China’s Provinces and the Belt and Road Initiative 9780367654887, 9780367654900, 9781003129707

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‘An excellent book on China’s Belt and Road Initiative (BRI) from a Polish/East European perspective examining China’s domestic dynamics, namely centralprovincial relationship. This is a must-read for any scholar who is interested in this subject.’ – Quansheng Zhao, Professor of International Relations, American University, Washington, DC, USA ‘Mierzejewski breaks new ground in scholarship on China’s major connectivity initiative, the “Belt and Road”, by engaging in detailed case studies of the roles played by provinces, in the process shedding light on politics and policy making in the Chinese state and its global implications.’ – Tim Summers, Assistant Professor, Chinese University of Hong Kong ‘Dominik Mierzejewski’s analysis of the role of China’s provinces in the Belt and Road Initiative is an important and innovative study of the role sub-national actors play in both domestic economic development and foreign paradiplomacy and qualifies the common perception of Beijing’s macro-management of both ambits. Discourse analysis of provincial-level party and government reports demonstrate how their competition abroad with the support of central government resources also promotes domestic horizontal integration, contributing to the governance and management of China’s unitary status.’ – Seán Golden, Full Professor (Retired) of East Asian Studies, Universitat Autònoma de Barcelona (UAB)

China’s Provinces and the Belt and Road Initiative

This book discusses the Belt and Road Initiative at the provincial level in China. It analyses the evolution of the role of local governments in Chinese foreign policy since the opening of China’s economy in 1978, showing how the provinces initially competed with each other, and how the central government was forced to react, developing more centralised policies. Unlike other books on the Belt and Road Initiative, which focus on the international aspects of the initiative, this book demonstrates the importance of the Belt and Road in reinforcing China’s unitary status and for managing and coordinating development at the local level as well as centre-province relations and province-to-province relations inside China. Dominik Mierzejewski is Associate Professor at the Department of Asian Studies, Faculty of International and Political Studies and Chair of the Centre for Asian Affairs at the University of Lodz, Poland. He specialises in the politics and foreign policy of China.

China Policy Series Series Editor: Zheng Yongnian Advanced Institute of Global and Contemporary China Studies, Chinese University of Hong Kong (Shenzhen)

57 Gender Dynamics, Feminist Activism and Social Transformation in China Edited by Guogang Wu, Yuan Feng, Helen Lansdowne 58 The Struggle for Democracy in China, Taiwan and Hong Kong Sharp Power and its Discontents Andreas Fulda 59 The Chinese Communist Party in Action Consolidating Party Rule Edited by Zheng Yongnian and Lance L.P Gore 60 Development and Poverty Reduction A Global Comparative Perspective Edited by Zheng Yongnian and Jiwei Qian 61 Designing Emergency Management China’s Post-SARS Experience, 2003–2012 Wee-Kiat Lim 62 China’s Environmental Foreign Relations Heidi Wang-Kaeding 63 The Decline of the Western-Centric World and the Emerging New Global Order Contending Views Edited by Yun-han Chu and Yongnian Zheng 64 China’s Provinces and the Belt and Road Initiative Dominik Mierzejewski For more information about this series, please visit: www.routledge.com/ChinaPolicy-Series/book-series/SECPS

China’s Provinces and the Belt and Road Initiative

Dominik Mierzejewski

First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Dominik Mierzejewski The right of Dominik Mierzejewski to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-0-367-65488-7 (hbk) ISBN: 978-0-367-65490-0 (pbk) ISBN: 978-1-003-12970-7 (ebk) Typeset in Times New Roman by Apex CoVantage, LLC

Contents

Acknowledgements List of abbreviations List of illustrations

1 2 3 4

viii ix xii

Introduction

1

Understanding the Belt and Road Initiative through central-local perspectives

6

The bridgeheads’ actions under the BRI: Heilongjiang and Yunnan case studies

55

Sichuan and Chongqing: internal integration, Eurasian land bridge and foreign policy

113

Guangdong and Hainan: urbanisation, maritime economies and strategic encounters under the Maritime Silk Road

172

Conclusions

229

Index

236

Acknowledgements

During field studies across China, the author met many friendly people who helped in his understanding of China’s centre-province relations as presented in this book. The author is also particularly grateful to scholars from Nankai University, the Zhou Enlai School of Government, Professor Zhu Guanglei, Professor Yang Long and Doctor Zhang Zhihong whose insights and conversations brought new light to my understanding of contemporary China. Moreover, talks and seminars jointly organised between the Zhou Enlai School of Government and the Center for Asian Affairs at the University of Lodz have developed a platform for discussing local government action both in the domestic and international arena. Needless to say, conversations with my Polish Chinese Studies’ teachers, namely Professor Jan Rowiński, HE Ambassador Ksawery Burski and Professor Krzysztof Gawlikowski, who all know China through the Great Leap Forward, the Cultural Revolution and Deng Xiaoping’s, Jiang Zemin’s and Hu Jintao’s policies, contributed most to my understanding of the Middle Kingdom. National Science Center funds allowed the author to make fields studies in China where the author gained practical knowledge about centre-province relations, horizontal relations between provincial-level governments and their vertical and horizontal interactions within the Belt and Road Initiative. This book would not have been possible without the financial support of the National Science Center in Poland with regard to the research project ‘The Role of Local Governments in China’s Foreign Policy’ (no. UMO2017/25/B/HS5/02117).

Abbreviations

General BCIM EC BRI BRICS CAFTA CCPIT CEPA CIIS CNOOC CNPC CPC CPEC CRM EC FYP GBA GMS GPRD JCCN MFAPRC MOFCOM MRC NDRC NPC NRPC PRC PRCGov PRD RCEP RMDZ SASAC

Bangladesh-China-India-Myanmar Economic Corridor the Belt and Road Brazil, Russia, India, China, South Africa (organisation) China-ASEAN Free Trade Area China Council for the Promotion of International Trade the Closer Economic Partnership Agreement with Hong Kong China Institute for International Studies China National Offshore Oil Corporation China National Petroleum Corporation the Communist Party of China China-Pakistan Economic Corridor China-Russia-Mongolia Economic Corridor the Five-Year Plan the Greater Buy Area Greater Mekong Subregion Greater Pan River Delta Joint Committee on Coordination of Commercial Navigation on Lancang-Mekong River Ministry of Foreign Affairs, People’s Republic of China Ministry of Commerce the Maritime Silk Road the National and Reform Commission the National Peoples’ Congress National Reconciliation and Peace Center (in Myanmar) People’s Republic of China the People’s Republic of China Government the Pearl River Delta the Regional Comprehensive Economic Partnership Ruili-Muse Demonstration Zone the State-owned Assets Supervision and Administration Commission of the State Council

x Abbreviations SCS SOA TNLA UCLG UNCRD United Nations ESCAP YREB

South China Sea the State Oceanic Administration the Ta’ang National Liberation Army United Cities and Local Governments the United Nations Centre for Regional Development the Economic and Social Commission for Asia and the Pacific the Yangtze River Economic Belt

The provincial-level governments ALGR BLGR ChCus ChLGR CqFAO CqLGR FLGR GdDRC GdLGR GdRDC GsLGR GxLGR GzFAO GzLGR HenLGR HkLGR HljDCOM HljFAO HljGov HljLGR HljNDRC HljYearbook HnLGR HrbGov HrbLGR HubLGR HunLGR IMLGR JlLGR JsLGR JxLGR KmLGR

Anhui Local Government Reports Beijing Local Government Reports Chengdu Custom Office Chengdu Local Government Reports Chongqing Foreign Affairs Office Chongqing Local Government Reports Fujian Local Government Reports Guangdong Development and Reform Commission (branch of the NDRC) Guangdong Local Government Reports Guangdong Reform and Development Commission Gansu Local Government Reports Guangxi Local Government Reports Guangzhou Foreign Affairs Office Guizhou Local Government Reports Henan Local Government Reports Haikou Local Government Reports Heilongjiang Department of Commerce Heilongjiang Foreign Affairs Office Heilongjiang Government Heilongjiang Local Government Reports Heilongjiang Development and Reform Commission (branch of the NDRC) Heilongjiang Yearbook Hainan Local Government Reports Harbin Government Harbin Local Government Reports Hubei Local Government Reports Hunan Local Government Reports Inner Mongolia Local Government Reports Jilin Local Government Reports Jiangsu Local Government Reports Jianxi Local Government Reports Kunming Local Government Reports

Abbreviations xi LLGR NLGR QLGR RlLGR SaxLGR ScGov SchLGR SdLGR ShLGR SxLGR TLGR XLGR XzLGR YLGR YnDRC YnFAO YnGov ZLGR

Liaoning Local Government Reports Ningxia Hui Local Government Reports Qinghai Local Government Reports Ruili Local Government Reports Shaanxi Local Government Reports Sichuan Government Sichuan Local Government Reports Shandong Local Government Reports Shanghai Local Government Reports Shanxi Local Government Reports Tianjin Local Government Reports Xinjiang Local Government Reports Xizang (Tibet) Local Government Reports Yunnan Local Government Reports Yunnan Development and Reform Commission Yunnan Foreign Affairs Office Yunnan Government Zhejiang Local Government Reports

Illustrations

Tables 1.1 2.1 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.1 4.2 4.3 4.4

The BRI national and provincial, regional economic policies (central government and self-positioning by the provincial-level government) Heihe City’s trade with Russia Inter-provincial integration projects Strategic emerging industries supported by a major region or province along the Yangtze River Economic Belt Region – key industries The given roles for BRI participator from western China Sichuan export market by country region as percentage of total provincial exports (2010–2020) Sichuan’s import by modes of transport by % growth Sichuan’s export by modes of transport by % growth Chongqing export market by country and region as percentage of total provincial exports (2010–2020) Major urbanisation projects in Guangdong province (1989–2019) The percentage of trade dependency between economic regions (2008–2016) Guangdong’s export market by country and region as percentage of total provincial exports (2010–2019) Hainan’s export market by country in and region as percentage of total provincial exports (2010–2020)

37 83 117 125 127 136 145 145 153 179 182 192 213

Graphs 1.1 2.1 2.2

Belt and Road Initiative-Provincial-level Government Research Framework Organisational structure of the cross-border economic cooperation Harbin municipal government foreign meeting by country (2013–2019)

47 66 77

Illustrations 2.3 2.4 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4

Heilongjiang provincial government foreign meeting by country (2013–2019) Yunnan provincial government foreign meetings by country (2015–2019) Administration structure of China’s regional development Sichuan provincial government foreign meetings by country 2014–2019 Chengdu municipal government foreign meetings by country (2013–2019) Chongqing’s municipal foreign meetings by country (2013–2019) Guangdong Provincial Government’s foreign meetings by country (2013–2019) Guangzhou municipal government’s foreign meetings by country (2017–2019) Hainan provincial government’s foreign meetings by country (2016–2019) Haikou municipal government’s foreign meetings by country (2017–2019)

xiii 78 98 118 141 141 157 196 196 214 214

Introduction

In 2010, as a visiting fellow at the Chinese Academy of Social Science, the Institute of World Economy and Politics in Beijing, the author discussed Chinese politics with H.E. Ksawery Burski, sinologist, and the former Ambassador of Poland to China. He graduated from Beijing University in the 1950s, surviving the Cultural Revolution and witnessing Deng Xiaoping’s reforms in China. H.E. Ksawery Burski mentioned a Chinese everyday saying – ‘the river changes its curves every thirty years’, ‘sanshi nian he dong, san shi nian hexi’ (三十年河东, 三十年河西) – and said that this resembles a universal truth of China’s political cycle. Taking the this environmental observation, nothing may be truer in the Middle Kingdom. After the collapse of the Qing Empire, the last century has seen China go through 30-year cycles: the Republican period, Chairman Mao’s reign, Deng Xiaoping’s reforms and now Xi Jinping’s period in power. These periods of ‘thirty-year curves’ are reflected in the reasoning of China’s centralisation and decentralisation, and discussions and policy implementations on how to govern, manage and guide a country of such enormous size in order to maintain it as a single national project. Set in this context, the book discusses the rationale and adoption of the Belt and Road Initiative at the provincial level in China. It does so by analysing the evolution of the roles of provincial governments in Chinese foreign policy since the post-1978 era of opening up and reforms, with a particular focus on the New Silk Road Economic Belt Initiative that was announced by Xi Jinping in 2013. With such openness, regional actors have competed with one another, with the central government forced to intervene in local government horizontal competition both domestically and internationally. Ultimately, this interaction between local and central governments led Beijing to shape more centralised policies towards the regions by incentivising them to strengthen cross-provincial cooperation. The primary argument here is that the Belt and Road Initiative (BRI) serves as a vehicle for managing and coordinating the development and foreign policy actions at the local level as well as limiting the negative impact that horizontal competition can cause in China’s internal markets. The majority of books and reports on the BRI discuss China’s policy from an international outlook. This book, however, provides an in-depth analysis of the role of the Belt and Road Initiative in China’s foreign policy as part of governing

2

Introduction

and managing China’s unitary status. To this end, the author presents the domestic rationale behind Xi Jinping’s policy that ultimately leads to domestic economic integration. The principal objective here is to discuss the BRI from two perspectives: first, the vertical relations between Beijing and the provincial governments, and second, the horizontal relations between the provincial governments themselves. It illustrates, as outlined, that the central government through a number of proposed cross-provincial economic projects such as the Yangtze River Economic Belt attempts to induce provincial-level governments to cooperate with each other, by allowing provincial governments to compete for global resources while limiting the negative impact of internal fragmentation and horizontal competition. The primary thesis discussed in the book is that the BRI as a signal for competition between provincial-level governments worldwide, and supported by central government resources, is an incentive for bringing about domestic horizontal integration. Following this assumption, the significant issues addressed in the book are as follows: how do the provinces adapt to new policies? Whether the BRI is strictly a centrally based project or can provincial governments play an essential role in shaping international activities under the BRI? Then, by comparing selected case studies, the author discusses the differences between provinces, different adoptions of central government policies, the different roles allocated by Beijing, the self-assigned roles of local governments, and finally the degree of horizontal relations between provinces. The book is mainly based on three major pillars that, along with increasing interaction with the outside world and the growing internationalisation of provinces, autonomous regions and municipalities, the central government has taken a division of labour approach and assigned different tasks to different regions. The second essential understanding of the BRI is that the central government allows local authorities to compete outside China. However, at the same time it requests that they integrate domestically and limit the negative impact of local protectionism in China’s transition into a domestic consumption economy. The third point discussed in the book provides a better understanding of how and to what extent the central government uses local international activities to conduct Beijing’s foreign policy. In the first part of the book, the conceptual framework of debating the BRI is mainly based on three approaches in Chinese Studies: decentralisation vs centralisation within the concept of horizontal competition; second, paradiplomacy, with regard to sub-national actors’ involvement in international politics; and finally, a discourse analysis of provincial-level party and government reports delivered at local people’s congresses (2015–2020). The second empirical part of the book allows the author to select case studies of Heilongjiang, Yunnan, Sichuan provinces, the Chongqing municipality, and Guangdong and Hainan provinces for further elaboration. With these case studies, the book discusses the linkage between China’s domestic development and the country’s foreign policy. In the next three chapters, the research method applied is a comparative approach towards selected cases, namely the two ‘bridgeheads’ of Heilongjiang and Yunnan, the two coastal actors of Guangdong and Hainan and two inland players, namely Sichuan and Chongqing. The book presents a map of local government actions in

Introduction 3 China’s foreign policy. The accounted variables include the party-state structure responsible for external relations, narrative strategies taken by selected governments within the Belt and Road Initiative, local documents issued by NDRC and other bodies responsible for international activities at the local level, directions of external actions and foreign visits of the leadership, and actions taken due to the strengthening internationalisation of local authorities, the structure of international trade and responsibilities undertaken as part of China’s foreign policy. In Chapter 1, the author debates the general understanding of the Belt and Road Initiative (BRI) as a domestic vehicle for managing relations between the centre and the provinces. This point touches on three significant aspects of the Belt and Road Initiative in the local arena: coercion, bargaining and reciprocity. As such, the BRI is placed within a broader picture of central-local relations in China. Particular emphasis is given to the debate on localism in China, the vertical connections as well as horizontal competition at the provincial level. It does so by presenting a different conceptualisation of the interaction between Beijing and provinces (S. Shirk 1993; Zheng Yongnian 2007) as well as cross-provincial relations (T. Summers 2018; J. Donaldson 2017; Linda Che Lanlin 2003, S. Heilmann 2018). This chapter is supported by discussing Graham Alison’s theory (1974) for the model of the politics of governments, and Zheng Yongnian’s (2007) ‘China’s de facto federalism’ with special regard to three institutions: coercion, bargaining and reciprocity saying that any final political decision is understood here as a result of various bargaining games among players in the national governments. The chapter then presents the discourse and academic debates around paradiplomacy and the role of sub-national actors in global politics and China’s foreign policy. It starts with a critical analysis of contemporary discourse in international relations on paradiplomacy (I. Duchacek 1984, 1986; A. Kuznetsov 2014; S. Curtis 2014) with a particular emphasis on Chinese discussions and understandings (Chen Zhimin 2001; Su Changhe 2010, Zhang Peng 2015). The majority of China’s academic papers discuss provincial-level governments in terms of agents, or intermediaries in Beijing’s foreign policy. Finally, an in-depth analysis of the approaches taken by local government to a national project, namely the Belt and Road Initiative, is provided. Section 1.3 is based on a discourse analysis of local government reports presented at local people’s congresses across the country. Against this background, the author discusses BRI as a vehicle for indexing provincial governments and motivating them towards further engagement in the global arena while encouraging them to integrate domestically. The second chapter contributes to a better understanding of China’s perception of internal frontiers with the concepts of China’s peripheral diplomacy, bridgeheads (qiaotoubao 桥头堡) and middle ground (zhongjian didai 中间地带) which refer to the provinces of Heilongjiang and Yunnan. In 2006 and 2009 respectively, Hu Jintao, the then chairman of the PRC, named both provinces (as well as Xinjiang) as bridgeheads in China’s foreign policy. The reason that these case studies were selected was based on the assumption that the term bridgehead is primarily a military one, and shows the importance of two border provinces and one

4

Introduction

autonomous region in China’s external relations. The terms for both provinces have changed over time, and are now referred to, less controversially, as ‘radiation centres’ (  fushe zhongxin 辐射中心). The chapter then presents an extensive in-depth analysis of these two provinces’ roles in China’s foreign policy. Both provinces share their routine tasks such as the internationalisation of the Chinese currency Renminbi (RMB), the promotion of cross-border economic cooperation as well as the management of minority issues. These roles referred to are defined and analysed through the lens of cross-border cooperation between Ruili and Muse on the Sino-Myanmar border, and Heihe and Blagoveshchensk on the Sino-Russian border. Chapter 3 discusses the relations between Sichuan and Chongqing in the context of the Belt and Road Initiative. The first part of the chapter focuses on previous attempts by China’s government to open up the western areas in an attempt to increase the area’s prosperity. In this context, the BRI is perceived as another attempt to deliver more effective economic growth in China’s western regions. As preliminary research shows, Sichuan is the most optimistic about the actions taken under the Belt and Road umbrella. In the first subchapter on Sichuan and Chengdu, the book provides an analysis of the centrality of Sichuan in Southwest China. The subchapter also presents an overall picture of the plans, programmes and actions taken by the local government of Sichuan province. In contrast, Chongqing plays the role assigned to it by Xi Jinping during his visit to the municipality in January 2016. This shows that Chongqing presents itself as a key player in the central initiative: the most critical link and a hub that bonds the Belt and Road and the Yangzi River Economic Belt Initiatives. In this context, the chapter touches on a different argument delivered by both subnational actors to persuade the central government that they are the most useful player in the Belt and Road Initiative. As identified from the analysis of external relations, both provincial governments attempt to strengthen their position by having closer relationships with the United States, Japan and Singapore. Being close neighbours, they adopt the approach of ‘shadow paradiplomacy’ – a concept further elaborated on in the chapter. Finally, the case of Guangdong and Hainan illustrates the importance of the 21st-century Maritime Silk Road. In this comparative approach, the author debates the difference between ‘sceptical’ Guangdong and ‘optimistic’ Hainan, which wholeheartedly supports the central plan of Belt and Road. Guangdong perceives itself as a ‘pawn’ ( paitoubing 排头兵) and the technological gateway to China’s interior as well as being the vanguard of China’s opening up. Through these steps it hopes to play a decisive role in China’s economic interactions with external actors. The development of new technologies such as 5G allows Guangdong to secure its provincial frontrunner status in China’s economic development. With this agenda, the southern province promotes its international actions via sub-national multilateralism shaped by the ‘port cities alliance’ with Los Angeles and Auckland as well as the multilateral platform of C40, and the United Cities and Local Governments organisation (UCLG). The province places great importance on Sino-American sub-national relations. However, Guangdong remains

Introduction 5 relatively quiet on an inter-provincial development project that focuses purely on intra-provincial integration. In contrast, Hainan is eager to play a pivotal role in China’s foreign policy for two reasons: the South China Sea and the country’s energy security. This is clearly illustrated by the structure of Hainan’s international trading partners with the Gulf countries occupying the top places. Moreover, Hainan positions itself as the most important part of China’s maritime economy and a vehicle for further integration in the Pan-South China Sea economic cooperation sphere. Following this context, the subchapter assumes the importance of horizontal competition and cooperation between both provinces in China’s Maritime Silk Road. By making a systematic comparison of these selected case studies, the book discusses the roles of provincial-level governments, their motivations and actions taken both in the domestic and international arenas within the centrally sponsored Belt and Road Initiative, and answers the dilemmas as to the effectiveness and reasoning behind Xi Jinping’s policy.

References Chen Zhimin. 2001. Ciguojia zhengfu yu duiwai shiwu (Subnational govenrnments and foreign affairs) Beijing: Changzheng chubanshe. Curtis S. 2014. “The meaning of Global Cities: Rethinking the Relationship between Cities, States and International Order” In The Power of Cities in International Relations, edited by Simon Curtis, New York, London: Routledge. Donaldson J. 2017. “China’s administrative hierarchy: the balance of power and winners and loosers within China’s levels of governments” In Assessing the balance of power in central-local relations in China, edited by J. Donaldson, New York, London: Routledge. Duchacek I. 1984. “The International Dimension of Subnational Self-Government.” Publius vol. 14, no 4: 5–31. Duchacek I. 1986. “International Competence of Subnational Governments: Borderlands and Beyond” In Across Boundaries: Transborder Interaction in Comparative Perspective, edited by O. J. Martinez, El Paso: Texan Western. Heilmann S. 2018. “China’s Core Executive: Pursuing National Agendas in a Fragmented Polity.” In To Govern China: Evolving Practices of Power, edited by V. Shue, P. Thornton, Oxford: Cambridge University Press. Kuznetsov A. 2015. Theory and Practice of Paradiplomacy: Subnational Governments in International Affairs, Routledge: New York, London. Shirk S. 1993. The Political Logic of Economic Reform in China, Berkeley: University of California Press. Su Changhe. 2010. “Zhongguo difang zhengfu yu ciqu cheng hezuo” [The Chinese local governments and regional cooperation]. Shijie jingji yu zhengzhi (World Economy and Politics) no 5: 4–24. Summers T. 2018. China’ s regions in an era of globalization. New York, London: Routledge. Zhang Peng. 2015. Zhongguo dui waiguanxi zhankai zhong de difang canyi yanjiu [Research on local participation in China’s foreign affairs]. Shanghai: Shanghai shiji chubanshe. Zheng Yongnian. 2007. De facto Federalism in China: Reforms and Dynamics of CentralLocal Relations. Singapore: World Scientific.

1

Understanding the Belt and Road Initiative through central-local perspectives

Taking into account the ongoing discussions regarding China’s political structures, the announcement of the Belt and Road Initiative brought new light to the decentralisation and centralisation nexus. The recent policy measures taken by Chairman Xi Jinping indicate that centralisation processes are critical to the agenda in Mainland China and that the BRI forms part of the story. By introducing the New Silk Road Economic Belt in Astana, in September 2013 Xi Jinping referred to China’s past of the great Emperor of Han Wudi and the special envoy Zhang Quan. While taking about Han Wudi and his highly centralised government, the Chinese policymaker signalled the ongoing centralisation within China. The dream of having effective centralisation government was realized in a step by step manner. The growing role of the leading groups, anti-corruption campaign and finally mass mobilisation with the Belt and Road Initiative became vital symbols of the new deal. But as discussed here, this process sounds successful within vertical relations, but horizontal relations are still far from narrowing the domestic fragmentation. The first section of this chapter focuses on the domestic modus operandi between central and local governments and discusses the rationale of the BRI as the vehicle for managing central supervision over the lower level. It does so by examining the relationship between centralisation, decentralisation and horizontal competition. The second section explores the theoretical discussion on the role of China’s paradiplomatical activities in foreign policy in general and in the BRI in particular. It examines the extent to which the provincial-level governments might utilise their foreign activities in order to gain more preferential policies delivered by the government in Beijing. The final part explores the reaction of provincial, municipal and autonomous regional governments to the central proposal of the BRI. Sometimes the reactions are mixed, or ambiguous, and demonstrate the different levels of willingness for cooperation with the central government. In other words, the core questions here are related to the upper-lower relations and proceed as follows: to what extent is the BRI part of central-local management? How does the central government use the BRI to navigate the external actions of the Chinese provinces to limit their competition and build the platform for collective actions that ultimately connect the domestic economy of China through a pan-provincial project like the Yangzi River Economic Belt? And, finally, how

Understanding the Belt and Road Initiative 7 does the local government translate the BRI into their local policy planning and external interactions?

1.1. The BRI: between decentralisation, horizontal competition and centralisation nexus Central-local relations in China can be examined via a range of approaches. The recent development of the Belt and Road Initiative should prompt a search for factors that redefine the relations between central and local government in China and, as the majority of experts agree, push towards a more centralised and coordinated relationship. In September 2013 President Xi Jinping proposed the establishment of a Silk Road Economic Belt. Thus, by reviving the Silk Road diplomacy, China presents itself as a global player. The global understanding of China’s strategy has been dominated by debating the strategic interactions of the global players (namely China, Russia and the United States), Sino-US economic controversies and the future of the global structure and has finally perceived China as a unitary, coherent power. Nevertheless, this perspective might not necessarily be proved correct. In its history, as a typical Chinese saying goes: ‘the river changes its curves for every thirty years’ (san shi nian hedong, sanshi nian hexi 三十年河 西三十年河东), the centralisation-decentralisation cycles have become an inherent part of China’s political reality. Within this dichotomy, the BRI is seen as the vehicle for bringing more centralised governance with special regard to the provincial level. Taking into consideration these understandings, the main narrative here is not only related to China’s foreign policy strategy, but discusses the Belt and Road Initiative together with other economic integration projects, mainly the Yangtze River Economic Belt and the Beijing-Tianjin-Hebei Metropolitan Area as the domestic political campaign that allows the central government to regain control over local actions and to navigate the local government’s external actions as well as economic development. The primary reason was to narrow disparities and fragmentation at the horizontal level by strengthening the role of intra-provincial relations and cooperation between them. On the other hand, by stimulating local governments to take part in the central government initiative of the Belt and Road, Beijing checks their willingness for cooperation and encourages enthusiasm, and, by using centrally planned projects, limits the fragmentation and competition between provincial-level governments. At the same time, the central government allows local governments to compete with each other in the global arena. On paper, this might look easy, but in fact it ignores the complex political reality in Mainland China. The general fragmentation of power necessitates consensus building. This need to deliver a consensus predisposes officials to negotiate with other relevant officials and creates a huge number of meetings (kaihui 开会). The Beijing-based government, in its vertical management, needs to use coercion, it needs to bargain and finally it needs to look for reciprocal measures (Zheng Yongnian 2007, 2–17; Lieberthal 2004, 189–191). The central-provincial dichotomy started during the Yuan dynasty. Its essential principles were based on administrative rather than economic considerations and

8

Understanding the Belt and Road Initiative

have remained in force ever since. From the time that the administrative divisions were established, the provinces have formulated their economic programmes and articulated their specific interests in the light of their differing circumstances. By building up their expectations in the process of relations with the political centre, they gain stronger political identities and promote particular political figures at the local level. Historically, many provinces have distinct cultural identities based on local histories, traditions, art forms, cuisine and cultural activities. Since the establishment of the People’s Republic of China, the role of the provinces has been to bring existing notions of provincial identities out of their cultural isolation by integrating them into the provincial-level political and economic agendas (Jae Ho Chung 2011; Donaldson 2017, 17–21). However, the particularities of different provincial-level structures in China remain far deeper than may initially be perceived. As Lucian Pye (1992, 24–25) rightly notes: Although the government in the PRC involves more concerted policy efforts, it is one of the grand illusions of the day that Chinese authorities are as omnipotent as they pretend to be. In a host of fields, from tax collecting to controlling economic activities in Guangdong, Fujian and other dynamic provinces, central authorities know that feigned compliance still reigns and that it is best not to attempt the impossibility by demanding precise obedience. Sovereignty, after all, calls for theatrical representation. Having experienced the Republican period of turmoil and total fragmentation, the central government recognised localism as a threat to China’s unitary position. The negative evaluation of Sun Yat-sen’s decentralised republican system influenced by the US federalist system have had an impact on further actions taken by the Communist Party of China (Yang 2015, 33–34). The illustrative example of localism in China appeared during the first years of the People’s Republic of China when the central government promoted land reform in southern China. In an agrarian society like China, the model of governing and managing land symbolised the level of decentralisation. At that time, Guangdong had the most significant stake of China’s foreign currency reserves and land rights, as well as the biggest community of Chinese overseas that made the province an ‘independent stakeholder’. To limit the local tendencies in Guangdong, the central government decided to establish a South China branch, under the leadership of the Central South Bureau of the Communist Party of China with Lin Biao as the leader. The newly established South China Branch came into conflict with the Central South Bureau regarding measures and steps related to land reform. The South China Branch emphasised that the land reform should be carried out from the actual situation in Guangdong and by the local regulations. Finally, the central government believed that the party had committed the error of ‘right-wing thinking and localism’ and accused them of being independent. The ‘local patriotism incident’ was the first anti-localism incident after the founding of the People’s Republic of China (Song 2017).

Understanding the Belt and Road Initiative 9 The newly formed government in Beijing discussed the relations within the People’s Republic of China but the decisive voice was given to Chairman Mao Zedong. In 1956 in ‘On the major relationship’ Mao Zedong discussed the dialectic of central-local relations: ‘centralization and decentralization are the unity of the opposite, and change according to the economic base and social structure’. Furthermore, Mao, in order to limit the negative impact on China, called for ‘the red line’ between both: To resolve this contradiction, our attention should now be focused on how to enlarge the powers of the local authorities to some extent, give them greater independence and let them do more, all on the premise that the unified leadership of the central authorities is to be strengthened. (Mao Zedong 1956) This quotation demonstrates that the central government recognised the importance of reciprocity in relations with the local authorities and acknowledged the difficulties in managing localism in China. The main aspects of the Maoist decentralisation were as follows: the majority of central enterprises were transferred to the management of the local authorities; emphasis was placed on local planning and replaced central planning with the more significant delegation of powers to local governments. However, as Mao Zedong recognised, the central-local dichotomy was in flux, lacking basic principles or grounding in the economic situation. The ‘localism’ issue became part of the political controversies of the 1957 ‘Rectification movement’, and further in 1962 after the Great Leap Forward failure. Following the short period of ‘regulation’ sponsored by Liu Shaoqi and Deng Xiaoping, Mao started the Cultural Revolution: the symbol of Maoist style decentralisation. Finally, the ten years of turbulence positioned China as a backward country in the international arena, and Deng Xiaoping took the pro-market economy path. The second important feature of the Maoist period is primarily based on the fact that the spatial economic development mainly contributed to inland development: that is, of the central and western provinces. During the First Five-Year Plan (1953–1957) almost all projects were located internally. Due to the national policy of ‘preparing for the next war’ and the self-reliance policy of the whole Maoist period, 59.4% of national investment was allocated to the interior provinces. The situation created disparities between Central and West China and East and South China and favoured the interior while limiting the role of coastal areas (Dali 1997, 7–9). Apart from favouring landlocked China, fluctuations in the fiscal and regulatory authorities from the central to local governments and the highly decentralised system during the Cultural Revolution enacted the Communist Party of China to implement ‘market-based federalism’ under the Deng Xiaoping period. By limiting the interventionist role of the central government, reformers reoriented previous policies and asked the provincial-level governments to take responsibility for economic development (Liu, Shih, Zhang 2018). However, the reforms were not

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to be undertaken immediately, rather they were to follow the principle of ‘crossing the river but touching the stones’ (mozhe shitou guo he 摸着石头过河). Xi Zhongxun (the father of Xi Jinping) in Guangdong and Zhao Ziyang in Sichuan (with his ‘Sichuan experiment’) took the lead in China’s reform and opening-up period (Tong 1987, 3–18). Regarding the practical measures in the late 1970s and early 1980s, the reformers identified three critical initiatives for encouraging local political autonomy to develop the economy and initiatives that at the same time sowed the seeds for potential political disintegration. First, based on the ‘Sichuan experiment’ evaluation, the state sector was decentralised, and the local authorities were responsible for the effectiveness of production. This meant that the centres of economic powers moved away from the political centre in Beijing to the localities. Second, due to attracting foreign investments and trading with foreign partners, localities were placed as more important than the Beijing-based government, and they took advantage of the situation with alternative sources to assist their economic development sources which were not controlled or planned by the central governments. Finally, all were taken under the ‘four cordial principles’: the principle of upholding the socialist path; the principle of upholding the people’s democratic dictatorship; the principle of upholding the leadership of the Communist Party of China (CPC); and the principle of upholding Mao Zedong Thought and Marxism-Leninism declared in late March 1979 by Deng Xiaoping and allowed the government to secure China’s unitary status. Moreover, the geographical reorientation from the interior to the coastal areas was perceived as compensation for the eastern part of China being ‘forgotten’ during the Maoist period. Now, China’s economic governance was precisely in the hands of the coastal areas, mainly Guangdong and Shanghai. The southern provinces, with their long periods of interaction with foreign countries, trade, open mentality and traditions of being ‘far away from the pollical centre’, cherished Beijing’s policy of economic decentralisation. But nothing comes without cost. The reform and opening-up policy has determined the transformation of China’s economy and fundamentally changed the situation of the relationship between the central and local governments. Before the reform and opening up, the Chinese egalitarian model of social governance, by shaping the status of ‘coalition of poor people’, secured the country’s unitary status. The new understanding by Deng Xiaoping’s ‘black-white cat’ strategy was taken from old Sichuanese proverb: ‘it doesn’t matter what color the cat is (yellow or black) as long as it catches rats is a good cat’ (Deng Xiaoping 1962), finally leads to local economic separatisms. In order to win the race, the local entities have taken different strategies of reform, advancing the system and regional promotion and maximising their interests. By giving the provincial-level governments a free hand, the horizontal style of competition became the most essential vehicle for China’s economic growth, fulfilling Deng Xiaoping’s motto that ‘without the competition there is no development’. This statement indicates that the only thing that was anticipated by the central government was economic growth. The discussed approach shapes the situation in which the local government has gradually become a relatively independent stakeholder with its interests and

Understanding the Belt and Road Initiative 11 objectives. Reform with the basic idea of ‘simplifying government and decentralizing power’ or ‘decentralizing power and transferring benefits’ or ‘small governments’ devolves more decision-making power to local governments and production units, and provides more benefits to local governments, enterprises and workers. But as a part of delivering growth, the decentralised approaches utilised the selfreliance model and created a vacuum for horizontal rivalry, as discussed later in the chapter. In order to achieve economic growth, China’s policy aimed at mobilising the enthusiasm (  jijixing 积极性) of local governments and producers. The local governments are not only responsible for balancing the macroeconomic aggregation of the national economy in different regions, but also play the role of independent regulators of economic activities. As a result of the newly implemented policies, the local government has a new role based on market-oriented reform as an independent stakeholder with its own interests and policy orientations. The critical issue is that the power of approving foreign investment belongs to the provincial-level governments. At the same time, they have more autonomy in the local economy, such as establishing industrial projects and establishing local markets to promote local economic development (Zhu 2008, 272–273). As presented in the literature, the Chinese power structure in Beijing has never been transparent – much more is known about the perspective of leadership conflict and central-provincial relations than the provincial perspective of inter-provincial conflict and relations with the centre and even foreign policy. The level of autonomy of the provinces in relation to the political centre is difficult to assess because it emerges as the result of an ongoing, perpetual bargaining process. Zheng Yongnian (2007), by introducing the ‘de facto federalism model’, discusses three models for analysing central-local relations: cellular, structural and pluralist. First, the cellular model provides the platform of limited interaction between central and local governments, and the centre is not always capable of implementing its policies. From this perspective, provincial governments tend to be very important in regard to the developing local economies. This model discusses the fact that the centre and the provinces do not interact following a formal organisational formula but it is instead based on patron-client relations. A similar argument is presented by Audrey Donnithorne (1981) when she states that China is not a monolithic society, but in this model, the centre cannot always seek compliance from the provinces. Rather, the localities act like entrepreneurs: developing local industries, providing coordination and finding customers. In other words, central ministries and planning organs lose primary supervision of financial and material allocation powers, important centrally managed industries find themselves in competition with localities for needed materials, local investment soars and protectionism hampers the movement of goods between localities. This brings conflict between the centre and the provincial governments during their interactions and, as should be stressed here, the horizontal race between provincial, municipal and even lower-level governments. Second, the structural approach debates the decreasing role of the central government and the strengthening of the position of decentralisation. From this point of view, the relations between both central and local government are highly

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institutionalised through fiscal policy and a nomenclature system. Barnett (1967) believes that decentralisation is possible when the centre needs it, and the power can easily be recentralised if the need arises. According to Andrew Walder (1986), the structural model places emphasis on the role of coercion, impersonal ideology and social atomisation. The governmental structure’s approach has been discussed by Allison (1971), and, in Chinese politics, by Lampton (1987), Lieberthal and Oksenberg (1988), and Shirk (1993). They mainly argue that a consensus in decision-making is a product of both vertical and horizontal bargaining processes within the one-party system. The consensus, however, is achieved in the process of bargaining. In the context of the effectiveness of the Belt and Road Initiative, bargaining with the most important actors at the provincial level allows both sides to identify the resources, arguments and specifics of the pertinent points (Lieberthal and Oksenberg 1988, 23–24). This approach mainly focuses on central-local relations as the function of discrete strategic interactions between the centre and the provinces to achieve consensus. The lines of authority between the leaders and the Central Committee go both ways, in a relationship Shirk calls ‘reciprocal accountability’ (Shirk 2007, 40). In Allison’s understanding, the most suitable model is the model that focuses on the politics of a government. The foreign affairs in this model are understood neither as choices nor as outcomes and are understood as a result of various bargaining games among players in the national government. In other words, this model frames the puzzle: which results from what kinds of bargaining among which players yielded the critical decisions and actions? Looking deeper, the model focuses on the perceptions, motivations, positions, power and manoeuvres of the players. Furthermore, finally, it stated that if a government formed an action, the action was the result of bargaining among players in the game (Allison 1971, 6–7). In Zheng Yongnian’s view (2017), what is crucial for the future of development in China and the success of the BRI are the relations between businesspeople and bureaucrats based on the bargaining process among them. If businesses and officials take opposing paths, economic development would be limited. In other words the BRI’s provincial ‘go global’ policy played a decisive role in shaping support and cooperation from local governments and business communities (Zheng 2017, 108–109). Allison’s reasoning was followed by Chenlan Li (2003), who argued that the major relations between central and local should be perceived as bargaining with the centre for more favourable policies. First, the major perpetual objective of the provincial governments is to obtain more authority and more significant room for manoeuvre regarding investments. Second, bargaining means more direct support in the form of injections of central resources, such as budgetary or extra-budgetary fiscal resources, bank finances and larger investment scale quotas. Third, in bargaining, the provincial-level governments exercise flexible implementation of central policies and use feigned compliance as a cover while engaging in various creative interpretations of central policies to attain provincial objectives. Fourth, by developing new horizons of investment expansion, provincial governments move beyond the state budget and the conventional state sector towards the nonstate sector, as well as the extra-budgetary state enterprises in their pursuit of

Understanding the Belt and Road Initiative 13 investment expansion. The last part in the bargaining process relates to internationalisation: the provincial effort to attract external resources from beyond the national borders, a new pretext used by the provincial governments to demand greater autonomy for the centre. Bargaining can be defined as a process in which two actors resolve the conflict between them by various forms of negotiation. It is bilateral, and both sides utilise their resources to promote their mutual interests or to maximise their respective interests. This approach reveals how the provincial leaders used their resources to gain more from the centre in terms of, for example, economic incentives. Intergovernmental economic decentralisation has enabled locales and bureaucratic units to accumulate resources to bargain with the central government. Provincial governors – ranked equally to government ministers – now manage provinces’ external economic relations, turning provinces into quasi-autonomous international actors that conclude international agreements and sometimes behave in ways diverging from or undermining central foreign policy. More to the point, the central-local relations perceived as non-zero sum game and, in fact, the bargaining process are mainly based on the preconditions: 1. both centre and local have irreducible power over one another, 2. irreducible basis of centre’s power over provinces ‒ coercion, 3. irreducible basis of provinces’ power over the centre – its intermediary role, 4. mutual interdependence and indispensability-protracted conflicts, a situation of total victory/total failure is not feasible, a politics of compromise and a non-zero sum game situation (Chenlan Li 2003, 44–45). The interesting point was discussed by Andrew Mertha (2009) who named the Chinese system as soft centralisation. After Deng Xiaoping took power, he decided to open China and allowed locals to manage economic development. However, in the late 1990s, Chinese authorities applied the partial centralisation of many key bureaucracies to regulate and discipline local government agents in their management of the economy and the implementation of policy more generally. The last model, the pluralist one, places the local governments at the centre of the research agenda. This approach primarily presents the relations between central and local from the perspective of the interest groups. Goodman (1994) argued that the provincial party secretaries played an important role in the decisionmaking process. He identified the provincial party branches as the political middlemen between central plans and local implementation. This is mainly based on the experimental model of China’s political and economic systems. The choice for experimental points is crucial to the emergence of national-level policies. China’s development is based on the greater policy support and the ‘first-in-trial’ right (preliminary reform trials, prior to carry and try) (xianxing xianshi quan 先行 先试权) mainly based on the comprehensive reform pilot zone often referred to as the ‘new special zone’. Generally speaking, the characteristics of the comprehensive supporting reform pilot zone model (shiyanqu moshi 试验区模式) are mainly reflected in three ‘levels’: the national level, to demonstrate and drive national economic development; the ‘comprehensive reform level’, meaning that reform is not simply economic, but a systematic project to achieve multi-faceted and three-dimensional coordinated development; and third is the ‘pilot area level’,

