a state visit by announcing the
formation of the AIIB.
 

t2contra

Major
Pt 2.

From a Chinese viewpoint, such a bank makes eminent sense. A major feature of China's
miraculous economic progress has been its emphasis on infrastructure development.
During the period of 1992-2011, the country spent nearly 8.5 per cent of its GDP on
infrastructure. The corresponding figures for other Asian countries were between 2 and 4
per cent.
The AIIB will serve at least five objectives for China. First, the country could invest part of
its foreign reserves of US$3.9 trillion on commercial terms rather than putting them in
US Treasuries where the real value is shrinking. Secondly, it will contribute to the
internationalisation of the yuan. Thirdly, it will help secure contracts for Chinese firms
and thus boost employment opportunities at home.
Fourthly, as China has funded numerous infrastructure projects all over the world
through China Development Bank and Exim Bank, some of which have created local
resentment, there will likely be much less such animosity when the funds come from a
regional multinational bank. And, fifthly, it will boost China's influence internationally
and significantly enhance its soft power.
The proposal has been badly received by the US, Japan and the ADB, three parties that
are likely to lose some power because of the new bank. This is likely to be compounded
when another new bank, the BRICS Bank, starts operating in Shanghai. Tokyo and
Washington have worked in tandem to maintain their power structure in the 67-member
ADB. China is now Asia's largest economic power. Yet, the US and Japan hold 15.7 per
cent of votes in the ADB, but China holds only 6.57 per cent.
The US has actively lobbied its close allies Australia and South Korea to not join the AIIB.
It is basically a power play to curtail China's growing soft power and economic influence
in the region. US Secretary of State John Kerry lobbied Australian Prime Minister John
Abbot to not join the AIIB when both met in Jakarta during the inauguration of President
Joko Widodo. Similarly, a senior South Korean diplomatic source observed that Korea
has "no reason not to join it", and that it is now "in a deep dilemma on what sort of
strategic choices it has to make as China challenges the US-led international order".
Over the medium term, the three important holdouts - Australia, South Korea and
Indonesia - simply cannot afford to antagonise Asia's most important economic power
and one of their largest trading partners. It would be surprising if they do not join within
the next two to three years because it would be in their national interests.
GOVERNANCE PRACTICES
31/10/2014 AIIB: Myths, vested interests, reality, Opinion - THE BUSINESS TIMES
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ADB and some unnamed senior Washington figures have questioned the likely
governance practices of the AIIB, including upholding good social, environmental and
labour conditions, transparency and sound economic principles. These in our view are
red herrings, primarily to preserve the status quo.
The AIIB is a new southern alternative to traditional sources of international
development funding. Properly structured, it could learn from and avoid the mistakes of
the World Bank and ADB. It could reflect broader and more appropriate mandates, and
adopt better governance practices. It would not be bound by tradition or historical
precedents and may even develop new and more effective financing mechanisms.
In 2007, then-Chinese president Hu Jintao made environmental protection one of the
seven pillars of foreign investment requirements. Anecdotal evidence indicates that
environmental and social impacts of Chinese finance are now about average. They are
more respectful and responsive to regulations of host governments, including oversights.
No one can beat China's record and experience in infrastructure, both within the country
and abroad. According to Chinese Foreign Minister Lou Jiwei, China Development Bank's
commercial infrastructure loan is now far bigger than that of the World Bank and ADB
combined. This has occurred only within the last 20 years.
Fred Hochberg, chairman of the US Export-Import Bank, has noted that his institution
has extended some US$590 billion in loans and guarantees over its 80 years of history. In
contrast, the Chinese institutions have provided some US$670 billion in only the last two
years. Thus, the sceptics are underestimating and misrepresenting the Chinese
knowledge and experience.
The AIIB will be a formidable competitor to the World Bank and ADB. It will shake up
their current modus operandi, and force them to rethink some of their unnecessary
lending restrictions and streamline their project approval, preparation and
implementation processes. The impact on the ADB is likely to be significant. It does not
have the same degree of expertise and intellectual prowess as the World Bank. Some of its
thinking, for example in the water area, is at least 15 years behind time. Unless it can
radically improve its performance, it would be increasingly marginalised by the AIIB and
BRICS Bank.
Over the medium to long term, the AIIB is likely to have a positive impact. It will provide
a new source of funding to Asian developing countries. For China, it will enhance its soft
power and bring considerable economic benefits. The competition will force the ADB and
World Bank to undertake serious reforms that have been long overdue.
31/10/2014 AIIB: Myths, vested interests, reality, Opinion - THE BUSINESS TIMES
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SPH DIGITAL NEWS
© 2014 SINGAPORE PRESS HOLDINGS LTD. REGN NO. 198402668E
Cecilia Tortajada is a senior research fellow and Asit K Biswas a
distinguished visiting professor at the Lee Kuan Yew School of Public Policy,
Singapore. They are co-founders of the Third World Centre for Water
Management, Mexico
 

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