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focusing on institutional innovation (Yang and Hu 2012, 35–42). The space for manoeuvre while implementing national sponsored policies by the local government is mainly justified by local conditions, leaving room for self-governance and allowing for deviations from central policies. This works for the benefit of the provinces which acknowledge that the central government, due to the great diversities among provinces, cannot sponsor one single policy. Moreover, as noted by Yu Keping, this approach allows the local governments to be innovative and compete in a healthy manner to stimulate China’s economic growth (Yu 2009, 120). According to the pluralist model, the provincial governments can be protectors of provincial interests by negotiating with the central government, and to some extent might be perceived as the creators of those interests. The central government here is perceived as the ‘small government-minimalist’ (xiao zhengfu 小政府). On the one hand, they are seen as the agents of policy implementations, but on the other, the provincial leaders frequently initiate policies that are often not in line with the central government priorities (Li 2007, 1–16). Further, in the ‘first to the trial zone’, Zhang Xin believes that China must establish a regional economic autonomy system that will allow local people to have complete freedom to choose their economic system. As he argued, each region should have the right to issue its own currency, the right to establish their development strategies, the right to implement their foreign trade policies and the authority to manage their relations with other regions. Simply put, each region should act as an independent ‘economic state’ (Mierzejewski 2009). This reasoning is not far from Sebastian Heilmann’s view on China’s core executive, that serves as the counterweight against centrifugal forces and particularistic forces and particularistic interests in the political-administrative system. From this perspective only by planning big projects China-wide, controlling fiscal resources flow and making the nation-state strong can the central government prevent China from the deeper fragmentation (Heilmann 2018, 77). This, however, can hardly secure China as the less fragmented country. The horizontal competition system is still critical for China’s economic development; however, it is not delivered by free market principles but by promoting local protectionism (difang zhengfu baohu zhuyi 地方保护主义). In order to achieve a better score during the evaluation based on economic indicators, the provincial-level government and lower entities use protectionism practices to secure their economic growth and not be exploited by the developed regions. In other words, the local government faces a ‘prisoner’s dilemma’, which enables them to adopt a free market approach to safeguard local interests and speed up economic reforms at the local level. Moreover, this brings the adverse effects of copying the development model, duplicating resources for the same type constructions (chongfu jianshe重 复建设), and the long-term, incorrect allocation of financial resources. Following this ‘copy paste’ method the belief in self-reliance (zili gensheng 自立更生) also constitutes a vital part of local protectionism. A central point of the concept of local self-reliance is the delegation of the major role in planning, control and management of local projects to a local organisation and leaders with the central government guidelines. Moreover, the policy of self-reliance dictates maximum

Understanding the Belt and Road Initiative 15 reliance on local funding for local projects, using local materials and relying on labour-intensive techniques (Taylor 2016, 68). The belief in self-reliance at the provincial and lower level creates different types of contestations. The first is driven by introducing new policies at the local level. Under the conditions of a market economy, the central government can no longer control all resources as in the planned economy era. The newly introduced policies by the local governments reflect their independent interests, and, daily, the central government needs to respond to the mushrooming policies. The next horizontal contention relates to the project-based approach. The projects are directly linked to economic interests and most directly reflect the level of economic performance. Especially for projects with special significance (such as large-scale, foreign-related, hightech, etc.), the central government’s attitude and support will often play a decisive role (  jueding xing zuoyong 决定性作用), so the competition between the local governments around these individual projects is also very fierce. The fourth is the competition ‘for funding and special financial resources given by the central government’, especially during times of crisis when the central government allocates funds to regulate regional development. However, in response to the 2008 international financial crisis, the central government has proposed a four trillion stimulus package, triggering local government competition (Feng Hui 2016, 241– 242). As Feng Hui (2016) has noted: ‘Each level of government quickly set up a special team “running the department into Beijing” to compete for funds. Leaders from all provinces and cities across the country “were busy selling themselves in Beijing”’. Moreover, a similar situation appeared after the Belt and Road Initiative in 2013. Many governments thought the BRI proposal was the stimulus package for local economies. Immediately after they identified the domestic the BRI reasoning, they were ready to compete. The local bureaucrats exercised the Chinese principle of paobu qianjin (跑部钱进): ‘running in various ministries, departments, and money will come into your pocket’. The understanding means that the use of these Beijing-based relations network based on provincial offices in the capital have close relations with the relevant departments in order to gain extra money transfer to local projects. After the funds are bestowed, the relevant central bodies hope to find capable partners at the local level and finally lose the control/ supervision of the given funds (Han Xu, Tan 2015, 80–81). These practices listed have formed central-local governments’ and local-local governments ‘game pattern’ (boyi geji 博弈格局) of competition and cooperation. In order to strengthen their comparative advantages, the governments across China implement the competitive governance concept of Albert Breton (1974), including a variety of techniques: special fiscal policies, central subsidies or quality competitions. If the achievements are prosperous, then the local government ‘will no longer have to worry about it, and the central government is optimistic, but usually, the governments present themselves in an excellent light’. If the experiment fails, the central government stops quickly and limits the losses and risks to specific areas (Feng 2016). However, as previously stated, the game mechanism creates a zone for disintegration. The game mechanism is mainly driven by local protectionism that safeguards local products, attracts foreign investment while

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developing local enterprises, promotes talent introduction and improves the high efficiency of government services. The protection of local information, known as information asymmetry, has contributed to the competition between local governments and results in the central government being less informed about the real situation at the provincial and lower levels (Chen 2016, 117). In order to improve their competitiveness, local governments are focusing on improving laws, conducting economic and trade fairs and conducting business invitations. However, the reality is far from being optimistic. Xinjiang, for example, effectively banned the import of 48 commodities because they would harm the local economy, and Jilin refused to market beer products in the neighbouring province of Heilongjiang and Liaoning. The decentralisation and market-oriented economy provide the platform for numerous ‘horizontal commodity wars’ (Goodman 1994, 6–7). As argued by Goodman the local protectionism, also known as ‘market localism’, does not necessarily mean total war but rather connection-building, deal-making, haggling and shielding of all with and against all. China’s local protection is generally industry-specific, mainly including particular industries that are the basis of local fiscal sources or local economic development, and stable social industries that have a deterrent effect on unemployment and inflation. The selected industries that are heavily protected by the local governments include services such as construction, mining, electricity, post and telecommunications, transportation and warehousing, as well as manufacturing industries such as tobacco, alcohol and automobiles. In other words, when protectionism contributes to the economy and tax revenue, the regions with poor economic development have stronger protection motives than the economically developed regions (Zhang 2015, 96–97). The coastal areas with relatively developed economies are more market-oriented, and productive inputs are more dependent on other provinces than self-sufficient. Products are more competitive, and the target market is the whole country and the world, so it is less dependent on local protection. In the relatively underdeveloped regions, the degree of marketisation is low, and the competitiveness of local enterprises is not healthy, so the dependence and expectation of local protectionism are higher. But it does not mean that the well-developed regions fail to use protectionism: they do the same but more subtly. Besides, in order to impose regional blockades and market segmentation, local protection may be implemented through discriminatory measures like extra local fees, bank loans and acceptance liquidation. The local government competition is reflected in eight areas: project competition, the competition of industrial chain development, competition for talents, science and technology, fiscal and financial competition, infrastructure competition, competition for environmental systems, policy systems and management efficiency (Chen, Gu 2019, XVI). Another point discussed by Brantly Womack and Guangzhi Zhao (1994) is that the provincial autonomy of the provinces combined with the different advantages of each province to produce significant diversification in many aspects of the development, including foreign trade. As a result of the reform, each province presents a more individuated set of resources and problems than in the past and each has a greater stake in further central permissiveness at least in those policy

Understanding the Belt and Road Initiative 17 areas that might favour their position in the system. The export-led economy provided the basis for the conflict over the central government resources and brought political tensions between coastal and inland provinces over the policies shaped by Beijing. Coastal provinces have more vital interests in external economy and would be interested in defending and preserving the positive, stable relations with the developed economies, and at the same time, as being backward inland provinces called for more incentives. On the one hand, this competition that allows the local governments to identify themselves inside the system, but at the same time resulted in duplication of construction and waste of resources. The methods used include applying more rigorous procedures and technical and qualitative standards to imported goods than to local ones, granting local firms preferential access to the banking system and meting out biased treatment to outside firms when it comes to the settling of disputes through the courts (Poncet 2004). In the command economy, the central government relies on a series of agents to capture and monetise rents. At the same time, as argued before, the local governments try to maximise their revenues and are not eager to share their own resources. This brings the question of China’s domestic development effectiveness to light. Being driven by multiple asymmetries, such as information asymmetry, or lack of identification of the local networks (guanxi), the central government possess little ability to be a competent supervisor (Wedeman 2003, 68–71). However, the critical point, overlooked by the central government, was the weaknesses in the implementation supervision process. The government in Beijing paid more attention to institutional reforms, and less to the implementation, as observed by Zhang Zhihong (2005) of Zhou Enlai School of Government in Nankai University. Apart from the discussed local protectionism, the central government needs to manage several other issues. An additional problem is framed by the popular saying that ‘the central government has a policy, but the local government has countermeasures’ (shang you zhengce, xia you duice 上有政策, 下有对策) and means flexible positions in implementation, decisions adapted to the local conditions and finally punishment or reward by the central government. In this sense, the majority of policies might be implied not in line with the central government wishes but rather according to the local interests. The second, what is named in Chinese literature ‘nine dragons manage the water’ (  jiu long zhi shui 九龙治水) or ‘zhize tong guan’ (职责同构), means lack of clear-cut distinctions between units at the local level or isomorphism of the central government and local government responsibilities. The example of sea environment management is handled by five units, and managing food safety is handled by 13 units, however in this area the decision is taken at the central level but it cannot be implemented because nobody knows who is in charge of implementation and all those at the local level wash their hands of the problem as well as even the foreign affairs conducted by the local economic department and international departments (Zhang 2005, 128–129). The final point is lack of communication between the central and local level and information asymmetry noted in Chinese academia as zhengling bu chu Zhongnanhai (政令不出中南海) ‒ ‘the political regulations stay in Zhongnanhai’ and are not effectively distributed (Han, Tan 2015, 81).

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Even though, according to the theory of public choice, local government officials are rational, ‘economical people’, and local governments are ‘quasi-economic people’, the local governments and their officials have internal interests which drive the decision-making and implementation of local protection policies, including pursuing the personal interests of public officials. But this rationality has been limited to the local communities and provincial-level administrative divisions, excluding any holistic thinking about the development of the whole country. This phenomenon was observed and criticised by the New Left school in the early 1990s. Wang Shaoguang and Hu Angang (1994), in their report ‘Report on China National Power’, perceived that the decentralisation led to the weakening of the capacity of the central government. Re-centralisation should be the cure for maintaining the unity of the country because economic growth has the potential to lead to political disintegration. Such arguments are based on three assumptions: exclusive economic determinism, conflictual model of relations between centre and province and the equation of China’s new economic regions with the traditional provinces and the kinds of regionalism that existed historically in China. Wang Shaoguang and Hu Angang both argue that it has been severely undermined by decentralisation and economic reforms. Wang takes extractive capacity as the key indicator of overall state capacity. He shows that the centre is unable to control extra-budgetary funds, and its relative share of tax revenues has decreased to the extent that Beijing has lost effective control over the country’s economic life. The New Left group believe that radical decentralisation is the main obstacle to the formation of a unified national market economy. They also believe that a highly centralised country may not necessarily be omnipotent or authoritarian. This view was shared by Wang Huning (1993), then a professor at Fudan University and a current member of the Standing Committee of the Central Committee in Xi Jinping’s cabinet, when in 1993 he called for a more centralised social management system (Wang 1993). Alwyn Young (2000), for instance, argues that the liberalisation and transformation of the PRC between 1980 and 1990 can best be characterised as a process of devolution. In his view, the present marketdriven Chinese economy is less efficient than the old planned economy because the former has carved up the country into local economic fiefdoms. During the period of reform, China has moved away from having one central plan to having many mutually competitive central plans. This leads to huge competition, massive production duplication, inefficient allocation of production outputs, trade wars and even local authority personal conflicts (Pei 2009, 117). Hongbin Cai and Daniel Treisman (2006) argue that none of the studies on decentralisation have been successful in establishing a ‘convincing link between China’s decentralization and China’s success’. They argue that the economic growth currently witnessed in China is an offshoot of policies emerging from ‘competition between pro and anti-market factions in Beijing’. Sub-national governments can ‘adjust’ national policies to local circumstances, producing constant multi-level bargaining around, and substantial non-compliance with, central initiatives. As noted by Philip S. Hsu (2004), local governments exercise their powers to ‘identify and choose from a particular range of feasible actions in implementation, as a result of

Understanding the Belt and Road Initiative 19 power devolution in the state hierarchy’ (Hsu 2004, 579). This view of the necessity of centralisation was also discussed by Shen Liren and Dai Yuanchen (1992), who argued that decentralisation promoted ‘independent kingdoms’ at different administrative levels. In their view, vertical management can help rid the interference of the interests of local government and formulate public policies based on the needs of the entire country and society. Second, the direct management of public affairs by the central government is intended to reduce the dependence of the system on the ‘people, finances and materials’ of the local government and strengthen the supervision of power within the system to prevent and restrain corruption. For the centralisation promoters, the positive significance of vertical management in promoting administrative efficiency is unquestionable. From the existing practice, one of the core contents of the pre-reform is to decentralise local governments and stimulate market vitality. However, as previously noted, the fragmentation based on the local protectionism is something that the central government has struggled with for a long time. Using unitary status as a dogma, the Beijing-based government has continuously tried to navigate China’s economic development and escape from the federalism trap. The very first voice for economic integration was raised from Shanxi when Liu Zaixing (1981, cited after Han, Tan 2014), the well-known economist, proposed the integration market of the mining industry in Shanxi and was followed by Luo Zude (1982, cited after Han, Tan 2014) and Wu Tiehua (1985, cited after Han, Tan 2014) who called for small-scale economic integration (Han, Tan 2015, 3). After Hu Jintao succeeded Jiang Zemin as the General Secretary of the Chinese Communist Party in October 2002, the concept of inter-regional development took on an additional meaning. As a way of bridging regional disparities and warranting social stability, Beijing came up with a ‘centrally-coordinated regional development strategy’ (tongchou xietiao quyu fazhan zhanlue 统筹协调区域发 展战略) which presupposed an enhanced role for the central government. While continuing with the ‘develop the west’ programme, the Hu Jintao-Wen Jiabao leadership announced its regional development target – the northeast – as the ‘fourth engines’ of China’s economic growth. In the ‘top-down’ model, the central government directly participates in or promotes the establishment of specialised regional governance organisations. Along with the implementation of the Belt and Road Initiative in 2014, the central government sponsored two big cross-regional projects: the Yangtze River Economic Belt and the Beijing-Tianjin-Hebei Metropolitan Area. The latter is seen as the first inter-provincial project coordinated by Beijing, where the leading development group at the central level is a leader with a working group developed by the two regional governments as the management team. In other words, the central government pressed the provincial-level government to make more coordinated local economic development policies. The newly presented ‘coordinated development’ (xietong fazhan 协同发展) concept promises to deliver regional integration by commonalities: mutual coordination, support, promotion and adjustment (Yang 2017, 108). The second project, the Yangtze River Economic Belt, is mainly based on three parts: the Lower Yangtze Region, the Central Yangtze Region and the Upper Yangtze River Plan to

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develop economic integration based on an urbanisation process with ChengduChongqing megalopolis, Wuhan megacity and Shanghai as the three big pillars in the integration project. The central government used the mixed method approach and positioned the cross-provincial bodies like the Yangtze River Economic Belt Committee and other sectoral committees as the leading administrative entities to manage the unification project (Yang 2017, 112–113). Going further, the central government, especially after the 18th Congress, has tried to establish the proper mechanism to deal with conflicts and coordination between regional organisations. With the increase of regional organisations, China’s regional coordination has been orchestrated on two levels: one is the coordination between the administrative regions within each regional cooperation organisation (xingzheng qu zhi qian xietiao 行政区之间), and the other is the coordination between the regional cooperation organisations (gequcheng hezuo zuzhi各区域合作组织) (Liu 2017, 53–55). A different approach has been taken in Guangdong-Hong Kong-Macao Greater Bay Area where the ‘bottom-up’ model proposed by the local government formulated regional planning, regional economic development and cooperative development opinions or policy arrangements. The organisational forms of regional governance, such as joint meetings and chambers of commerce, fully negotiated and voluntarily participated in the conclusion of contracts, formed an institutional framework for regional governance and solved public problems in the region. Alternatively, the local government strives to recognise the self-generated regional governance practices in the form of regional planning at a higher level (or central level) to enhance the authority of regional governance organisations (Cheng, Zhou, Hao 2018, 129–130). Nevertheless, after gaining power in 2012, Xi Jinping favours a more centralised, coercive government with political campaigns as the core in China’s political system. As stated by scholars from the New Left Movement at the beginning of 1990s, centralisation is about to bring unitary status and limit the negative impact of fragmentation. The ‘crawling centralization’ started with fiscal reform in 1993 when, step by step, the central government got their hands on the local tax revenues. Expenditure at the local level exceeds the revenues and, as such, the provincial-level government started to compete for centrally distributed resources. Under the vertical system, the first and the most essential coercive means employed by the centre are the nomenclature system (zhiwu mingcheng biao 职务名称表制度) and massive campaigns (zhengzhi yundong 政治运动) to solicit compliance from the provinces. In the context of central-provincial government relations, the Central Party Committee along with the dedicated Organisational Department exercise the power of appointment, they possess lists of reserve cadre for all available positions and they monitor the institutions and processes for making all appropriate personnel changes (Burns 1987, 36). As the unilateral top-down action, it aims to guarantee central control over the provinces and strengthen the unitary status of China. As stated by Zheng Yongnian (2007), the subordination itself, however, does not imply coercion; in the process of executing subordination the central government can use politically driven coercive

Understanding the Belt and Road Initiative 21 measures. During the period of reform, the nomenclature system was decentralised, and the centre lost its control over the nomenclature to prefectural, city and county party committees (Chan 2004). In this sense, the anti-corruption campaign in China is clearly connected with the nomenclature system and allows the central government to make bureaucratic changes and promises to regain control over the party structures across the country. Only by implementing a more centralised government can the accomplishment of ongoing processes such as urbanisation, changes in the hukou system and a regional integration process be seen as possible. At the same time, the anti-corruption campaign has been assisted by the Belt and Road Initiative that generated enthusiasm across the country and serves as a massive political campaign (Donaldson 2017, 127–128). Even though the centralisation and the anti-corruption campaign might be applauded by the general public in China, the nomenclature system in both centralised and decentralised China makes horizontal competition more intense. The local policymakers, in order to win their position in Beijing, look to develop their own provinces and by a ‘first-to-trial, first-to-imply’ system which receives incentives from the central government and is praised as the positive force in the country. These campaigns are usually connected to particular leaders and are very vague and may not stand the test of time. In limiting the negative impact of the nomenclature system and navigating more lasting policies, the central government is managing the ongoing inter-provincial integration projects. The central government tries to develop inter-provincial cooperative organisations or urban agglomerations and has called for the establishment of the Yangtze River Delta Urban Economic Coordination Meeting, the Pearl River Delta Executive Chiefs Joint Meeting and the Bohai Sea Regional Chief Executives Joint Meeting. These are considered vital for establishing a link organisation to coordinate, and, by giving common incentives, reduce resistance from the provincial level and push domestic unification into more productive phases (Yang, Nie 2017, 95). From this perspective, by introducing the Belt and Road Initiative together with the presented inter-provincial projects, the central government has tried to narrow the gap, and the competition among the local authorities; by pushing them to one collective goal, it has attempted to build the vehicle for common interests or a ‘community of shared interests’ (liyi gongtong ti 利益共同体) inside China. But, paradoxically, this refers only to the provinces under the cross-provincial unification projects and does not result in limiting future competition between integrated structures as this would only elevate it to a bigger scale (Yang 2017, 131). Moreover, the ‘double edge sword’ of horizontal competition and cooperation by implementing the BRI transfers the inter-provincial competition from the domestic arena to worldwide. But, in order to make this competition effective, the central government made attempts to introduce the division of labour concept, discussed further in the last subchapter. Within the idealistic approach, after four to five years of the campaign, the central government recognised the comparative advantages of each province and allowed each to be effective in one or two areas. This should definitely narrow domestic horizontal competition, and by navigating China’s local governments abroad, would move horizontal competition

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worldwide. However, the Belt and Road Initiative shows the duality of engagements: central-local and local-local has not been changed, and any centralised government cannot change this substantial vertical and horizontal competition, not only inter-provincially but also intra-provincially, because it would go against the logic of Chinese development (Interview, Guangdong 2019).

1.2. Foreign policy, paradiplomacy and the Belt and Road Initiative Since the reform and opening up, Chinese provinces and cities have been seeking ways to Go Global and looking to formulate their competing internationalisation strategies. The logic of development in post-1978 China has mainly been driven by economic competition with reliable political confession in a one-party system dominated by the Communist Party of China. In this case, the critical element was to position itself under centrally sponsored policies, build its own position inside the system and look for positive feedback effect of multiplicating central financial transfers. This, however, has not been the only dimension of China’s global outreach. The second important pillar of China’s regional global engagements has been shaped by the globalisation and regionalisation processes that have implied progressively less subordination to the state-centric system. Looking at the narratives in the West, the first mention of paradiplomacy is found in Ivo Duchacek’s article published in Publius in the fall 1984 issue. In the beginning, ‘paradiplomacy’ was used as the follow-up expression of the previous neologism ‘microdiplomacy’, also created by Ivo Duchacek. Later, other terms appeared such as ‘protodiplomacy’, ‘subnational governments’ diplomacy’, ‘regional diplomacy’ and ‘constituent diplomacy’ (Pietrasiak et al. 2018). Western academia quickly affiliated the action taken by sub-national actors with globalisation processes. Furthermore, the role of cities and regions was discussed by the founding father of the global city concept, John Friedmann, in 1986 when he responded to the breakdown of the post-war Bretton Woods system and the formation of the new financial markets, the emergence of offshore banking and export processing zones, the rise of the multinational corporation and the emergence of the new international division of labour. This approach is mainly based on the fact that the cities are places of articulation of globalisation, where people and products link themselves to the wider world and its market. Cities have become places of articulation that underpin globalisation, where people and products link themselves to the wider world and its marked by the deepening cities integration (Curtis 2014). Saska Sassen (1991) argues that certain cities and regions have taken on new global functions that go beyond the traditional role of the cities as nodes in international trade and the banking system. First, global cities are centres of strategic command and control for global activity. The second feature is based on the fact that they are a key location for financial services, which have replaced manufacturing as the leading sector. Furthermore, finally, the global cities act as production sides and as markets for those products and services. The global cities are the product and producer of the globalised market, and become ‘a new type of

Understanding the Belt and Road Initiative 23 centralized territorial node through which flows of the world economy are channeled and articulated’ (Curtis 2014, 62–69). This phenomenon was named ‘paradiplomacy’, defined by Alexander Kuznetsov (2015) as ‘a form of political communication for reaching economic, cultural and political or any other types of benefits, the core of which consist in self-sustained actions of regional governments with foreign governmental and non-governmental actors’. Kuznetsov’s perspective conflicts with that presented by Simon Curtis (2014) who assumed that the global cities and regional diplomacies have not been part of any fully worked out plan or strategy on the part of any political group or set of elites, but are the relatively unforeseen by-product of the implementation of a set of ideas about the liberal market and global market security. In fact, the internationalisation of regions and cities produces a structural crisis between the nation-state and globalisation. This conflictual relationship continues to play a central role in contemporary debates about globalisation and the potential demise of the modern state system. Since the end of the last century, city diplomacy and sub-national governments’ external activities have become an essential part of China’s international relations (IR) discourse. In the area of sub-national actors’ paradiplomacy, Chinese scholars have partly followed the narrative shaped by Western scholars in the early 1980s. Moreover, they have tried to adjust their understanding to Chinese conditions. Contrary to Western notions, Chinese scholars, for example Chen Zhimin and Su Changhe, failed to use paradiplomacy. Paradiplomacy, understood as pingxingwaijiao (平行外交), is only used by scholars from Hong Kong, Taiwan and Macau. In Mainland China’s discourse, paradiplomacy has been replaced by local governments’ foreign affairs activities (次国政府外事活动 ciguo zhengfu waishi huodong) and local government actions in foreign affairs (地方政 府对外事行动 difang zhengu dui waishixingdong). As stated, in China the term diplomacy is only reserved for the central government as it is the only body that can conduct foreign policy. In Chen Zhimin’s book Subnational Governments and Foreign Affairs, published in 2001, he referred to the division of labour concept, discussed the level of autonomy of local governments and explored the roles that are played by local governments. Interestingly, he predicted that due to the processes of globalisation and regionalisation, the role of local and regional governments would be strengthened. What should be noted is that Chen Zhimin (2016) labelled this process ‘new medievalism’. The concept draws a comparison with the medieval period of urban development. In the era of the globalised world, as stated by the Fudan-based scholar, regions and cities might follow the medieval pattern of associations, such as the Hansa – the German Hanseatic League that secured the interest of merchants and was the body that shaped the principles of European trade in the 14th to 17th centuries. This form of cooperation existed before the Westphalian state-centric order, and in fact by having the city-to-city consular relations, tariff deals and so on would become an example of the new order in the post-1648 reality. The second Chinese scholar to publish on paradiplomacy was Su Changhe (2010), currently based at Fudan University. In his papers, he mainly discusses the phenomena of globalisation, regionalisation and cross-border cooperation, such as the preconditions for paradiplomatic activities,

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and perceives all three as the primary factors that strengthen the local authorities’ actions in the international arena. As all Chinese scholars agreed to the fundamental issue for local governments in economic development, and to achieve more effective economic development, international cooperation is perceived as one of the major pillars for achieving this goal. This global outreach of Chinese provinces searching for global resources has brought the issues of competence, competition and division of labour among the central and local governments into ‘the limelight’. The globalisation paradigm follows the understanding of pluralists, such as Robert Dalh (1961), and argued that there are multiple power structures and political actors, all of whom strive towards various goals. In this context, global cities are not only players within a nation-state but more a nexus and focal point for the global economy. The global cities and supply chains function as the primary force that drives and intertwines the modern economy, and are frequently independent of the nation-state where they reside (Hochadel 2018, 24–25). In traditional policy, the city and the local governments act together with existing hierarchical structures to engage actions with their nation-state, and between domestic and foreign cities. In the discussed context, the global interactions of local authorities are limited. The central government in Beijing, as the guarantor of China’s unitary status, sees deeper involvement in globalisation, especially in its economic spectrum. The political engagements, however, are seen as a threat to national unity and when regions and cities tend to act independently in different international organisations the central government closely monitors all actions (Zhong 2019, 132). Nevertheless, from the international perspective, the rise of global cities as an independent network is a phenomenon that proved globalisation as the process that pushes changes ahead. In other words, the cities are taking responsibility when the nation-states fail to provide a solution. They are at the front line of the fight against global climate changes, for example by grouping together into C40. In this particular context of global warming, the visibility and importance of city mayors has been growing, and provides the opportunity to develop their foreign policy agenda. The cities and local governments have been developing capabilities as network actors that allow them to have the global reach they need to bridge the various scales of the global issues (Hochadel 2018, 40–43). Moreover, through internationalisation, especially by China’s big cities like Guangzhou or Shanghai, the project of building a ‘community of common interests’ under the Belt and Road umbrella might be undermined. In Hocking’s (1993) concept of ‘multilayered diplomacy’, the critical aims of the local governments are promoting regional interests – interests related to powers and responsibilities, especially in economic areas. The second part is involvement – continuous but likely to fluctuate in intensity – concentrated on the economic agenda, based on bureaucratic and political resources in order to build the legitimacy among the local population and be part of national economic strategies. The final point made by Hocking referred to the transnational platforms used by regional authorities to achieve prior-scheduled economic goals. In overlapping global and domestic realities, the local constituencies act by exerting influence on national governments to protect their interests at the international arena, and,

Understanding the Belt and Road Initiative 25 by using their resources, act directly on the international stage (Hocking 1993, 40–43). It has been suggested in the previous subchapter that vertical relations along with the horizontal competition are most crucial in China’s case. The major objective of the central government in relation to provincial-level governments has been to limit ‘unhealthy competitions’ and coordinate the assigned roles to each actor under the national policies. One of the very first attempts was made by Hu Jintao in 2006 and 2009 respectively. The president of China named two Chinese provinces – Yunnan and Heilongjiang – and the autonomous region of Xinjiang as bridgeheads (qiaotoubao 桥头堡) and the essential pillars of Chinese foreign policy. Significantly, the term used by Hu Jintao is of military origin and is most commonly deployed by staff during military planning. Three significant areas were designed for the ‘qiaotoubao’ regions: to assist the central government in strengthening its abilities to combat non-traditional threats; to help the central government in strengthening regional cooperation (cross-border governance); and to aid the central government in opening up China’s west and central regions. The exact meaning, in this context, is not well-defined; however, these provinces were chosen as bridgeheads due to their better usage of governing relationship with minorities (Interview, Guangdong 2019). The second term recently used by the Chinese leadership and in the conventional narrative is ‘paitoubing’ (排头兵) – meaning ‘pawn’ or ‘checker’ (Luo 1994; Li 2016, 213). The definition of ‘pawn’ also has a different meaning. As the author understands it, the pawn (or checker) is only a small and not very important part of a chess game. Nevertheless, for local policymakers and bureaucrats, the meaning is different. In the eyes of the Guangdong and Guangzhou bureaucrats, the assigned role of the pawn represents being ahead, being a leader and being superior to any other region in China. Without the pawn, the government would have failed to start the chess game as well as subsequent moves towards the United States made by Guangzhou. This implies that the Cantonese see themselves in the vanguard of reforms, opening up and internationalisation, and even at the forefront of political changes and China’s diplomatic game. For the local authorities, being the pawn means exceptionalism and playing the most crucial of roles. In the context of Sichuan, the role of the pawn is viewed from a different perspective. This ‘label’ is more related to the county level when it comes to the regional development of the province, rather than any critical role in China’s foreign policy (Interviews, Guangdong 2016, 2019). In the Chinese narrative, the role of globalisation is seen as minor, while vertical relations are seen as the most critical for local authorities’ international actions. Along with the opening-up and urbanisation processes in China, coastal areas and major cities such as Beijing, Shanghai and even Guangzhou have become an essential part of China’s foreign policy strategy. In this regard, Zhao Kejin developed a particularly innovative theoretical explanation for city diplomacy in his proposition of ‘embedded diplomacy’ (qianru shi waijiao 嵌入式外 交). In his view, in order to meet the expansion of urban and regional functions in the dual process of globalisation and urbanisation, the city’s external actions

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should be embedded in the state-to-state relations, and broaden the international institutional system. Due to this city diplomacy, inclusion of foreign relations has become part of the multi-level diplomatic system (Zhao Kejin 2014, 11). A similar point is made by Xiong Wei and Wang Jie (2013), who perceive city diplomacy as a part of international exchange in which the city participates under the authority and guidance of the central government. All activities taken at the sub-national level are coordinated, but fully controlled and managed by the country’s foreign policy apparatus. As observed by Cui Shaozhong and Liu Shuguang (2012) in Foreign Affairs Review, local governments are the only executors of central government recommendations in economic diplomacy. Moreover, local governments act as ‘information desks’ for the local business community as can be seen in cities such as Yiwu in Zhejiang province. This economic diplomacy sponsored by local governments leads to more decentralised and open actions in the external operations of the local governments. Further, the model of European regional representative offices in Brussels should be perceived as a model for Chinese local authority offices in Europe. Cui Shaozhong and Liu Shuguang (2012) conclude that local actions in foreign affairs should be perceived as a catalyst and not be seen as contradictory to Beijing’s policy. According to Yang Long from Nankai University, close cooperation between the central governments provides a political guarantee for the cooperation between local governments. The cooperation framework between the two countries provides institutional convenience for the transnational cooperation between local governments. In the context of Sino-Korean relations, due to the fact the subnational relations are less dependent on political and ideological agenda, they bring more benefits and are perceived as more effective. Moreover, the transnational organisations and international legal frameworks are seen as an important part of regional interactions. Regarding relations between China, Japan and South Korea, there are sub-national pan state organisations, for example, the China-Japan South Korea Sister Cities Association, the South Korea China-Japan Regional Exchange Association, the United Association of North-East Asia local governments and the East China (Japanese sea) Governors Association and East China Sea (Japanese sea) City Major Association (Yang, Zhang 2017, 7–9). In this regard, Yang Jiemian (2011) proposed the concept of ‘local foreign affairs’ and considered the place proposed under the overall diplomatic structure of the country. The understanding of the concept of ‘local foreign affairs’ is to integrate and coordinate under the strategic layout of the country’s overall diplomacy. The core of ‘local foreign affairs’ should be to strengthen the country and the local international influence and voice. Chen Haosu (2008) believes that urban diplomacy as a whole is subordinate to national diplomacy, but contrary to the official diplomacy led by the central government, regional diplomacy carries an ‘unofficial colour’ (fei guanfan de secai 非官方的色彩). Being unaffiliated to the central government, the actions taken at the local level should be perceived as more effective, especially when it comes to public diplomacy or soft power (Chen Haosu, 2008). Another example of the Chinese definition is the work of Professor Gao Shangtao (2010) of the Foreign Affairs College. The regional and urban external activities

Understanding the Belt and Road Initiative 27 have two characteristics: one is their non-sovereign character, and the other is the positioning of the city as a sub-national actor. The former determines that the city mainly undertakes low-level political functions such as economic development, cultural exchange and social cooperation. As Gao Shangtao has stated, Chinese provinces in paradiplomatic actions are entirely subordinated and aligned with central government foreign policy (Gao 2010, 33). Contrary to the liberal approach, the necessary feature of central-local authorities in foreign affairs is synergy in both sides’ actions. Furthermore, as Chen Futao (2003) has argued, due to their special position in the system, local governments play the unique role of middle person (zhongjie xingwei zhe 中介行为者) or central policy agents (daili ren 代理人) and diplomatic partners (hezuo huoban 合作伙伴). The intermediary role has two aspects: because local governments’ external actions don’t have ‘official colour’, the central government can use it for their own foreign policy goals and all networks and connections are used by local governments in order to realise central government goals. With reference to the intermediary role, two examples should be pointed out: the first regarding the Taiwan issue, the second in relations with Japan. When Papua New Guinea established relations with Taiwan in 1995, the government of Jinan paid an official visit to Port Moresby. Through this channel, the actions taken by the local government opened a door for the central government’s chequebook diplomacy (Li 2007, 100). The second case illustrates that sensitive historical issues are not a necessary part of the national agenda. In order to push the relations with Japan forward in June 2003, both governments decided to place difficult historical issues, such as the abandonment of poisonous chemical gases by the Japanese invaders of Qiqihar, under the umbrella of local government in Heilongjiang that allows both sides to overlap over the sensitive issues and conduct more pragmatic relations (Chen 2003, 28–29). This view is shared by Nankai University Professor Yang Long, who examines the decisive role of local governments in Sino-Japanese relations. According to him, in times of central government crisis, the sub-national level conducts valuable, intensive and stable relations. It contributes to state-state relations and should be seen as one of the crucial pillars of the relations between central governments. A similar understanding of placing provincial-level governments as an intermediary in central government relationships was given by respondents in an internet survey on the external role of local authorities in China: 50% of respondents answered that, in a time of Sino-American crisis, the close ties between Guangzhou and Los Angeles would ease tensions between the two countries. Moreover, as perceived by scholars, Guangzhou hopes to act more autonomously and strengthen its relations with the West, but still play a role in China’s overall foreign policy (Author’s online survey, 2018). This presented data indicates that local governments play a supporting role in the state’s foreign policy and by playing a soft-power role might marginalise the negative image of the Peoples’ Republic of China. A large number of cities organise diplomatic events, for example visits from heads of states, and by being intellectual and cultural centres are perceived as an essential part of the country’s foreign policy and soft-power ‒ cultural strategy. Moreover, as discussed in the

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next chapters the local channels are used to exercise political relations and contribute to the national policy of the BRI (Li 2016, 32–35). According to Wu Jianmin (2012), the local governments’ diplomacy is part of public diplomacy. The local governments’ interaction with foreign counterparts plays an important role in shaping China’s international image. And due to the fact that the local channel has greater access to foreign public opinion it should be seen, according to Li Min (2007), as a part of ‘external propaganda’ or ‘external publicity’ (Li 2007, 107–108). In theory, the new public diplomacy should be perceived as a two-way institution. On the one hand, the practice of city diplomacy has an impact on the country’s foreign strategic decision-making. When signing a cross-border cooperation agreement and joining a global or regional multilateral cooperation framework, the central government needs to consider local interests. In principle, the international interests of the city and the national interests should be placed within ‘the unity of diversity’ framework. Therefore, the influence of urban diplomacy on national foreign policy decisions, although not seen as having a direct effect, should be understood as an indirect participation in the decision-making. On the other hand, urban diplomacy can provide a multilayered path for national strategy implementation. By establishing friendly and cooperative relations with cities and regions in other countries, cities can promote the development of bilateral relations or increase the possibility of reaching international agreements and compete with other ‘global cities’ (Han, Tan 2015, 27). From the more practicial bureaucratic perspective, by participating in the sub-national global organisations like C40, UN-Habitant, the big Chinese cities are actively looking for markets for the prducts made in their province (Interview, Guangdong 2019). As Liu Bingxian (2016) has stated, the first attempt towards institutionalisation was establishing the Public Diplomacy Association sponsored by cities such as Shanghai, Tianjin, Guangzhou, Wenzhou, Zhuhai and Xinning and supported by the Foreign Affairs Commission of the People’s Consultative Conference (Public Diplomacy Association 2017). This body should be perceived as a platform seeking common interests and collective initiatives in shaping international actions. Through local channels, the Chinese have realise the strategy of ‘going global’ and ‘bringing in’, according to Liu Bingxian (2016). The discussion in China proposed ‘three pillars’ of regional diplomacy: defining China’s identity and soft power; establishing the decision-making mechanism of foreign affairs at the local level; and the coordination mechanism between Beijing and local governments in international relations and as diplomatic channels. At the city level, urban public diplomacy is an aspect of urban diplomacy; but at the national level, urban diplomacy can effectively promote national public diplomacy goals. This effectiveness is mainly shaped by the fact that city-to-city or region-to-region relations are free from the coercive measures generally used by the central government (Acuto, Morissette, Chan, Leffel 2016). In forming and maintaining their role as international actors through global partnerships, sub-national actors such as local governments are likely to act as the agents for their own interests, as well as their countries’, especially in the context

Understanding the Belt and Road Initiative 29 of soft power and public diplomacy, as said before. However, to be obedient, the local authorities at the provincial level formulate their expectations towards the Beijing-based government and frame bottom-up pressure. According to the Chinese literature, the core Beijing policy towards the regional governments is to shape local enthusiasm (jijixing 积极性) and, based on this enthusiasm, conduct further steps in implementing policy, both internal and external. On the other hand, the differentiation of local international interests and the enhancement of international capacity are the main driving factors behind local governments’ international activities, and indeed the Belt and Road as the centralisation vehicle cannot limit competitive horizontal power between provinces and even within provinces. As indicated by local bureaucrats, the local authorities have been given an umbrella under which they can operate internationally and the Belt and Road Initiative is seen as such. The critical issue in taking all actions by the local policymakers in China is ‘not to break the umbrella’ and act according to received general instructions. The ‘umbrella’ term was used during the meetings in 2016; however, in October 2019 the local leaders responsible for international cooperation used the term ‘proposal’. The changes in official narratives were mainly driven by an ongoing anti-corruption campaign in which the term ‘umbrella’ has a very pejorative meaning and is understood as ‘a guard of illegal activities that need to be crushed’ (yousan bida 有伞必打) (Interview, Guangdong 2016; Sina 2020). Nevertheless, the central government recognised the Belt and Road Initiative as the aim of go global sponsored by the central government and acknowledged that the local government follows the central-led policy. However, on the other hand the local structures have used this umbrella for their own purposes by assuring the central government of their loyalty while at the same time adjusting the central directions and guidelines for their own purposes. Looking into a more detailed understanding of central government policy, the Belt and Road is seen as ‘centrally sponsored enthusiasm’ and ‘big plans’ from Beijing are not sufficient to make foreign policy more coherent. The provincial leaders also hold power to appoint leaders for sub-provincial administrative entities, interpret the central objectives for national development for their province and to set policy agendas and budget allocations accordingly. Moreover, foreign affairs at the provincial level are conducted by different bodies that, on the one hand, compete with each other, and, on the other, overlap their competences. These bodies strongly resemble provincial foreign affairs offices: a provinciallevel ‘leading group’ comprising senior provincial officials, and other provinciallevel offices, such as the provincial departments of commerce and other entities, including ‘friendship associations’, ‘people’s associations’; and other semigovernmental groups, like ‘sub-councils’ and provincial branches of the China Council for the Promotion of International Trade, provincial-level leaders that manage and promote provincial interests overseas. The provincial party secretary and governors represent their provinces abroad, often meeting with the leaders of the states and being responsible for the economic performance of their areas, and have critical authority over the management of economic development, including foreign economic relations, in geographic areas and for populations that may be

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as large as, or larger than, states across their international borders (Christoffersen 1996, 265–299). The popular belief that central government possesses the omnipotent power to dictate foreign policy is challenged by the bargaining process between central and localities. Hoping to secure China’s unitary status, the Beijing-based government needs to offer more incentives than globalisation, and, by attracting local authorities, centralise and control their international activities. Under the influence of the dual trend of ‘internationalization of domestic politics and internalization of international politics’, local politics, national politics and international politics are increasingly integrated into multi-level governance (Chen Futao 2003, 28). Against this backdrop, as Zhao Kejin of Qinghua University has stated, the new dynamic provides the basis for the new division of labour among the central and local governments as indicated in the context of the official document of ‘Vision and Action 2015’. Nevertheless, the division of labour is not centrally imposed but is rather seen as a bargaining process. In this case, the central government accepts these local politics but not in very official statements, but rather in a moun way – meaning by quiet permission. Further, what was viewed by Yang Guangbin (2001) as most important is that the Chinese quasi-federal arrangement means that the central government ministries cannot dictate policies to provincial governments because they have lower status in the Chinese bureaucracy structure. From this point of view, the provincial governments possess a relatively free scope regarding their dealings in, for example, economic and environmental issues (Yang 2001, 172). The second important fact is the scale of provinces. As stated by Su Changhe (2010), the scale of the local economies should be perceived as a very important factor behind the local authorities’ international actions. In 2010, Henan province ranked 5th in China and 24th in the world, while Guangdong, the top regional economy in China, ranked 16th in the world (Su 2010, 5–10). In 2017, 35 Chinese cities had a GDP equivalent to entire counties, for example Shanghai equals the Philippines, Shenzhen equals Sweden, Chengdu equals Norway and Guangzhou equals Switzerland, and in 2018 Guangdong GDP equalled South Korea (Visualcapitalist 2017). No matter how the local authorities are subordinated to the central government, Chinese academia observed ‘the game of diplomatic authority’ between both of them. Under the conditions of the unitary state system, the central government is the leader in foreign policy, and local governments are dependent on upper-level decisions. Despite the fact that local governments’ diplomatic activities are still limited by international and domestic legal frameworks, however, the implementation of China’s central government decision might be questioned by the provincial-level government and, in fact, limit options in China’s foreign affairs. As discussed by local officials in Kunming, the central government has very high expectations with the same limited resources, and the localities cannot ultimately fulfil the projects delivered by Beijing (Interview, Yunnan 2019). On the one hand, it asks local government to take part in the global technological revolution and compete with other actors. On the other, it asks the local government to play the role of promoting China’s soft power. In economic and diplomatic decision-making, the game process is more

Understanding the Belt and Road Initiative 31 repetitive, which requires a continuous cycle of decision-making and feedback. Local governments influence the priorities of foreign policy-making of the central government (through various means, leading individuals, cooperative organisations, enterprises), diversely, they actively participate in direct contact with local governments in other countries and enhance mutual trust through exchange (Yang 2016, 110–116). Zhang Peng, of Shanghai International Studies University, discusses the other side of the same coin. Recognising that the role of local governments in China’s external actions is limited, she developed the concept of ‘limited participation’. This has been rooted in the local governments’ role in executing foreign policy decisions and traditional subordinate relations with the central government (lishu guanxi 隶属关系). Although ‘limited participation’ has been perceived as the primary approach, local governments, by implementing the go global strategy, increasingly have room for their initiatives. As long as they only work for economic and material benefits, the central government values their actions. The global process allows local authorities to participate in the process; it also prompts the central government to strengthen its management and control over local actions (Zhang 2015, 180–184). The latter dynamic was recognised by the central government, and in 1999 specialised areas of responsibility were created: the Foreign Affairs Offices (FAO, waiban 外办) and Foreign Affairs Provincial Leading Group (shengji waishi lingdao xiaozu 省级外事领导小组). The former serve, first, as policy watchdogs to ensure that various central plans and policies are implemented; second, as advisers who conduct research and present policy recommendations to the local party committee and government; third, to handle administrative issues related to foreign trips, consular affairs, friendship city affairs; and finally, to explore new channels of international cooperation (Li 2016, 214). The latter, leading group is usually headed by the party secretary and is responsible for designing foreign activities at the provincial level. However, this does not mean that the organisational structures of FAO are not similar across the country. The administrative structures in charge of the foreign affairs are different in different parts of China and are dependent on the level of interactions with foreing countries, elites perspections and needs, as well as the roles given by the central government. Needless to say, the United Front Department and the Propaganda Department at various levels are also involved in provincial governments’ external policies (Cheung, Tang 2001, 94–95). The second, even more important, aspect is the horizontal competition that is not in line with the desired goals in China’s foreign policies but which hinders the realisation of local interests. As discussed in the first subchapter, the competition between localities has become the major driving factor behind China’s economic successes. The Belt and Road Initiative exports horizontal competition worldwide, but similarly to domestic rivallry does not necessarily bring effective outcomes. The local governments’ competitions in countries along the Belt and Road can overlap, causing duplication of project investment, and resulting in a waste of resources, which might deepen the negative externalities of local economic development, resulting in ‘Pareto efficiency’. The domestic politics and

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disorderly competition outside the country will confuse the cooperation partners of the countries along the route. They may also be used by the other party, resulting in the inability of regional diplomacy and the failure to achieve development and promote cooperation. For example, as discussed further in the last chapter, in 2013, Guangxi and affiliated business interests agreed with Malaysia’s Pahang state government to upgrade Kuantan port, including developing a cross-country railway, road links, and a USD 3.4 billion industrial park. Guangxi subsequently leveraged the BRI to expand its involvement. However, in September 2015, Guangdong province signed own agreement with Malaysia’s Malacca state, including a USD 4.6 billion industrial park and a USD 10 billion port upgrade. As argued by Lee and Zhang there is a little economic rationale for developing two world-class ports on the Malay Peninsula (Lee, Zhang 2019). In the context of discussing the Belt and Road, an important issue that should be examined are the disparities inside China. Since 1949, and even after the economic reforms started in the early 1980s, the separation between economic and political subdivision was nominally left untouched and, in fact, created tensions and fragmentation inside China. These regionalisation schemes should be regarded as exclusive of each other and the central government by sponsoring cross-provincial plans’ cooperative development along the Yangtze River Economic Belt or the Bohai Bay. The rise of one region or locality tends to produce what is known as ‘backwash effects’, with the movement of labour and capital, and helps the growing region to move further upwards. Meanwhile, the less developed regions suffer from ‘current account’ and human capital deficits and find it challenging to keep up investments in infrastructure and thus to stay competitive (Yang 1997, 7–9). After 1978 these policies only benefited the eastern part of China, and, from this perspective, the policies proposed by Jiang Zemin (Go West) and Xi Jinping (the Belt and Road) are seen as compensation to the central and western parts of China. Throughout the reform, the provincial-level governments have become more dependent on foreign markets and capital than on the policy sponsored by the central government. Receiving only 3% of its capital development from Beijing made Guangdong production dependent on the international market and the dependency on Hong Kong became almost 100%. Then 70% of Fujian industrial output was created through investment from Taiwan alone. Northeast China, as well as Jiangsu or Shandong, has closer ties with South Korea and Japan, Xinjiang with post-Soviet republics in Central Asia and Yunnan ties with Burma and Thailand were considerable. This economic dependency does not always fit with the political pronouncements made by the central government. Between 1981 and 1991, policy was driven by letting the coastal regions ‘get rich first’ and was presented as the regional policy; however, it allows local dignitaries to exercise their provincial power. In the late 1980s the inter-provincial economic ‘wars’ ceased, but the integration of the domestic market has undermined the twin role played by the local authorities, at once regulators and players in the field of economic activity (Poncet 2004). By giving more economic benefits to the local level, as well as the responsibility for their affairs to the provinces, this policy resulted in considerable growth in provincial autonomy.

Understanding the Belt and Road Initiative 33 The first provinces were those who had natural advantages and responded positively to the central reform initiative. These provinces, mainly located in coastal areas, contributed to the central tax revenue, as in the case of Jiangsu province. From this perspective, the centre came to depend on the continuing fast growth and stability of these provinces not only for financial reasons, but equally for political and social rights. Beijing is highly dependent on the quality of economic performance at the provincial level. The problem of disparities among the province and the central and western parts of China demanded preferential policies from the central government. The inability of the centre to dictate regional economic policies and the active economic role of provinces is reflected in a new type of local planning which focuses on smaller trans-provincial economic regions growing out of the economic interchange between sub-provincial areas with particular economic advantages. This new role for economic regions (spanning two or more Chinese provinces kuadiqu 跨地区) was shaped to achieve and provide more effective economic performance and coordination of the decisions taken at the local level. The fact mentioned earlier was reflected in the decision made by the State Council on, for example, shaping the Yangzi River Economic Belt, or the Pearl River Delta economic development. The role of more significant economic regions, with increasing inter-provincial and international integration that provinces might no longer have the size and scope to provide, creates a new vacuum for economic development in China. Moreover, this development is mainly based on sharing common interests between provinces and the competitive advantage between provinces. The Belt and Road Initiative and the promotion of macroregional projects like the Yangtze River Economic Belt provide significant opportunities for central provinces and western provinces to expand their opening up and cooperation and enhance the level of open economy development. This policy of the BRI, understood as a combination of other regional economic integration projects, had been lobbied for by officials and researchers from inland provinces since the 1980s (Summers 2018, 14). When it comes to international cooperation, Sichuan province’s role connects the Central Asian and European countries to the west, connects to the China-Mongolia-Russia Economic Corridor to the north, and integrates into both the China-Indochina Peninsula Economic Corridor and the construction of the China-Pakistan, Bangladesh, India, and Myanmar Economic Corridors in the south (MFA China 2019). Incentives are the critical part of central-local relations in China. In order to achieve its goal of more integrated market, the central government needs to provide incentives like a pilot zone, special money transfers or, as previously mentioned, create a platform for horizontal competition in the global arena and by the evaluation hand over further incentives. In this regard, the Belt and Road Initiative serves as the platform for escaping the growing tensions inside China and directs by special money transfers and other incentives the provincial governments’ attention to competition outside China. During the period of reforms since 1978, the attributes of local foreign exchanges are becoming increasingly abundant, and the forms of exchanges and cooperation are becoming more advanced. This connotes that the central government dominates rather than monopolises a

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country’s foreign relations and exerts its ‘high-level politics’ such as policies and security. Even under the centralised vehicle of the Belt and Road, the local governments, on the other hand, are more deeply involved in the process of national foreign policy decision-making, strengthening their ‘voice’ on the world stage, especially in the field of ‘low-level politics’ such as economy, society and culture.

1.3. Domestication of the Belt and Road Initiative and provincial-level governments The dominant narratives on Belt and Road have referred to the central policy, and very rarely discuss the provincial- and lower-level perspectives. The different level of adoption, as well as different perspectives and understanding by the co-workers under the BRI umbrella, should be seen as critical for the future of the project. As argued in the chapter, by announcing the BRI as the new campaign, Xi Jinping wishes to stimulate local authorities for horizontal cooperation with provincial-level governments’ global horizontal competition. In this regard, the BRI and go global policy acts as the incentive based on special money transfers for provincial-level BRI projects (yi dai yi lu daxiangmu chubei ku 带一路大 项目储备库) to limit the negative impact of China’s market fragmentation and stimulate the cross-provincial consumption. The second important goal is to limit the negative impact of the local debt crisis. Comparing the State Council reports between 2014 and 2020, the former presents a very optimistic picture, stating that under the Belt and Road the local governments are particularly active in supporting the BRI projects, infrastructure connectivity and global hunting for resources. In 2015, Li Keqiang called for expanding new space for international economic cooperation and at the same time be part of the domestic integration projects like the Yangtze River Economic Belt. As discussed in 2016, due to fiscal constraints, the central government’s special transfer payments to local areas decreased by one-third. Instead, the central government opened the special guarantee fund in case of local government bankruptcy. The crucial issue for the success of the BRI is seen only with four big strategies together: the Yangtze River Economic Belt, the Hebei-Tianjin-Beijing Metropolitan Area and the Open Up the West policies. The critical factor behind it, as indicated by the prime minister, was to strengthen productivity cooperation. The first sign of difficulties with the local government department was evident in the 2017 report: ‘the projected deficit of local governments is 830 billion yuan. Local government individual bonds to be issued will total of 800 billion yuan, and local government bonds will continue to be issued to replace their outstanding debt’ (Li Keqiang 2017). One year later, the governmental report saw the BRI as the next round in opening the inland regions, stimulating the go global policy and productivity cooperation. After five years the prime minister was more realistic, and his 2019 report sheds light on the real perspective of the BRI in the context of local governments’ international activities with the BRI as the umbrella. The central government statement: ‘Budgetary deficits in some localities are quite large. There are still many risks, and hidden dangers in the financial and other sectors’ indicates that, to a certain extent, by allowing

Understanding the Belt and Road Initiative 35 local governments to go global and compete for financial and other resources, the BRI was to limit the negative impact of the Chinese crony capitalism and keep the economic growth. More to the point, as promised by the central government, 2.15 trillion yuan of special local government bonds will be issued, more than 800 billion yuan compared to 2018. This policy was designed both to provide funding for key projects and to create conditions for better forestalling and defusing local governments’ debt risks (Li Keqiang 2019). Despite political and security considerations, the Belt and Road is essentially a superior design of economic diplomacy strategy of go global, productivity cooperation and ‘bringing in’. As previously discussed, the regional diplomacy has a clear economic driver, and local governments see strengthening international cooperation as an indispensable part of a sustainable development strategy. As the Chinese optimistically admitted, the Belt and Road is a successful initiative of the central government to attract local participation in foreign economic cooperation. In the planning and promotion of the Belt and Road Initiative, sub-national diplomacy has been included in the top-level design. By integrating the regional and city development strategy with the country’ s diplomatic strategy, the BRI has become a vital vehicle for national integration. It tends to establish the working mechanism of coordination between the central and local governments and create coherent interests between both sides. This relationship is reflected in the following two aspects: by encouraging towns and cities along the Belt and Road to participate in the Belt and Road Initiative, the central government hopes to strengthen overall coordination, and hopes to avoid the situation of strife competition, and, on the other hand, the local level along the BRI inside China hopes to gain more special money transfers and, in fact, greater autonomy in foreign relations. In this context, the Belt and Road promotion process is also central and local but is still the process of ‘constant gaming in communication’. Even though the BRI is seen as the vehicle for more centralised government, during the construction of the Belt and Road, provinces and cities have made an attempt to break the authorisation and monopoly of the central government for their own economic interests. There may even be acts of exceeding the local governments’ authority or making changes in top-down implementation processes. Further, provinces and cities are more focused on foreign cooperation for the local and short-term interests of the city rather than the overall and long-term interests of the country. This short-term thinking provides the basis for the competition between provinces and cities that will not only affect the efficiency of regions and cities on foreign exchanges, but destroy national foreign policy strategy. The implementation of the diplomatic strategy has adversely affected and even harmed the overall interests of the country. In this case, the central government should play a leading role and strengthen overall coordination in local external relations as well as try to point out the particular province to cooperate with a particular country (yisheng yiguo 一 省一国): for example, when the central government has identified Shandong as the only ‘key province’ for economic and trade exchanges with South Korea, causing ‘dissatisfaction’ in Liaoning and other provinces, and therefore needs to balance their alliances in external relations. From this perspective as a national economic

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diplomacy strategy, the Belt and Road Initiative has increased the incentives for local governments to compete for diplomatic decision-making power. In order to obtain the policy dividends of the central government policy, domestic provinces, autonomous regions and municipalities have actively responded to this concept. Being deeply impacted by the central government proposal, immediately more than 30 cities in China have declared themselves as the starting point of the Belt and Road Initiative, and concepts such as ‘core areas’, bridgeheads and ‘hubs’ have emerged (Chen Xiang, Wei Hong 2016). In this regard, the Belt and Road Initiative is seen as the coordinating mechanism brought about by the attempt to introduce the division of labour. Important aspects that define the division of labour as specialisation are understood as the division of tasks into discrete activities among individuals within the organisation or between more substantial units. Following this comes the notion of functional interdependence: the dependence of one part on another, and by shaping the division of labour increases dependence of one group on the other unit (Smith, Snow 1976, 520–522). Through imposing the division of labour delivered in March 2015 by the Ministry of Foreign Affairs, Ministry of Commerce and National Development and Reform Commission ‘Vision and Actions’, the central government tries to bring together diverse interests and limit provinciallevel lobbying in Beijing as well as provincial competition inside the country. By naming the provinces ‘the pace-setter and main force in the Belt and Road Initiative’ the central government presents different roles for different local actors. The document names the pivotal provinces and cities in China’s infrastructure projects. In other words, by publishing ‘Vision and Action’, the Beijing government selected the most active actors and allowed them to contribute to the Beijing-sponsored initiative also with financial resources. Going through the document it is particularly important to find the provinces that were excluded from the project like Jiangsu province. However, provincial leaders simply ignored their omission and followed Miller’s understanding that each province has its own the BRI projects. In the document, seven provinces were excluded and even the NDRC’s State Information Center is monitoring the BRI activity among 31 provincial-level units (Lee, Zeng 2019). The majority of provincial actors, even landlocked ones, were given tasks to open up the country and utilise the opportunities given by the Belt and Road. The central government, by using the variety of labels as ‘windows’, ‘core area’, ‘strategic channels’, ‘key bases’ and ‘international transport corridor’, encourages the provinces to develop the concepts further and answer with more specific policies. Reading the local documents, as detailed later, mainly delivered by the provincial-level governors, we assume that they respond with different enthusiasm and a very diverse way of embracing the project (see Table 1.1). The newly introduced policy of the BRI was perceived as the motivation tool that stimulates local authorities to participate in the project, to reform and innovate, as well as to ‘develop new advantages for participating in and leading international cooperation and competition’ (Vision and Action 2015).

Understanding the Belt and Road Initiative 37 Table 1.1 The BRI national and provincial, regional economic policies (central government and self-positioning by the provincial-level government) Province/city

The position given by the central government

The position given by provincial-level governments

Xinjiang AR

The core area, window

Shaanxi, Gansu, Ningxia AR

Channels, trade and logistics hubs, important industries and cultural exchange bases for further cooperation with the Central, South and West Asian countries

Transportation hub, trade, logistic culture and technology centre The vital fulcrum of the Silk Road Economic Belt, an essential hub of China’s opening to the west, ‘golden section’ of the ‘Silk Road Economic Belt’, the strategic base of sub-regional cooperation

Qinghai, Inner Mongolia AR Heilongjiang, Jilin, Liaoning

Important window opening North of China

Guangxi AR, Yunnan, Tibet AR

A critical gateway for the integration of the ‘Belt and Road’ with South-East Asia initiative to promote Tibet-Nepal border trade and tourism and cultural cooperation 21st Century Maritime Silk Road Core Area

Fujian

Shanghai Guangdong Zhejiang Hainan Jiangsu Shandong

The ‘Belt and Road’ Initiative, especially the 21st Century Maritime Silk Road Pioneer and Main Military Area

Strategic channels, important fulcrum and cultural exchange centre of Silk Road Economic Belt, bridgehead in opening northern parts of China, exchange and cooperation platform with Russia and Mongolia, a critical node in the construction of China-MongoliaRussia Economic Corridor International Corridor for cooperation with ASEAN Radiation Center for South and Southeast Asia Greater Mekong Subregion Economic Cooperation, actively connect the ‘Belt and Road’ and the Bangladesh-China-IndiaMyanmar Economic Corridor. promote the construction of the Himalayan Economic Belt An essential hub for the construction of the ‘Belt and Road’ connectivity, a cutting-edge platform for economic and trade cooperation on the Maritime Silk Road, an essential link for cultural exchanges on the Maritime Silk Road A core node region in global investment and trade, the 21st Century Maritime Silk Road bridgehead, a leading area for economic and trade cooperation that promotes the ‘Belt and Road’ strategy, an ‘Online Silk Road’ pilot area, and a trade and logistics hub area, the two dominant positions of the South China Sea maritime strategic fulcrum of the New Asia-Europe Continental Bridge East Bridge and important areas along the New Asia-Europe Continental Bridge Economic Corridor (Continued)

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Table 1.1 (Continued) Province/city

The position given by the central government

The position given by provincial-level governments

Chongqing

Outstanding Support for Western Development and Opening of Western China Inland open economic regions

Important strategic fulcrum/pivot of the Silk Road Economic Belt, the industrial base of the 21st Century Maritime Silk Road, and the western hub of the Yangtze River Economic Belt The vital transportation hub and economic hinterland of the ‘Belt and Road’ strategy, the meeting point of the Silk Road and Maritime Silk Road, central cities along the Yangtze River Economic Belt and important sections of the ‘Belt and Road’ strategy

Chengdu Changsha, Nanchang, Wuhan, Hebei, Zhengzhou

Source: Ding Renzhong, Chen Xingxing. 2016. Zhongguo quyu jingji zhengce xietiao de zai sikao. Jian lun ‘yidai yilu’ Beijing xia quyu jingji fazhan de zhengce yu shouduan [Rethinking of China’s Regional Economic Policy Coordination. The Policies and Means of Regional Economic Development in the Context of the Belt and Road Initiative]. Nanjing daxue xuebao (zhe xue, ren wen xue, shehui kexue) (Nanjing University Studies (Philosophy, Humanities and Social Science)) no 1: 26–27.

Apart from positioning the provinces within the BRI, the central government has used the project as a part of the appraisal system. By calling for opening up the inland regions, the central government creates space for global horizontal competition, that in the case of central and western China has been reflected in the creation of rail transportation of goods to Europe. In terms of transport corridors that are very limited, as of April 2017, 27 cities in China have opened routes to European cities. The local governments have scrambled to invest a lot of financial funds in order to subsidise and coordinate with the central government. In the end, unified planning became the China-Europe train, which avoided a more significant waste of resources and formed unified external action taken by the provincial-level governments. The discussion of local government participation in the BRI strategic competition and cooperation relationship is based on the theory of competition and cooperation relationships (ImSilkroad 2020). The subsidies provided by local governments average 7,500 (USD 1,086) to 10,000 yuan for a 20-foot equivalent unit container (TEU), and sometimes the figure is as high as 20,000 yuan. A cargo train hauling 80 TEUs needs at least 600,000 yuan in subsidies (CASS 2017). The Belt and Road as the next round of China’s opening mainly of the inland areas produced competition among local authorities. Horizontal competition, as part of the appraisal system, stimulated the provincial-level governments to subsidise local initiatives. The cargo trains to Europe are an illustrative example. Started by multinational companies Dell, HP and Foxconn, as time passed they became the calling card of the Belt and Road Initiative. In 2019, Xian took the lead with 2,133 trains per year, followed by Yiwu, Chongqing, Suzhou, Chengdu,

Understanding the Belt and Road Initiative 39 Zhengzhou, Wuhan, Harbin, Hebei, Quanzhou, Changsha, Xiamen, Nanchang and Shenyang (Imsilkroad 2020). Apart from the central government documents and appraisal system, the provincial-level government presents its own positions within the Belt and Road Initiative.2 The yearly reports delivered in the local people’s congresses, which use different types of label such as ‘central era’, bridgehead, ‘radiation centre’, ‘pawn’ or ‘linking/bonding point’, have discussed the self-appointed roles within the BRI and deliberated over special ‘local’ BRI projects, levels of adoption and willingness for further integration with pan-regional integration projects, mainly the Yangtze River Economic Belt and the Beijing-Tianjin-Hebei Metropolitan Area, or limiting activities to their own backyard, as in Guangdong, which presents either a lukewarm or enthusiastic approach to the BRI. Furthermore, making the political confession to the role of Chairman Xi Jinping is seen by Beijing as the readiness to take part in the central government project. As acknowledged from the quantitative approach, Sichuan province was the most ‘optimistic’ about the project, while Heilongjiang policymakers from the governor’s office discussed the BRI less. Apart from these two extremes, the provinces present somewhat balanced views and by skillfully presenting their communications strategies hope to gain extra resources from Beijing. The first group of municipalities consisting of Beijing, Tianjin, Shanghai, and Chongqing present their geographical locations as the most important in navigating regional development plans as well as the BRI Initiative that leads to limiting the fragmentation of China’s domestic market. Chongqing, for example, presents itself as an active player in building a logistic hub, ‘bonding point’ (lianjie dian 连接点), between the BRI and YREB, part of the Western development with its ‘outstanding’ geographical position and unique role between domestic development and international cooperation. The Chongqing municipal government claims to provide the impetus for further development in the area of international productivity cooperation and takes a leading role in exporting China’s overcapacity. Interestingly, though, the government and officials referred more to Xi Jinping’s position and his visit to Chongqing in January 2016 than to the Belt and Road itself (CqLGR, 2015–2020). The second city, Shanghai, declares that it would participate, serve and implement decisions from the national level, as well as seeing itself as the example for the other local governments. As is quite natural, Shanghai discusses trade and financial cooperation under the BRI, and new modes for cooperation with transnational companies based on the most advanced technologies. The city recognises itself as the bridgehead in international trade, as well as a part of local, regional development of the Yangtze River Economic Belt and Yangtze River Delta (SLGR, 2015–2020). The third city, Tianjin, sees the BRI as part of the national strategy for opening up the country that is related to the go global strategy. For Tianjin, government is the ‘window of opportunity’ that should be used to the fullest in order to greater benefit the local economy, with the Free Trade Zone as the most important example of delivering economic growth to the city. The mayor, Zhang Guoqing (TLGR 2020), declared active international

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cooperation with Europe, Arab countries and Africa. Apart from investment, the government announced the opening of ten new ‘Luban Workshops’ and cooperated with the Ministry of Foreign Affairs in promoting the ‘global Tianjin’ project (TLGR, 2015–2020). Beijing, as the political centre, situates itself as the inspection centre for imported products, as a partner for typical projects with the Asian Development Bank and the Silk Road Fund. Moreover, the BRI is seen as part of the go global policy and Beijing as an important part of the China-MongoliaRussia Economic Corridor. Most important for Beijing’s city government, however, was the fact that it was the host city of the BRI Forum and by all accounts contributes to the national policies. Moreover, the capital city declares itself to be the international hub for ‘young talent’ (by opening International Talents District Pilot Zone) as well as the hub for ‘unicorns-start-ups’ – the new technologies companies. In 2020, Beijing governor Chen Jinning mentioned for the first time the international productivity cooperation directed towards Germany and Japan (BLGR, 2015–2020). The second type of China’s administrative divisions are autonomous regions. Regarding the autonomous regions of Xinjiang, Ningxia, Inner Mongolia, Tibet and Guangxi the governors perceive the provincial governments as an essential part of the whole project. From the executive view, the most subordinated to the central government is Xinjiang. This should not be surprising, however, while discussing Belt and Road, as the Xinjiang government is the only one that acknowledges Chairman Xi Jinping’s position as the master of the BRI concept but also presents the most crucial role as the chairman in the political system in Mainland China. Following the official narrative from Beijing, Xinjiang has placed itself as the core area (hexin qu 核心区) for the Belt and Road strategy, and promises to speed up the building of the China-Pakistan Economic Corridor. The local authorities also referred to the Central Committed Xinjiang Conference and acknowledged the tasks given by the central government. In 2016 the local government of Xinjiang discussed the participation in three economic corridors: the Eurasian land bridge, the China-Pakistan Economic Corridor and the ChinaRussia-Mongolia Economic Corridor. The historical and strategic chances given with special money transfer are perceived as part of the go global strategy of the Xinjiang AR. These policies, as stated in 2017, were possible only under the leadership of the Communist Party and only with Xi Jinping. Apart from using the popular slogans the government in Xinjiang promised to build the hub for RMB internationalisation in the capital of the autonomous region – Urumqi – and cooperate with provinces along the BRI in order to make the logistic cooperation more effective (XLGR, 2015–2020). Ningxia Hui AR, an area inhabited by the Muslim minorities, perceives the BRI as the proposal and guideline that brings great (hard to find) opportunities for openness and development. In the area of international cooperation, Ningxia is designated to bring more Arab world money to China and is the main organiser of the China-Arab World Summit, with particular regard to Egypt and Saudi Arabia as indicated in the reports. Using its cultural proximity to the Arab world, the government in Ningxia has offered to speed up the opening of Sino-Arabi Technological Park as well as develop the special testing economic

Understanding the Belt and Road Initiative 41 zones (NLGR, 2015–2020). The government in Lhasa, similar to Xinjiang, sees the BRI as a national strategy and has declared utilising special funds from the BRI: the Tibet Investment Fund. Moreover, the local government strengthens the cross-border cooperation with Nepal, and builds Gyirong crossing points as well as opening the South Asia Research Center. Tibet positions itself as part of the China, Bangladesh, India and Myanmar Corridor (XzLGR, 2015–2020). The Inner Mongolia government looks to the economic corridor with Russia and Mongolia: stating that a bridgehead is a ‘very vital force’, especially for the border cooperation with Manzhouli and Erenhot. More to the point, the possibilities for future collaboration are increasingly evident with the Beijing-TianjinHebei Metropolitan Area, with West China and the north-east of the country. Apart from domestic cooperation, since the BRI was announced seven years ago, the provincial-level government has listed 13 international projects with Mongolia, Russia, Israel, United Arab Emirates, Japan and Belarus (IMLGR, 2015–2020). As learned from overall government report analysis, Guangxi AR is one of the most active participants of the BRI. Crucial for the region is opening the door for cooperation with South-East Asia and ASEAN, in particular. What should be noticed is that the governor not only debates external action taken under the umbrella of the BRI, but also interstate cooperation. Two examples were discussed in 2015, namely the Zhuhai-Xinjiang cooperation and the Macau-Guilin testing zone. As the border province, Guangxi AR cooperates with Malaysia, Singapore and Vietnam as an important pillar of provincial global outreach. In short, the Guangxi government listed any possible form of cooperation starting with ChinaASEAN fairs in Nanning, through cross-border cooperation, and navigating with Beidou to better implement the Belt and Road strategy (GxLGR, 2015–2020). In north-east China, the three provinces of Liaoning, Jilin and Heilongjiang have also tried to present their vision of how to engage directly with a Beijingshaped foreign policy. Heilongjiang, as the overall study shows, uses the BRI least, especially when Luo Hao took his post as governor. The provincial-level government based in Harbin has confirmed its willingness to cooperate with the China-Mongolia-Russia Economic Corridor and has strengthened cross-border cooperation. However, untypically, when referring to the BRI, the provincial government has assured that the province would ‘dock with’ the national policy. The verb jiezhu 借助, to dock, expresses a very passive approach and indicates high expectations from the central government. An important part of the narrative sponsored by the provincial government was not integrated with other north-east provinces, but rather the cooperation with Guangdong based on mutual assistance programme (duikou hezuo 对口合作) and promoting connectivity across the border with Russia. Compared to Heilongjiang, at least at the provincial level, all provinces seem to be very enthusiastic about the Belt and Road Initiative (HljLGR, 2015–2020). The most active approach was adopted by the Liaoning government. It was clearly stated that the BRI means go global and by having 97 projects abroad, companies from the province are ready to take responsibility for further engagement under the BRI. Moreover, Liaoning has discussed opening an exclusive testing zone and strengthening cooperation with 16+1, a platform for

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cooperation between China and Central and Eastern Europe, taking the lead after Hebei province was designated for local cooperation with CEE (LLGR, 2015– 2020). Being well connected with Japan and the Korean Peninsula, Jilin discusses the possibility of international cooperation with the north-east region, with particular regard to: cross-border cooperation with North Korea and the Tumen River initiative, the bridges in Jian city (Tongmen prefecture), being a part of the Arctic Silk Road plan, the Changchun to Vladivostok high-speed railway, cooperation between Zarubino port and the Changchun Logistic Center and sea routes from Changchun to Busan in South Korea. Moreover, the BRI is seen as part of the opening-up strategy and will contribute to the development of local economic integration. The vital parts of this dynamic are the Changchun-Jilin-Tumen Economic Zone, connection with the Dalian and Beijing-Hebei-Tianjin Economic Zone and opening up to South China (JlLGR, 2015–2020). The coastal areas that seem to contribute the least to the BRI policies and are perceived as the beneficiaries of Deng Xiaoping’s policies – namely Shandong, Jiangsu, Zhejiang, Fujian, Guangdong and Hainan – have tried to present their readiness for further engagement under the BRI. At the start, the coastal areas had mixed feelings about the Beijing-sponsored Belt and Road Initiative. Shandong had declared that with any action taken under the BRI, priority was to be given to the economic integration with neighbouring provinces as well as with the ongoing projects of the Yangtze River Economic Belt and the Beijing-Hebei-Tianjin Metropolitan Area. When it comes to the external actions, Shandong province listed the United States, Japan, South Korea, ASEAN and Australia as partners, as a part of China’s go global strategy. With regard to cooperation, the provincial-level government claimed to strengthen relations with the China-South Korea Industrial Park and the Sino-German Industrial Park (Jinan), as well as a new pilot project, the China-ASEAN SME centre and participation in the RCEP. Finally, the governor Gong Zheng admitted that shipping goods via the Eurasian land bridge was a useful part of mapping Shandong as the connection point between the inland belt and the maritime road (SdLGR, 2015–2020). In the southern province of Jiangsu, the government presents itself as the intersection (jiaohui dian 交汇点). Being excluded from the BRI documents in 2015, Jiangsu, at the very beginning, took a low-profile position, presenting itself as the ‘exchange point’, and has preferred to play an important role in regional integration with neighbouring provinces as well as intra-province integration. Nevertheless, the government in Nanjing later changed its mind, declaring its readiness for active integration into the Belt and Road Initiative construction, and naming their own BRI Initiative: the construction of a China-Kazakhstan (Lianyungang) logistics cooperation base, the Shanghai Cooperation Organisation industrial park; a China-Arab (United Arab Emirates) capacity cooperation demonstration park; Cambodia’s Sihanoukville Special Economic Zone, the China-Korea (Yancheng) Industrial Park; and finally cooperation with Taiwan through the Kunshan Deepening Cross-Straits Industrial Cooperation Pilot Zone. Moreover, as stated in the governmental reports, the important part was to navigate the cooperation with Taiwan and Chinese overseas. However, as observed in 2019 and 2020, when the BRI was mentioned six and

Understanding the Belt and Road Initiative 43 five times respectively by the governor Wu Zhenglong, more than half of expressions mentioned the BRI in the 2019 and 2020 were given to the domestic unification with inter-provincial economic projects like YREB (JsLGR, 2015–2020). Zhejiang, located south-east of Jiangsu, places itself as a bridgehead, an important hub in China’s Belt and Road strategy, and has declared its readiness to take part in the project. Hangzhou is named as a central city under the centrally sponsored policy. The important part of the project is to integrate the Zhejiang economy into the Shanghai Free Trade Zone as well as the Lower Yangtze River Economic Rim. In the case of Zhejiang, the important part is to navigate economic development through digital development and mainly with foreign partners, but also to be part of the ‘next round of reform’. The coastal city of Ningbo was named as the important port for cooperation with Central Europe and part of the Maritime Silk Road. Similar to Jiangsu, the government in Zhejiang started to promote the BRI in 2019 when the governor of the province, Yuan Jiajun, mentioned the BRI six times in this report (ZLGR, 2015–2020). In Fujian’s governmental reports, the BRI was only mentioned five times and was the second least mentioned province in the whole country, after Heilongjiang. In the context of the government in Fuzhou, cooperation with ASEAN countries and China overseas was presented as key to BRI policy. In the case of relations with China overseas, the provincial government recognised the education of young Chinese overseas (peiyang qiaojie xinsheng liliang 培养侨界新生力量) as the important part of future provincial relations with South-East Asia as well as two units from India: Chennai Metropolitan Area and Tamilnadu, as declared in 2020. Relations with China overseas and the culture of Mazu (sea goddess) are seen as comparative advantages of the province and seem to be the most important part of the Fujianese Belt and Road policies (FLGR, 2015–2020). Finally, there is the birthplace of Chinese reforms in the Dengist period: Guangdong. The government of this southern province discussed only international cooperation without placing itself as part of any regional development projects like the Yangzi River Economic Belt. In its international outreach, the provincial government claims to have close relations with the Chinese overseas and highlights port city alliances, including with Los Angeles and Auckland. Similar to Fujian, Guangdong hopes to use its ‘bamboo network’ in South-East Asia, and, by investing in, for example, Malaysia, Malacca port, it is building its own relatively independent position within the system. Moreover, financial cooperation with global institutions has been taken seriously by the provincial government. What should also be noticed is that, in 2020, the governor limited discussion of the BRI with only two references to national policies, while at the municipal level the BRI was totally ignored (GdLGR, 2015–2020). Being on a separate island, and a province at the same time, policymakers from Hainan tried to use the opportunity of the Eurasian land bridge and 21st Century Maritime Silk Road and position themselves as ‘part of China’s foreign policy’ as only one provincial-level government and named Hainan as the part building a ‘maritime superpower’ (hai yang qiang guo 海洋强国) in the context of the South China Sea disputes. Further, by utilising the Boao Forum, Hainan presents itself as a business and political dialogue platform. What should be observed and

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discussed further is that the Hainan government, similar to the Xinjiang governments, has declared its political allegiance by including Xi Jinping’s thoughts as the crucial part of the Belt and Road Initiative (HnLGR, 2015–2020). In the Western provinces, the BRI is placed together with the ‘new round of opening the West’. Gansu presents its successful stories based on ‘productivity cooperation’ and take its role as the logistic intersection in China’s cooperation with Central Asia (GsLGR, 2015–2020). The Qinghai government has presented further cooperation with surrounding local governments in order to achieve better results in ‘productivity cooperation’ – exporting China’s overcapacity. In 2020, by listing the BRI 12 times, the governor Tang Renjian listed further engagement with foreign countries, such as an agreement with the French organisation Les Plus Beaux Villages de France, that would benefit Gangsu’s agritourism, as well as the domestic collaborative agreement with Guangxi, Hainan, Zhejiang, Chongqing and Inner Mongolia (QLGR, 2015–2020). Sichuan motivates its action under the BRI by listing itself as the ‘pawn’, the part without which the next round of opening up might be impossible. The Belt and Road Initiative and the promotion of the Yangtze River Economic Belt provide major opportunities for Sichuan to expand its opening up and cooperation and enhance its level of open economy development. When it comes to international cooperation, Sichuan province’s role connects the Central Asian and European countries to the west, connects to the China-Mongolia-Russia Economic Corridor to the north and integrates the China-Indochina Peninsula Economic Corridor and the construction of the China-Pakistan, Bangladesh, India and Myanmar Economic Corridor in the south (SchLGR, 2015–2020). Due to its geographical proximity, Chongqing similarly understands the BRI as being the connecting point between South-East Asia through Guangxi AR and with Europe via the cargo train with Duisburg. Nevertheless, one difference is more conspicuous than in Sichuan: the political confession in the leading role of Chairman Xi Jinping. Being located south of Sichuan and Chongqing, Guizhou mainly focuses on the internal integration and declared its active participation in all ongoing projects with the BRI at the front line. In this regard, the critical role is given to mutual assistance (duikou bangfu 对口帮扶) and, as stated, the government in Guizhou expects more assistance from the developed eastern and southern parts of China. Nevertheless, the government in Guiyang positions itself as the Land-Sea Corridor and declares its support for the air connection with the United States and Russia. Moreover, in 2015, the governor Chen Miner pointed out the critical direction for international cooperation of the province: ASEAN, Taiwan and Switzerland. The provincial-level government alone (only one in China) recognised the importance of the international and domestic division of labour within the central government policies (GzLGR, 2015–2020). The last province in Southwest China: Yunnan uses its position as bridgehead and ‘radiation centre’ and has promised to open China to continental South-East Asia. Similar to Chengdu and Chongqing, Kunming sees itself as part of the Yangzi River Economic Belt, but at the same promotes Yunnan companies’ go global strategies as well as providing stability by conducting effective crossborder governance. After the Belt and Road appeared, Yunnan used its bridgehead

Understanding the Belt and Road Initiative 45 status to navigate its strong position within the initiatives and lobbies in Beijing for more incentives for the ongoing Bangladesh, China, India and Myanmar Economic Corridor. This, however, changed when ‘radiation centre’ was renamed by Xi Jinping. Since then, the provincial-level government has used the names given by the current paramount leader (YnLGR, 2015–2020). Henan, located in Central China and recognised as the ancient birthplace of the country, anticipated the concrete vision of its participation with the BRI and named Zhengzhou and Luoyang as the pivotal cities and radiation centres inside China as well as in the broader Eurasian projects. As part of a landlocked area, the Henan government presents international experiences in a ‘practical model’ of openness under the BRI that is part of domestic economic unification (yitihua 体化). The very practical actions taken by the Henan government are related to Zhengzhou-Luxemburg air cargo flight and cargo trains to Europe, and Poland in particular (HenLGR, 2015–2020). The importance of domestic integration was discussed by the policymakers from Anhui province when they placed the province as the centre of all regional integration projects, such as the Yangtze River Economic Belt, only by horizontal cooperation that the inland provinces might open up and follow as provided by Beijing. The government in Hefei promised to strengthen commercial, industrial and machinery production cooperation with countries along the Belt and Road but the critical element was to find the intermediary in the landlocked province opening up (ALGR, 2015–2020). Shaanxi, with the capital in Xi’an as the starting point of the Ancient Silk Road, declared that by announcing the central plan, the Beijing-based government created confidence/ trust or faith among people. Interestingly the government in Xi’an was the only single in China presents its position as ‘the BRI believer’. More to the point, the BRI, implemented as the national strategy, provided a new platform for reform and the opening up of inland provinces (SaxLGR, 2015–2020). Shanxi, its capital in Taiyuan, also presented its own advantages, with science and technology and culture as the prominent factors in its engagement under the Belt and Road Initiative and hopes to increase the number of tourists visiting the province. As stated by the governors, the geographical location of the province should be perceived as an additional advantage in China’s go global strategies. Without using the special dedicated terms, Shanxi declared that it stood at the forefront of opening up and as the centre for cooperation with ‘fraternal’ provinces in Central China and active economic integration with ongoing projects such as the Bohai Economic Rim and the Beijing, Tianjin and Hebei Metropolitan Area (SxLGR 2015–2020). In Hubei, the BRI is perceived as one project among the Jing-Jin-Ji region and the Yangzi River Economic Belt and declares active participation with developed countries (France) and Macau and Hong Kong as the important part of Hubei’s activities in the BRI. The local government highlighted the strategic central position of the province and pointed to Wuhan as the centre for international cooperation with particular regard to international trade and level of provincial consumption. On the eve of the Coronavirus outbreak, the governor of the province, Wang Shandong (HubLGR 2020), firmly declared that the government would not allow any of the ‘three carrots’ (san jia mache 三驾马车), or ‘troika’ ‒ investments,

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consumptions and export ‒ to weaken provincial GDP growth (HubLGR, 2015– 2020). The Jiangxi government has taken an active position and has promised to cooperate with Shenzhen, Wuhan, Fujian, Ningbo, Xiamen or Shenzhen province and other pivotal cities in the BRI that might serve as intermediaries in opening up the province. In the context of integration with the Yangtze River Economic Belt, the provincial government takes the lead in promoting Jiujiang Industrial Park and supporting the automatic industry in the province, as well as the establishment of the Belt and Road China Porcelain Road Tourism Alliance. Similar to the understanding of the Hunan government as mentioned, Nanchang committed itself to working hard to integrate its economy into regional development plans by promoting a regional customs clearance integration system, and, as stated in 2020, opened up dialogue with the Guangdong Provincial Government to participate in the Pearl River Delta Economic Zone (JxLGR, 2015–2020). Changshabased authorities promote cooperation with local governments in North-East Asia as well as districts in Russia in the Volga river regions. International productivity cooperation has been perceived as the core in the provincial go global strategy, together with organising special foreign missions for business, especially state-owned enterprises (SOEs) and the Industrial Park in Ethiopia (HubLGR, 2015–2020). Apart from positioning itself and having to wait for a special money transfer under the BRI umbrella, by placing the BRI in this particular context – domestic and international or both – the provincial-level governments declared their willingness for further integration within the domestic cross-provincial developmental projects. As noted in governmental reports (2019, 2020), the bridgeheads Heilongjiang and Xinjiang have positioned themselves as the pillars for China’s external policies, with a lack of integration with other provincial-level governments, while Shanghai and Guangdong place regional and intra-provincial, not cross-provincial, integration projects as most important: the Lower Yangtze River Basin and Greater Buy Area, respectively. A similar approach was presented by Zhejiang and Fujian (coastal provinces) which do not benefit from BRI funds like inland provinces, followed by Jiangxi and Jilin. The Belt and Road Initiative is the compensation for inland provinces, however, they need to find an intermediary for opening up on their own. The inland governments of Jiangxi, Hubei and Heilongjiang called for cooperation with the coastal provinces and cities: Guangdong, Fujian and even Shenzhen, and considered these places as the indirect platforms for opening landlocked places. The second comparison of provincial-level governments is based on qualitative approach: from this perspective Sichuan, Gansu, Zhejiang, Guangxi and Hainan are the top five among the provincial governments. The third interpretation is given by the different vocabularies and phrases used by the provincial-level governments. This is perceived as the rhetorical strategy signalling willingness for further engagement with the Beijing-based government under the BRI. Analysing the peculiar vocabulary, we find two polar extremes. On the one hand, there is very positive and active participation serving the BRI (Guangxi Yunnan, Liaoning, Shanghai, Beijing), serving China’s foreign policy (Hainan), making proper usage of the given policy (Sichuan, Hainan) and naming the BRI as an historical opportunity (Xinjiang). On the other hand, the provincial-level

Understanding the Belt and Road Initiative 47 governments present a very passive approach by saying that they would ‘dock’ to the BRI and wait for more Beijing-sponsored subsidies (Heilongjiang), and promising to actively integrate themselves into the BRI (Fujian) (LGR, 2015–2020). *** The Belt and Road Initiative, together with the ongoing different unification projects, is conceived as the comprehensive external and internal project that intends to limit the fragmentation of the Middle Kingdom. The external actions taken by the provincial-level governments under the BRI are embodied in the internal structure of vertical-horizontal competition and cooperation. At the same time, the central government is navigating the external relations of the provinces with special money transfers, pressing them to integrate with the country. As a result, the global competition of provincial-level governments for the resources needed for their development is stimulated, sometimes resulting in shadow paradiplomacy. By positioning itself within the Belt and Road Initiative, and being used for horizontal competition, the international action taken by the second administrative divisions has resulted in maintaining the status quo (see Graph 1.1). As observed within Xi Jinping’s sponsored project, there are two mutually exclusive processes. First, the international outreach of the Chinese provinciallevel governments is mainly driven by horizontal competition, and second, by introducing the Belt and Road Initiative, the central government is to limit competition among the provincial and city governments and push their cooperation within the domestic arena. At the same time the central government has strengthened vertical management over particular provincial-level governments. Nevertheless, as identified by the quantitative and qualitative analysis of the provincial report (2015–2020), not all provinces have been interested in ongoing economic integration projects planned by the central government and not all of

Belt and Road Initiative vertical relations bargaining process interprovincial integration central management/coersion measures

horizontal relations interprovincial competition local protectionism self-reliance model

internationalization/ foreign policy vertical and horizontal relations province self-positioning global horizontal competition/shadow paradiplomacy

Graph 1.1 Belt and Road Initiative-Provincial-level Government Research Framework Source: author own research framework.

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the provincial-level bodies were included in the centrally governed plan, but all hope to benefit from the central government resource transfers. As the research on governmental reports delivered at the local people’s congresses shows, the different provinces have different perspectives and understandings, and ultimately illustrate the will for cooperation in diverse ways. Not all see the BRI as an opportunity; not all perceive it as good for development; some even perceive the BRI as the next stimulus package or as a continuation of the ‘go out’ strategy. In this sense, the BRI is presented as nothing new, but the continuation of the Jiang Zemin policy, perhaps with more precise directions – as evident in the majority of provincial-level government reports. To China, the strategic plan of the Belt and Road, together with pan-China development projects, such as the Yangtze River Economic Belt and the Beijing-Tianjin-Hebei Metropolitan Area, has been attempted to establish a rule-based system that minimises isolationist behaviour (guli zhuli xinwei 孤立主义行为). The BRI, from this perspective, is about selecting interests, coordinating actions and combining them into one project. Only by these inter-provincial projects can Beijing amplify long-term stability, build trust in the relationships between regions, and at the same time help to form cooperation between provinces and limit the fragmentation of China. This plan, however, faces the practical problem of implementation across the country. In fact, the Belt and Road has failed to constitute one single coherent strategy but has rather become a platform for competition: a type of game between the local government and the central government and inter-provincial competition that in fact undermines the central government strategy. Moreover, as observed by Lee Jones and Zeng Jinghan (2019), inter-provincial competition is already shaping the BRI’s practical implementation and shows that the BRI is not a coherent master plan but rather based on somewhat competitive, sub-national interactions. The antagonism between governments is a constant variable that indicates rivalry between governments and secures their position, promotes individual policies and defends local individual interest in vertical relations with Beijing. To sum up, by participating in the national policy of the Belt and Road and competing for resources worldwide, local policymakers expect the positive feedback effect. At the same time, the central government tries to limit self-interest and places more ‘win-win’ between the vertical and horizontal dynamic. This, as discussed in the next three chapters, faces counter policies from the local level: the localities search for national preferential policies without considering the effective coordination of inter-regional policies, even without considering the connectivity between national and foreign economic development; strengthening vertical control over provinces will limit the horizontal bonds between provinces.

Notes 1 This is based on the textual analysis of provincial-level governments from 2015 to 2020 when the BRI appeared in a majority of reports for the first time and contextualise the BRI from the perspective of guojia ‘Yi dai yi lu’ (国家‘一带一路’) ‒ statesponsored BRI; zhongyang zhengfu zhengce (中央政府) – central government policy;

Understanding the Belt and Road Initiative 49 zhudong rongru主动融入 – active integration; fuwu ‘Yi dai, y ilu’/fuwu guojia zongti waijiao服务‘一带一路’/ 服务国家总体外交 – serve the BRI/serve national foreign policy; duijie ‘Yi dai, yi lu’ 对接‘一带一路’ ‒ be part of the BRI; yonghao ‘Yi dai, yi lu’ 用好‘一带一路’ – use the opportunity; and jiji canyi 积极参与 ‒ active participation. All documents can be downloaded from http://district.ce.cn/.

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Mao Zedong. 1956. On Ten Significant Relationship. Accessed September 11, 2019. www. marxists.org/reference/archive/mao/selected-works/volume-5/mswv5_51.htm. Merta A. 2009. “Fragmented Authoritarianism 2.0: Political Pluralization of the Chinese Pol-icy Process.” The China Quarterly, vol. 200: 1–18. MFA China. 2019. Waijiaobu juban Sichuan quanqiu tuijie huodong [Ministry of Foreign Affairs Supports Sichuan Global Promotion]. Accessed July 12, 2020. www.fmprc.gov. cn/ce/ceee/chn/zgyw/t1401899.htm. Mierzejewski D. 2009. “Not to Oppose but to Rethink’ The New Left Discourse on the Chinese Reforms.” Journal of Contemporary Eastern Asia, vol. 8. Accessed June 13, 2019. http://koreascience.or.kr/article/JAKO200918067804371.page. Minxin Pei. 2009. China’s Trapped Transformation. Boston: Harvard University Press. Pietrasiak et al. 2018. Paradiplomacy in Asia: Case Studies of China, India and Russia. Lodz: Lodz University Press. Poncet S. 2004. “The Fragmentation of the Chinese Domestic Market.” China Perspectives, no. 55. Accessed June 12, 2019. http://journals.openedition.org/chinaperspectives/410. The Public Diplomacy Association. 2017. Accessed December 12, 2018. www.chinapda. org.cn/chn/. Pye L. 1992. The Spirit of Chinese Politics. Boston: Harvard University Press. Sassen S. 1991. The Global City. Princeton: Princeton University Press. Shen Liren, Dai Yuanchen. 1992. “Formation of ‘Dukedom Economies’ and Their Causes and Defects.” Chinese Economic Studies, vol. 25, no. 4: 6–24. Shirk S. 1993. The Political Logic of Economic Reform in China. Berkeley: University of California Press. Shirk S. 2007. China: The Fragile Superpower. Oxford: Oxford University Press. Sina. 2020. Sao hei chu e you ‘san’ bi da [Need to Fight with Evil Umbrellas]. Accessed February 29, 2020. https://k.sina.com.cn/article_5444885376_1448a5b8002000opks. html. Smith D., Snow R. 1976. “The Division of Labor: Conceptual and Methodological Issues.” Social Forces, no. 55: 520–528. Song Fengying. 2017. Huanan fenju zhongyan lingdao Fan Fan meng yuan shimo [The Prominent Leader of South China Branch Fang Fang Was Wrong]. Accessed January 11, 2020. http://cpc.people.com.cn/GB/64162/64172/85037/85038/6483790.html. Su Changhe. 2010. “Zhongguo difang zhengfu yu ciqu cheng hezuo [The Chinese Local Governments and Regional Cooperation].” Shijie jingji yu zhengzhi [World Economy and Politics], no. 5: 4–24. Summers T. 2018. China’s Regions in an Era of Globalization. London and New York: Routledge. Tang Wei. 2014. “Yi dai, yi lu yu chengshi waijiao [The Belt and Road Initiative and Urban Diplomacy].” Guaji guanxi yanjiu, no. 4: 61–68. Taylor P. 2016. Rural Energy Development in China. London and New York: Routledge. Tong J. 1987. “Urban Economic Reforms in Sichuan under Zhao Ziyang.” Chinese Law and Government, vol. 20, no. 3: 3–18. Vision and Action. 2015. Vision and Actions on Jointly Building Belt and Road. Accessed June 12, 2020. http://www.china.org.cn/china/Off_the_Wire/2015-03/28/content_3518 2638.htm. VisualCapitalist. 2017. 35 Chinese Cities with Economies as Big as Countries. Accessed February 11, 2019. www.visualcapitalist.com/31-chinese-cities-economies-big-countries. Walder A. 1986. Communist Neo-Traditionalism Work and Authority in Chinese Industry. Berkeley: University of California Press.

Understanding the Belt and Road Initiative 53 Wang Huning. 1993. “Shehui zhuyi shichang jingji de zhengzhi yaqiu; xin quanli jiegou [The Political Needs for Socialism Market Economy: New Power Structure].” Shehui Kexue, no. 2: 3–7. Wang Shaoguang, Hu Angang. 1994. Zhongguo guojia nengli baogao [A Study of China’s State Capacity]. Hong Kong: Oxford University Press. Wedeman A. H. 2003. From Mao to Market, Rent Seeking, Local Protectionism and Marketization in China. Cambridge: Cambridge University Press. Womack B., Guangzhi Zhao. 1994. “The Many Worlds of China’s Provinces: Foreign Trade and Diversification.” In China Deconstruct: Politics, Trade and Regionalism, edited by D. Goodmann, G. Segal. New York: Routledge. Wu Jianmin. 2012. Difang zhengfu waijiao queke [Shortage of Diplomatic Skills by Local Governments]. Accessed December 29, 2018. http://news.sina.com.cn/c/2012-0416/170824280412.shtml. Xiong Wei, Wang Jie. 2013. “Chengshi waijiao: Lilun zhengbian yu shijian tedian” [Urban Diplomacy: Theoretical Debate and Practical Features]. Gonggong waijiao likan, Spring edition. Yang Guangbin. 2001. Dangdai Zhongguo zhengzhi daolun [Guide to Contemporary Chinese Politics]. Beijing: Renmin Daxue Chubanshe. Yang Jiemian. 2011. Zhongguo Shibo waijiao [China’s Global Expo Diplomacy]. Beijing: Shishi chubanshe. Yang Long. 2017. Zhongguo qucheng zhili yanjiu baogao 2016 [The Research Report on the Regional Governance in China]. Beijing: Zhongguo Shehui Kexue chubanshe. Yang Long, Hu Huixuan. 2012. “Zhongguo quyu fazhan zhanlue de tiaozheng ji dui fu ji guanxì de yingxiang [The Adjustment of China’s Regional Development Strategy and Its Impact on Intergovernmental Relations].” Nankai Xuebao (Zhexue shehuikexue ban), no. 2: 35–45. Yang Long, Nie Jici. 2017. “Sheng ji jiaojie didai quyu hezuo de zhengce chuangxin-yi Huanghe jin san jiao quyu hezuo de jizhi tansuo wei li [Policy Innovation of Regional Cooperation at the Inter-provincial Junction Zone: A Case Study of the Mechanism of Regional Cooperation in the Golden Triangle of the Yellow River].” Puyang Xuekan, no. 1: 95–102. Yang Long, Zhang Yanhua. 2017. “Zhong-Han defang zhengfu kuaguo hezuo de xianzhuang yu qianjing [Status and Prospects of Transnational Cooperation between Chinese and Korean Local Governments].” Nankai Daxue xue bao, no. 2: 7–9. Yang Yi. 2016. “Zhongguo waijiao juece Zhong de difang zhengfu – yi Guangxi tuidong ‘Fan Beibu wan quyu jingji’ hezuo wei li [Local Government in China’s Diplomatic Decisions: Taking Guangxi’s Promotion of ‘Pan Beibu Gulf Economic Cooperation’ as an Example].” Lilun Yuekan [Theory Monthly], no. 5: 110–116. Yang Zhong. 2015. Local Governments and Politics in China: Challenges from Below. London and New York: Routledge. Young A. 2000. “The Razor’s Edge: Distortions and Incremental Reform in the People’s Republic of China.” The Quarterly Journal of Economics, vol. 115, no. 4: 1091–1135. Yu Keping. 2009. Rang minzhu zaofu Zhongguo [Making Democracy Benefit China]. Beijing: Zhongyang bianji chubanshe. Zhang Peng. 2015. Zhongguo dui waiguanxi zhankai zhong de difang canyi yanjiu [Research on Local Participation in China’s Foreign Affairs]. Shanghai: Shanghai shiji chubanshe. Zhang Yong. 2015. Tongchou xietiao, Difang zhengfu jingji tiaojie yu guojia hongguan tiaokong [Overall Coordination: Local Government Economic Regulation and National Macro-control]. Beijing: Zhishi Chanquan Chubanshe.

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2

The bridgeheads’ actions under the BRI Heilongjiang and Yunnan case studies

The Belt and Road Initiative and China’s peripheral provinces of Heilongjiang and Yunnan are all subject to internal frontiers and the concepts of bridgeheads (qiaotoubao 桥头堡), middle ground (zhongjian didai 中间地带) and, finally, China’s peripheral diplomacy (zhoubian waijiao 周边外交). As part of China’s foreign policy, the provinces take an active role in shaping a bottom-up decision process and by sponsoring local interactions with neighbouring countries that have been lobbying in Beijing to nationalise their own policies. In 2006 and 2009 respectively, Hu Jintao, the then chairman of the PRC, named both provinces (as well as Xinjiang) as bridgeheads in China’s foreign policy. The term bridgehead is primarily a military term and shows the importance of the two border provinces and one autonomous region in China’s external relations. The term for both provinces has changed over time and now ‘radiation centre’ (  fushe zhongxin 辐射 中心) is used as a less controversial name. As mentioned before, both share the common tasks of internationalising the RMB, promoting cross-border economic cooperation as well as managing minorities’ issues. In this chapter, the case study was selected because of two major factors: first, both were named as bridgeheads in China’s foreign policy by Hu Jintao (2009), and most importantly, both are points on the Heihe-Tengchong (cities in Heilongjiang and Yunnan respectively) demarcation line. This imaginary line that divides China into two parts (eastern and western) is also known as the Hu Line, named after the Chinese scholar Hu Huanyong, a Chinese demographer who first identified the demarcation in a mid-1930s research paper. The eastern part covers about one-third of the nation’s land mass but has 94% of the country’s population. In contrast, the area west of the Hu Line has only 6% of the population, made up mostly by ethnic minority groups. This vast area, which has varied terrain, is still referred to by some as ‘the wild west’. The Heihe-Tengchong line has drawn the attention of the central leaders. Being perceived as an informal division of the country, Chinese Premier Li Keqiang stated that ‘the nation needs to “breakthrough” the Hu Line to achieve modernization in China’s central and western regions’ (Li 2014). The bridgeheads’ roles are defined and analysed through the lens of crossborder cooperation between Ruili and Muse on the Sino-Myanmar border and Heihe-Blagoveshchensk case studies on the Sino-Russian border. This inductive

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approach, by looking beyond the propaganda of success, illustrates the realities in China’s policy towards its neighbours, Russia and Myanmar, through a provincial lens. By making the comparison between the different actions taken by Heilongjiang and Yunnan provinces, the chapter identifies the lines of centralisation, decentralisation and competitive actions taken by both in the paradiplomatical arena. By shedding light on the theoretical aspects of managing the border areas and the practical dimensions of the implementation of the Belt and Road at the local level in Heilongjiang and Yunnan provinces, the chapter will answer the questions of how both bridgeheads position themselves within the BRI, in what way they develop new projects, and how do they cope with the central government’s expectations, and finally how to understand the difference of the provincial paradiplomacy with special regard to the realities of cross-border governance with Russia and Myanmar?

2.1. Bridgeheads, middle ground and cross-border governance within the Belt and Road Initiative Whenever we discuss border areas, the very first idea that comes to mind is intermediary. Being located on the crossroads of different civilisations, languages, interests and political structures, these locations play a critical role in Beijing’s policies towards the countries that surround China. Ever since both Heilongjiang and Yunnan became intermediaries between China’s civilisation and Christian (Orthodox) and Buddhist civilisations, they have played an important role in shaping the Middle Kingdom’s external relations towards Russia and South-East Asia. Being located in China’s north-east, Heilongjiang has gravitated towards Russia and other north-east Asian countries and cultures. Yunnan province, in the southwest of the country, has an enormous number of minorities that have deep connections with South-East Asia, and with Thai culture in particular. Since 2013, the introduction of the BRI has motivated provincial governments across China, including Heilongjiang and Yunnan. Local leaders have been trying to find a place in the BRI and position themselves in order to receive centrally distributed resources. Both Heilongjiang and Yunnan have used their previous position of bridgeheads, later changed to the less controversial term of ‘radiation centre’ and declared their readiness to participate as Beijing’s government agent in the newly sponsored Belt and Road policy. From Beijing’s perspective, governing the peripheries has always been a challenge. The physical distance, the cultural mixture and gravitation towards Russia, in the case of Heilongjiang, and toward Myanmar and Thailand, in the case of Yunnan, have brought nuanced and very different methods to Beijing’s management of its two border provinces. However, the two provinces play a stimulator and an intermediary role in China’s peripheral diplomacy to go global and ‘bring in’ policies. 2.1.1. Defining middle ground, bridgeheads and peripheral diplomacy Heilongjiang and Yunnan, as was mentioned earlier, are two provinces on China’s periphery. The physical distance from the political centre in Beijing, the cultural

The bridgeheads’ actions under the BRI 57 differences between the capital of Heilongjiang and Russian influences, Yunnan and Myanmar, Thailand influences and the historical connotation of areas that have been ‘forgotten’ by the political centre has shaped and accentuated the provinces’ peripheral status. In the past, the periphery areas along China’s continental border were occupied by tribes and kingdoms of the north-east, north, north-west, and south-west, and surrounded the core territory of China of what is today’s Henan province. The major reasons for governing the borderlands were threefold: first to eliminate existing or potential threats to Chinese frontiers and trade routes posed by nearby tribes, kingdoms or foreign states; second, to intimidate or persuade neighbouring states, kingdoms and peoples along the periphery into accepting Chinese suzerainty and thereby acknowledging China’s Sino-centric world view; and generally to reinforce, among the Chinese populace, the personal authority of the new regime and its leaders (Swaine, Tellis 2000). In modern times, the governing of ethnic minority areas has always been a dilemma highlighted by the concept based on the ‘Chinese people’ covering the cross-border identities of wuzu gonghe: Manchus, Mongolians, Muslims, Tibetans and Han. For the first time, this assumption was employed in the eminent sociologist Fei Xiaotong’s formulations of the Chinese nation as ‘diversity in one’ (duoyuan yiti 多元一体). The Zhonghua minzu concept was based on a ‘coagulative core’ of China’s multi-ethnic tapestry. Fei Xiaotong upheld the official view of China as a single nation within a diverse culture. He argued that there is no clear line between the Chinese culture and other cultures within it: China’s peculiarity is that minorities are inseparable from the Han. Within China, Beijing seeks both to tighten control over and better integrate its former imperial frontiers ‒ still referred to as ‘Outer’ as opposed to ‘Inner’ China ‒ into the Chinese heartland. In this context, the tianxia concept frames the understanding of the interactions between Han Chinese and minorities, and serves as an ideal vehicle that defines groups instead as a cultural construct rather than a political community of a state. But the critical feature of this notion was that culture and people were unified and was followed by unifying politics by making an ‘all-under-heaven’ state. But regardless of the inclusive framework discussed by Chinese academia, these are important concepts in debating the centre and periphery relations. The tianxia understanding brought about the concept of centrality of Chinese culture and the uncivilised nature of barbarians (Mierzejewski, Kowalski 2019). The concept of centrality is based on the cultural superiority of the Chinese cultures (zhongguo wenhua zhongxin zhuyi 中国文化中心主义) that is reflected in the Chinese writing system and Confucianism thinking, while the periphery is distant from the centre and to a certain extent plays the role of the middle ground (zhongjian didai 中间地带): the melting point of different way of thinking. Being located in the peripheral areas, as discussed by Wang Mingke, it plays the critical role of buffering the Chinese culture, and the middle ground should be seen as the critical place for interactions between China and the cultural other. This understanding acknowledges that the border areas with external others are critical in forming the nation’s identity that is based on the differentiation of self from the other. The creation of the middle ground involved a process of mutual invention and assimilating ‘the other’ into their own conceptual order. Indians became savages

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and were asked to follow normal conventions of behaviour. In this ‘in-between’ area, each side sought to achieve their aims using different methods and might use force to achieve their respective goals. The critical objective in these areas is to limit the negative impact of physical force and find other means to bring stability and sustainable development. In other words, the central and defining aspect of the middle ground is the willingness of those who created it to justify their own actions in terms of what they perceived to be their partner’s cultural premise (White 2011, 51–52). Apart from the concept of ‘diversity in one’ and the ‘middle ground’, the Chinese government recognised the strategic geographical locations of provincial governments. Significantly, the term bridgehead used by Hu Jintao is of military origin and is most commonly deployed by staff during military planning. The bridgehead indicates the strategically important area of ground around the end of a bridge or other points of possible crossing over a body of water which at a time of conflict is defended or taken over by attacking forces. In economic terms, bridgeheads act as a port and facilitates the ease of transportation and play a role of international centre of shipping, finance and information which together form an integrated international centre of trade. It is a city or a region that sits in a strategic position on the logistical supply chain and serves the specific purpose of controlling the flow of resources along international trade routes. Moreover, it is a place for opening up landlock provinces. The basic characteristics of a bridgehead are its powers to control, develop and influence. Apart from these three characteristics, the responsibilities of bridgeheads are wide-ranging and should deliver prosperity to the respective regions, protect border security and stability, serve as a front line in low-level wars and non-security threats, develop ethnic and national zones through the new economic model, promote international and regional cooperation with neighbouring states and serve as hubs for national trade. In China’s economic policy the border provinces act as trade corridors (maoyi qudao 贸易 渠道) and commercial intermediaries (zhongjian shang 中间商) between China’s more developed provinces, and neighbouring countries. Following this first step that is based on foreign trade, the second phase of integration is based on the industrial cooperation while carefully managing cultural and structural differences as well as handling possible conflicts of interest (Feng, Xia 2015, 124–125). From the foreign policy and the Belt and Road Initiative’s perspective, the roles given to the bridgeheads are seen as critical in China’s international strategy. Their status is mainly based on the national strategy and planning of regional development by using the comprehensive advantages of each region and by giving these regions responsibilities. The bridgeheads serve as entities that open up and assist in the development of China’s western, central and eastern regions. Being located adjacent to ‘other’ countries, the border regions are responsible in managing the non-traditional security threats that are transnational and identify their origins, conceptions and effects. These security issues include irregular migration, human traffic, drug traffic and illegal cross-border marriages. In other words, threats where international cooperation is needed (Caballero 2016). In the context of non-traditional threat management, the local governments are responsible for:

The bridgeheads’ actions under the BRI 59 broadening their relationships with the relevant countries and their local governments in solving a series of non-traditional security issues. China’s cooperation channels include expanding and deepening cooperation in economic, cultural and other fields to promote the resolution of major non-traditional issues such as separatism, the drug problem and cross-border ethnic issues, providing a reference and information for national decision-making. Moreover, as discussed by Chinese academia, a bridgehead’s position is only limited to inland border provinces that should serve as soft-power elements in China’s foreign policy and also be part of the informal relations that China has with neighbouring countries (Zhang 2010). In recent years, due to its controversial military connotation, the term bridgehead has been replaced by ‘radiation centre’, interpreted as a central point which is formed by the convergence of human factors in the area, and its radiating effect is expressed as a divergent process in the radiated area (Chen 2015, 21–25). All this means that bridgeheads are an important part of China’s peripheral diplomacy. In 1988, the Chinese government declared that ‘China has always attached importance to maintaining and developing good-neighbourly relations with neighbouring countries’, and for the first time proposed the concept of ‘periphery’. After the disintegration of the Soviet Union, the number of neighbouring countries in China increased and the surrounding environment became more complicated than before. In 1993, a government report, for the first time, stated that China ‘actively develops good-neighbourly and friendly relations with neighbouring countries and strives for a peaceful surrounding environment’ (zhoubian huangjing 周边环境). In 1997, during the 15th Party Congress, the neighbouring areas were perceived as important in order to build a peaceful environment for China’s economic development. By referring to China’s neighbourhood in 2002, Jiang Zemin presented the view that safe, peaceful and prosperous bordering countries are a precondition for reducing the risk of another world war, and due to this reason China would follow a policy of cooperation with its neighbours. In 2007, Hu Jintao referred to neighbourhood diplomacy and the principles of China’s policy towards the region. Interestingly, the actions China took in the region were mainly perceived through its relations with developing countries, with these relations playing an important role in shaping a global order, which was not exclusively sponsored by the Western powers. In October 2013, the central authorities organised a special working conference on peripheral diplomacy, and declared that ‘the great importance attached by the Central Committee to the diplomatic work around the country’ (Xi 2013). Moreover, senior officials identified a four-part philosophy and approach to guide diplomacy toward such nations, centring on efforts to convey or realise affinity or amity, sincerity, mutual benefit and inclusiveness, which was repeated during 18th and 19th Party Congress in 2012 and 2018 respectively. The majority of discussions on peripheral diplomacy focused on the South China Sea territorial disputes, while border issues with Russia and continental South-East Asia were discussed but to a lesser extent. Cheng Qi, a scholar from Qinghua University, sees American foreign policy as a disruptive factor that creates three types of challenges for China’s peripheral diplomacy: enflaming territorial disputes and conflicts; looking for a middle ground

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for strategic competition in China’s peripheral regions; and limiting the positive outcomes of regional economic integration in East Asia. These three factors interweave and influence each other, so it is exceedingly difficult to resolve them. Therefore, China’s peripheral diplomacy needs to have flexibility, balance and manoeuvrability between different competing forces (Chen 2014). This can be illustrated by the development of new economic ties through the Silk Road Economic Belt and economic corridor concepts, and the desire to manage periphery disputes in a peaceful manner. Further elaborations on this topic were given by Shi Yuanhua of Fudan University when he observed that diplomatic relations with China’s neighbours will remain the ‘top priority’ for China’s diplomacy. He advocated finding two or three ‘intermediate countries’ or ‘a country in between’ (zhongjian guojia 中间国家) that pursue a balanced policy between China and the United States and cultivate good relations with the chosen actor. It allows for China’s peaceful position as a rising power to be secured while narrowing the gap between China and the United States and allowing the intermediate country not to adopt a one-sided policy. On the further usage of bridgeheads, the policy proposed by Shi Yuanhua positions them as a part of building positive relations with centrally selected intermediate countries, which are especially visible in China’s South-East Asia policy (Shi Yuanhua 2018). 2.1.2. Cross-border governance: a theoretical understanding Within the framework of peripheral diplomacy, the paradiplomatical activities across its border are regarded as an important part of China’s external relations. Cross-border cooperation is, first, seen as part of the military and political strategy of the state’s territorial integrity. Second, it should close the gap in economic, cultural and social development. This cooperation should also develop effective selection of immigration and creation of a labour mobility system. Finally, crossborder cooperation should nurture the development of integration-driven culture and social behaviour (Bilchak 2014). While discussing effective cross-border governance, Bela Balassa (1962) suggested that the unity across a border takes a series of successive forms in the border states of a free trade area, customs union, common market, economic union and full economic integration. In addition, G. Kramer identifies three successive stages: 1. Integration through unilateral state activities; 2. Cooperative integration with an entering into bilateral and multilateral agreements, and contracts to enable cross-border cooperation; and finally, institutional integration. Enrico Gualini (2003) says that cross-border governance is an institutional construct resulting from complex processes of co-evolution that consist of three dimensions: political-economic (related to the operation of a strategic selectivity of aims), institutional (involving institutional aspects of collaboration) and symbolic-cognitive (deals with the creation of transborder communities and creation of a cross-border identity). Gualini’s research raises critical questions regarding the incentivising of cross-border sustainable cooperation. He addresses the questions of sufficiency in promoting innovative forms of collective action and for realising an adequate concurrence of resources as well as for

The bridgeheads’ actions under the BRI 61 the building of new coalitions and governance regimes. Cross-border economic development spans the actions of a multitude of different public, semi-public and private players and for collective and individual entities operating at the national, cross-border and international level, the issues of incentivisation is seen as critical. Bringing all of these different actors under one ‘community of common interests’ is a never-ending challenge as they include businesses, clusters, employer organisations, research centres, universities, territorial authorities, chambers of commerce and industry and development agencies that vary greatly in terms of their functions, interests and operating methods. More to the point, provincial leaders are fundamentally responsible for the stability within their provinces. In fact, these local governments have the best understanding of the actual socioeconomic conditions in the border areas and are asked by the central government to play a leading role in the negotiation of institutional arrangements in crossborder economic cooperation with a particular focus on environmental pollution, transportation, differences in related systems and land-use planning. The border areas are mostly remote areas, and the level of economic development is relatively low compared to inland areas. The government-led cross-border economic cooperation, on behalf of the participants in the border area, negotiates with the central government in order to come to an intergovernmental agreement, to determine the degree of economic cooperation, the model of cooperation and the goal of cooperation. The construction and development of border economic cooperation zones require an effective operation and incentive-compatible management system when every participant can achieve the best outcome for themselves just by acting according to their true preferences (Ledyard 1989). Nelles and Durard (2014) consider the cross-border governance as a political process that is built through innovation, experimentation, error and re-evaluation within a unique set of institutional constraints imposed by a fragmented international context. Each region invents ‘its own’ method of coordinating political action in ‘its own’ cross-border space. In the case of China, this model has proved to be successful. The institutional innovations within their cross-border model is a ‘dream’ for any border province. The cities along the border like Ruili in Yunnan, or Heihe in Heilongjiang are experimenting with different types of policies to attract the government in Beijing and has received more funds for regional projects. On the other hand, Terlouw (2004) says that cross-border governance, in the case of European integration, is a new form of management where horizontal cross-border links are closely connected with vertical links between different administrative levels ranging from local to European. These horizontal-vertical relations remain a duality in China’s political structure. On the one hand, the local governments are given freedom in shaping their economic plans, and they compete (horizontal competition) in order to present better results (measured by GDP). But, at the same time, the central government might use cohesive measures to limit independence. Coercive measures are based on fiscal policy combined with a nomenclature system. Joachim Blatter suggests two models of governance that are territorial governance characterised by ‘vertical interaction lines and information flow within

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national units where the border is crossed at the top of the hierarchy’ and functional governance that consists of ‘direct contacts between different level actors across a border’ (Blatter, Kreutzer, Rentl, Thiele 2008). The first territorial governance is understood as the process of territorial organisation of the multiplicity of relations that characterise interactions among actors and different, but nonconflictual interests. The functional interdependencies have acted as the most important driving forces for the acceleration of cross-border cooperation, including Europe, during the last few decades. Functional orientation is mainly based on horizontal relations, project-based management, integration of social and private actors and porous borders. Zhou Ping (2008) defined cross-border governance as the ability of mobilising national and local resources in order to provide the ability of governance in border areas. Both orientations are very much visible in Chinese actions. The first is that territorial management is hierarchical: the upper level should approve a decision taken at a lower level as the local government has many tasks to complete due to the number of actors across the borders including military, business and social groups. The second is functional orientation which is mainly based on project-led horizontal competition that in fact allows the central government to stimulate and monitor more effective actions taken by the locals. 2.1.3. Border areas and cooperation within the Chinese context In the Chinese context, frontier governance (bianjiang zhili 边疆治理) under the umbrella of the BRI has become part of the country’s development strategy and the development of regional governance and China’s geopolitical outreach. Historically, frontier governance (border governance) was mainly based on the coordination of relations between different ethnic groups. These frontier regions were the equivalent of ‘ethnic regions’ and the major theme was how to resolve contradictions and conflicts between ethnic relations. In more recent years, however, China’s objectives for its role in its neighbourhood have shifted. In the Republican period, the study of China’s frontiers mainly focused on academic explorations on issues such as the natural environment, socio-politics, economics, culture, military and borderland international relations in the frontier areas (Jin 2018). The growing importance of imported resources, raw materials and increasing energy dependence on foreign markets in China’s interactions with its neighbours has added a more explicit economic and energy-related dimension. Apart from the economic independence and along with the reform and opening-up policy, the problem of ‘ethnicism’ (zuji zhuyi 族际主义) governance has become one pillar of border governance. China’s go global policy in the micro-scale of cross-border cooperation is now part of China’s regional policy and regionalism (qucheng zhuyi 区域主义). This cross-border management is now an integral part of further regional policies and the issue of inter-ethnic relations is an element of integrated planning and design of a regional governance framework. Frontier governance must not only handle the relationship between the frontier region and other domestic regions, but must also pay more attention to the relationship between the frontier and the countries along the border and should be a part of bilateral

The bridgeheads’ actions under the BRI 63 relations. The ongoing processes associated with a rising China has brought about the localisation of frontier management. These policies are mainly based on the state’s implementation of special policies and measures to achieve economic and social development in the frontier regions. In order to achieve the desired goals, the political centre has ceded this responsibility to local governments which have a better understanding of the actual socio-economic conditions in the region and can play a leading role in the negotiation of institutional arrangements in crossborder economic cooperation. Being directly involved in governing, ‘soft policies’ such as environmental pollution, transportation, system rationalisations and spatial development planning, the local governments have attained power. Nevertheless, the border areas play critical roles in three dimensions: state security, an opening-up and go global policy as well as equal development across China and the development of a prosperous society (Zhou 2015; Ma 2011, 3–4). As has previously been mentioned, the government-led cross-border economic cooperation is a bargaining institution. All participants and stakeholders: central, local governments, international organisations and non-state actors are in a constant process of forming an intergovernmental agreement, so as to determine the content of economic cooperation, the mode of cooperation and the goal of cooperation. The frontier governance has moved towards three-dimensional governance in a multidimensional space (duoyangxing zhili 多样性治理) where national interests are constantly overlapping. Going further into the border areas, the sovereignty concept is displaced by a number of challenges like overseas interference based on cultural differences, and the difference between the socialeconomic model and political model of the state organisation. Xing Guangcheng from Wuhan University points out that in the border areas ‘everything’ is weaker: innovations, living standards, education, medical care and social contradiction are more profound than in China, and people in the border areas are ‘less civilized’ than those living in China. Going further, he identifies the biggest challenges for the stability across the border: terrorism, separatism and ideological struggles. As Fang Shengju (2017) said, in governing border areas several issues are paramount: poverty alleviation, minorities’ contradictions, state security issues, political identity questions and other social issues are mainly regarded as nontraditional security threats. With the border provinces (nine administrative units) being the poorest in the country, income disparities can lead to separatism, terrorism and religious fanatism sponsored by ‘the other hegemon states’, which may pose a threat to national integrity and create social disturbances. The minorities’ contradictions are in three categories: contradiction within one ethnic group, contradictions between two different groups such as between a minority and different social strata, and between the minority group and the state. Paradoxically, in some border areas these minorities are in the majority with the Han people being the minority. This also provides the basis for social interest contradictions. However, these social interest contradictions are minor compared to the fact that all border regions are economically less developed, meaning that they pose a multidimensional threat to the national security. However, because of the capabilities of the provincial and lower-level government, these border regions participate in

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securing the economic security of the country. While the eastern part of China is well developed with well-established international connections, the border provinces with their natural resources are positioned as supply bases. Moreover, bordering countries such as Myanmar, Russia and Kazakhstan are energy providers for Mainland China. Therefore, a stable situation across the border is critical for the economic development of the energy-hungry coastal provinces. The new challenge listed by Feng Shaoju (2017) is of political identity. The border regions are usually locations where different identities interact with each other. However, it is seen as key that the state’s identity rather than ideological philosophies is promoted. From the Chinese perspective, military obligations for state security and border jurisdiction, especially in the times of forming a nation-state, are seen as critical for the country’s further development (Fang 2017, 55–70). The Chinese governments, both at central and local levels, deal with different types of environments: geographical, political, cultural, social and international. Because one of these environments can have an impact on another, governments try to incentivise cooperation. One of the incentives that might bring about cooperation is cross-border economic cooperation zones exclusively based on the Chinese experience and governing through the rule of law, through which both sides might secure sustainability (Ibid., 53–54). By establishing economic zones, China can open and build more sustainable channels for products made in China or even relocate production from inland China. Hu Chao (2018) said that China was not solely responsible for the future effectiveness of cross-border economic zones. He discusses the policy of the central government of the neighbouring country, the level of openness, political structure and enthusiasm for cooperation within the negotiated model. In cross-border cooperation, apart from poverty alleviation and economic development, other important factors within this negotiated model include limiting the negative impact of ideological confrontation, relocation of the production and transfer of technology and capital resources of a neighbouring countries to the border areas. Effective cooperation would make the respective parties more enthusiastic and create an opportunity for deeper cooperation, which, in turn, would attract investment from China’s more developed regions and create space for urbanisation across the borders (Hu 2018, 83–85). In the early 1990s, the opening of China’s coastal areas achieved remarkable results, however, the pace of opening up border areas was sluggish in comparison. In 1993, trade from the coastal zone accounted for more than 80% of trade delivered by all zones: coastal, inland and border zones. This situation was acknowledged by the central government that in March 1992 decided to approve the establishment of 14 national border economic cooperation zones at seven major border ports along with border areas such as in Ruili and Heihe. Another important year for further engagement was the implementation of WTO regulations and adjusting to the new global division of labour after the global financial crisis in 2008. After more than 20 years of construction and development, China’s border economic cooperation zone has taken shape and has become an important force for economic development in border areas. Although these zones have

The bridgeheads’ actions under the BRI 65 played a positive role in driving economic development along the border, they are not free from challenges. After the establishment of the Border Economic Cooperation Zone, the first task was to build infrastructure and logistic facilities inside China as well as in neighbouring countries. It may ultimately provide a platform for building agricultural and production zones and relocate production from the coastal areas in China that had undergone an economic transformation and would allow the government to create a new division of labour in China. Moreover, the bordering countries with their vast natural resources are predominantly seen as energy providers (Xiang, Zhang, Li 2019). In China, after the central government approved the establishment of a border economic cooperation zone, power is delegated to the local governments located along the border. Generally speaking, the management systems of the 18 border economic cooperation zones are slightly different due to the differences in conditions and environment, but all have established a special management body: the border economic cooperation zone management committee (bianjiang jingji hezuo qu guanweihui 边境经济合作区管委会). This management committee is at the same level as bordering countries and cities. They are all division-level units and belong to the dispatching agencies of prefecture-level cities. Among their members, there is usually one chairman, one deputy director and deputy director, one to two directors, and they are usually concurrently appointed by the deputy county leader where the border economic cooperation zone is located. Establishing a management committee at the same level as authorities in bordering countries and cities not only helps the management committee fully grasp the information on the construction of the cooperation zone but also clearly defines responsibilities. Coordination with other departments is easy to promote and ensures efficient construction of the cooperation zone, as noted by Hu Chao (2018). The main leadership of bordering countries and cities and the director of the management committee embodies the principle of incentive compatibility. It can ensure that the border economic cooperation zone effectively mobilises and allocates resources in bordering countries and cities to facilitate the progress in construction. At the same time, the management committee is specifically responsible for the construction and management of the border economic cooperation zone, and its target responsibilities are clear, which also facilitates the assessment of construction performance (see Graph 2.1). The critical factor in giving the power to the local management, on the one hand, indicating direct tasking by the Ministry of Commerce and Customs Office in Beijing, on the other, should strengthen the position of the local administration in national foreign trade. This ‘coastal logic’ of Deng Xiaoping’s reform, however, is still far from being achieved. No one has ever thought of elevating Yunnan or Heilongjiang to the same position as Guangdong or Shanghai, but sustainable growth was expected in some quarters. According to research presented based on the generalised entropy index, the trade in cross-border zones has been lagging behind inland zones and coastal zones, and was only approximately 27% of coastal area trade (Guo, Meng and Xue 2018, 135–140).

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Graph 2.1 Organisational structure of the cross-border economic cooperation Source: Hu Chao, op. cit., p. 94.

2.2. Heilongjiang: opening the north-east ‘old industrial’ basis? Heilongjiang, with its border with the Russian Federation, is perceived as the gateway to China’s north-east. However, historically today’s territory of China and Russia belongs to the Shiwei, Jurgens, and Manchu people and regards itself as independent although in the past it was in fact divided into a number of tributary kingdoms to the Middle Kingdom. The current status of Heilongjiang was shaped by the unequal treaties signed in Aigun and Beijing by Qing and Romanov Empires in the 19th century. Both sides established the Sino-Russian border along the Amur River, reversing the previous Nerchinsk Treaty of 1689, the only treaty in this region that China perceived as fair. Since then the north bank of the Amur/ Heilong River has belonged to Russia. Further concessions were given after the Treaty of Beijing two years later, and Russia acquired the vast area on the south bank of the Amur, gaining control over the Primorye region down to Vladivostok (former Haishenwai). The agreement resulted in the Qing’s Empire, the Republic of China and then the People’s Republic of China having no access to the sea. The areas of the middle ground between the two empires and two civilisations before Russian colonisation was loosely associated with Beijing but became highly influenced by Russia. Even today, the large number of Russianstyle buildings and Tsarist emblems on Harbin’s Central street is a reminder of Russia’s past domination in the region. After a few years of cordial relations and China’s one-sided policy in the 1950s, Chairman Mao Zedong formulated a

The bridgeheads’ actions under the BRI 67 confrontational policy towards the Soviet Union that finally led to border clashes in March 1969. Nevertheless, the Maoist policy failed to change the Opium Wars legacy and from the strategic point of view, being deprived access to the sea minimises the options for the development of today’s north-east China. However, that notwithstanding, the region of China’s north-east is still recognised as an important tool in conducting relations with Russia. After Tiananmen in 1989, and the limited interaction between China and the West, Deng Xiaoping, during his Southern Trip (1992), decided not only to reopen the coastal areas but also to open the inland province by sponsoring free trade zones in the border areas: in the case of Heilongjiang in Heihe and Suifenhe. This decision, however, was also in line with the agreement on the eastern section of the Sino-Soviet state border, signed by the ministers of foreign affairs of the Soviet Union, Alexandr Bessmertnykh, and China’s Qian Qichen. Nevertheless, the period of opening up and reform was conducted clearly in favour of the coastal provinces, and the north-east as well as western China asked for more concrete compensation. In 2003, the central government recognised the needs of north-east China and issued the ‘Revitalize the Old Northeast Industrial Bases’ policy led by the National Development and Reform Commission. Furthermore, the then prime minister, Wen Jiabao, set up a leading group to administer the Revitalization of the Old Northeast Industrial Bases with their counterparts at the provincial level. The new top-down project was designed to attract more foreign investment by applying an FDI-oriented development strategy with the developed regions of Japan, Europe and South Korea as the leading external parties (Jae Ho Chung, Hongyi Lai, Jang-Hwan Joo 2009, 109–115). By issuing new plans and regulations, Beijing hoped to secure harmonious development and limit the disparities across the country. This process, which was discussed by the State Council, was only possible by creating more cross-provincial cooperation and limiting horizontal competition (Meng Honghua 2019, 104–105). From this perspective, the next stimulus brought about more equal development along with the introduction of the Belt and Road Initiative. Since the BRI was launched, the Heilongjiang government and Harbin municipal government have discussed different projects, programmes and policy planning that introduced special measures to develop north-east China and utilise centrally distributed resources. After almost two years when the BRI was announced in Astana, NDRC, MOFCOM and MFA identified the critical players at both provincial and city levels. This initiative encouraged Heilongjiang province, and two other north-east provinces, Liaoning and Jilin, to improve the railway links connecting the province with Russia and its regional railway network, strengthen cooperation with Russia’s Far East region on sealand multimodal transport and complete the construction of a Eurasian high-speed transport corridor linking Beijing and Moscow. The province was labelled as the ‘key window’ in the gateway to northern China (Vision and Actions 2015). The local government in Heilongjiang immediately declared it was ready to take on the task of developing north-east China with particular regard to cooperating with the Russian seaports of Vladivostok and Nakhodka and strengthening cooperation

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with the Tumen River Delta. With these actions the BRI stimulated enthusiasm among the local elites who hoped to display their advantages to the Beijing-based government and attract centrally distributed resources. 2.2.1. Local government and NDRC adoption of the BRI The story of Heilongjiang’s involvement in China’s external relations, especially in economic diplomacy, started when the Northeast Asian Economic Forum (NEAEF) held its first meeting in Changchun, and when, in 1991, Beijing designated Jilin province to conduct the Tumen cross-border project. Immediately after the central government’s decision, the Heilongjiang Academy of Social Sciences held a conference in Harbin on the same topic but referred to regional cooperation as the Sea of Japan Rim Economic Circle, centred on Niigata. At the very beginning, the scholars in Heilongjiang did not see cooperation with Russia as the core of its provincial international outreach. However, they looked to the more developed regions of northern Japan (Christoffersen 1996, 273). At this time, relations between China and Russia were at the start of normalisation. Trading between both sides of the border was difficult and challenging as 8,000 different trading agencies in the province were responsible for trade with Russia. At least from this perspective, the governments from both sides needed to face the challenges in limiting chaotic conditions in the cross-border relations and, naturally, Heilongjiang preferred to find a partner in more organised regions (Zhang, Liu 2018, 104–105). Whatever developed partner Heilongjiang would like to find, due to its natural proximity, Heilongjiang province has to develop relations with Russia and the Russian Far East in particular. Since the 1990s, the provincial and municipal government established 18 pairs of sister city or town relationships, including three pairs at the provincial level with Amur region and the Jewish autonomous prefecture and 15 pairs at the municipal level, for example with Khabarovsk. As discussed earlier, the announcement of the BRI encouraged the further internationalisation of Chinese provinces, and the majority of provincial-level governments regarded the BRI with unconcealed optimism. In the case of Heilongjiang, however, the provincial government was cautious about the central government’s proposal and at the very beginning did not express a great deal of enthusiasm. In 2015, Lu Hao, the then governor of the province, declared that the province would implement the national strategy of the BRI by building a China-Mongolia-Russia Economic Corridor and strengthening local cooperation with Russia. In 2016, the governor declared Heilongjiang’s readiness to be ‘supported’ (juezhu 借助) by the national policy of the BRI and to create economic corridors as well. In 2017 and 2018, Governor Lu Hao was the only governor in China to express a very passive approach by declaring ‘active docking’ (jiji duijie 积极对接) with the BRI, and ‘docking’ (duijie 对接) with the BRI (HlLGR 2017, 2018). In fact, this less optimistic tone presented by Lu Hao might be driven by the fact that as a former Communist Youth League chairman, he was affiliated with Hu Jintao, the former president of China (Lam 2006, 21). Finally, when in 2018 Lu Hao was transferred

The bridgeheads’ actions under the BRI 69 from governor to the position of the Minister of Natural Recourses in Beijing and was replaced by Wang Wentao, a former party leader in Shanghai, Songjiang districts, mayor in Kunming and party secretary in Nanchang and Jinan, the local narratives on the BRI took on a more optimistic approach. In 2019, the BRI was perceived as a vehicle for opening up the northern province to the outside world, where Heilongjiang as an active partner as well as active participant shapes the economic reality of the China-Mongolia-Russia Economic Corridor. Contrary to his predecessor, Wang Wentao also listed numerous international activities that Heilongjiang would like to participate in such as the China-Japan Local Government Forum and the Sino-US Governor Forum. Moreover, Wang Wentao, as other provinces have shown, such as Ningxia or Sichuan, supports MFA conferences on provinces ‘going global’, and stated that the event organised in November 2018 was very important (HljLGR 2015–2020). During the meeting in Beijing Wang Yi, the Minister of Foreign Affairs, called Heilongjiang an ‘’important hub’ in China’s opening up to East Asia. While in Beijing, Wang Wentao declared the province would fight for high standards in the China-Russia local cooperation and be an active member and participant in ongoing international activities: the China-Russia Local Cooperation Council, the first China International Import Expo, the Governor of China and Japan Governors Forum, Khabarovsk International Business Day, and the Governors Forum of China and the United States. (MFAPRC 2018) These initiatives illustrate hope for more diversified international cooperation, but along with the introduction of the BRI and cordial relations between Xi Jinping and Vladimir Putin, the business activities of Heilongjiang were left in Russian hands. In provincial reports, cooperation with Russia in 2012 was mentioned only seven times, while between 2014 and 2018 the country was mentioned 26, 40, 41, 32, and 76 times, respectively. The top-down signalling limits the option for provincial international activities and in China’s north-east the horizontal division of labour designated Heilongjiang for cooperation with Russia, Jilin with South Korea and Liaoning with Japan. The presented approach taken by the provinciallevel government illustrates that Beijing hopes to use provinces in shaping its policy towards the region. This argument is further supported by the rationale presented in a 2020 report when the provincial government placed the relations with Russia as priority and promised to utilise the newly opened cross-border cooperation through the Tongjiang Railway Port, Heihe Highway Port, and the Heixiazi Island Highway Port. Moreover, the governor sees the local cooperation council of the ChinaRussia Friendship, Peace and Development Commission and the bilateral provincial governor’s political meetings as the core of the province’s international activities. Although cooperation with Russia looks promising, Heilongjiang’s external outreach cannot be conducted without the strong support of the advanced

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economy of the southern Chinese provinces as well as from Hong Kong. As indicated, in 2020, without domestic unification, the government in Harbin cannot deliver effective cooperation with Russia and has failed to meet the ‘link with the South and open the North’ (nanlian bei kai 南联北开) project’s goals (HljLGR 2020). The city of Harbin as the vehicle responsible for developing urbanisation as a key factor in economic development hopes to navigate more international cooperation within the sister and friendship cities formula. What should be seen as a paradox, Russia again made a priority. In 2015, however, without referring to the BRI, the mayor of Harbin Song Xinbin declared the city’s readiness to undertake its duties: ‘We must take the initiative and take the lead to speed up the construction of a new pattern of multi-level, wide-ranging, cross-border interaction, opening-up and cooperation with Russia’ (HrbLGR 2015). In 2016, Harbin positioned itself as the central city for cooperation with Russia and an active player that would grasp the strategic opportunity of the BRI. In 2017 and 2018, the arguments of being at the core of Sino-Russian cooperation were repeated, however the new narrative appeared in the latter year. Harbin recognised its geographical position as a regional advantage and due to this fact stated that from now on it would consolidate its central status vis-à-vis its relations not only with Russia, but also with Japan, South Korea and North America. The wish for diversification of international partners signalled the readiness for competition with the other two north-east provinces of Jilin and Liaoning, but also expressed disappointment about its growing dependence on Russia (HrbLGR 2016–2018). Needless to say, the competition over central government resources between Liaoning, Jilin and Heilongjiang is the key issue in the internationalisation of the province. They pay less attention to the geopolitical strategic goals of Beijing that hope to use the whole region as part of China’s grand strategy. The aforementioned competition undermines possible unification. It is exemplified in only one document signed by the Harbin and Changchun local Development and Reform Commission that plans by 2025 to build one metropolitan area that would be brought about by an integration development experimental zone (Xinhua 2020). Similar to what was discussed at the provincial level, domestic cooperation between south and north China, namely Heilongjiang and Guangdong provinces as well as two regional competitors from Shenyang and Changchun, were seen as important. As the mayor of Harbin said in 2015, the city is taking the opportunity to be a hub for products made in China, in this particular case based on the cooperation between Guangdong and Heilongjiang, and between Shenzhen and Harbin with Shenzhen (Harbin) Industrial Park as the leading project. As declared in 2018, both provinces have a total of 310 projects, while the cities conducted 191 projects (HljDRC 2018). In 2020, while referring to international cooperation, the mayor of Harbin, Su Zhe differentiates city roles for different international partners: Harbin is the bridgehead for cooperation with Russia, a node city for relations with Central and Eastern Europe, and a window for North-East Asia and North America (HrbLGR 2020). Moreover, the Harbin government invites more companies from developed China to establish their branches in Heilongjiang and

The bridgeheads’ actions under the BRI 71 start their international expansion such as the international connection with the Belarusian White Stone Industrial Zone. The well-established cooperation with Belarusian authorities is seen as an incentive for southern China companies and by these means Heilongjiang and Harbin position themselves as an intermediary for Chinese business in their relations with Russia and North Asia. Moreover, Guangdong is dedicated to supporting the reform of SOEs in the old industrial district of Heilongjiang, as well as disseminating the experiences of small and medium-sized enterprises (SME) from the south to the north, seen as part of the development of Heilongjiang’s economy. In this regard, the critical factor for further development in Heilongjiang will be to attract social capital from Guangdong, based on public-private partnerships and with the Russia-China Local Investment Fund, and to deliver further investments in the province as well as in the Russian Far East. Heilongjiang is positioned as a food supply base and supply network in the ‘talent people cooperation’ (rencai duijie 人才对接) structure (GdNDRC 2018; HljDRC 2017a). Taking these provincial and municipal reports, the BRI is perceived as part of China’s global plan, and, even more importantly, tends to stimulate the unification of domestic markets, and by shaping cooperation between Heilongjiang and Guangdong has tried to channel the opening up of China’s north-east and transfer positive experiences from southern China. With stimulus from the BRI proposal, the local government, both on the provincial and municipal levels, issued dozens of laws, instructions and regulations but also stated a political will to cooperate. In August 2014, the Standing Committee of the Provincial Party Committee in Heilongjiang proposed to incorporate the Eastern Land-Sea Silk Road Economic Belt as part of the China-Russia Economic Corridor into the BRI within the provincial 13th Five-Year Plan. After this, in December 2014, the Heilongjiang Provincial Party Committee Economic Work Conference promised to speed up the construction of the China-Mongolia-Russia Economic Corridor and designated Harbin, the capital of the province as the centre of the Amur-Heilong River Silk Road Belt, its economic belt. The border city of Suifenhe and the port of Vladivostok, which has sea routes to Japan, South Korea and North Korea, were named as pivotal points. However, appointing the Russian city of Vladivostok as an important part of China’s project indicates two important consequences: access to a seaport is necessary for the further development of the province, and might be perceived by the Russian side as interference in its domestic affairs and, as a consequence, may limit cooperation (Song Linlin 2019). In March 2015, the Heilongjiang government approved a plan to build the China-Russia-Mongolia Economic Corridor. As part of the national strategy of the BRI, the local government declared it would develop the Land-Sea Corridor with connections between Chinese seaports in Guangzhou, Ningbo, Shanghai and foreign ports in Busan (South Korea), Niigata (Japan), and seaports with Vladivostok and Nakhodka (Far East, Russia). The seaports in the Russian Far East would be connected with land routes via Suifenhe, Harbin, Manzhouli and then through Russia to European seaports in Hamburg and Rotterdam. During the first period between 2014–2015, the plan would be connected/combined with the BRI (xianjie 衔接), then between 2016–2020 (the mid-term goal), the Heilongjiang

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Land-Sea Economic Belt would be connected with the domestic economic belts that have connections with the Euro-Asia Land Belt. The long-term goal targets the building of an integrated cross-border transportation network with Russia and connecting Asia and Europe, forming an export-led economy, which would be a comparatively significant advantage (HljGov 2015). In addition, in May 2018, Heilongjiang Province established the Joint System of Heilongjiang Province’s Cooperation with Russia, and the city of Harbin issued the Three-year Action Plan for the Construction of BRI (2019–2021), which further pushed the province into Russian hands. Apart from Russia, being the core country for Heilongjiang’s international cooperation, the municipal government named other major countries for international cooperation, namely Ukraine, Belarus and South Korea as technological partners, and Russia, Mongolia, South Korea, Japan and Israel as partners in shaping sister cities’ cooperation and public diplomacy, dubbed peoples’ diplomacy (renmin waijiao 人民外交). In order to achieve developmental goals, Harbin formulates policies to support Russia’s industries, encourage Russian enterprises to cooperate with their Chinese counterparts and introduce Russian enterprises to the Chinese market. In other words, in order to export goods from China, the province has stated its intention to develop the Russian market and facilitate export procedures in order to be a hub for Chinese products from across the country and stimulate the export of ‘Made in China’ products to Russia, with the transactions settled in Chinese currency (HrbGov 2018). From the perspective of north-east China, the most important issue is the reform of state-owned enterprises, and the reform of local government enterprises. Internationalisation should deliver part of these domestic reforms of Heilongjiang province as mentioned by the State Council in the document entitled ‘The opinion on Several Major Policy Measures to Support the Revitalization of Northeast China’ (2014). In these areas, the local authorities can count on central government support in the development of Shenyang and Harbin’s aviation industry with international partners as well as guiding provincial-level government in applying for international loans supported by the International Monetary Fund or the World Bank as well as promoting provincial bonds sold in Shanghai and Shenzhen. In the document, Harbin was mentioned as a hub for digital commerce with Russia and Mongolia and as a heavy industry location for the military-civil industry (PRCGov 2014). Nevertheless, the internationalisation of the province has also been initiated by central government activities and further stimulated by the agreement signed by China and Russia in 2008: ‘The Outline of Cooperation between Northeast China and Russia’s Far East and Siberia (2009–2018)’. As was announced, cooperation with the Russian Far East seemed to be a chance for the economic rejuvenation of Heilongjiang Province. This, however, failed to deliver the expected results and the Intergovernmental Commission suspended the project for cooperation of the Northeast and the Far East and the Baikal region of Russia. As mentioned, the centrally sponsored initiatives do not secure the important corridors to the Russian ports Vladivostok and Nakhodka and the connections via the corridor

The bridgeheads’ actions under the BRI 73 ‘Primorye-1’ to ship Chinese goods to the United States and Europe. The ‘Primorye-2’ from the Chinese border city of Hunchun to the Russian ports Posiet and Zarubino transports Chinese goods to the Korean Peninsula and Japan (Greizik 2018). Another possible option for Heilongjiang is to participate in China’s Arctic Policy. Following the decision taken on the BRI, the Chinese government attempted to extend its policy and in January 2018 published a White Paper on Arctic Policy, which for the first time clearly explained China’s Arctic Policy objectives, basic principles and significant information regarding relevant major policies and related situations. The local governments, however, were not mentioned in the document, and the Beijing-based government looked for Arctic Silk Road agents in opening the northern direction of the BRI. The China Arctic actions started in 1999 when China organised several scientific expeditions to the Arctic, with its research vessel Xue Long (Snow Dragon) as the platform. Along with the announcement of the BRI, Chinese leaders looked for a northern route to Europe, as a possible alternative for transporting Chinese goods. In 2017, China and Russia announced that they would jointly develop and construct the Binhai International Transport Corridor. Locating Heilongjiang in the national policy of the Arctic Silk Road, the Chinese government stated that the shortest distance between the Arctic Circle and China’s northernmost point, in Mohe county, is more than 1400 kilometres and designates Heilongjiang to be part of the Beijingbased policy in the Arctic (MFAPRC 2015). Apart from the logistics, Northeast China as an agricultural power base should be seen as a potential location for developing China’s investments in the agricultural sector in the Russian Far East. As pointed out by Lu Junyuan and Zhang Xia (2016) in their seminal book on China’s Arctic Interests and Policy the critical factor for future policies in agriculture would be global climate change. Along with temperature changes, the food availability structure would be changed, reducing access to food and affecting food quality. In order for China to feed its population, the country needs to invest in the Russian northern territories (Lu, Zhang 2016, 242–243). 2.2.2. Heilongjiang’s trade, investments, politics and biases The centrally navigated sub-national international activities, based on the cordial leadership relations between Xi Jinping and Vladimir Putin, has condemned Heilongjiang and Harbin into being part of the Russian Federation, and Russia Far East in particular. The one-sided economic interactions have been mainly driven by the fact that Russia is a natural resources provider to China, and Heilongjiang, due its geographical proximity, serves as a corridor for oil and gas transportation to developed regions like Shanghai. Since 2013, when the BRI was announced, provincial trade dependency on Russia was a record-breaking 69.8% (2018) and had grown by more than 20% over the last 12 years. The second important feature of this trade dependency is the fluctuation of trade and the structure of Heilongjiang’s trade with Russia. Fluctuations have been recorded since 2012 with growth of 12.2% in that year, followed by 5.8% in 2013 and 3.1% in 2014. However,

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foreign trade then dropped by 53% in 2015, and a further 9.6% in 2016, before increasing by 22.5% in 2017 and 64.7% in 2018. Although the growth might have been high, as observed by Jiang Yi (2018), the problem lies in the structure of trade with Russia: only 0.6% of total trade is delivered by processing trade enterprises (jia gong maoyi 加工贸易), 35.2% by break bulk cargo (xiaoe maoyi 小额 贸易) and 56.8% by general cargo (yi ban maoyi 般贸易) (Jiang 2018, 52–53). What needs to be noted is that in 2014 Heilongjiang’s processing trade enterprises claimed a 5% share of provincial trade with Russia but this had dropped to 0.6% by 2018 (Ma, Hao 2014, 220). As further statistics illustrate, the province’s second most important trading partner is the United States. However, the next three are not geographically close to China: Brazil, Angola and Saudi Arabia. Brazil is mainly a partner in agriculture and the soybean trade, while the next two are partners in oil production. Heilongjiang, with its famous Daqing oil fields, is one of the biggest oil producers in China (HljYearbook 2013–2016). Along with the BRI, the provinces have found new statistical parameters: trade with countries along the BRI, mainly developing countries. While Heilongjiang has concentrated on trade with countries along the BRI, namely Russia, the importance of markets in Japan and South Korea has been limited. In 2012, Japan and South Korea made up 1.49% and 2.05% of provincial trade, and only 1.30% and 1. 61% in 2014. As a consequence, Heilongjiang by utilising BRI projects in Russia has lost potentially fruitful cooperation with more developed partners (Zhang, Liu 2016, 220). Being aware of a growing dependency on the Russian Far East, the local government takes steps to diversify markets and secure future economic growth. Products are delivered by provincially subsided cargo trains to Europe and by testing export-led economic growth. The four China Railway Express train lines, including Harbin-Germany, Harbin-Russia, Harbin-Belarus and Daqing-Belgium Volvo, have been opened, and 461 shipments with a total of 30,940 TEU have been completed. Furthermore, in 2018 nine cross-border e-commerce platforms were opened, and 81 countries and regions have invested in the province’s parks, including Nestle, Airbus, Daewoo, Volvo, Case New Holland, Yihai Kerry and Anheuser-Busch InBev (HljDRC 2017b). Further diversification of international markets faces a practical problem: with 15 border points along the border with Russia, only Suifenhe has train connections and these are not in a westerly direction. On the other hand, as a landlocked province, like the other bridgeheads of Yunnan and Xinjiang, the further opening up and development is highly dependent on having access to the sea. In this regard, the government in Harbin is promoting the seaport connections between China’s Guangzhou-Ningbo-Shanghai, South Korea’s Busan, Japan’s Niigata and Russian’s Vladivostok-Nakhodka, to integrate Dongbei with Russian Far East regional integration projects. Planning transportation routes from China’s south, which already has seaports, takes on the appearance of incentivising the Russian side, but not necessarily domestic partners from the south. Whatever the case, all of Heilongjiang’s projects are facing critical limitations, imposed by the Russian side, which might challenge the status quo based on the 19th century’s unequal treaties. Allowing Heilongjiang to

The bridgeheads’ actions under the BRI 75 have easy access to Russian ports is seen as part of a geopolitical game played by Moscow, and in fact should be seen as the most critical factor in Sino-Russian cross-border governance (Interview, Harbin 2019). The second important indicator of Heilongjiang’s international outreach are investments sponsored mainly in the Russian Far East: due to the fact that the Russian region is rich in natural resources with 81% of the Asia-Pacific Region’s diamond reserves, 51% of the region’s forest resources, 37% of its freshwater resources, 33% of its aquatic biological resources, 32% of its gold reserves, 27% of its natural gas reserves, 17% of its oil reserves and has agricultural land is regarded as fertile by Chinese investors. The Chinese Ministry of Commerce (MOFCOM) stated that in 2017 Chinese investors had applied for 32 investment projects in the Russian Far East worth a total of USD 4.2 billion which was more than the totals of the development zone and the Vladivostok Freeport (MOFCOM 2018). In 2017, there were 146 enterprises in 18 overseas parks promoted by Heilongjiang in the Russian Far East, with a total investment of USD 1.81 billion. But not all Chinese companies enjoyed the incentives given by the Russian Far East Development Zone. As discussed by Chinese sources, only 39 enterprises in five overseas parks were given preferential taxation policies and preferential policies in VAT, customs duties, property taxes, land tax and social security funds (MOFCOM 2018). Cooperation in agriculture is seen by Heilongjiang as a possible vehicle for accelerating economic cooperation with the Russian Far East (RFE). This cooperation is mainly controlled by Heilongjiang-Russia Agricultural Cooperation Association which has 100 corporate members with 380,000 hectares of arable land in RFE and Siberia (Zhou 2015). In December 2017, both the Harbin Dongjin Group and Heilongjiang Shipping Group signed the ‘Khabarovsk-Fuyuan Grain Repatriation Strategic Cooperation Agreement’, jointly investing nearly 300 million RMB in storage facility construction for Russian grain production. In 2018, more than 100 Chinese companies invested in the agricultural sector across the border. On the one hand, the future expansion of Chinese business into the agricultural sector in the Russian Far East is driven by the fact that the territory has fertile soil and that the Russian territories have reduced their labour force. On the other hand, being technologically less advanced than China, the Russian Far East would naturally be receptive to cooperation with the northern provinces of Heilongjiang and Jilin (Yi, Li, Lu 2019, 49–50). As estimated by Zakharov and Napalkova (2019), Chinese companies leased and owned 352,800 hectares with the biggest stake in the Amur region (118,300 hectares) and in the Jewish autonomous region (89,900 hectares). Nevertheless, in the context of future Chinese investment in the agriculture sector, the limitation in exports imposed by the Russian government might limit possible business options for Chinese companies. This tendency was particularly visible after the Coronavirus outbreak. After the FAO issued recommendations for global food chains, the Russian government, in order to maintain domestic food reserves, issued new regulations on limiting export capacity of major agricultural products, with the export of major cereal crops not exceeding seven million tons between March and June 2020 (HljDCOM 2020).

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Apart from planning and executing investments, the second important pillar in cooperation with Russian border regions is the internationalisation of RMB. The Chinese side has tried to boost economic cooperation with Russia with Bing Hu, the chairman of ‘The China-Russia Regional RMB Fund’, stating that ‘reducing foreign exchange risk between RMB and RUB via other currencies provides the better condition for bilateral trade and investment’ (Devonshire-Ellis 2019). What should be noted here is that the fund is financially supported by two financial institutions, Suiyong Capital from Guangzhou and the Dazheng Investment Group, as well as the investment platform of the Heilongjiang government, and shows practical mutual cooperation. The fact that two Chinese companies established the China-Russia Fund within a mutual assistance programme shows the Russian side’s financial weakness (RDIF 2019). The further exemplification of the RMB internationalisation is illustrated by the China (Heilongjiang) Free Trade Pilot Area that by expanding the cross-border use of RMB, allows financial institutions and enterprises to integrate RMB funds from countries and regions such as Russia, and provides the basis for Chinese currency (HKTDC 2019). Apart from economic activities, developing the political framework is seen as an essential part of Heilongjiang’s international relations. The lion’s share of visits at the local level was with Russian counterparts, although interestingly at the central government level only the two countries’ deputy prime ministers have met in Heilongjiang. In May 2015, Wang Xiankui, secretary of the provincial party committee, visited the Khabarovsk border area and the Jewish autonomous prefecture. Governor Lu Hao discussed with his Russian counterparts, complementary policies and production issues regarding the China-Mongolia-Russia Economic Corridor. In the same year, Governor Lu Hao visited South Korea, Australia, New Zealand and Hong Kong to promote the development advantages and business opportunities of Heilongjiang under the national Belt and Road strategy and to promote the construction of the Heilong/Amur Silk Road Belt by utilising domestic and foreign resources and two markets. While the highest ranking official from Russia to visit Harbin was the deputy prime minister, the province cannot gain more attention from the central government under a highly centralised relationship. A second example from the provincial level are relations with North Korea’s local governments – this is a new approach which first emerged in 2019. The Korean local government of North Hamgyong province had two meetings with Party Secretary Zhang Qingwei and the governor of Heilongjiang Province, Wang Wentao. Relations between Heilongjiang and North Hamgyong Province were established in 1982, and the visit of the Korean delegation was organised to celebrate 70 years of PRC-DPRK relations as well as the participation of Korean business in China-Russia affairs organised at that time in Harbin (HljFAO 2019). This has been particularly visible in Harbin’s external actions with Denmark, Austria, Finland and Holland, and at the provincial level with North Korea and Taiwan. The latest example was related to the April 2015 visit of Wang Xiankui, secretary of the provincial party committee who wanted to attract business from Taiwan to the Heilong River Silk Road Belt. During the meetings, nearly 30 letters of intent worth 10 billion yuan were signed. Interestingly, a meeting took

The bridgeheads’ actions under the BRI 77 place between the city government and the international department and countries that Heilongjiang has minimal interactions with, namely Denmark, Finland and Austria. This might be related to the growing role of the province in China’s Arctic Silk Road and its desire to use some of these countries’ experience in winter tourism. Relations at a local level might serve as a testing ground before more serious steps are taken in engaging Scandinavian countries in the Arctic Silk Road (see Graph 2.2 and 2.3). The example of the cooperation with Lappset illustrates the incentive for further political engagements through city-to-city relations. Lappset, an outdoor sport equipment producer based in Rovaniemi, the capital of Finland’s northernmost province, has gained significant traction in the Chinese market. Lappset operates SantaPark in Rovaniemi and has been developing a project to establish a Santa Claus theme park in the northern Chinese province of Heilongjiang (China in the Arctic 2019). Apart from bilateral relations, the city of Harbin has been practising trilateral cooperation with Nigata from Japan and Khabarovsk from Russia. The first Environmental Industry Forum was held in 2001 and since then the three cities have focused on practical industrial cooperation (Interview, Harbin 2019). While discussing provincial-level relations with its Russian counterparts, it is worth noting the critical voices from the northeast on bilateral relations. As has been said by Chinese academics, the most crucial issue here is how to force the Russian side to be more open and cooperative, and to persuade them to take on deeper reforms. Whatever the Chinese side does, scholars in Heilongjiang lamented that due to the poor reputation of Russian financial institutions in terms 14 12 10 8 6 4 2

2013

2014

2015

2016

2017

2018

Ukraine

Belarus

Holland

Poland

Israel

Germany

Finland

Austria

South Korea

Japan

United States

Denmark

Russia

0

2019

Graph 2.2 Harbin municipal government foreign meeting by country (2013–2019) Source: author own assessments based on Harbin International Department www.hrbfao.gov.cn/ (last accessed 19 October 019), and http://xxgk.harbin.gov.cn/ (last accessed 12 March 2020).

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18 16 14 12 10 8 6 4 2

2017

Canada

2019

North Korea

2018

Belarus

Holland

2016

Switzerland

New Zealand

2015

Australia

USA

Japan

South Korea

Russia

0

Graph 2.3 Heilongjiang provincial government foreign meeting by country (2013–2019) Source: author own assessments based on Heilongjiang International Department www.hljfao.gov.cn (last accessed 20 March 2020).

of foreign exchange, bilateral trade is at great risk. The second issue is the US dollar (USD) domination in trade settlement and the risk of foreign currency fluctuations. Another issue is the shortage of products in the border areas due to an increase in production costs leading to unprofitability. Since Heilongjiang is less likely to produce some of the products which are in demand on the Russian market, the province has been trying to play a limited intermediary role in re-exporting products made in southern China. However, southern China still bypasses the intermediary entity with Zhejiang and Guangdong directly exporting their products to Japan, South Korea and Russia (Feng Anquan 2012, 315). The provincial-level unilateral actions such as those of Guangdong that opened a ‘Made in Guangdong Products Show Room/Promotion Centre’ in Moscow clearly illustrate that domestic competition and the over-targeting of the Russian market cannot be dealt with by the central government in Beijing (Zou 2014, 231). Harbin-based scholars complained that the policy of the State Council (2017), as well as the pairing up of Liaoning with Jiangsu, Jilin with Zhejiang and Heilongjiang with Guangdong, does not change much. In fact, the BRI has had the reverse effect to the one intended and channels Heilongjiang activities somewhat inwardly rather than outwardly, with the later policies of ‘leading outside by domestic linkages’ (wai yin nei lian 外引内联) failing to bring about the desired outcome (Li, Pu 2018, 24–25). The position of the province is not only challenged from within the country but is limited by the unfriendly approach of the Russian local governments. The topdown signalling does not change a great deal, and the Russian side fails to favour

The bridgeheads’ actions under the BRI 79 cooperation with China. The policies on the Russian side have been fluctuating, being based mainly on unilateral protectionism with tariffs on agricultural products and other products exported by China, along with additional taxes imposed on Chinese companies. Furthermore, Russia’s social transition and economic transformation have not yet been completed, and China’s northern neighbour is perceived as unstable. Russia’s accession to the World Trade Organization has not significantly changed its domestic markets. In addition, the lack of judicial independence, coupled with byzantine administrative procedures and corruption, means that Russia is still a relatively minor business partner. There other important issues impacting cooperation with Russia. First, the homogeneity of the industrial development of both sides plays a decisive factor in the lack of cooperation. Second, limiting the possibility of China’s domination over the Russian Far East where the locals are more open to Japanese and Korean investments. As identified by Ma Youjun (2017), the companies at the provincial level have a lot of practical problems such as investing without prior feasibility studies, lack of detailed planning, obstacles to the settlement of local currency, risk aversion, social cognition, cultural differences and a lack of experience in operations abroad. Even large construction projects under the BRI such as the China-Mongolia-Russia Economic Corridor might not significantly change the situation. The three countries along the corridor have different corporate governance and cultural concepts and are not willing to incorporate these different models into one common framework. Another issue is that Russia and Mongolia are resource-intensive economies. Due to its abundance in natural resources and an energy export-oriented strategy, industrial structures in Russia have been stagnating over the last decade and have not undergone substantial reforms. An economy based only on the export of raw materials has limited the competitiveness of Russian products and Russia remains on the periphery of international industrial supply chains. As more than 50% of Mongolia’s population is concentrated in the capital, Ulaanbaatar, with a significant minority of the population engaged in the nomadic economy, there is little demand for motorways and other road construction. Because China’s northeastern region, Russia’s Far East region and the centre of Mongolia are far from the developed hinterland, it is a region with relatively little economic development, and, as a consequence, major infrastructure projects are not high up on the Mongolian central government’s list of priorities (Zhou 2015, 15). Finally, the Belt and Road Initiative has created domestic distrust in Russia, and hindered day-to-day cooperation and the development of China’s and Russia’s economies. As presented by Ma Jian and Yang Hui (2018), the Russian government should take special measures to eliminate Russian concerns, enhance mutual understanding and trust between the two countries and lay the foundation for a comprehensive strategic cooperative partnership between China and Russia. The fear among leaders and the general public is one of ‘Sinization’ of Russian territory with the ‘China threat theory’ still being popular, and as CIIS scholar Yang Lan stated (2020), this limits further cross-border interactions. After the BRI was announced, local limitations have been multiplying. While investing in Russian regions, Chinese companies have been asked to build special transportation

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facilities and other infrastructure. But the core issue here is the lack of support from the Russian local governments which are sometimes not willing to cooperate or have an increasing number of demands. As offered by the Chinese side, according to Russian regulation, the state’s capital contribution to the investment will not exceed 10% of the project’s investment total. Under the conditions stipulated by Russian law, the Russian side cannot provide investors with any special preferential policies like the infrastructure needed for their projects. Furthermore, over the period of the Belt and Road, the Russian government tightened the visa regime for official Chinese workers, first with the visa cost of 1,000 RMB, a waiting period of three to four months, import quotas for Chinese tobacco products and the imposition of foreign labour quotas; for example, Chinese investment can exceed 50% in agriculture, infrastructure and transportation and 15% in the tobacco industry (Zhang Mei 2015, 214). Furthermore, Russia decided in 2017 that if Chinese conglomerates planned to invest in the mining industry, the activities would be limited to the Russian mainland and the resource-rich Russian Far East. The premise was that processing must be carried out in the Russian heartland; if Chinese enterprises were to introduce Chinese labour into Russia, the division of labour could only be 20% on the Chinese side with Russia claiming the other 80% (Yang 2020). These controversies go beyond trade, and investment policies touch different consumption practices and perspectives. The Russians are greatly influenced by the European model, demanding known brands and best quality products. The quality of some Chinese products does not conform to the Russian mindset, which ultimately leads to difficulties in selling certain Chinese products in Russia. Moreover, the Russian nation has great ‘national pride’ and is very patriotic, meaning they often reject other countries and nations. The perception on the other side of the Amur in Russia also plays an important role. While being seen as only interested in Russian raw materials and ‘Simply selling Chinese products to Russia and sending Chinese labourers will not help Russia achieve greater production, import-substitution, and investment’, and would not upgrade cooperation between the two (Lukin 2018, 173). This might be the basis for boycotting Chinese products that has been exacerbated by the Coronavirus outbreak in China. COVID-19 has become a part of cross-border governance, but when the Russian side closed the border in January 2020, Chinese citizens flew from Moscow to Vladivostok in an attempt to reach home through the border in Suifenhe, the only possible choice. After the government in Heilongjiang had identified a growing number of COVID-19 positive cases which were ‘imported from Russia’, it decided to close the border at the beginning of April, just after the city had opened a free trade zone with Russia (BBC 2020). 2.2.3. Heihe: the dilemmas of the cross-border cooperation Cross-border governance between China and Russia has a long history, especially with interactions in the post-Opium Wars period that brought mistrust and had a heavy impact on common perceptions. An illustrative example is from the

The bridgeheads’ actions under the BRI 81 Museum of the Aigun Treaty in Heihe that covers the history of the Sino-Russian border issue, specifically covering the Aigun Treaty and the Treaty of Nerchinsk. The museum has wax figures of the people who signed both treaties, and a monument of a Chinese hero who defended China in the late 17th century during Kangxi Emperor Sa Busu’s reign. More to the point, in its reading of history the Heihe museum failed to address the Blagoveshchensk massacre in 1900. In this context, it is shown that the government’s intent is to be fairly positive about the Russian people, and to remember that history should not be the basis for revenge, but for a better future. Otherwise, the negative feeling towards the other might put pressure on the government itself, which may then behave more assertively and aggressively (Mierzejewski 2012). On the other side of the Amur, Russians celebrate the Cossacks for their role in securing lands that were once Chinese but, since the middle of the 19th century, have been firmly part of the Russian Far East (Higgins 2020). The view from Primorskii Krai continues to portray the border as a ‘dyke holding back millions of Chinese’, and leaves the region in conflict with Moscow over how much the border will become a common area for cooperation (Christoffersen 1996). After the collapse of Qing’s China and Romanov Russia, this section of the borders in Inner Asia (the USSR, Mongolia and China border triangle) functioned as a Sino-Soviet border management model. A closed-border policy characterised this model, with special attention being paid by state authorities to the supervision of border communities (special rights, movement control, the propagandist idea of the border as a bastion, etc.), along with a very strong connection between socialist modernisation and militarisation of the area (Peskov 2018). In fact, due to the ideological clashes between Beijing and Moscow, the river border of Heilong/Amur, which both cities share, was closed by the end of 1980s to the general public with no mutual interaction. In 1984, General Secretary Hu Yaobang said after his visit to Heihe: ‘In the south – Shenzhen, in the north – Heihe, are two wings which will help China fly’. This optimism was linked to the fact that the two cities neighboured one another, which is in contrast to the rest of the Sino-Russian area, which was desolate in comparison. In 1983, the Soviet Union and China agreed to open cross-border channels and local government cooperation for bilateral trade. Then in the same year, the State Council took the decision to build an airport in Heihe. After two years, in November 1985, the first air cargo route was opened with Harbin, followed by logistic transportation across the ice on the Amur River during the wintertime. In December 1987, the Heihe government sent Russia 206 tons of watermelon as a symbol of goodwill and it became the first step in what was dubbed ‘watermelon diplomacy’. The Soviet Union in return sent 306 tons of chemical fertiliser. In 1988, the State Council passed special regulations allowing both cities to conduct ‘One Day of Tourism’ that allowed both sides to exchange people. In September 1992, the decision was taken by the State Council and Central Military Commission to open flight routes from Heihe to Russia and Japan. The paradox of this situation was that Heihe and Blagoveshchensk had the world’s shortest airline flight, only nine minutes fly operated between 1994 and 1998. The first document passed by the State Council allowed Heihe and three other border cities (Suifenhe, Hunchun,

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and Manzhouli), with their own management and administration, to be open for trade with Russia. This decision was taken in March 1992, just after Deng Xiaoping’s ‘Southern Tour’ whose purpose was to open China after the turbulent times connected with 4 June 1989. In fact, the logic of reform, which built Shenzhen and Guangdong ten years before, finally arrived in Northeast China. The zone in Heihe, established at the border crossing with Blagoveshchensk, was envisaged as having five functions: production of export goods; high-tech production; business services; free trade; and storage and distribution. As far as the Russian side is concerned, however, the Heihe-Blagoveshchensk link has operated overwhelmingly as a primary adjunct of barter trade. In 2014, after the BRI was announced, the State Council announced a project to build a bridge across the river’s borders with Russia and North Korea, as well as using the northern corridor to reach Central Europe through Russia. The next year, “Regulation No. 72” promised support for border cities in Northeast China in making feasibility studies for tourist projects to utilise the geographical position of the region. Starting from the newly implemented policy of economic incentives, the local government passed a new investment law in 2000 and 2004 and finally established a free trade economic zone in Heihe (Xing, Liu, Xie 2018, 25–28). Apart from historical issues and centrally planned border cooperation, challenges arose from tensions between the local government and local business people in China. With this in mind, the Heihe government tried to attract foreign investors as the domestic market lagged somewhat behind other markets. By bringing more incentives and initiatives to the table, the city government hopes to spark enthusiasm on the Russian side. This, however, does sound rather implausible. These incentives are for foreign investors, but domestic companies have asked for further assistance as well. According to the survey, 3% of companies believe that the most important problem in current business operations is the lack of local government support, and 90% of the companies surveyed hoped that the government would provide financial support. At present, the province’s foreign trade support policy is mainly to reward and support large exporters and taxpayers. For example, the Heihe Municipal Government grants large foreign trade import and export businesses (taxpayers of more than ten million) with a further 8% exemption from personal income tax. In addition, in order to incentivise foreign trade, the local government at the county level utilises specifically through the Foreign Trade Development Fund subsidies of 100,000 RMB. But any sort of government intervention as identified by Chinese scholars, would not resolve the problem, because it is based on lack of experience and the rather conservative mentality of people living in northern China. After the industrialisation period in the early 1950s and major national projects like Daqing and Anshan, people in this part of China are used to having the support from the upper echelons and are rather reluctant to create their own initiatives (Guan, Gui 2018, 26–28). However, these expectations do not only belong to the entrepreneurs, but also echo the narrative from the bureaucratic level. In Heihe’s case, its former mayor, Xie Baolu (Xing, Liu, Xie 2018), called for the provincial and central government to take a more active stance in shaping the division of labour in international trade and

The bridgeheads’ actions under the BRI 83 coordinate actions taken by the local government. The uncoordinated competition between local structures has led to an unsatisfactory outcome, with local authorities more focused on competing with their local Chinese counterparts rather than exploring foreign markets. These requests are followed by coordinating a more just tax revenue redistribution and allowing local products to enter local markets, and not pushing them to go global (Xing, Liu, Xie 2018, 31–45). The centrally led cross-border governance caused Heihe to rely heavily on cooperation with Russia. In 2015, Heihe’s trade with Russia was 86% of the city’s total trade, in 2016, 2017, 2018 and in the first six months of 2019 the city’s dependence on Russia was even higher at 95%, 94%, 93% and 90.08% respectively. In the first six months of 2019, trade with the Russian Federation dropped by 17.18%, in 2018 it grew by 17.77%, in 2017 trade dropped by 3.9%, in 2016 by 14.78% and in 2015 by 43.67%. This means that Heihe’s economic development is highly vulnerable to events in the Russian Far East, and contrary to expectations, the Belt and Road Initiative has made Heihe’s trading conditions more precarious (see Table 2.1). This great dependency on Russia brought many challenges to the cross-border trade during the Coronavirus outbreak in January 2020. From January to February 2020, the top three categories of export commodities in the area’s border trade declined: the export of mechanical and electrical products was 1.96 billion yuan, down 9.7%; the export of labour-intensive products such as textiles and clothing was 640 million yuan, down 11.9%, and the export of agricultural products was worth 750 million yuan, down 13.6% (HljGov 2020). Further problems were identified in this cross-border trade. The poor condition of Heihe’s industry means that the city exports are limited to basic goods like clothes, textiles and trade shows. These issues are exacerbated at the same time by the Russian market itself and the spending power of Russian citizens in the Russian Far East, which is not sufficient to purchase Chinese products. People in Heihe complain that ‘China sponsors all initiatives, and Russian local governments across the border are corrupt and not eager to reform’ (Interview, Heihe 2019). Moreover, there are loopholes in border trade supervision. It forces trade to be based on illegal activities such as smuggling which undermines the reputation of the province. The Russians are not overly optimistic about this state of affairs Table 2.1 Heihe City’s trade with Russia Period

Total /change

Export/change

Import/change

Jan‒June 2019 2018 2017 2016 (USD) 2015 (USD)

203364.72/−17.18% 413768.41/+17.77% 367261.65/−3.9% 57925.37/−14.78% 67958.96/−43.67%

55941.44/+9.8% 85187.22/+3.58% 98245.16/−43.14% 26225.77/−31.24% 38147.51/−61.35%

147423.28/−24.24% 328581.2/+22,11% 269016.49/+28.47% 31669.6/+6.25% 29811.45/+35.9%

Source: Heihe governmental reports 2015–2019 online: www.heihe.gov.cn/info/1102/87839.htm, www. heihe.gov.cn/info/1102/97040.htm, www.heihe.gov.cn/info/1102/101454.htm, www.heihe.gov.cn/info/ 1102/74151.htm, www.heihe.gov.cn/info/1102/73595.htm.

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and in fact have ‘condemned and boycotted’ trade with China. The next obstacle is that the small-scale enterprises in Heilongjiang have a great deal of room to grow in terms of capital, technology and management. However, due to the oneway trade, Russia cannot produce better quality products to compete with enterprises from China (Wu Yun 2019). The final problem observed by Mikhailova and Wu is that the unilateral actions such as naming both cities as a ‘twin city project’ and proposing a number of common projects with enthusiasm was counterproductive, with the government in Blago wishing to generate new projects on its own (Mikhailova, Wu 2017, 16). The final but most illustrative example of the region’s cross-border governance is the 19.9-kilometre highway bridge project between Heihe and Blagoveshchensk. After 31 years of negotiations and too much fanfare the bridge was opened in November 2019. So, it took China 17 years of negotiations to enter the WTO but to build a single bridge with Russia it took almost twice as long, and even then the Russian side only agreed to a road bridge, and not a rail bridge. The latter version, which would have been the area’s second rail bridge, would have been more profitable for Chinese companies and opened up more options for business in the Russian Far East (Xing, Liu, Xie 2018, 160–161). In mid-October 2019, the bridge was still under construction but finally opened in November 2019 (Xinhua 2019; Interview, Heihe 2019). However, the challenges in building the bridge were not created by inclement weather conditions, as indicated by the Russian side. In fact, conflicts took on three forms: between the interests and laws of the federal government, the interests of the local administration and its regional policies regulating the business of Chinese traders and between national and local discourses on Blagoveschensk and ‘Chinatowns’ (as well as between the levels of xenophobia in Blagoveschensk and the rest of Russia, including regions closely involved in Chinese immigration). Moreover, the business activities across the border provide the basis of informal business practices and mafia-style cooperation (Ryzhova 2008). This was critical when it came to the construction of the bridge over Amur in Heihe. The ferry crossing was under the control of the Russian mafia which, by corrupting local officials, delayed the construction of the bridge. Moreover, during the wintertime when the river remains frozen, the one-way transportation costs 1500 RMB, an amount that is hardly affordable by the local SMEs (Interview, Lodz 2017; Jiang 2018, 74). However, it would not be wrong to say, as the situation with COVID-19 illustrates, that Heihe and Blagoveschensk are stuck with each other. Currently, the local merchants say that local consumption and travel activities have dropped to almost zero and as reported by Ivan Zuenko: ‘already in mid-April most local hotels, restaurants, and tourist destinations were on the edge of bankruptcy, including stores selling jewellery and marine products. In Blagoveshchensk they were oriented exclusively to Chinese guests’ (Zuenko 2020). Being mutually interdependent, both sides are looking to improve their trading partnerships during and after this pandemic crisis. But, on the other side, the nationalistic forces in Russia, by repeating the ‘China virus’ narrative, might impact bilateral relations and even trade interdependence may not help both sides look to a more distant relationship.

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2.3. Managing Southwest China and cross-border governance in Yunnan province For more than 2,000 years, Yunnan has been China’s gateway to Southeast Asia and South Asia and part of what was known as the ‘Tea Horse Road’ (chama dao 茶马道). In the modern era, the importance of Yunnan was recognised by Sun Yan-sen when he proposed the Yunnan-Burma Railway (Burma railway). Furthermore, construction started in the late 1930s, came to a halt because of the Japanese invasion of Burma and western Yunnan and was finally opened by the Japan government in 1943. During the Maoist period, Southwest China took part in strategic production relocation and preparations for the next war, named the Third Front, further discussed in the next chapter (Summers 2012, 42–51). Throughout the reform era which began in 1978, West and Southwest China were left behind in the majority of reforms and more privileges were given to the coastal areas. When the disparities between eastern and western China appeared critical, and after 20 years of reforms, the government realised the need to correct this imbalance. Consequently, in March 1999, Jiang Zemin proposed a developmental strategy for the western region. The decision acted as an impetus for the region and neighbouring countries to act quickly. In 1998, Yunnan’s capital Kunming together with Bangladesh, India, Myanmar organised a conference on economic cooperation in Southeast Asia. In August 1999, a group of scholars from Kunming prepared the very first proposal for the Bangladesh-China-India-Myanmar Economic Corridor (BCIM EC). Since then, the concept has been developed at the local level and lobbied for in Beijing. The year before the BRI, four countries opened the BCIM Business Council, and in 2013, the BCIM EC was formally launched, with routes from Kunming to Kolkata, linking Mandalay in Myanmar as well as Dhaka and Chittagong in Bangladesh (Lu, Liu 2017, 77–79). The central government, along with launching the BRI, needs to have real projects under the umbrella of the new proposal, and the BCIM EC along with other economic corridors perfectly matched the government’s requirements. Apart from the BCIM EC, an earlier project from 1992, the Greater Mekong Subregion (GMS), attracted the attention of the Yunnan government. This was not a central government project but rather an Asian Development Bank (ADB) plan. Before joining the Greater Mekong Subregion in 1992, Yunnan was simply required to report to Beijing in case it sought to launch any external projects. In the first decade of the GMS, however, a host of large-scale projects such as the Lancang-Mekong riverway, the KunmingBangkok Highway and customs clearance facilities were initiated by Yunnan without any advance reporting to Beijing. The scope of Yunnan’s external authority was at the time even envied by some foreign provincial officials from federal countries. In order to receive central government resources, they lobbied Beijing together and once local policy was nationalised, all sides benefited. Recently, the role of Yunnan province has been strengthened even further by the global response to the Buddhist violence against the Rohingya. By imposing sanctions and attempting to have Myanmar’s leaders put on trial in international courts, the West has pushed Myanmar into the arms of the Chinese. The Chinese government

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exploited the situation to its fullest and in fact, as said by Lu Guangsheng and other scholars (2017), limited the negative impact of the democratic transformation that flamed anti-Chinese sentiments (Lu, Feng, Zhang 2017, 110–114). Moreover, in 2018, Myanmar signed up to the Belt and Road Initiative, and in January 2020, Xi Jinping visited Myanmar and signed more than 30 agreements. In this context the government in Kunming, apart from managing cross-border governance and lobbying the central government, is cooperating with other provinces to promote the positive image of China with the Kunming government acting as a public diplomacy player. The provincial government reports reflect the changes in Yunnan’s role under the BRI. As further discussed in the chapter, the local authorities concentrated more on the relations with neighbouring countries like Myanmar, Laos and Vietnam rather than concentrating on local cross-border governance. 2.3.1. Local government’s perspectives on the Belt and Road Initiative The creation of the BCIM EC by people ‘on the ground’ in Yunnan illustrates the critical role of provincial institutions in shaping China’s policy towards South and Southeast Asia. Fourteen years of lobbying has allowed the province to nationalise the BCIM EC and has changed the central government’s perspective on China’s relations with Myanmar. In this case, paradoxically, the natural allies of Chinese local government policymakers are those in Myanmar. The provinciallevel scientific bodies, institutions, business associations, think-tanks and other relevant institutions from India and Bangladesh have all been calling for closer regional economic cooperation and integration (Senz 2007). In December 2013, after the BRI was announced in Astana, the governments organised the first meeting of the Bangladesh-China-India-Burma Economic Corridor Joint Working Group in Kunming and signalled the importance of the initiative as national policy. The meeting formally established a mechanism for the governments of the four countries to promote economic corridor cooperation. In the same month, Yunnan University, together with the Province Indian Ocean Research Group of the Propaganda Department of the Yunnan Provincial Committee of the Chinese Communist Party (CCP) and the Academy of Social Science, organised a conference on Yunnan’s initial response to the Belt and Road Initiative. First, the meeting declared the Yunnan province had contributed to ‘the new round of China’s opening up and neighbourhood diplomacy’ and was to be part of the national strategy of reaching the Indian Ocean (Summers 2019, 7–8). A further stimulating signal was given by the Prime Minister Li Keqiang, and by discussing the BCIM EC in the governmental report (2014), pushed the Yunnan provincial government to be an active promoter of the initiative as part of the Belt and Road Initiative (Li 2014). By acting quickly, the government in Kunming hopes to utilise its opportunity and position itself as the ‘front line’ area (qian yan 前沿) for the next round of opening up and reforms. In fact, this narrative followed Hu Jintao’s decision in 2006 to make Yunnan a bridgehead in China’s foreign policy as well as Xi Jinping’s promoting of the province as a ‘radiation centre’ (or ‘pivot’) in January 2015. The new language is reflected in

The bridgeheads’ actions under the BRI 87 the immediate decision taken by the Yunnan Provincial Government to establish a group for the construction of a pivot for China’s actions in South and Southeast Asia. The body was chaired by the governor, the deputy governors were deputy leaders, and 45 provincial-level departments were involved. The key tasks were to coordinate and promote the Belt and Road Initiative with the Yangtze River Economic Belt Construction, and to be the radiation centres for South and Southeast Asia (Chen 2017). Furthermore, being part of China’s peripheral diplomacy, the role of Yunnan was recognised by the central government’s document ‘Vision and Action’ (2015) (Summers 2019, 6). The document declared that the central government ‘should make good use of the geographical advantage of Yunnan Province, and advance the construction of an international transport corridor connecting China with neighbouring countries’. As mentioned, the province should be mainly involved in the GMS, and make the region a pivot for China’s opening up to South and Southeast Asia. Interestingly, before the official document was published (28 March), the party secretary of Yunnan province, Li Jiheng, officially named the province as a pivot (radiation centre) for China’s opening up to South and Southeast Asia (Li 2015). In the year in which Xi Jinping named Yunnan a ‘radiation centre’, the government produced dozens of promises, documents and regulations. In March 2015, the government in Kunming by praising Xi Jinping’s inspection in Yunnan presented future engagements under the BRI. Not only was the go out strategy mentioned by the local governments but Yunnan also presented itself as the hub for products made in the inland provinces (YnGov 2015). The role of the middleman (intermediary), if successful, would bring unification inside China and the provinces by identifying opportunities and incentives to cooperate. Chen Hao, the party secretary, saw that the possible investment projects sponsored by companies, especially SMEs from Shanghai and Guangdong and cross-provincial development (kuayue fazhan 跨越发展), would play a critical role for future projects under the Belt and Road umbrella. Major projects supported by national policies under the Belt and Road allow the province to leave behind decades of isolation and to upgrade its connectivity with its southern neighbours as stated in documents issued by the State Council. Apart from Beijing’s statements, further documents were released at the provincial level in August 2015: the “Opinion on the Implementation China’s Radiation Center for South Asia and Southeast Asia and the ‘Plan for Building a Radiation Center for South Asia and Southeast Asia in China (2016–2020)” (YnGov 2015). The documents, similar to those at other local levels, clarified the development goals and basic ideas, focusing on the construction of regional economic and trade, scientific and technological innovation, financial and cultural centres. The provincial policymakers declared they would develop Yunnan as a new ‘economic growth pole’ in southwestern China and make it the catalyst for China’s border area development. As stated in provincial documents, Yunnan has five major goals. First, developing a regional economic centre by utilising its position between the Pacific and Indian Oceans. Second, to eliminate the infrastructure bottleneck and promote further infrastructural investments. Third, to construct an open economic system. Fourth, to create effective

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public services. Finally, to build pragmatic relations with neighbouring countries. International cooperation is seen through the prism of cross-border cooperation with economic and industrial zones bringing the stability of practical cooperation as part of China’s go global plans. The local people’s congress pointed out that all bodies at the provincial level ‘would “fight” for building an effective radiation centre’ (Ren, Li 2018, 3–4). The municipal governments took a similar approach. As stated in the 13th FYP, the city of Kunming presents itself as a ‘radiation centre’ for South and Southeast Asia, as well as an essential part of domestic development. The promises and plans delivered by the provincial and municipal government echo the language and argument behind naming itself as a ‘checker’, an ‘engine’ and a ‘strategic connection point’ in the strategic plans of the central government. This new vocabulary used by central and local government reflects limiting negative connotations of a bridgehead’s militaristic meaning. By using the softer international city, centre, door and hub it is hoped that these terms will stimulate positive thinking towards China, with Southwest China as a starting point (Li 2016, 150–151). The discussed vocabulary and argumentation of generating more unification inside China, and Yunnan as an intermediary in China’s opening up, reinforce the argument made by Yuan Weiping, Yan Xiaoyan and Cao Honghua (2018). They emphasised that the efficiency of an export-oriented economy is only possible by ‘internal and external drive’. The critical factors in this project were local connections and balanced cooperation. More to the point, it sees the BRI as part of ongoing reform in China that should ultimately drive domestic integration and change the export-led economy to a consumption-based model (Yuan, Yan, Cao 2018, 130–131). In order to ensure a financial mechanism for all declared projects, the provincial government (November 2016) passed a regulation on creating a financial centre for business activities in South and Southeast Asia. Interestingly, the division of competences was only distributed between provincial- and municipal-level financial bodies and branches without having a unique role for central institutions. The document does not mention special money transfers for BRI projects and clearly shows that central government ceded the financing of the go global policy to provincial institutions (YnGov 2019a). The second illustrative example of provincial and municipal adoption of the BRI is derived from the analysis of the reports, in which local policymakers present their readiness for cooperation with the central government. The BRI, as presented by the policymakers in Yunnan, was partially in recognition of the needs of western China, together with the ‘Open Up the West’ policy that provides stability and reduces disparities inside China itself (YnLGR 2015–2020). In 2015, the governor Chen Hao declared that Yunnan under the BRI would develop cross-border economic cooperation, for example in Ruili or Hekou, and by following the official statement of Xi Jinping, position itself as a ‘radiation centre’. Moreover, the provincial government hopes to utilise all central government policies referred to in the BRI: China-Myanmar Economic Corridor, China-Indochina Economic Corridor and local government cooperation platforms. What was also important was the reference to a domestic integration platform based on the Yangzi River

The bridgeheads’ actions under the BRI 89 Economic Belt, and in this regard Yunnan-Shanghai mutual assistance cooperation (YnLGR 2015–2020). This dual provincial-level cooperation is part of the duikou hezuo model, when the richest and more developed regions of China are asked to provide necessary assistance to poorer provinces. Looking into the cooperation with Shanghai and other developed provinces, Yunnan hopes to position itself as an intermediary and play the role of a platform for the economic expansion of business inside China (Interview, Kunming 2019). Nevertheless, the government also identifies major obstacles in delivering effective policies, mainly derived from non-traditional security threats and in minority cadres that ‘have a weak sense of reform and innovation, and are not active in daring to think and daring to act’. In these unstable cross-border areas (72.6% of Sino-Myanmar border is in the hands of militant groups on the Myanmar side), the critical issue is to bring political stability because development can only take place in a stable environment. Another problem is caused by the competing forces in Upper Myanmar, for example in the Kokang region, where Chinese citizens of different ethnicities are recruited and retired People’s Liberation Army soldiers are hired (Zhang Xiaowei et al. 2018, 30). Apart from these challenges, the announcement of the Belt and Road Initiative is recognised as a stimulus for the local authorities in their efforts to build effective cross-border cooperation. In the governmental reports already mentioned, the number of issues regarding the yanbian 沿边 border dropped from 31 in 2015 to 11 in 2019. The context of discussing cross-border cooperation has changed over time. Interestingly, between 2013 and 2017, the governor of Yunnan province tackled the issue of cross-border cooperation by announcing special projects such as the Ruili-Muse Demonstration Zone (RMDZ), advocating for special tourist zones across the border, and discussing non-traditional security threats. The RMDZ’s importance is underlined by the fact that it is located at the crossroads of South and Southeast Asia and provides stability. For China’s energy security a 793-km gas pipeline and 771-km oil pipeline run through the region. However, in Yunnan’s 2018 governmental report, Governor Ruan Chengfa omitted to mention the cross-border cooperation with the city of Ruili. He stated the importance of cooperation between Yunnan province and neighbouring countries with priority given to the relations between province and the state. The limitation of the discussions on small-scale projects has resulted in two processes. First, the ongoing centralisation process limits autonomy in dealing with cross-border issues with central government managing border cooperation. Against this backdrop, the ongoing centralisation process is reflected in the disappointment of the central government, and in the fact that Yunnan province failed to meet quotas and targets imposed in regional development plans. Second, it might say that only talking about the cooperation with neighbouring countries strengthens the role of Yunnan province as a bridgehead in China’s foreign policy. In order to attract more incentives, local officials began to focus less on border trade and talk more about an increasing openness with Southeast Asia and relations with the countries along the Belt and Road (YnLGR 2013–2019). Moreover, as the national policy states, urbanisation with the Yunnan Dianzhong New Area (YDNA) is seen as critical

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in developing economic development (YnLGR 2015–2020). The government positioned the province as a bridge hub (qiaoliao niudai 桥梁纽带), initiated the hub’s internationalisation of RMB, located industrial parks in neighbouring countries, promoted productivity cooperation and finally brought the two markets of the BRI and YREB together in order to utilise them to the fullest. More to the point, the opportunities of organising the China-South Asia Expo, promoting the province during China Import Fairs in Shanghai, would be utilised to promote products from Yunnan province (YnLGR 2015–2020). In the year after the 40th anniversary of Deng Xiaoping’s reform and the country’s opening up, the Yunnan governor only once mentioned the BRI. He declared that the BRI is part of the reform and opening up of the country with Yunnan as a ‘radiation centre’ playing an important role in Chinese policy (YnLGR 2015–2020). The Kunming municipal government’s attitude to the BRI is even more striking. Since 2013, the mayors of the city have referred to the BRI a mere three times. The first time it was recognised was in 2017 when the city was presented as an important node city of the Belt and Road Initiative and at the forefront of the country’s opening-up strategy. Trade, investment and energy security were seen as critical for the city’s development. In the area of internationalisation, the growing number of foreign consulates, international sister city agreements with 21 cities, including Kolkata and South Asia and Southeast Asian sister cities, made Kunming a leader in sub-national cooperation, and in this regard was China’s regional leader for cooperation with South and Southeast Asia. The city declared that it would play an active role and integrate the Belt and Road Initiative as well as the national strategy of the Yangtze River Economic Belt into its economic policy, build a new structure of opening up to the outside world, be a leader in establishing and maintaining cooperation between Yunnan and Southwest China and the south and cooperate closely with key regions such as Beijing, Tianjin, Hebei, Yangtze River Delta, Pearl River Delta, Chengdu and Chongqing (KmLGR 2015–2020). As presented in 2019, what was critical for the further development of the city was the construction of an international optical cable and communication infrastructure for South and Southeast Asia, the completion of data exchange centres and small call centres in order to promote the third pillar of the economy. Furthermore, the government said that it would actively participate in the construction of new industrial zones, deepen exchanges and cooperation with the ASEAN Free Trade Area, the Pan-Pearl River Delta region and ten cities in Sichuan, Yunnan and Guizhou. The newly established friendship relationships with Jakarta and Antalya, as examples of the provincial go global strategy, were also mentioned by the mayor of the city (KmLGR 2015–2020). 2.3.2. Yunnan’s actions: money, perceptions and politics The provincial government’s declarations begin to encapsulate Yunnan’s economic and political policies. The former is mainly directed towards the energy sector and hydropower construction, along with inland navigation projects, crossborder economic and industrial cooperation and investment in the agricultural sector, the latter mainly driven by public diplomacy that limits anti-Chinese

The bridgeheads’ actions under the BRI 91 sentiments and provides a political platform for ceasefire talks between the central government and militant groups from Upper Myanmar. Additional political actions are based on the relationship between the provincial party secretary and the governor with high-ranking policymakers from neighbouring countries. As discussed by Liu Wei and Lu Guangsheng, the sub-national government activities consist of promoting the construction of economic corridors by creating an appropriate political atmosphere (non-economic means), improving the geopolitical climate for cooperation and supporting central government initiatives in the Southeast and South Asia (Lu, Liu 2017, 69). The first project of strategic importance in which Yunnan took part was the Lancang-Mekong Channel. With the encouragement of the Yunnan government, China, Laos, Myanmar, Thailand and Thailand signed the Lancang-Mekong Commercial Navigation Agreement (LMCNA 2000). The agreement identified four Chinese towns, Simao, Jinghong, Tonghan and Guanlei, two towns in Myanmar, six in Laos and one in Thailand as major pivotal towns along the river. Moreover, the document listed the responsibilities of the local government: organising Joint Committee on Coordination of Commercial Navigation on Lancang-Mekong River (JCCCN) Meetings, and representing China in meetings (Communications Department of Yunnan Province and Navigational Affairs Bureau of Yunnan Province). However, the mismatch in the countries’ respective governmental delegations is stark. The Chinese government is represented by the provincial level while other member countries send delegates from their central governments. Moreover, Yunnan is the only Chinese member on the Council of the Mekong Institute with the deputy governor of Yunnan normally tasked with leading the entire Chinese delegation at its annual conference. This political asymmetry shows how the system in China is decentralised, and illustrates how Yunnan acts as the intermediary between Beijing and its southern neighbours. This intermediary position works when the central government invests money, for example 100 million RMB in Yunnan-managed projects as stated in the ‘Lancang RiverMekong International Shipping Development Plan (2015–2025)’, which the provincial government promised to fully utilise. In order to increase the number of vessels (substantial tonnage) from 80 tons to 400 tons, money would be invested in the construction of ports, and the dredging of 890 kilometres of rivers from Simao to Luang Prabang ny 2025 (JCCCN 2015). These measures reflect Yunnan interests; however, since the ‘Sanya Declaration on Langcang-Mekong Cooperation’ was implemented, Yunnan’s actions are split between different ministries. As Lu Guangsheng and Jin Zheng (2017) said, these responsibilities are allocated to different Beijing government bodies. The MFA manages bilateral negotiations, the NDRC is responsible for economic projects, foreign development aid is in the hands of the Ministry of Commerce and the Ministry of Public Security governs minority issues. The competing administrative bodies in the Langcang-Mekong region creates multi-level dilemmas for the government in Kunming (Lu, Jin 2017, 66). However, this division of responsibilities among the ministries is somewhat contradicted by the investment projects connected with advancing the inland navigation infrastructures of the Irrawaddy River. Apart from the frustration created

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by the Myitsone investment problems in 2011, the Chinese side, from the national governmental level to large state-owned conglomerates, is still seeking further opportunities to invest in very unstable areas. Inland navigation, as a transport corridor, is seen as safer, more convenient and more profitable than road transportation. But in order to make practical usage of Banmaw’s inland port facilities and use the Irrawaddy River to the south, the prefecture government of Dehong, along with the city of Ruili, is responsible for managing road construction on the Chinese side, as well as assisting in infrastructure projects in the Kachin and Shan states on the Myanmar side. As identified by the prefectural government, there are three roads near the border with Yunnan: to Tengchong, Longchuan and Ruili, while the most convenient road to Banmaw is from Longchuan (Zhangfeng). Plans for road construction, according to Chinese sources, were rejected by the Myanmar government. In such a situation, Yunnan’s local government lobbies in Myanmar and formulates other proposals with new incentives. When the Longchuan-Banmaw problem appeared in 2014, the Yunnan Provincial Development and Reform Commission took the lead and conducted another technical inspection and investigation of the Irrawaddy River. Following a positive assessment in March 2015, the CITIC Group’s research team inspected the ChinaMyanmar Irrawaddy River-Land Intermodal Transport project and considered it to be the most effective solution to promote connections between Myanmar and China. The appearance of the CITIC Group, a large conglomerate from Beijing, was no coincidence. In the following year, subsidiaries of China’s CITIC Group Corporation, including the China Harbour Engineering Company, won contracts for two major projects in the town of Kyaukpyu which would open a route to the Bay of Bengal (Poling 2018). But as has been said before, not all projects are sponsored by centrally distributed funds and provincial governments face the dilemma of how to fulfil obligations that have been imposed upon them. In order to demonstrate its effectiveness, local policymakers have been looking to cooperate with local enterprises and form a public-private partnership investment model to encourage enterprises to invest in China-Myanmar cross-border road construction projects. An example of this is the Myitkyina road project between China and Myanmar that was jointly led and financed by the Yunnan provincial government, Baoshan city and Tengchong city; in the Myanmar-India section of the Myitkyina-Bansao Highway project, the local governments of China and Myanmar cooperated with enterprises and offered a tender using the build-operate-transfer mode (BOT) which Burma Northern Royal Jade Ltd won. A similar situation occurred when the Yunnan local governments supported by private funding started the Zhangfeng-Banmaw and Nongdao-Banmaw road projects. This example, however ambitious, means that prefectural governments are facing a depletion of their financial resources. And it inevitably questions arise concerning who pays for what, and who is responsible for what? The local governments, in particular, no longer have sufficient access to credit and other financial resources, and as a result, hoard resources and pass the financial costs onto their suppliers. As acknowledged by Yunnan province leadership, Myanmar’s

The bridgeheads’ actions under the BRI 93 borders have experienced reduced traffic volumes due to a lack of funds. The bridgehead government tries to demonstrate its goodwill, but the current state of affairs remains largely unchanged. This problem is considered important because as Yao Qinhua (2017) said: the comrades in the front line of Yunnan understand that no matter how well the Chinese road facilities are constructed and then unblocked, the roads in Myanmar are not accessible or the conditions are poor, which will affect the efficiency of the Chinese roads and cause vehicles to wait in transit. Localities in Yunnan province summarised the status of the China-Myanmar border roads in one word: difficult. Under the circumstances, it would prove advantageous to actively help local governments in Myanmar to build border highways. In other words, taking the narrative of the BRI might help local governments to receive more funds from provincial-level governments, and in turn, provinciallevel governments from the central government (Interview, Kunming 2019). By only referring to ‘opening up’, the municipal government does not accept being tied to the excessive expectations imposed by the central government, as exemplified by a local NDRC plan which stated that by 2020 the local government should have done USD 50 billion in foreign trade (YnDRC 2016). The municipal government, due to its economy being similar in structure to bordering countries, predominantly based on agriculture, has preferred to cooperate with domestic partners such as the more developed realms in the coastal areas of Shanghai and Guangdong (Interview, Kunming 2019). The third important role performed by the local government is related to the internationalisation of Chinese currency. Yunnan’s government is responsible for organising specialised training for local organisations from Myanmar, Laos and Vietnam, providing knowledge on China’s currency and banking system, supporting scientific bodies dedicated to studying development in the GMS, the BCIM Economic Corridor and cross-border cooperation, as well as promoting Chinese culture. As identified by Lu Guangsheng and Yi Zhu (2017), Yunnan’s government involvement in cross-border governance is about establishing a model that widens cooperation between China and ASEAN. Moreover, the local banks and the People’s Bank of China branch in Kunming steered trade policy towards transaction settlements in RMB, with 95% of border trade being settled in Chinese currency. As indicated by the Chinese side, the domination of RMB facilitates trade but also infiltrates the markets of partner countries. RMB has become somewhat of a de facto currency in the border areas of Laos, Myanmar and Vietnam. The RMB circulation area generally covers 70–180 km inside the countries’ borders but in some cases can extend as far as 300 kilometres. In Shan state the RMB has actually become the de facto currency, replacing the Burmese official currency, the Kyat. The Chinese currency may bring stability to the border regions and minimise anti-Chinese sentiment on the micro-scale, as well as controversies over sovereignty with Myanmar, Laos and Vietnam. Cross-border trade between Vietnam, Laos and China is settled in RMB and, in a very organic way,

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rearranges national borders and creates space for Chinese domination (Interview, Hanoi 2018). Furthermore, the agricultural sector has become an essential part of Yunnan’s activities in Myanmar. The very first cooperation was initiated by the border prefecture of Lincan county and Shan state on the Myanmar side in 2012 when both sides signed a memorandum of understanding on agricultural cooperation with 200,000 hectares of land (Lu, Liu 2017, 107). Another example of border prefecture activity can be seen in Baoshan city. In 2019, local media reported that ‘as a result of the Belt and Road’, 22 enterprises from the city had invested in a plantation sugar cane, banana, rubber, tea, corn, rice and cassava, with 40,000 hectares of arable area, and had hired between 30,000 and 50,000 Burmese workers (People’s Daily 2020). Further impetus was given by the provincial government which encouraged local companies to go global. In 2015, Yunnan established the China-Myanmar Agricultural Technology Training Center and provided Myanmar technical personnel with agricultural technology training concerning livestock, poultry breeding technology and new technologies in rice cultivation. The intense activities, sponsored by the local government, allowed Yunnan companies to ‘go Myanmar’ and invest in joint projects. In 2017, the Yunnan Agricultural Reclamation Group and Myanmar Fuxing Brothers Group signed an agricultural industry cooperation agreement for pilot projects in Yangon, Rakhine State, Keng Tun and Myitkyina (Xinhua 2018). As mentioned already, the provincial government’s role is to provide soft power through the use of diplomatic tools. In this context, the need to limit anti-Chinese sentiments in ASEAN, and in Myanmar, in particular, plays a critical role. In 2016, a group of scholars from Yunnan University published a report from comprehensive public opinion surveys in Myanmar. According to the surveys conducted in Myanmar, the general public had a negative view of China. First, the Burmese preferred to do business with Americans (approx. 87% in cities, and 83% in the countryside), while only 43% of people in cities and 40% in the countryside wanted to do business with China. Moreover, a majority in Myanmar regarded relations with the United States as more important than those with China. The importance of relations with China failed to exceed 15%, while relations with the United States was close to 60%. Interestingly, the Kachin people and Shan people (two states bordering China), with 35% and 27% respectively, perceived the United States’ role as being significant, while only 8% and 15% respectively saw China’s role as being significant (Kong Jianxie et al. 2016, 93–101). Although Chinese investments benefit the Myanmar government, the impact on the Myanmar people and their perceptions are quite different. People were silent during military rule but started to protest against the projects after state power was transferred to a new government (Khine Tun 2015, 183). Anti-Chinese sentiment is also a product of poor management skills by Chinese companies investing in Myanmar. The lack of social responsibility, according to Lu Guangshen, is a critical factor. People in Myanmar complain about ‘only governmental deals’, deals under the table, investment that failed to help the common people, corruption

The bridgeheads’ actions under the BRI 95 involving Chinese companies, land exploitation and job placements for Chinese workers only (Lu 2016, 49–51). Other negative images are of wealthy Chinese people with their occasional ostentatious behaviour, the aggressive business practices of wealthy Chinese investors, ethnic Chinese Kokang and Wa drug warlords, and military robber barons who have made wholesale acquisitions of real estate and other property. On the other hand, the Chinese business community in Myanmar provides the necessary skills and knowledge of how to operate in international markets. The use of China’s global network has allowed Myanmar businesses (Bamboo network) to develop in New York, Los Angeles and Taiwan as well as establishing associations in Chinese cities in Guangdong, Guangxi, Yunnan, Beijing and Xiamen. Therefore, the community might play a role in China’s soft power and strengthen the economic ties between both countries. Despite these positive factors, China’s influence in Myanmar may be regarded as counterproductive, and it can lead to friction in bilateral relations. The Chinese behaviour of being superior to the other is a widely held opinion in some quarters of Myanmar: ‘We are the Chinese kitchen, they take away what they like and leave us with the rubbish’ (Egretean, Jagan 2013, 245). The Chinese have even been accused of following Great Britain’s colonial model. As discussed by Lu Guangsheng of Yunnan University, this perception crystallised after the political transformation in Myanmar, when anti-Chinese sentiment became part of the democratic transformation and political discourse in the battle for votes. Apart from dealing with the Chinese overseas and trying to manage anti-Chinese sentiment, the Yunnan provincial government is dealing with the legal status of the Kokang people. Since the border is porous, people of Chinese origin and without Chinese citizenship look to Mainland China for help. This issue can be illustrated by events in 2009 when the Burmese army broke a 1989 ceasefire agreement and invaded Kokang territory. Quickly after central government actions, the provincial government needed to deal with 37,000 refugees of Chinese origin (Egretean, Jagan 2013, 282–283). Furthermore, the Yunnan government is responsible for managing nontraditional security threats including influxes of refugees, illegal drug trafficking and providing a platform for negotiations between opposing forces in Upper Myanmar. Even though China and Myanmar signed an agreement on border management and cooperation (1997), which included responsibilities for local administrations and annual consolidations, because of the border’s porousness, there were still a number of problems. The key issue of governance in the area is that there are 16 minorities of the same origin living on both sides of the border with differing legal statuses. This fact indicates the relatively low effectiveness of implementing central or provincial government regulations and laws. The diversity of minorities has created a zone of perpetual conflict and humanitarian crises: in 2015 an armed conflict in the Kokang Special Zone China created more than 60,000 refugees, and in 2017 fighting between Kokang rebels and Myanmar troops in Laukkai in northern Shan forced 20,000 refugees to cross the border into China, with roughly 1,600 residents seeking refuge in the town of Lashio (Song

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Lili 2017, 466). In fact, the provincial government is responsible for organising essential assistance for refugees in times of conflict. For the time being the Yunnan government creates safe areas, 20 km away from the border, and provides medicine, food and emergency tents (Interview, Kunming 2019). Apart from managing the humanitarian crisis on a national and prefectural level, governments need to combat rising inflation and real estate prices. In 2015, after the conflict in Kokang, the town of Nansan experienced food price increases of over 500%. The Zhenkang County Development and Reform Bureau attempted to regulate the market but without the appropriate funding from the provincial government, it was to no avail (Li Cansong et al. 2015, 570). Cross-border tensions, however, is not the only problem local authorities have to face. As 25 cross-border counties are mainly inhabited by minorities, they are targeted for recruitment by external forces. Kachin, for example, called for a national liberation war under the slogan ‘Kachin is one family under heaven’. Another illustration of this issue is Wa state, which borders the cities of Langcang and Pu’er, and mobilised Chinese citizens in order to create an independent ‘Big Wa state’. This provides a platform for a three-way competition: a vertical contest between China and militant groups along the border, between these militant groups and the central government in Myanmar whose intent is to build the nation-state, and a horizontal competition between competing militant groups in Upper Myanmar. As stated in the 1997 agreement between China and Myanmar, the local governments ‒ provincial, prefectural and county levels ‒ are responsible for monitoring and maintaining law and public order in the border areas and cooperation in the prevention and suppression of transnational criminal activities. In this regard, Kunming, as China’s peripheral and border diplomacy (guojing waijiao 过境外交), is a facilitator of negotiation processes: in November 2018, Myanmar government’s Peace Commission and the three armed ethnic groups, which comprise the Northern Alliance, reached an agreement to reduce clashes in the Kachin and northern Shan states (MMTimes 2018); and in December 2019 between the Kachin Independence Army, the TNLA, Arakan Army (AA) and Myanmar National Democratic Alliance Army with the government’s National Reconciliation and Peace Center (NRPC) (Nan Lwin 2019). Moreover, the provincial government provides the necessary training for Myanmar militia, and oversees the Myanmar police. Kunming-based think-tanks and a university unit provide the necessary analysis and reports for the Chinese Ministry of Foreign Affairs when the need arises, for example, for China’s special envoy, Sun Guoxiang, who is directly involved in the peace and reconciliation process in Myanmar. Interestingly, the limited involvement of Beijing in the Upper Myanmar peace process and by ceding responsibility of facilitating negotiations at the local level, practically allows the central government to look beyond these critical problems on a state level. Although Beijing might not wish to be involved in what it perceives as local issues, cross-border governance has been exposed to international influences. As Chinese academics such as Lu Guangsheng and Wang Zichang, have observed, the United States and Japanese non-governmental organisations are incredibly

The bridgeheads’ actions under the BRI 97 active in the border areas. In Kachin, American non-governmental organisations, predominantly Christian organisations, provide financial help to militant groups across the border while Japanese NGOs, by promoting and supporting Buddhism, limit Chinese soft power. The situation is even more complex when we include the post-GMD legacy, the history of the Yunnan Anti-communist National Salvation Army and Taiwanese activities in Upper Myanmar. Taiwan is operating in the areas of education, military training, for example in Wa state, providing financial aid and arming the region with military facilities. Of particular concern to Beijing is the possibility of militant groups joining Taiwanese political organisations which compete with incentives given by the People’s Republic of China and limit business opportunities for merchants from the mainland. Yunnan’s internal recognition by Beijing can be seen by the fact that the central government has allowed representatives from Yunnan to both become members in national delegations on various international occasions as well as meeting Myanmar’s leaders who visit Kunming on an annual basis. Not only has the provincial secretary and governor met their Myanmar counterparts but also State Counsellor Aung San Su Kyi in three consecutive years: May 2017, June 2018 and May 2019. During the meetings Chen Hao ensured measures for building stability in the border areas between both countries: strengthening BCIM EC cooperation, building Sino-Myanmar connectivity, strengthening energy cooperation and promoting cooperation in the fields of education, health care and culture (YnFAO 2018). Looking into the geographical density of international meetings, the most significant portion of provincial-level activities are aimed at Myanmar, Laos, Vietnam and Thailand. These political interactions go hand-in-hand with foreign trade, primarily targeted at Myanmar but also Vietnam, Thailand and Laos. The growing ranks of Myanmar’s delegations has also been reflected in provincial governmental reports when small cross-border projects have been discussed less in the BRI period. The dynamics reflect two major factors. First, Yunnan’s geographical location, and second, as Ma Jiali (2014) observed, Yunnan’s friendly atmosphere has helped to soften the positions of decision-makers from India and Burma: ‘In Beijing, they tend to adopt confrontational and sometimes aggressive positions. In Yunnan, the atmosphere is markedly different. People from other countries are more neutral and friendly, and they can feel a more harmonious atmosphere. Things are easier to negotiate here.’ The very natural way in which relations through Yunnan are conducted allows the central government to go beyond relations based only on a party-to-party basis and to avoid a ‘one-sided policy’ towards Myanmar (Li Cansong et al. 2015, 575). A similar conclusion was drawn by Wu Jianmin (2014), the well-known Chinese diplomat, who argued that central government relations, when conducted through Yunnan, mitigates the negative perception of China, and softens the negative impact of ‘China threat’ theories (see Graph 2.4). There are two important factors regarding this international provincial government cooperation: first horizontal competition and dui kou hezuo. This interprovincial competition has produced bureaucratic antagonism, with the attitudes of Yunnan’s officials toward Guangxi being mostly negative. For instance, the academic establishment within Yunnan attributed Guangxi’s growing influence,

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12 10 8 6 4 2

Sri Lanka

2019

Israel

2018

Singapore

Nepal 2017

Bangladesh

2016

Cambodia

2015

Thailand

Vietnam

Laos

Myanmar

0

Graph 2.4 Yunnan provincial government foreign meetings by country (2015–2019) Source: author’s own compilation based on Yunnan provincial International Department webpage www.yfao.gov.cn/ (last accessed 20 January 2020).

over the past decade, in the Mekong subregion to what the Chinese call ‘going through the back door’. But assessing the role of the BRI in provincial foreign trade, the annual provincial data does give grounds for optimism. Over the BRI period, foreign trade only grew with Myanmar and Vietnam and in fact dropped in the cases of Thailand, Malaysia, Indonesia and Laos (YnYearbook 2010–2018). Nevertheless, as an official in the Kunming governmental office said, international cooperation is very complex and complicated. Apart from economic problems, Yunnan is located on the crossroads of three significant civilisations: Buddhism, Hinduism and Confucianism. The cross-cultural governance, crossborder issues and a lack of statehood in Northern Myanmar has meant that Shanghai is perceived as a stable partner with local authorities preferring to cooperate with domestic rather than foreign counterparts (Interview, Kunming 2019). Furthermore Yunnan, as a frontier region of China, has no advantages in terms of capital and technical resources. However, the province does have extensive links with China’s most developed locations, such as Shanghai and Guangzhou, which should be seen as an advantage in future policies towards Southeast Asia. Yunnan, with Shanghai now having established a bureau in Kunming, is exploring potential cooperation and is lobbying for future investment on behalf of Shanghaibased companies especially in the rubber industry (Interview, Bangkok 2020). Another option is to be an intermediary between China and India where Shanghai is considered the centre for India-China trade, and taking into account transport

The bridgeheads’ actions under the BRI 99 costs, Kunming presents itself as an intermediary between the China’s coastal areas and South Asia (Gurudas, Ujjwal 2019). 2.3.3. Managing turbulent areas: cross-border governance in Ruili The practical role in China’s ‘embodied diplomacy’ in Yunnan province is highly dependent on the level of economic, industrial and infrastructural development along the border. With its 4,061-kilometre-long border, the province has 25 counties and eight cities on the borders of Myanmar, Laos and Vietnam, along with six border prefectures accounting for just about the entirety of provincial border trade in this region. However, because the border is porous, there are more than 100 historical and illegal crossing points. In fact, in official prefectural documents, it is the Dehong Minority Autonomous prefecture with Ruili that has positioned itself as a leader and bridgehead in China’s policy towards Myanmar. Sharing more than 500 kilometres of unstable borders with Kachin and Shan state and having close connections with the cities of Lashio, Myitkyina and Mandalay, Dehong provides stability in the Ruili-Muse Border Economic Cooperation Zone, without which policies under the BRI with BCIM EC, China-Myanmar EC and China-Indochina EC strategies would face huge challenges (Mierzejewski 2018). The stability in the border areas is provided by three factors: central political relations, political relations between China and the militant groups in Northern Myanmar and cross-border economic interdependence. The last factor is in the hands of Ruili and crosses border counties. Ruili’s role as a key city for stimulating sluggish economic development in its border region and connecting with neighbouring Southeast Asian economies, began when the city created the Jiegao Border Economic Development Zone in 1991. A further legal framework was created in August 1994 when China signed the Memorandum of Understanding on the Border, which defines border trade: bilateral land has trade and exchanges of goods by border residents between Yunnan and Myanmar. By decentralising and relocating development priority to southwestern Yunnan and its border region, the Chinese government has ‘scaled-down’ administrative decision-making to allow this underdeveloped frontier to catch up. While the nation-state is the primary actor in the tri-actor relationship with its greatest influence being on the direction and balance of mobility in cross-border areas, the (border) city acts as the primary location and vehicle for these movements. In addition, the border city is the direct actor for implementing any national and provincial policies intended to assist border cities to become more prosperous and cooperative with one another. Even more importantly, the border city is the actual engine for economic growth and also serves as a distributor of the benefits derived from new development and greater mobility. A further elaboration on this issue was discussed in 1996 when the State Council in China classified border trade as the exchanging of goods by border residents, with the goods’ value not exceeding a set amount or quality at opening-up points or markets designated by the government within 20 km of the border. The State Council also included in its classification cross-border trade activities between

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Chinese enterprises which are granted operational rights for a small amount of trade in border areas, and enterprises or other trade organisations in the border areas of neighbouring countries. The history of the Ruili economic zone can be traced back to 1992 when the central government announced the cross-border trade zone, and the government in Kunming established the Administration of Border Economy and Trade as the governing body. It accounts for 64% of the total volume of trade between Myanmar and Yunnan Province of China, and 26% of trade between China and Myanmar. There are four national border economic cooperation zones in Ruili, Jingcheng, Hekou and Lincang and another six governed by the provincial government and all are seen as assets that can accelerate the construction of the Kunming-BaoshanMagshi-Ruili Economic Belt and the China-Myanmar Economic Corridor as a whole (YnGov 2019). From the perspective of the Ruili government, its obligations were also clearly defined: build a China-Myanmar border economic and trade centre, be an important international land port that is open to the south-west, an international cultural exchange window and a coordinator for urban and rural development along the border (YnGov 2019c). This allows Yunnan to designate Ruili as a facilitator for RMB internationalisation. Beijing approved a special programme as of January 2004 which stated that taxes on the export of goods under the terms of small border trade in Yunnan settled in cash or through an RMB bank transfer could have 40% and 70% of the amount refunded, respectively (YnGov 2019a). Cooperation between the cities of Ruili and Muse is a testbed for limiting market fragmentation, and plays an incentivising role for people in Upper Myanmar and brings the black market and street bank stalls (ditan yinhang 地摊 银行) under control. These policies were utilised by a local agreement, signed in 2008, between the border cities of Ruili and Muse and allowed for the movement of vehicles between Ruili and Muse, beyond which cargo has to be carried by a local vehicle. For vehicles staying within the Special Export Processing Zone, there is also an exemption in requirements for insurance, and visas for drivers. For vehicles moving beyond Jiegao to Ruili no special licence is required, but insurance must be purchased at a cost of RMB 175 (UNESCAP 2013). Further administrative regulations were issued by the provincial government in Kunming and delegated even more by central government. There are two different organisational models of border governance: state-level zones and provincial governed border zones. Being directly governed by the State Council, the RuiliMuse zone has its own Management Committee of the Border District (bianhequ shili guanli weiyuanhui 边合区设立管理委员会). The committee can establish management institutions and departments according to actual economic and social development requirements, and perform its functions in the name of the provincial government. Then, the created departments can delegate administrative powers for economic and social development to the border areas as stated in the regulations passed by the Yunnan government in April 2016 (YnGov 2019b). There are two issues connected with the practical side of Ruili-Muse cooperation: first, the promoting of self-reliance approaches taken by the Ruili-Muse Cross-border zone and second, trade fluctuation. The first issue is visible in the

The bridgeheads’ actions under the BRI 101 2018 budgetary document of the Ruli-Muse Cross-Border Trade Zone Management Committee in which the government declared self-reliance, without special budgetary subsidies, and no additional funding from central government (RuiliGov 2018). This was despite the fact that central government clearly defined the role of the border city as developing cross-border trade. It is worth mentioning here that the total foreign trade of Dehong Prefecture accounts for 74.25% of total imports and exports from Yunnan Province to the Myanmar border ports, and 49.08% of China’s total trade with Myanmar with Ruili being the border zone’s largest trade port (RuiliGov 2019). Nevertheless, due to the unstable situation between 2014 and 2018, cross-border trade fluctuated between 7.7% and 58.3% . Other issues have also been discussed in Ruili city governmental reports. Due to the fact that 70% of Sino-Myanmar trade is brought in by road transport, the city government is participating in road repairs in Myanmar. In 2017, Ruili stated that assistance worth 50 million RMB had been allocated to the Oriental Highway Co. Ltd for reconstruction projects concerning the Muse-Mandalay highway. Nevertheless, the poor infrastructure, mainly on the Myanmar side, limits options for potential investors that are only interested in the mining and logistic sectors (RlLGR 2017–2019). In 2018, the mayor of the city lamented that however great the enthusiasm generated by the central policy of the Belt and Road was, the local economy still has ‘chronic diseases of traditional industries based on the jade and fruit trade’. Foreign investors are not fully aware of business opportunities that are lacking in four areas: a lack of transformation, a lack of high-end professional talent, a lack of innovative quality and a lack of awareness of responsibility. As the Ruili government recognised, the non-traditional security threats such as ‘smuggling, drug trafficking, gambling, village bandits and village hegemons, and illegal land purchasing all provide a platform for social panic’ and means that social governance becomes less effective (RlLGR 2017–2019). Managing security in border regions that have experienced almost 70 years of continual conflict and is home to a significant number of armed groups remains a challenge. However, the Chinese declared that the present situation was mainly due to weak governance on the Myanmar side. Officials in a Yunnan border county highlighted the fact that while the border remains open and relatively secure, there is little they can do to accelerate economic development or deepen local cross-border relations. The problem is that both economies are relatively backward and are based on similar or the same structures. In fact, they compete with each other, when cooperation should be the priority. A second, even more critical problem, is that Myanmar’s sovereignty over the northern part of the country is fragmented and the state cannot exercise its power (Chen, Stone 2017). The country’s national identity matters and by taking on cross-border projects and making them part of national policy, local governments can attract investment and are presented as a model for the entire country. Moreover, by attaching national importance to these projects, the Myanmar central government places local authorities at the centre of its foreign policy and relations between the crossborder parties. Another important dimension of the BRI for Yunnan is to be an integral part of the central government-sponsored regional integration plans for

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the Yangzi River Economic Belt. Throughout this initiative and its mutual assistance relations with Shanghai, Kunming tries to use its position as the middleman that assists the richer regions and companies’ expansion into Southeast Asia. *** The Belt and Road Initiative stimulates the Heilongjiang and Yunnan governments to take more proactive actions to open and explore external markets. After the initial enthusiasm and optimism, however, the BRI does not necessarily translate into special money transfers, and governments at the provincial and lower levels have been asked to organise funding from non-governmental sources such as BOT and public-private partnership. Moreover, being located in the strategic areas for China’s energy security, provincial governments have been asked to take on the responsibility of stability provider. On the one hand, it appears to be a financially sound project, but bridgeheads do need to utilise their financial resources, investing for example in the agricultural sector, lobby in neighbouring countries and, by improving crossborder governance, provide stability. This view from Beijing, however, contradicts opinions ‘on the ground’. In both cases, the critical factor behind this international outreach has been stimulated by horizontal competition: Heilongjiang with Liaoning and Jilin, and Yunnan and the Guangxi Autonomous Region. Although occasionally challenging and sometimes not in line with Beijing’s strategy, this competition allows provincial governments to win the race for central government resources. Apart from the regional integration in the border areas, these mutual assistance projects further illustrate the challenges in regional integration. Heilongjiang and Yunnan are looking for further cooperation with provinces further afield such as the more developed areas of southern and eastern China. Heilongjiang’s government seeks further engagement with Guangdong and positions itself as the starting point for Guangdong’s ‘go Russia’ policy. Yunnan, by having a municipal office in Shanghai, looks for more advantages in being an intermediary for ‘go South and South-East Asia’ business. Another aspect that both bridgeheads have in common is the paradiplomatical interactions which are based on the nomenclature system. Both governments, however, to a different degree, accept their subordination to the central government and make political and economic promises. In the case of Heilongjiang, the nomenclature system plays a role, and when Lu Hao, the former chairman of the Communist Youth League, was transferred to Beijing from his post in the province, the political subordination to the central government went deeper. As was illustrated in the chapter, both Heilongjiang and Yunnan enjoy the same status of bridgehead. However, a closer look at their respective international activities reveals several differences. Yunnan’s position, for example, is more decentralised than that of Heilongjiang. Another contrast between the two bridgeheads is the historical continuity of mutual interactions between China and Russia, and between China, Burma, Laos and Vietnam. Compared to Heilongjiang, Yunnan is located only on the crossroads of civilisations, while Heilongjiang stands at the crossroads of civilisations and empires coupled with a very strong sense of nationhood and ethnic identity. This is significant; and Beijing needs to adjust the level of paradiplomatical activities delivered by provincial governments, especially those with land border areas.

The bridgeheads’ actions under the BRI 103 Apart from the historical aspect, another difference can be found in the asymmetry in the relations. The less autonomous position of Heilongjiang’s can be seen in Beijing’s grand planning. Talking to the Russian side is only possible through the highest authorities of the central government, while managing relations with Myanmar is more decentralised. This is illustrated by the seniority of diplomats visiting both regions. In Harbin, the provincial government met the Russian Federation’s deputy prime minister, while Kunming was allowed to host visits from Myanmar’s president, heads of parliaments and state councillors. As was previously mentioned, along with the BRI as well as Beijing and Moscow’s cordial relations, local government internationalisation is driven to be onesided but at the same time this does not contribute to the local economy. In fact, the central government contributes the most. Once Heilongjiang concentrates mainly on the Russian market and investment in the Russian Far East, the central government is less interested in developing and lobbying for having more prominent access to Russian seaports as it would allow Heilongjiang’s companies to export its products to Japan and South Korea or to the United States. Ultimately, the central government positions the province as a real ‘checker’ in China’s policy towards Russia. Acting as a pawn in China’s policy towards Russia, the local government in Heilongjiang faces a lot of quandaries. Apart from this trade and investment dependency, the mentality of people in Northeast China is seen as part of the problem. As are the expectations from Beijing, the passivity that emerged from being in a landlocked location and the impact of past heavy industry. However, the Russian side also has a number of issues: the lack of professional skills, a lack of political will, corruption (as mentioned by the Chinese about local Russian governments), no collective thinking by Russian people, a lack of long-term vision and the promotion of ‘China threat’ theories. Moreover, because the Russian Far East’s purchasing power is relatively low, Chinese companies cannot find a sophisticated market for their products. In other words, the Chinese need to have smooth access to Russian ports in the Far East rather than looking for a market in a country that is far less developed than China, especially across the border. Contrary to what is expected in Beijing, Heilongjiang cannot persuade Russia to have closer cooperation with its southern neighbour. Being highly dependent on relations with the central government, Heilongjiang cannot utilise its role as bridgehead to the degree that Yunnan province does. Located in the southwest of the Hei-Tengchong line, the Chinese province of Yunnan has more licence to control its relations with Southeast Asia. The first advantage is that because there is no asymmetry between Yunnan and the countries in Southeast Asia, it allows the central government to cede some of its responsibilities to the province. But the situation in Yunnan is slightly different to Heilongjiang. Yunnan is seen by Beijing not as a typical checker but rather as a province that brings stability and is a reliable partner in unstable cross-border areas. One of Yunnan’s most important responsibilities is to manage the humanitarian crisis caused by the conflict in Upper Myanmar, and host ceasefire talks between the competing forces in the region. The second difference between the

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two bridgeheads is that investment in Myanmar is more decentralised than that of the Russian Far East. This could be because people living across the border are of the same origin, and, as consequence, are able to communicate with each other more effectively. Moreover, Yunnan as part of Yangtze River Economic Belt is urged to cooperate with neighbouring provinces and to utilise the mutual assistance platform with Shanghai that might benefit the economic development of Yunnan province. Having a lack of access to a seaport, especially as the province is competing with Kunming Guangxi AR, the most important aspect of Yunnan’s international activities is to be an intermediary in CITIC investment in Myanmar and through these means have access to a seaport in Kyaukphyu. However, the key advantage of Yunnan’s position in China’s foreign policy is the asymmetrical relations between China and Myanmar and other Southeast Asia countries.

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The bridgeheads’ actions under the BRI 111 Zone for Integrated Development and Joint Promotion of Ecological and Environmental Protection]. Accessed March 3, 2020. www.xinhuanet.com/2020-01/07/c_1125431060. htm. Yang Lan. 2020. Yidai yilu changyi yu Eluosi yuandong kaifa zhanlue ronghe de lujing [The Integration of the “Belt and Road” Initiative and the Russian Far East Development Strategy]. Accessed April 14, 2020. www.ciis.org.cn/2020-04/01/content_41110707. html. Yao Qinhua. 2017. “Zhong Mian hulinahutong xianshi yu qianjing fenxi yi Yunnan jishu sheshi jianshe wei shijiao [China-Myanmar Transportation Interconnection Status and Prospect Analysis from the Perspective of Yunnan Infrastructure Construction].” Shehui kexue [Social Science], no. 5: 25–37. Yi Huiling, Li Lingyan, Lu Chunyue. 2019. Zhongguo dongbei lao gongye jidi zhenxing yu Elusosi yuandong kaifa liandong xiaoying yanjiu [Research on the Joint Effect of the Revitalization of Northeast China’s Old Industrial Base and the Russian Far East Development]. Dalian: Dongbei caijing daxue. YnLGR. 2015–2020. Yunnan Local Government Reports. Accessed May 12, 2020. http:// district.ce.cn/zt/2020/zfgzbg/index.shtml. YnGov. 2015. Zhonggong Yunnan sheng wei guanyu shenru guanche luoshi Xi Jinping zong shuji kaocha Yunnan zhongyao jianghua jingshen chuan chu kuayue shi fazhan luzi de jueding [The Yunnan Provincial Party Committee’s Decision to Implement the Spirit of the General Secretary Xi Jinping’s Investigation of Yunnan’s Important Speech and Break Through the Path of Leapfrog Development]. Accessed May 10, 2020. www. yn.gov.cn/zwgk/gsgg/201504/t20150403_179666.html. YnGov. 2019. Yunnan Provincial People’s Government’s Opinion on the Implementation of Several Policies and Measures to Support the Development and Opening of Key Border Areas. Accessed May 2, 2020. www.yn.gov.cn/zwgk/zcwj/yzf/201910/ t20191031_183828.html. YnGov. 2019a. Yunnan sheng renmin zhengfu guanyu jianshe mianxiang Nanya Dongnanya jinrong fuwu zhongxin de shishi yijian [Yunnan Provincial People’s Government’s Opinion on the Construction of a Financial Service Center for South Asia and Southeast Asia]. Accessed May 10, 2020. www.yn.gov.cn/zwgk/zcwj/zxwj/201910/ t20191031_183814.html. YnGov. 2019b. Notice of the Yunnan Provincial People’s Government on Printing and Distributing the Development and Opening Plan of Yunnan Province’s Border Areas (2016–2020). Accessed May 2, 2020. www.yn.gov.cn/zwgk/zcwj/zxwj/201911/t20191101_ 184096.html. YnGov. 2019c. Interpretation of the “Administrative Measures of Yunnan Province Border Economic Cooperation Zone”. Accessed May 2, 2020. www.yn.gov.cn/zwgk/zcjd/ bmjd/201904/t20190404_154969.html. Yuan Weiping, Yan Xiaoyan, Cao Honghua. 2018. “Kua quyu hezuo xia Yunnan goutong ‘lang’ ‘dai’ de quyu zhanlue yanjiu [Research on the Regional Strategy of Communication ‘Corridor’ and ‘Belt’ in Yunnan under Interregional Cooperation].” Jingji wenti tansuo [Discussions on Economic Issues], no. 2: 130–138. Zakharov A., Napalkova A. 2019. Why Chinese Farmers Have Crossed Border into Russia’s Far East. Accessed April 1, 2020. www.bbc.com/news/world-europe-50185006. Zhang Fenglin, Liu Xitao. 2016. “2015–2016 nian Heilongjiang sheng yu Ri Han jingmao hezuo xinshi fenxi yu yuce [An Analysis and Forecast for Economic and Trade Cooperation between Heilongjiang, Japan and South Korea (2015–2016)].” In Heilongjiang jingji fazhan baogao (2016) [Annual Report on Economic Development of Heilongjiang (2016)], edited by Zhu Ning. Beijing: Shehui kexue wenxuan chubanshe.

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Zhang Jinping. 2010. “Ciguo zhengfu waijiao zai ‘xiaotoubao’ kaifang zhanlue Zhong the jueding [The Position of Local Governments’ Diplomacy under the Concept of ‘Bridgehead’].” Xue Lilun [Theory Studies], no. 2: 4–7. Zhang Mei. 2015. “Heilongjiang sheng dui E jingmao xingshi yu yuce [An Analysis and Forecast of the Economic and Trade Cooperation between Heilongjiang and Russia].” In Heilongjiang jingji fazhan baogao (2015) [Annual Report on Economic Development of Heilongjiang (2015)], edited by Qu Wei. Beijing: Shehui kexue Wenxuan chubanshe. Zhou Ping. 2015. “Ludi bianjiang zhili: cong zujizhuyi zhuanxiang qucheng zhili [Land Border Governance: From Managing Ethnicity to Regionalism].” Guojia xingzheng xueyuan xuebao [National Governance Institute Gazette], no. 6. Zou Xiutong. 2014. “Heilongjiang sheng dui E dongbu diqu jingmao qianying fenxi [Analysis of Prospects of Economic and Trade Cooperation between Heilongjiang and Eastern Russia].” In Heilongjiang jingji fazhan baogao (2014) [Annual Report on Economic Development of Heilongjiang Province 2014], edited by Zhang Xinying. Beijing: Shehui kexue wenxuan chubanshe. Zhang Xiaowei et al. 2018. “Mian bei chongtu dui “Yi dai, yilu” zai Mian tuijin de yingxiang jili [The Impact of the North Myanamar Conflict on the “The Belt and Road” in Mynamar].” Shijie dili yanjiu [World Region Study], vol. 27, no. 2: 26–35. Zuenko I. 2020. The Coronavirus Pandemic and the Russo-Chinese Border. Accessed May 11, 2020. http://www.theasanforum.org/the-coronavirus-pandemic-and-the-russochinese-border/.

3

Sichuan and Chongqing Internal integration, Eurasian land bridge and foreign policy

Conducting economic, political and social development in landlocked areas, such as Sichuan and Chongqing in western China, has always been a challenge, but both played a significant role in modern China’s history: Sichuan at the beginning of the Republican era with protecting railway movements (1911) and Chongqing as China’s wartime capital during the anti-Japanese war. During the Mao Zedong era, both were responsible for developing industries in the region in a process dubbed the Third Front, and when Deng Xiaoping took power, Zhao Ziyang continued to promote this famous Sichuan experiment. Nevertheless, as time went on, the competition between Sichuan and Chongqing became increasingly challenging to manage. With this in mind, the central government proposed a new administrative division with Chongqing as a provincial-level municipality under governance from Beijing. Hence, today’s policies should not be perceived as new, but rather as the continuation of Sun Yat-sen, Mao Zedong and Deng Xiaoping’s policies. In 1922, Sun Yat-sen in his book, International development of China, tried to attract Western capital to the western parts of the country. This process of encouraging capital from the West was discontinued as Mao Zedong put forward his self-reliance concept which was included in his policy of the Third Front. However, Sun Yat-sen’s ideas were somewhat restored both with Jiang Zemin’s Open up the West policy in 1999, and Xi Jinping with the BRI discussing the further development of western China. These three policymakers are or were followers of Sun Yat-sen, who designed the role of western China in bringing Asia and Europe, the two most populous centres, together through a massive rail construction project. In this chapter, both Sichuan and Chongqing were selected because of two critical factors: first, both are landlocked areas that are intended to be in the vanguard of the BRI, and opening up the country, and second, both had been part of one administrative unit before the central government split them into two units with Chongqing becoming a municipality directly governed by the State Council in 1997. Another important feature is that both have been playing an important role in Beijing’s policy planning of opening the West. The chapter, therefore, addresses the critical issues of both administrative units’ responses to the Belt and Road Initiative and the Yangtze River Economic Belt with Beijing, naming Sichuan as an international hub and Chongqing as a domestic link. By giving the two provinces different roles, the central government hoped to limit the negative

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impact of horizontal competition. However, this policy still created space for competition. This chapter answers the question of what impact the BRI has on the two competing governments, to what extent it provides a platform for cooperation and how Beijing manages and controls this competition. However, in the process of implementing the BRI strategy, there were many issues which the initiative faced. These included how to integrate the western region into the BRI and how to develop and transfer wealth to the region after years of the central government focusing on coastal areas? How, more specifically, could provinces in western China leverage the BRI to develop their respective economies, without repeating the measures of Jiang Zemin and Hu Jintao? Furthermore, in both Sichuan and Chongqing, could internationalisation and paradiplomatical activities be recognised as an incentive for domestic integration?

3.1. Opening the landlocked: ways for western China development In the late 1990s, the main focus of the leadership was the disparities in the socioeconomic development between West, Central and East China. From this perspective, the Belt and Road Initiative should be perceived as a continuation of the Opening the West programme in all but name. As was stated by the leadership, the BRI takes into account the development of the western region’s overall economy, and promotes the region’s industrial sector and its advantages of the western region to further encourage economic expansion in countries along the BRI, especially in the Eurasian section. However, first, the government both at central and local levels needed to lay the ground rules about how landlocked areas like Chongqing and Chengdu were to compete for the Beijing government’s resources while cooperating within the framework of building one megalopolis. 3.1.1. The dilemmas of development in landlocked areas Due to their geographical locations, landlocked areas face multiple dilemmas and challenges with one of the most critical being access to international markets. In opening up the economy to the outside world, these areas depend on land and air transport, which are both more expensive than sea transport and require more infrastructure and bureaucracy. Because these areas have solely land borders, governments, including local institutions, need to recognise additional cross-border procedures and lobby for better conditions. Overall transport costs of a landlocked country can be divided into three components: transportation within the country’s borders, transportation through transit countries and sea transportation to the final destination. Another problem the landlocked areas face is unstable political, social or economic conditions in a transit country, meaning that entire transport networks and development of an export-led economy can be limited (Gallup, Sachs, Mellinger 1998). These factors mean that landlocked countries have lower output growth rates predominantly due to the negative effect being landlocked has on the volume of international trade.

Sichuan and Chongqing 115 Furthermore, a landlocked area cannot utilise their comparative advantages such as technically advanced industries to the degree that coastal regions can. The increased cost of imported capital goods and the lack of access to international markets limit the possible options for economic growth. This is illustrated by the higher transport costs faced by landlocked areas that may reduce investment, even if this investment is intended to serve the domestic market. Furthermore, this lack of connectivity with international markets has made transport costs a significant factor in the choice of location for foreign direct investment (FDI) as fewer investors and companies are interested in investing their resources in those regions that lack the appropriate transport infrastructure. This is another reason that landlocked areas continue to lag behind the coastal areas. These factors result in international or domestic companies, which are accustomed to transport efficiency, doubting the ability to supply their customers promptly with the product required from these regions. This in turn discourages companies and investors from signing long-term export contracts in these landlocked provinces. Although developing an export-led economy to the landlocked areas needs to be accompanied by infrastructure projects, connectivity itself may not be enough. Radelet and Sachs (1998) found these costs to be about 50% higher for landlocked countries, while Rodrigo Cárcamo-Díaz Limao showed that the median landlocked country experienced transport costs 42% higher than the average coastal economy costs (USD 8,070 versus USD 4,620) (Rodrigo Cárcamo-Díaz 2004). Transport overland is seven times more expensive than sea transport. An extra 1,000 km by sea adds USD 190 to shipping costs whereas a similar increase in land distance adds a huge USD 1,380. Higher transport costs will, more often than not, lead to lower real incomes because more resources need to be employed for transportation with potential gains from trade consequently reduced (UNCDR 2019). The efficient utilisation of labour and trading partners in landlocked areas is primarily decided by transport costs. The resulting lack of integration with external markets hinders economic growth by limiting the scope of the market and negating specialisation in production. This dependence on the cost of transportation can take at least four forms: 1. Dependence on transit infrastructure; 2. Dependence on political relations with neighbours; 3. Dependence on peace and stability within transit neighbours; 4. Dependence on administrative processes in transit as landlocked countries depend on strong political relations with transit countries (Ibid.). If a conflict arises between a landlocked country and its transit neighbour, either military or diplomatic, the transit neighbour can easily block borders or adopt regulatory impediments to trade. The existence of a well-functioning transport system is a prerequisite not only for trade to take place, but also for private FDI to be channelled to a specific country or region (Chowdhury, Erdenebileg 2006, 18–24). In other words, the central and local governments need to work closely to influence foreign states and regions, develop close relations and ensure the political will for further economic engagement. Apart from foreign trade issues, further economic development is shaped by agglomeration economies. The concept is mainly based on the fact that the economies are reaped either when a large number of firms in the same industrial sector locate close to each other or when

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a large number of firms from different industries are located in the same region or city. However, without a port city, landlocked areas may find it challenging to attract firms in rapidly evolving and expanding industries (MacKellar, Wörgötter and Wörz 2000, 4–5). The landlocked provinces in China face similar dilemmas of how to nurture economic growth through more effective opening-up policies. In the cases of Sichuan province and the Chongqing municipality, the higher transport costs during their participation in foreign trade limit possible options for future development. Nevertheless, regional development and economic integration have been discussed in China since 1980, when the first paper by Liu Wuxing was published on Shanxi province’s energy resources. Scholars and policymakers struggled to conduct an effective coordinated and balanced programme of regional development. In 1985, Wu Tiehua postulated the strengthening of the urbanisation process and by pushing further integration between urban and rural areas and creating effective and coordinated development. The very first pilot zone of integrating both areas was proposed by the Jiangsu Party Committee when they discussed the city as the centre and the countryside areas as a belt where the city would provide opportunities for development. In the Seventh Five-Year Plan (FYP), the central government discussed to organise the regional institutions responsible for shaping common economic space, and using these organisations in a very ‘rational way’ (Hu 2014, 3–5). According to the FYP, the critical links should be guided by cooperation between three belts: the eastern, central and western belts and on a lower level by six comprehensive economic regions; seven economic regions; nine economic regions and nine ‘metropolis economic circles’ (see Table 3.1). Nevertheless, along with China’s opening up and growing dependency on foreign trade, especially in the coastal areas, disparities have become a problem for both central and local governments. Over the more than 40 years of China’s economic development based on an export-led economy, the coastal areas have built a strong position by prioritising more profitable relations with foreign markets over interactions with landlocked provinces. This dynamic, as stated by Li Boxi, contributes to the growing disparities that pose a great threat to national integration and stability, and without growing horizontal cooperation, China would be in a worse position. This postulate was reflected in the 8th FYP when, while referring to regional development, the government called for ‘planning, rational division of labour, mutual assistance, coordinated development, and the balance of interests and common benefits’. Apart from shaping economic development along with urbanisation processes, the central government faced the dilemma of how to adjust local interests, and how to incentivise the coastal provinces to cooperate with inland and landlocked areas. The fragmentation of the domestic market forced the government to encourage domestic companies to utilise central and western regions of China as part of their value chains and through these means impose an internal division of labour of the Chinese economy. The latest attempt to incentivise activities for landlocked areas was discussed at the 13th FYP and the National Development and Reform Committee (NDRC) promised to ‘improve long term channels for funding, and continue to increase transfer payments and government investment’ (NDRC 2016a).

Sichuan and Chongqing 117 Table 3.1 Inter-provincial integration projects Name of the cross-provincial integration projects

Provinces and cities included in the projects

Domestic Economic Belts Six comprehensive economic regions

The eastern, central and western belts The Northeast region, the middle and lower reaches of the Yellow River, the middle and lower reaches of the Yangtze River, the Southeast Coast and the Southwest and Northwest regions Northeast China (Liaoning, Jilin and Heilongjiang), Northwest China (Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang), North China (Beijing, Tianjin, Hebei, Inner Mongolia and Shanxi), East China (Shandong, Shanghai, Jiangsu and Zhejiang), Central China (Henan, Anhui, Jiangxi, Hubei and Hunan), South China (Fujian, Guangdong, Guangxi and Hainan) and Southwest China (Sichuan, Guizhou, Yunnan and Tibet) Northeast China (Heilongjiang, Jilin, Liaoning and Inner Mongolia), the Bohai Rim Area (Beijing, Tianjin, Hebei and Shandong), the valley of the middle reaches of the Yellow River (Shanxi, Henan and central and west parts of Inner Mongolia), the Yangtze River Delta (Shanghai, Jiangsu and Zhejiang), the middle reaches of the Yangtze River (Hubei, Hunan, Anhui and Jiangxi), the Southeast coastal area (Fujian, Guangdong, Guangxi and Hainan), the Northwest region (Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang) and the Southwest region (Sichuan, Yunnan and Guizhou) Shenda (Shenyang and Dalian), Jingjinji (Beijing, Tianjin, Tangshan, Qinhuangdao and Shijiazhuang), Jiqing (Jinan, Qingdao and Yantai), Dashanghai (Shanghai, Suzhou, Wuxi, Changzhou, Ningbo and Hangzhou), the Pearl River Delta (Guangzhou, Shenzhen, Zhuhai and Shantou), Jihei (Changchun and Harbin), Xiang’ egan (Wuhan, Changsha and Nanchang) and Chengyu (Chengdu and Chongqing)

Seven economic regions

Nine economic regions

Nine ‘metropolis economic circles’

Source: N. Okamoto, ‎Takeo Ihara (2005) Spatial Structure and Regional Development in China. An Interregional Input-Output Approach, Singapore: Palgrave Macmillan, pp. 48–51.

Hu Jun (2014) points out that the lack of domestic interdependence in spatial development can create the potential for clashes between provinces based on a self-reliance mentality, and only by mutual dependency would a convergence of interests be possible (Hu 2014, 21). The central government, by trying to bring unity to a unitary state, has attempted to coordinate regional growth and reduce developmental disparities. However, its efforts have only been partially successful. In China, the administrative structure responsible for regional development is governed by a small central government group supported by a provinciallevel leading small group, expert meetings, the NDRC and Ministry of Finance. Throughout the consultations, the central government and local bodies discuss

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their respective interests, desires and futures, and plans for ‘coordinated development’. However, these ad hoc meetings on the surface appear problematic. Apart from the structure formed under the State Council’s guidance, China has no law or regulation on the statute books regarding coordinated regional development. Instead, there are different types of regulations in different spheres such as mutual assistance law, labour migration law and fiscal policy law (Hu 2014, 52 and Graph 3.1). 3.1.2. Historical continuations and Open Up the West policy Sichuan and Chongqing issues regarding economic development and international outreach have been widely discussed. In the case of Sichuan, the province has, down the years, experienced fluctuations in its position in official strategies of central authorities. Due to its natural conditions: favourable climate, a high degree of humidity, and the long-lasting effects of the Dujiangyan irrigation system, Sichuan province has become the breadbasket of China. Since the Tang-Song dynasty, the province has been a key economic area. However, throughout its history, Sichuan has needed to compete with the provinces of Guizhou and Gansu. Guizhou was part of the State of Shu, and during the Warring States period, the

Graph 3.1 Administration structure of China’s regional development Source: Hu Jun (2014), op cit., p. 51.

Sichuan and Chongqing

119

Chinese state of Chu conquered this area. Gansu played the role of a corridor under the Han dynasty, while Sichuan was the home of the states of Ba and Shu. During the Three Kingdoms era, Liu Bei of Shu was based in Sichuan. Since the Ming dynasty, three million Han Chinese, predominantly from Nanjing but also from Shanxi and Hebei, settled in Yunnan and the importance of Sichuan began to decline. Identified as a priority by the Qing government, Sichuan province saw a number of reconstruction projects as local authorities tried to reverse the migration flow. To combat depopulation, the local government required more incentives to attract people to settle in Sichuan province. The significance of Sichuan was also confirmed by Luo Bingzhang (1860): ‘Sichuan is the most important province in the western territory of the country . . . It has always been deemed critical in the security of the country. If Sichuan is lost, the Yunnan, Guizhou and Guangxi could no longer expect any military funds’ (cited after Dai 2009, 14–27). Sichuan was also pivotal in the changing of the regime in modern China. In 1905, Sichuan Province established the Sichuan-Hankou Railway Company, and much of the Sichuanese became shareholders of the railway venture. While the central government hoped to nationalise the company, the Sichuanese went on strike and protected their property, named ‘the Railway Protection Movement’, which in fact singled out further actions taken by the military and finally led to the Wuchang Uprising and Xinhai Revolution that resulted in Qing’s dynastic abdication. During the Second World War, the city of Chongqing took the lead. In 1938, a year after the war with Japan started, Chongqing became the capital of the Nationalist Government. Moreover, its strategic position was utilised by Chiang Kai-shek who tried to align the neighbouring province of Yunnan with Kunming as an academic and intellectual centre when three universities Beijing University, Qinghua and Nankai from Tianjin moved their headquarters there. In August 1945, American Ambassador Hurley escorted Mao Zedong from Yannan to Chongqing for negotiations with the Nationalist side and continued until 10 October when both sides reached the Summary of Conversations Between the Representatives of the Kuomintang and the Communist Party of China agreement (known as 10–10). Both sides agreed to follow Sun Yat-sen’s Three Principles of political democracy, unified army and equal status of political parties. However, this agreement marked the beginning of the Chinese Civil War won by the Communist Party of China in 1949 (Spence 1991, 465–476). After the establishment of New China, and the high industrialisation in Northeast China, and Heilongjiang in particular, the 1960s saw another approach to developing and industrialising China’s west which was introduced by Mao Zedong and was dubbed the Third Front. This process was motivated by the threat of potential military confrontations with the United States and the Soviet Union. Its goal was to create self-sustaining industrial clusters in interior China and was based on the principles of ‘people’s war’ introduced by Lin Biao – the Chinese Marshall and Minister of Defense. The term Third Front was first used as a national defense concept, referring to the vast hinterland that would be far away from potential war fronts. The Third Front allowed for economic growth in the landlocked provinces to be delivered through massive state investments. Similar to what was said

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by Sun Yat-sen, the development was driven by developing rail lines between Chongqing-Guiyang and Chengdu-Kunming completed in 1965 and 1970, respectively. According to estimates, the Chengdu-Kunming line cost 3.3 billion yuan and accounted for nearly 21% of the national construction budget in 1965. The development of rail lines was in line with building a massive industrial complex; Panzhihua – the steel mill in Sichuan, and Liupanshui – a coal mine in Guizhou. Panzhihua, which cost 3.74 billion yuan, was to supply a significant heavy industrial complex to the north and northeast of Chengdu and Chongqing while Liupanshui was responsible for supplying coal to Panzhihua (Kowalski 2012; Kinzley 2012). Apart from the development of Chengdu’s surroundings, Chongqing took the lead in steel and military machine production. Total investment in the Third Front accounted for 52.7% during the Third FYP and 44.3% during the Fourth FYP. This massive state investment pushed development forward and played a critical role in developing China’s western regions (Naughton 1988). According to Mao Zedong’s instructions, the National Planning Work Conference in September 1964 decided to establish a relatively complete industrial system in the southwest and northwest regions with Chongqing playing a critical role in regional development. A precondition for further economic growth was seen as building a heavy steel industry that was capable of manufacturing conventional weapons and other important machinery and equipment. This first phase was followed by the building of Jiuquan Iron and Steel Plant, and the Panzhihua raw material base to initially establish a relatively complete industrial hub including major industries such as metallurgy, machinery, chemicals, and fuel. The Panzhihua project focused on the growing role of Sichuan province and its railway connection with Kunming, and later Chongqing’s military industry. In October 1964, a planning team released the ‘Third Front Plan for Chongqing Region’ paper, and the city was chosen as a centre for the conventional arms, and machinery manufacturing industries. The plan proposed more than 200 projects to be relocated and built in Chongqing, at a total cost of 4.2 billion yuan (Ma 2009). Due to the international situation and domestic clashes between Mao Zedong and Liu Shaoqi, the Third Front should be considered as a ‘classic manifestation of the ability of a centrally planned system to mobilize vast quantities of resources for industrial development and dispose of those resources according to the preferences of central planners relatively unconstrained by economic considerations’ (Naughton 1988, 17). During the First Five-Year Plan (1953–1957), state investment in interior provinces was 56% state investment, and in the Second Five-Year Plan (1958–1962) was 59%. Along with the American involvement in the Vietnam War, and growing tensions with the Soviet Union, national security concerns grew in the early 1960s, and the Third Five-Year Plan (1966–1970) allocated 71% of state investment to the interior provinces, with the bulk going to Sichuan, Hubei, Gansu, Shaanxi, Henan and Guizhou (The Third Front 2009). As one might imagine, people were driven by ideological campaigns and in order to limit negative perceptions within society, the government endeavoured to keep up morale through political campaigns. The failure of the Third Front

Sichuan and Chongqing 121 was partially hidden by the Cultural Revolution and the ten years of upheaval that followed (Meyskens 2015, 238–260). The Third Front project sponsored in the 1960s became irrelevant, and policy needed to be adjusted in four areas: an overaccumulation of heavy industry activity at the expense of light industry and agriculture; an overemphasis within the heavy industry on metallurgical and machine-building sectors; the neglect of critical issues such as energy and transportation, labour costs and building materials (Kjeld 1983, 253–255). Due to the shortages mentioned here, the plan to generate economic growth to the region failed to deliver, and by locating factories in high mountains and caves it became a very costly project. With Deng Xiaoping’s reforms, Chinese policymakers made a negative evaluation of the previous economic model that was based on mass mobilisation campaigns and class struggle. It was evaluated that the state was not capable of delivering the massive centrally sponsored investment and the model of development was transformed into an export-led economy whose focus was on the coastal regions of China. But surprisingly, Sichuan did become a key location in reforming the country. In late 1978, six factories were selected to be experimental centres. Once plan quotas had been fulfilled, the six factories had a high degree of autonomy in production and pricing decisions. This number was increased to 100 industrial enterprises in 1979, and 417 in 1980. Although a contract system was introduced by Zhao Ziyang, this was not a new idea. A similar system had been introduced by Li Jinguang in his report during the 8th party congress in 1956. He stated that non-socialist methods of production would not be replaced by socialist ones. This contract system undermined the foundation of the Maoist order and supported Deng Xiaoping’s position inside political cycles in Beijing. The results of the old-new policies quickly became apparent with the industrial production of Sichuan (covering 84 industrial reform enterprises) rising by 14.9% in 1979, and 9.6% in 1980 with profits increasing by 33% in 1979 and 7.3% in 1980. With regard to western development, it is worth noting that Deng Xiaoping promised that once the eastern part of China had developed, then it would help the less developed regions: ‘One of the solutions to the problem is that the areas that become prosperous first pay more profits and taxes to help the development of the poor area’ (Deng Xiaoping 1988). This message clearly stated that western China would have to wait until eastern China had developed its capacity to assist the rest in their development. But these policies led to growing disparities among the Chinese people and social unrest. In June 1999, Jiang Zemin called for a more balanced development: While continuing with the development of the eastern coastal region, we must not miss the opportunity to accelerate the development of the central and western regions. From now on, the Party and the government must regard the great development of the West as a major strategic mission and give the issue priority over everything else. Soon after these political declarations, the Leading Group for Western Region Development was formed by the State Council and took responsibility for guiding

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future policies. The plan consisted of measures in four fields: infrastructure construction; ecological protection; industrial restructuring; and the development of science and technology (S&T), education and human resources. As argued by Heike Holbig: as many official statements and documents published up to the summer of 2000 bear witness, this foreign investment euphoria dominated the initial agenda of the Open Up the West policy, leading to intense contests between provincial jurisdictions in the western and central regions to obtain preferential measures. The central government wished to conduct the economic performance in the west of China with the same methods that had been adopted in the coastal areas: by FDI. This, however, went in a different direction with the government having to sponsor massive infrastructure investment (Holbig 2004, 335–338). As identified by the World Bank, an FDI location has four determining factors: the GNP of a given province, infrastructure development, the level of education of its population and its access to a port (Gipouloux 1998, 8). In October 2000, the Central Committee of the Communist Party of China issued the ‘Tenth Five-Year Plan for National Economic and Social Development’, and as decided by the 5th Plenary Session of the 15th CPC Central Committee, the government issued long-term national debt of 1.4 billion yuan to implement the development of the western region (Lai 2002, 432–435). The government, as stated by Zhu Rongji, was responsible for providing infrastructure investment, and through appropriate connectivity, the western regions would be more attractive and affordable for foreign investment. The second important part of Opening the West was the environmental protection that allowed for the production of healthy food. It allowed farmers to become materially better off (Zhu 2000, 22–23). On the one hand, the government recognised the growing disparities as a possible threat to the stability of China, but on the other hoped to utilise the overcapacity of steel, cement and glass produced by companies in the eastern part of the country to rescue the Chinese economy and benefit the whole country, as was clearly stated by Prime Minister Zhu Rongji in January 2000 (Zeng 2010, 21–22). Soon after Jiang Zemin’s declaration in March 2001, the Outline of the Tenth Five-Year Plan for National Economic and Social Development made specific arrangements for the implementation of the strategy for the development of the western region. In the first eight years of the Open Up the West programme, the GDP of the western region increased by an average annual growth rate of 11.6%, exceeding the national economic growth in the same period. Moreover, according to official statistics, social fixed assets investment grew at an average annual rate of 22.9%, 1.9 percentage points higher than the national average; total foreign trade increased from USD 17.2 billion to USD 78.6 billion, with an average annual growth rate of nearly 25%. By 2007, a total of 92 new key projects in the western region had been implemented, with a total investment of over 1.3 trillion yuan. Many state-sponsored projects such as the Qinghai-Tibet Railway, the

Sichuan and Chongqing 123 West-East Gas Pipeline, the West-East Power Transmission and the Water Conservation Project have been built. The plan’s achievements were impressive: 650,000 kilometres of new highways, 6,600 kilometres of new railways, newly installed power grids with a total capacity of 113 million kilowatts and 26 newly opened airports. In 2016, after three years of implementing the policy of the BRI, foreign capital in the western region only totalled 62.69 billion yuan, a year-on-year increase of 1.6%. Furthermore, the numbers for western China, presented in 2017 by MOFCOM, were not so impressive either: western China attracted 6.2% of FDI, the central regions 6.3% while eastern China took the lion’s share of 87.5% of total utilised FDI in China (MOFCOM 2018). This was very much repeated in 2018, when the east claimed the majority of FDI (83.4%) while both the West and Central China received 7.1%. The remaining 2.4% of FDI was absorbed by the banking, securities and insurance sectors (MOFCOM 2019b). 3.1.3. Bringing the east and the west together: the YREB and the BRI By opening the west and implementing the Third Front, the central government conducted economic policy in the form of three belts. However, these policies still failed to integrate China into one macroeconomic body. In 1984, during a special conference in Urumqi, Sun Xiangqing from the State Council Development Center introduced the economic concept of the Yangtze River Economic Belt (YREB). By mentioning the division of labour between Shanghai, Nanjing, Wuhan and Chongqing, the central government tried to reduce competition between local governments and guide their future actions. The integration project began along the Longhai-Lanxin railway line (陇海-兰新) from Jiangsu, through Central China and Lanzhou to Urumqi and then the Soviet Union’s Railway, making it the third longest Eurasian land bridge in the world. Chinese planners looked back to historical developments when large transport arteries had always promoted economic prosperity along the artery, like in case of the United States. Following this reasoning, the central government placed Sichuan province as part of the Longhai-Lanxin Economic Belt and, together with Jiangsu in the east, bonded together with the Yangtze River Economic Belt to open up western China. Both belts cross the country from east to west, and by being parallel structures, encourage economic development in the less developed regions of China. This logic was also adopted by the new government formed by Xi Jinping and Li Keqiang in 2012. China’s eastern and southern provinces, by absorbing FDI, continue to be integrated into the network of international economic exchanges while reducing cooperation with inland China. A possible solution to this lack of internal economic relations was announced by Xi Jinping. The BRI was regarded as a possible option to open the west of China via the inland Eurasian bridge and YREB and has been seen as an economic solution for western China’s challenges. Second, the BRI combines transit transportation and internal development, and integrates internationally in the economic belt with plans to use the advantages of foreign trade for horizontal integration. Therefore, without domestic integration, the BRI would remain primarily on the drawing board and

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would not be completed successfully. The core issues as presented by the World Bank and NDRC is that China’s market is fragmented, and even along the YREB, inter-provincial trade is far less than intra-provincial trade. This is reflected in the low levels of economic integration between cities in the upper, middle and lower reaches of the region. Because most trade in the region takes place within each province as opposed to between provinces, opportunities to leverage the regional market and inter-provincial trade are missed. Zhejiang’s market is an illustrative case study. Less than 20% of its regional trade is conducted with other provinces along the YREB, while more than 80% of trade is within the province (NDRC, World Bank 2019). Furthermore, this problem is accentuated by the volume of Zhejiang’s international trade whose foreign trade accounts for between 60% and 80% of the province’s total trade. Being highly dependent on the foreign market means that Zhejiang is exposed to international crises like the financial crisis in 2008 and the COVID19 pandemic in 2020 (He Xuqiang 2019). Apart from the lack of economic integration along the YREB, the additional issue of cultural differences was discussed by a group of scholars from Nanjing University. Integration was not only between different industries and different types of economies but also that of different cultures. The upper level of the river was dominated by Sichuanese-Chongqing Bashu culture, the middle of Hubei and Hunan by the Jing-Chu culture and the lower section, including Shanghai as the centre of WuYue culture (Song, Gu, Gu, Cai 1987, 4). Therefore, it is of paramount importance to encourage the provincial governments to deepen cooperation with each other. Along the YREB, the central government has incorporated six provinces into the project: Zhejiang, Jiangsu, Anhui, Hubei, Hunan and Sichuan, with the municipalities of Shanghai and Chongqing. In a governmental report in 2015, Prime Minister Li Keqiang proposed key industries for each participant. Information technology was seen as a key industry for six of the eight actors with the Internet of Things (IoT) being particularly important in three provinces; all provinces and municipalities were designated to work in the biology and biomedicine industry (Table 3.2). In 1997, the YREB, stretching from Shanghai to Chengdu, was considered to have the greatest economic potential in China but this project, like the BCIM EC, had to wait 17 years for the go-ahead. But a critical impediment to trade even in the YREB is a lack of converging interests: ‘The difference between different regions and interest groups within the economic belt is very large’ (Yuan, Yuan 1997, 24). In fact, the negotiations, meetings and building domestic political consensus resulted in the final decision taken in 2014. But as illustrated in Table 3.4 the industries in all provinces along the YREB replicated and the central government failed to introduce the effective division of labour. In September that year the State Council passed regulations regarding the ‘golden corridor’ which covered an area of 2.1 million square kilometres and accounted for more than 40% of China’s population and economic output. According to the guidelines passed by the State Council, by implementing these new policies, the Chinese government hoped to secure openness for western China. The major points in the document were dedicated to the development of new technologies in water (river) transport, the modernisation of river ports (infrastructure),

Sichuan and Chongqing 125 Table 3.2 Strategic emerging industries supported by a major region or province along the Yangtze River Economic Belt Region – key industries Region

Key industry

Shanghai

Information technology, advanced equipment manufacturing, biology, new energy, new materials Biology, information technology, Internet of Things, new-energy vehicles, new materials, new energy, advanced manufacturing equipment, new emerging marine industry New energy, new materials, biology, biomedicine, energy-saving and environmental protection, Internet of Things, software, service outsourcing, information technology, advanced equipment manufacturing Information technology, energy-saving and environmental protection, new materials, biology, new energy, advanced equipment manufacturing, new-energy vehicles, public security, biomedicine Information technology, advanced manufacturing, new materials, biomedicine, medical equipment Information technology, biomedicine, new materials, advanced manufacturing Information technology, new energy, advanced equipment manufacturing, new materials, biology, energy-saving and environmental protection Microelectronic equipment, Internet of things, robots and intelligent equipment, new materials, high-end transportation equipment, newenergy and intelligent vehicles, MDI and chemical new materials, shale gas, biomedicine, environmental protection

Zhejiang Jiangsu Anhui Hubei Hunan Sichuan Chongqing

Note: MDI¼4, 40-diphenylmethane diisocyanate. Source: Li Keqiang. 2015. Central Government Work Report. Cited after Ying Cheng et all. 2017. Financing Innovation in the Yangtze River Economic Belt: Rationale and Impact on Firm Growth and Foreign Trade. Canadian Public Policy. vol. 43 : 122–135.

testing new solutions with ‘economic demonstration areas’, strengthening Yunnan as a bridgehead in China’s foreign policy, connecting the Silk Road Economic Belt and 21st Century Maritime Silk Economic Road, building a YREB hub (shuniu 枢纽) in Chongqing and an international link (niudai 纽带) in Sichuan province. Sichuan is positioned as a key player when it comes to international cooperation and is even named a bridgehead in the national strategy of the YREB. This approach allows the Chinese government to properly manage urbanisation processes along the Yangzi River, including the Chengdu-Chongqing city cluster as well as Guizhou and Yunnan provinces (Seminar, Nankai University 2018). Moreover, part of the western region’s development stems from its post-Third front legacy. As observed by Ye Qing, a vital part of YREB integration is the military-civilian integration development strategy, forming a multi-faceted, multidomain and highly effective military-civilian integration development pattern. These military enterprises still play a significant role and the YREB is an economic belt of ‘military-civilian integration’ (Ye Qing 2016, 18). In 2019, YREB’s GDP was 42.6% of China’s GDP, with the strongest units being in Jiangsu (21.8%) and Zhejiang (13.6%), followed by Sichuan (10.2%), Chongqing (8.7%) with Yunnan (5.1%) and Guizhou (3.7%) bringing up the rear. The most important

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part of the integration project is to strengthen investments in the landlocked provinces and the transfer of private capital transfer from the wealthy regions to the less developed provinces. In 2019, Anhui province utilised funds from the provinces of Shanghai, Jiangsu, Zhejiang and set up 2,979 projects with an investment of more than 100 million yuan in each project, with a total investment of 641.4 billion yuan. But still, as Zhou Zhonglin (2018) stated, the core issue of the development of the YREB was the institutional mechanism, which involves more local protectionism. The provinces and cities along the Yangtze River are based on local economic interests. Developing an effective institution should start with environmental protection, but conflicting interests along the Yangzi River play a decisive role in shaping cross-provincial governance. However, the central government passed the ‘Yangtze River Environmental Protection Law’ in May 2018, and authorities face the challenges posed on a local level. Once the local government does not receive a sufficient environmental subsidy, it would not be able to compensate the local producers, and would be hesitant to go up against local businesses. In some provinces, over the last few years, the ratio of yearly fixed assets investment to GDP has exceeded 100%, implying that the current GDP of China is being boosted by infrastructure construction and real estate development. For example, the ratio for Chongqing in 2013 and 2014 was 81.63% and 86.14%, respectively, and the ratio for Sichuan was 77.02% and 81.71%, respectively. Guizhou Province, which has a positive weight for both regions, had a 91.18% and 97.40% fixed assets investment to GDP ratio in 2013 and 2014, respectively. However, in 2006, the year before the global economic crisis began, the ratio in Chongqing, Sichuan and Guizhou was 61.61%, 50.78% and 51.19%, respectively. Regarding fixed assets investment dynamics, the ratio in western China compared to well-developed eastern China remained higher before the BRI at between 21.3% and 29.2% in 2011. Paradoxically after the BRI, the project that targeted the opening of the west was announced, investments oscillated between 1 and 3% on a yearly basis, and in absolute numbers were half of those in the eastern part of China (China Statistical Yearbooks 2011–2019). Apart from being a part of the YREB, the provinces along the Yangtze River are also part of the Belt and Road Initiative, the plan that promises to open up western China. In this context, provincial-level governments are given roles or sometimes position themselves as part of national policy. As presented by Chang Tao and Bai Youxing, Shaanxi, with Xi’an as its capital, is the starting point and ‘pawn’, Xinjiang the core area and bridgehead, Gansu as a bridgehead in the golden corridor and Ningxia as the centre for commercial interests with the Arab world. He Yixia named Sichuan as a pilot area for urbanisation as well as a location for opening up western China toward Europe, while Chongqing expects to be the central government’s starting point for the Silk Road Economic Belt and was named by NDRC in the 13th FYP as a ‘strategic pivot and connection point in the region’ (see Table 3.3). As has been discussed in the chapter, the railway connection via the Eurasian land bridge plays a critical role in developing landlocked areas of western China.

Sichuan and Chongqing 127 Table 3.3 The given roles for BRI participator from western China Province, city

Role in BRI

Author

Shaanxi

A new starting point, checker; strategic fulcrum; logistics centre, financial centre, business centre, cultural exchange centre, embassy and consulate centre; China Civilization Heritage Innovation Zone. Bridgehead, checker, Main Force, Core Area.

Chen Tao, Bai Youxing

Xinjiang Gansu

Ningxia

Qinghai Sichuan/ Chengdu Chongqing

The golden segment, golden node. Create new splendour of the Hexi Corridor (Gansu Corridor); Inheritance and innovation of Chinese civilization. China-Arab (China-Arab countries) new economic growth hub; strategic fulcrum opening to the west; inland open economic experimental zone; building the Silk Road Air Economic Corridor; building a western financial centre to achieve financial integration with Arab countries. Strategic node. Pilot zone for comprehensive supporting reform of urban-rural integration; Opening to the west through the railway line to the EU. Pilot zone for comprehensive supporting of reforms of urban-rural integration; the first of five scheduled trains of the ChongqingXinjiang-European Railway; the central government will position Chongqing as the starting point of the ‘Silk Road Economic Belt’.

Chen Tao, Bai Youxing Chen Tao, Bai Youxing Chen Tao, Bao Hongjie

Chen Tao, Wang Xinong He Yixia He Yixia

Source: Zhang Gongsheng, Pang Zhiqiang (2015), ‘Sichou zhilu jingji dai’ guonei duan jianshe: zhanlue yiyi ji gongneng dingwei [Construction of the ‘Internal Section of the Silk Road Economic Belt’: Strategic Significance and Functional Positioning] Jingji Wenti (Problems of Economy) no 4: 7.

This, however, was not the idea of central or local government but from multinational companies such as Dell, Foxconn and Hewlett Packard. The first private enterprise shipment was delivered from Chongqing to Duisburg in 2011 and was soon followed by the Chengdu-Lodz connection in December 2012. Other Chinese cities soon developed their own lines to Europe with the current number standing at 82 starting points. This horizontal competition brought the government to the conclusion that to achieve more productive projects, unification via centralisation was required. As presented in the document issued by the National Development and Reform Commission, the China Railway Express to Europe was seen as the remedy for Opening Up the West and encouraging more cooperation between provinces in China (kuadiqu 跨地区) by building a community of common interests with countries along the route, and by being an essential platform in developing an effective Belt and Road Initiative. The document also

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discussed three different geographical corridors: western, central and eastern. The western corridor would start in three different cities: Chongqing, Chengdu and Xian through Xinjiang (Alashankou) to Kazakhstan, Russia, Belarus, Poland and Germany; a second southerly branch would cross Xinjiang (Ghorgos) in China’s western region through Kazakhstan, Turkmenistan, Georgia, Iran, Turkey to Bulgaria, with another option going through Kazakhstan, Afghanistan, Iran to Bulgaria; and a third branch via a border point in Irkeshtam in Kyrgyzstan, through Uzbekistan, Tajikistan and Turkey with the final destination being in Europe. The second central corridor through Erenhot in Inner Mongolia, Russia and Belarus to Europe, and the eastern corridor which after the Manzhouli checkpoint in Inner Mongolia would traverse Russian Siberia to Europe. The corridors’ division implies the reality that Chongqing, Chengdu and Xian are responsible for distributing products from western China, Changsha, Wuhan and Zhengzhou with Inner Mongolia for distributing products from southern and Central China, and finally Suzhou, Hangzhou, Hefei, Nanjing and Shenyang and Harbin with northern China for attracting prospective employees from the eastern coastal areas. The critical part of the document discussed the different roles that different cities in China would play; however, Chongqing and Chengdu play dual roles of node cities for supplying products and acting as railway hubs. Further development would be in the shape of common custom clearance and rail procedures with countries along the Belt and Road Initiative. This role was ceded to the local level, which was responsible for organising workshops for custom clearance bodies for further discussion and implementation of procedures. Moreover, the local authorities were asked to support enterprises in the region to expand production capacity cooperation, trade with countries along the China-Europe line and increase the volume carried by China-Europe lines (NDRC 2016b). Total responsibility for the effectiveness of the rail projects was ceded to local administrations. As a consequence, in order to fulfil centrally planned quotas, for example 5,000 shipments per year, local governments have used the China Railway Express as a platform for building their own position inside the system rather than following a model of cooperation. Both Sichuan and Chongqing have followed a similar course of action. From the Third Front policy, the Open Up the West and the Belt and Road Initiative, along with Yangtze River Economic Belt, the government has made a great deal of effort to limit the negative impact of horizontal competition, which was discussed in the first chapter. Throughout these processes, the central government has looked to strike a balance between local interests and form a collaborative platform for common action. By introducing the Belt and Road Initiative together with the Yangtze River Economic Belt and Chongqing-Chengdu Agglomeration Zone, the central government has tried to walk this tightrope, and reduce competition among local authorities by pushing them towards one collective goal. In this context, the division of labour in landlocked areas, although challenging to achieve, should be applied by defining local potential and key advantages in order to shape clear-cut distinctions among regional areas. As far as the western

Sichuan and Chongqing 129 region’s development is concerned, the BRI together with the YREB was seen as the decisive combination in bringing sustainable economic growth to less developed areas of Mainland China. This is illustrated by the land and sea opening of the Silk Road Economic Belt and the Maritime Silk Road, as well as the Yangtze River Economic Belt which traverse the east, the centre and the west of China, connecting the northern and southern areas of China. Nevertheless, as observed in the case of Sichuan and Chongqing not only have these locations competed for an advantageous position in the Chinese system, they have in fact also played a role in China’s foreign policy.

3.2. The most active BRI ‘player’: Sichuan province Taking the responsibility of being the centre of western China’s development, the Sichuan government hopes to utilise the BRI’s opportunity and position itself as the most significant location in the landlocked region for central government-led policies. Continuing its historical importance of being in the vanguard of groundbreaking policies at the local level as well as an important part of China’s modern history, it is not surprising that Chengdu is regarded as a central location in the BRI. In fact, the focal position of Sichuan is supported by its historical legacy related to the Railway Protection Movement, which sparked and fanned the revolutionary flames that led to the Xinhai Revolution and the overthrow of the Qing Empire. The province’s role in the Third Front Policy of Mao Zedong, and the Sichuan experiment conducted by Zhao Ziyang in the late 1970s, demonstrated Sichuan’s readiness to take on responsibility in the BRI. More to the point, the historical role of Sichuan province in China’s past is shaped by the fact that Deng Xiaoping, the architect of reforms in China, was a native of Sichuan. Furthermore, the critical factors in shaping Sichuan’s position in its various roles correspond with the province’s central geographical position in China’s west and its close cultural proximity to the political centre in Beijing through its Sino-based culture. Nevertheless, it also reflects the changes in China’s position in the world, SinoAmerican relations and the need to broaden cooperation with Europe. Having its own civilisation and history, Sichuan sees the BRI as an opportunity to be highly proactive across the Eurasian continent, Southeast Asia, Japan and the United States. Apart from being responsible for local economic development, the provincial government has been part of Beijing’s policy towards the international regions listed. By planning a business-friendly location, Chengdu incentivises central governments in the hope of securing China’s increasingly important position in global affairs. On the other hand, the provincial and municipal governments in Chengdu take a highly active position in response to the Belt and Road Initiative and by this proactive stance secure their place in central government projects with funding from Beijing. But nothing is without cost; and the local government articulates its exceptions so that it can receive more incentives from the political centre. This chapter, by discussing the declarative positions and practical actions taken by Sichuan, further elaborates on central-local bargaining relations,

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Sichuan external outreach in the United States, Western and Central Europe as well as Sichuan’s shadowing of the action taken by the competing government of neighbouring Chongqing. 3.2.1. Sichuan discussing and planning its role in the Belt and Road Initiative Since the BRI was announced, local policymakers have taken an extremely optimistic and proactive position, recognising itself as a critical part of national policy. The government, academia and journalists quickly used the term ‘checker’ to position the province and persuade the central government to invest more in Sichuan. In the context of Sichuan, the role of the pawn is taken from a different perspective. This ‘label’ is related more to the county level when it comes to the regional development of the province, rather than any important role in China’s foreign policy. Sichuan local bureaucrats preferred to name Sichuan as a ‘pioneer’ (Interview, Sichuan 2018). The pioneering nature of the province and its centrality was also recognised by the Minister of Foreign Affairs Wang Yi (2016). Sichuan, throughout Chinese history, especially when the Southern Silk Road linked to the Northern Silk Road, has always been a ‘pioneer’ (kaifang de xianxingzhe 开放的先行者) in China’s opening up. The Belt and Road Initiative and the promotion of the YREB have provided significant opportunities for Sichuan to expand its opening up and enhance the level of open economic development. When it comes to international cooperation, Sichuan’s provincial role connects Central Asian countries with European countries in the west, connects with the China-Mongolia-Russia Economic Corridor in the north, integrates into the China-Indochina Peninsula Economic Corridor and is involved in the development of the China-Pakistan, Bangladesh, India and Myanmar Economic Corridors in the south (Wang Yi 2016). In the context of international activities, Sichuan province’s external cooperation forms part of local, regional and national plans of development under the Belt and Road Initiative. In the case of western China, the external actions are part of the Great Western Development, and the YREB. From 1999 onwards, the central government has paid attention to building a hospitable environment for investments and further economic development. The provincial policymakers, with Zhou Yongkang as leader, soon realised that the Open up the West campaign should have been used by Sichuan to its fullest. They started to promote Sichuan as ‘the economic powerhouse of China’s west and a bulwark for environmental protection along the upper reaches of the Yangtze River’ (McNally 2004, 426). The Open Up to the West strategy, as named in governmental reports, was seen as an opportunity that should be actively grasped and implemented. From the described approach, the Belt and Road Initiative was also optimistically taken up by the local government of Sichuan province. In governmental reports, governors in front of the Local People’s Congress urged Sichuan officials to use the BRI opportunity to its fullest by strengthening the position of the province, taking a more active position in regional and local development, developing trade with

Sichuan and Chongqing 131 foreign partners, promoting logistical cooperation and cooperating with the Western European countries of Italy, France and Germany. In the light of government reports, Sichuanese authorities refer to the province’s Third Front legacy and see it as an essential base for civil-military industry (junmin ronghe 军民融合). In 2015, when the BRI appeared in the report for the first time, Wei Hong, then the governor, elaborated on the process of modernisation; urbanisation and internationalisation were placed together; and the aspiration of Chengdu, the capital of Sichuan province, to be a global city. With its growing economic interests, the governor declared that Chengdu will use the ‘single window’ model of international trade: meaning that all parties involved in international trade and logistics will submit standardised documents through a single platform to meet the relevant laws and regulations, and management requirements (ScLGR 2015–2019). As a landlocked province, Sichuan faces the major problem of developing an exportled economy. However, Wei Hong pointed out that Sichuan did not face major issues on its side, but ‘the complexity of international relations was still perceived as unprecedented, and was having an impact on Sichuan’s foreign trade’ (Ibid.). Despite this, Sichuan positioned itself as the connecting point between the north, through Lanzhou and Urumqi to Europe, and the south through Kunming to continental Southeast Asia and South Asia Corridors. The BRI is perceived as part of an integration project and together with the YREB plays a critical role in developing the economy of western China. However, Wei Hong failed to recognise the unification of the market, and by only referring to actively promoting the experience of the Shanghai Free Trade Zone positioned Sichuan as the hub in further integration plans sponsored by the government in Beijing (ScLGR 2015–2019). After the corruption scandal in late 2015, Wei Hong was removed from his post, with Yin Li, the then deputy party secretary, and educated in medical science by Soviet and American specialists, succeeding him. In 2016, Yin Li, by strengthening international cooperation promised to organise the business activities of 1,000 companies located in Sichuan in Southeast Asia, South Asia, Central Asia, and Central and Eastern Europe per year. One project that was given a prominent role was the ‘Two Rivers Cooperation’: the Russian Volga and Chinese Yangzi (upper and middle level) (ScLGR 2015–2019). The report in 2017 differed from the previous year’s with more technological advanced cooperation (shuanchuang 双创) coming to the fore. The governor pointed to major international partners from France, South Korea, Germany, and Hong Kong and Macau whose activities were located in the region’s industrial parks. Yin Li then promised to 1,000 train shipments per year from Chengdu to Europe and strengthen the provincial activities in international production capacity cooperation, while Sichuan was named as a Belt and Road Initiative economic contact base (jingji lianluo jidi 经济联 络基地) with overseas intellectual property rights protection platforms (ScLGR 2015–2019). Major activities between Sichuan, Italy and France were mentioned in 2018. Interestingly, as a landlocked province, the government in Chengdu had been looking for seaport access, and Sichuan organised a meeting with Hong Kong and Macau. Nevertheless, it also declared a willingness to cooperate with other free

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trade zones in Shanghai and Guangdong. As was stated in the last report, all activities might serve China’s go out strategy. Moreover, the governor said proudly that: ‘the trade volume of the countries along the “Belt and Road” increased by 79.8%, and the number of international trains exceeded 1,000, ranking it first in the country’. The second core issue for Sichuan international cooperation, as presented in the 2018 report, was how international capacity cooperation in the ‘111 Project’ should be implemented and this meant: 100 critical international capacity cooperation projects, ten international production capacity cooperation demonstration bases, and by 2020 exports of Sichuan equipment and other commodities would account for USD ten billion. The final focal point in the report was based on the Third Front legacy, and discussed ‘civil-military integration’ as part of provincial international activities (ScLGR 2015–2019). According to a 2019 report, Sichuan province under the BRI had accelerated the pace of reform and opening up, and optimistically stated that the ‘vitality of innovation in the whole society has continued to increase’. The governor described Sichuan as a pivotal place in securing intellectual property rights in the civil-military industry, and the pilot project of low-altitude airspace management. Moreover, the independent research and development of Sichuan’s private enterprises and the world’s first dual-core artificial intelligence commercial satellite were successfully launched, illustrating military-civilian integration. An essential part of the province’s global outreach was the search for global high-tech resources. In order to facilitate this, the provincial government supported 125 major science and technology projects, with more than 1,500 innovation platforms being developed. The province built 860 incubators, and 6,597 small and medium-sized enterprises with 32 projects and won a 2018 National Science and Technology Award (ScLGR 2015–2019). The second important aspect of the BRI policy in western China was based on developing metropolitan areas, with Sichuan Chengdu playing a critical role. In 1982, Chengdu was named as a city of national historical and cultural importance, and in the mid-1990s Sichuan played the role of a political, economic, cultural, financial and commercial centre, as well as a transportation and communication hub for Southwest China. In 2011, Chengdu was designated a ‘cultural city’ of China, and an essential national high-tech industrial base. In 2016, the State Council approved the ‘Chengdu-Chongqing Urban Agglomeration Development Plan’ document and stated that Chengdu aimed to build a ‘national central city’ (zhong xin chengshi 中心城市). According to these plans, by 2020 Chengdu’s urban agglomerations will be developed to the same degree as other urban agglomerations in China, and by 2030, would have the status of ‘world-class city’, although what this actually entails remains unclear. In order to achieve these goals, Chengdu actively promotes its cooperation with developed countries: two innovation centres with South Korea and Germany, and one environmental protection centre with France. Moreover, the city has declared a desire to strengthen relations with the United States, Mexico, Pakistan and India (ChLGR 2016). Chengdu’s centrality was also evident when, in May 2016, the city was identified as a pilot city for the innovation and development of modern logistics by the National Development

Sichuan and Chongqing 133 and Reform Commission. Furthermore, the rail connection between Sichuan and Lodz (Poland) launched a national demonstration project of multimodal transport with Silk Road International Air Railways and was placed under the Circular of the General Office of the NDRC on the Exchange of Experiences in Developing Pilot Cities in Innovative Development of Modern Logistics Reform and Trade body (2017, No. 1823) and urged other provinces to study the advanced experiences and practices of pilot cities such as Chengdu. In 2017, Luo Qiang, the new mayor of the city, apart from listing Germany, France and South Korea as international partners of the city, also mentioned cooperation with Singapore. As further discussed in this chapter, Chongqing was designated by the central government to open a Special Economic Zone with the state-city and Chengdu used this capacity to approach Singapore with a cooperation proposal. In 2018, the city organised a number of prestigious international events, including the G20 Ministers of Finance Meeting and the Sino-American Governors’ Forum. Being part of the YREB, Chengdu places itself as a gateway-hub for further international outreach of China’s west as well as part of the west-south domestic corridor, and with the Tianfu New District as a location for new technologies, is superior to other such locations in the region. Furthermore, the local soft power based on the traditional Sichuan opera and other cultural activities would attract foreign tourists to visit the region, according to Luo Qiang (ChLGR 2018). In 2019, as the ‘friends’ cycles’ (pengyou quan 朋友圈) slogan became popular, the mayor of Chengdu declared that the international strategy taken by the city had achieved enormous results and ‘Chengdu’s international friends’ cycle is skyrocketing’. Apart from the ‘friend’s cycle’, further industrial cooperation was developed, which included Chengdu, whose particular role in Sino-Japanese relations allowed it to open Sino-Japanese Industrial Park. Interestingly, apart from international mercantileoriented cooperation as part of the national initiative, the municipal government declared that it would establish a BRI arbitration international court, International Business Mediation Centre and a Foreign Law Arbitration Centre. Through these institutions, Chengdu hoped not only to be a trade centre, but also part of a further redefinition of the global trade structure by securing China’s interest with its own regulations and courts (ChLGR 2019). Chengdu’s enthusiasm regarding the BRI, places a very heavy burden on Sichuan as the province has to attempt to meet all quotas, numbers and plans that puts the province itself under pressure. According to the ‘251 Executive Plan’ formulated in 2015, Sichuan needs to achieve a target of USD two billion in infrastructural investment, 10% growth per year in investment and USD three billion in trade volume. In this project, 20 countries along the BRI were chosen for cooperation with Sichuan, including Russia, Singapore, the Czech Republic, India and Saudi Arabia. Fifty significant investment and infrastructural projects, especially in emerging industries, were chosen (but only above USD one billion), and infrastructural plans (but only those in excess of USD one hundred million). Moreover, 100 companies, including Changhong, Chengda and Honghua, were chosen as companies for the implementation of China’s go out strategy (ScNews 2015). Furthermore, Sichuan hopes to play a role in ‘Made in China 2025’ and a special

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‘Action Plan’ in order to acquire new technologies and to develop relations with advanced economies such as Germany. This was particularly important for Sichuan’s robotic industry that focuses on the development of industrial robotics, specialised robotics and complete sets of production and processing equipment, as well as meeting the needs of the automotive, electronics and defence sectors. Moreover, Sichuan will seek to take the initiative of ‘top-level design’ in the 5G industry and then through China’s network technology integration platform provide technical support for the industrialisation of 5G systems and the establishment of international standards (Sina 2016). In order to secure the sustainable development of economic growth based on the development of new technologies, the provincial government promised to strengthen its own capabilities, utilising human resources development and institutions. This, however, as stated in the ‘Action Plan for Building Start-Ups (2016–2020)’ was impossible without projects, scholarships and special subsidies for ‘foreign talents’. To finance this project, the government promotes the attaining of resources through a combination of three methods: venture capital + listing financing + bond financing. The first two methods can be utilised with foreign capital, while the last is strictly controlled by the central government and cannot be a part of the province’s external relations (ScGov 2016). Three years after the BRI was announced, the provincial government’s optimism was rewarded. In a rare move for a province in Mainland China, the central government transferred funds to Sichuan’s special provincial-level reserve bank for significant Belt and Road projects (shenji ‘yidai yilu’ zhongda xiangmu chubeiku 省级 ‘一带一路’ 重大项目储备库). Sichuan initially received a special money transfer worth 1.2 trillion RMB from the central government and planned more than 140 projects, covering infrastructure construction, economic cooperation, capacity building, energy resource development and cultural exchanges. In June 2018, the bank’s reserves counted 1.3 trillion RMB and were committed to 150 projects. As stated by official documents, Sichuan province investments are mainly concentrated in Belarus (Big Stone Industrial Park), in pharmaceutical industries in Kazakhstan and the machinery industry in Russia, Mongolia and the Czech Republic (ChineseGov 2016a). Moreover, Chengdu’s municipal government established a special industrial investment fund for the advanced manufacturing sector (12 billion RMB). As expressed in official documents, the major reason behind the special investment fund was to support development in the e-information, biomedicine, automobile, and defence sectors, as well as rail transit industries (ChengduGov 2017). An important aspect of future effective policies under the BRI is domestic cooperation, including the Chengdu-Chongqing city cluster as well as Guizhou and Yunnan provinces (ChineseGov 2014). As a scholar from Chengdu said, ‘in the construction of the Belt and Road, the most important issue is to coordinate with the surrounding areas, especially Chongqing, imposing the division of labour, cooperation and coordination, in order to avoid vicious competition’ (Chengdu canyi . . . 2016, 150).

Sichuan and Chongqing 135 Nevertheless, this optimism and the plans delivered by the local policymakers contradicts the common perceptions. As one interviewee from Chengdu said, Sichuan people are very much in favour of new projects and plans sponsored by Beijing. However, the fact is that the current leader, Xi Jinping, hopes to wipe out all of the achievements made by Deng Xiaoping, the former Sichuanese leader of China. The second important issue is that the central government imposed high quotas of development which the local government found extremely challenging to achieve. However, by producing artificial statistics, they presented outstanding results to the central government. And finally, the problem of horizontal competition ‘especially with Chongqing’ and a lack of clear and logical division of labour produces ‘evil competition’ which appeared to undermine all plans and regulations. Apart from calling for a division of labour, scholars in Chengdu stated that cooperation with Guangxi AR and the seaports in the region was critical for the future development of foreign trade as ASEAN countries are the province’s second/third biggest trading partner. This understanding, however, goes against the traditional post-Third Front division between Chengdu-Kunming and Chongqing-Nanning and in fact, a broadening of the platform for horizontal cooperation as well (Interview, Sichuan 2018). 3.2.2. The international markets and politics in the Sichuanese ‘paradiplomacy’ As the BRI was announced as the next round of China’s reform and opening up, the landlocked provinces faced the dilemma of how to open their local economies to international markets. It is useful to analyse the trade distribution by country and look into statistics that allow the western provinces to show their ingenuity in locating a foreign market. But, as said in the first subchapter, inland transit needs to be supported by political interaction that secures markets, and provides a platform for a positive political atmosphere. On the other hand, the plans to be a high-technology hub in western China means that the provincial-level government needs to cultivate relations with the United States and Western European countries. What should be noted as a paradox during the years of the BRI, which promised to change the geographical destinations of foreign trade, is that the percentage of trade with the United States in Sichuan’s foreign trade volume has grown systematically. Between 2010 and 2012, before the BRI was announced, the USA occupied first place with between 16.6% and 21%. After the BRI was announced in Astana in 2013, this volume had increased to between 18.3% and 28.6%. ASEAN was the province’s second most important trading partner, followed by the European Union, Hong Kong Japan and South Korea. These numbers, however, are part of a broader picture. Foreign trade made up a mere 12.5% of Sichuan’s economic growth, 21.1 percentage points lower than the national level and 10.6 percentage points lower than neighbouring Chongqing. Sichuan’s foreign trade scale was minor from a national perspective with only a 1.7% share and only 6.7% of Guangdong’s foreign trade volume. The overall scale of foreign

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investment is small, and direct foreign investment in Sichuan is less than 2% of the country’s total. The number of enterprises in Sichuan’s import and export sector accounts for less than 7% of those in Zhejiang and 10% of Shandong’s. In other words, the international competitiveness of enterprises and industries is relatively low, with the service industry not being in a position to face international competition (Sichuan Statistic Bureau 2018). The growing role of trade relations with the developed world can be illustrated by data. In 2017, the top five trading partners of the United States, ASEAN, EU, Japan and South Korea accounted for 74.2% of Sichuan’s trading partner volume. In 2018, the top four trading partners were the same ‒ the United States, ASEAN, the European Union and Japan ‒ and accounted for 68.1% in Sichuan external trade. In 2019, the United States, ASEAN, the European Union, Taiwan and Japan had a 73.6% share of Sichuan’s total foreign trade import and export (ChengduCustom 2019). In the first quarter of 2020, ASEAN, the United States, the European Union (excluding the United Kingdom), Japan and South Korea were the top five trading partners in Sichuan, and the total import and export value accounted for 71.9% of Sichuan’s total foreign trade (ChengduCustom 2020). The growing role of ASEAN in Sichuan foreign trade illustrates that the negative impact of the Sino-American trade war means that there is a necessity of possibly bypassing trade restrictions by utilising their guanxi with the Chinese who are based in other countries in Southeast Asia. As trade friction between China and the United States began to take hold, trade with the ASEAN market became even more critical and had grown from 19% in 2013 to 33.9 % in the first quarter of 2020 (see table 3.4). After seven years of the BRI, the policy that promised to diversify provincial markets, the United States market was still as important as the markets along the BRI, and the markets of the US, EU and Japan, which were twice as important as the markets in the developing world, and accounted for more than 70%, imply that political relations are critical for the province. Furthermore, products ‘made in Sichuan’ accounted for 86.6% of provincial exports, and according to the ‘10000 companies go out’ report in 2017, 4,181 companies were accompanied by Table 3.4 Sichuan export market by country region as percentage of total provincial exports (2010–2020) 2020

2019

2018

2017

USA 14.8% 19.6% 26.1% 22.5% EU 16.8% 19,6% 15.9% 17.2% ASEAN 33.9% 27.7% 25.8% 26.4% Japan 5.5% 6.0% 6.9% 4.7% Hong Kong 7.3% 7.1% 15.9% 7.6% Holland ND ND ND ND Germany ND ND ND ND Russia 1.8% 1.6% 1.6% 1.6%

2016

2015

2014

2013

2012

2011

2010

29.3% 18.1% 15.3% 4.7% 10.9% 5.3% 3.4% 1.4%

22.4% 16.4% 17.8% 4.0% 11.3% 5.0% 3.0% 1.7%

20.8% 19.5% 16.2% 3.5% 12.9% 6.4% 2.9% 2.5%

20.9% 25.8% 24.7% 10.5% 18.6% 20.4% 25.7% 19.4% 19% 16% 8.7% 11.9% 3.1% 3.7% 3.6% 2.8% 11,7% 7.5% 10.0% 14.5% 6.2% 6.9% 7.5% 2.0% 2.9% 2.9% 5.5% 3.8% 2.2% 1.7% 1.8% 2.1%

2020 – data of January March this year. ND: No Data. Source: statistical data obtained from Sichuan Provincial Department of Commerce and Chengdu Custom Office http://swt.sc.gov.cn/sccom/swsj/list.shtml (accessed 13 May 2020).

Sichuan and Chongqing 137 the government in foreign business trips. These foreign missions were based on local entrepreneurship, and indicate that promoting local business played a more important role in Sichuan’s activities than inter-provincial cooperation (ScGov 2016). However, Sichuan cannot expand trade with countries along the Belt and Road without deepening its integration with wealthier regions like the coastal areas of Shanghai and Guangdong. Sichuan coordinated with the central government and utilised the bilateral and multilateral cooperation mechanism already established between China and countries along the Belt and Road. In this area, regional forums, visits from local politicians, as well as participating in official state visits, are seen as a vehicle for the province to nurture stable economic relations (Peng 2018, 42). An important part of the export-led economy is the support given predominantly by the provincial government to local companies. The major theme of cooperation is productivity (capacity) cooperation. Sichuan organises special meetings in Cambodia, for example, the Sichuan-Cambodia capacity cooperation negotiation meetings, including discussions on the export of Sichuan furniture, building materials and other products to Cambodia; Ziyang city holds Sichuan-Vietnam Machinery and Machinery Capacity Cooperation and Exchange seminars in Vietnam; and finally, the provincial-level government promotes industrial parks in India, Karamay and Morocco (Guoji Shangbai, 14.05.2017). By the end of 2017, the Sichuan SOE had 244 projects in foreign countries and had opened trade missions in Hong Kong, Ethiopia, Saudi Arabia, Laos, Vietnam, Brunei and Poland. The Sichuanese government supports the province’s major companies in their go global strategies. Among them are: State East Electric Group, China Railway Eryuan Engineering Group, Sichuan Railway Investment Group, Sichuan Aviation Group Sichuan Energy Investment Group and Sichuan Huaxi Group. Sichuan Railway Investment, for example, invested USD 1.5 billion in 50 overseas projects in countries such as Tanzania, Eritrea, UAE, Cambodia, Norway, Germany, France, Russia and Micronesia, where the Group opened representative offices or subsidiary companies. Sichuan Energy Investment Group opened a sewage treatment plant in Thailand as well as a Moscow street lamp renovation project and a Malaysian chemical construction project. As of the end of 2017, Sichuan stateowned enterprises had 244 overseas investment projects, covering 50 countries and regions, in nine categories, worth a total of approximately USD 12.73 billion (SASAC 2018). In 2018, there were 203 overseas projects under construction with a total investment worth approximately USD 29.13 billion. Leading the way were the central enterprises (chuan yang qi 川央企) in Sichuan with USD 14.37 billion, followed by provincial enterprises (shengshu qiye 省属企业) with USD 12.76 billion, and township enterprises (shizhou qiye 市州企业) which invested USD two billion (MOFCOM 2019a). Apart from supporting its own companies, the Sichuan government needs to attract more foreign investment that would secure the importance of foreign trade in Sichuan’s economic development. Companies with foreign capital occupied first place in the provincial export structure with a 57% share, followed by SMEs with 31% and SOEs with 12%. Companies in the processing industry had a 55% share of total provincial trade (Yang, Ran

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2017, 255–257). So only through foreign investments in new technologies can Sichuan secure a minimal position in the Belt and Road Initiative that is driven by the go global strategy. Apart from economic interactions, external relations have become an important pillar of China’s foreign policy and for Sichuan as well. On the one hand, provincial and municipal governments have attempted to secure stable economic relations and shape a positive investment environment, on the other, it facilitates central government relations. This dynamic is particularly evident in the case of relations with the United States and Japan. The very first signal of the Sichuanese role in Sino-American relations was seen in September 2015 when as the only party secretary, Wang Dongming, together with governors from five provinces, accompanied Xi Jinping in his state visit to the United States. Given the fact that Chengdu Aircraft Industry Group subsidiary of SOE Aviation Industry Corporation of China is located in Sichuan, making aviation one of the leading industries in Sichuan, Wang Dongming visited Boeing, Apple and Tesla in order to strengthen relations and invite American companies to invest in Sichuan. Recognising Chengdu as the powerhouse of new technologies, a memorandum of understanding on strategic cooperation with the state of Washington and with Microsoft, indicating a deeper cooperation, was signed (The Paper 2015). In May 2018, China-US Governor Forum was organised in Chengdu. From the American side (e.g. according to the governor of Alaska) the meeting in Sichuan played a very positive role in reducing the US trade deficit with China. But the main target in Sichuan’s international relations is the state of California, with which Sichuan signed a friendship province/state agreement, which, with the establishment of a joint committee between chambers of commerce and the California-Sichuan Clean Energy Partnership, institutionalised the relationship between the province and American state. This agreement was signed by the then governor of California, Jerry Brown, during his visit to China, when he met Xi Jinping in Beijing ‘in a closed-door meeting, a rarity which the governor called highly “unusual”’ (CapRadio 2017). On the other hand, by building an appropriate political climate, the Sichuan government hopes to conduct its own high-tech development exemplified in the Meishan-California smart city project as well as by having closer relations with California through the California Office in Chengdu (Sohu 2018). The Chinese side tried to use close relations with their counterparts in the United States by building a positive climate with the National Governors Association and influencing American policy towards China. However, governors of American states have little if any impact on White House policies, which is in contrast to China where the American governors’ lobbying of Beijing is a prerequisite (Interview, Sichuan 2018). Along with the Sino-America trade war, a very meaningful example is the newly introduced law in the American Congress, the City and State Diplomacy Act. Sponsored by Ted Lieu, a Republican congressmen from California of Taiwanese origin, the law proposed establishing a new special paradiplomatic bureau in the Department of State that would guide and monitor American states’ foreign activities (USCongress 2019). The second illustrative example of the changes in the political climate was in a speech delivered by Mike Pompeo to the National

Sichuan and Chongqing 139 Governance Association when he warned local policymakers to limit and examine their relations with Chinese provincial-level governments (Pompeo 2020). Even though the Sichuanese side has been looking to keep communication channels open, in December 2019 Yin Li met Neil Bush, an international businessman and son of George H. Bush the former president of the United States, whose business career is linked to American investment in China and who has close relations with Jiang Zemin’s family (ScFAO 2019c). In the case of the United States, paradiplomatic activities do not meet the country’s expectations, because the Chinese side thinks that local relations might influence and ease Washington’s policy towards Beijing, one interviewee admitted: ‘However, this channel does not work that way, at least in the American system’ (Interview, Sichuan 2018). However, in the case of Sichuan’s actions in Japan, paradiplomacy works as a tool for softening a counterpart’s position. The first visible example of the forthcoming thaw in relations occurred during the China-Japan Governors’ Forum. In the Third China-Japan Governors’ Forum in Sapporo (May 2018), several policymakers from Sichuan, Hebei, Liaoning, Heilongjiang, Jiangxi provinces and, on the Japanese side, Hokkaido, Iwate, Yamagata, Shizuoka, Toyama and Tottori prefectures discussed bilateral, and local cooperation. For the first time in history, the forum was chaired by Premier Li Keqiang and Japanese Prime Minister Shinzo Abe. By using the sub-national level, both sides have pushed the relationship beyond the historically controversial issues and the East China Sea territorial disputes, and has now become an essential vehicle for exchanging experiences, debating future policy plans and economic development. This unprecedented ‘state of affairs’ between the two countries was exemplified in 2018 when the governor of Sichuan province visited Japan twice. The first visit took place on the occasion of the Sino-Japan Governor Forum in Japan. Yin Li put forward four suggestions on strengthening pragmatic cooperation between Sichuan and Japan and urged use of the sister cities platform to go beyond national politics. The second was to further enhance industrial cooperation by inviting Japanese companies to invest in Sichuan. Third, to jointly carry out exchanges and visits between scientific research, and scientific and technical talents. Yin Li’s final suggestion was to strengthen cooperation in disaster prevention and mitigation, improve the scientific and technological capabilities of disaster prevention and mitigation to mutually benefit the countries’ people (ScNews 2018). During his second visit (August–October 2018), Yin Li attended the China (Sichuan)Japan Economic Cooperation Advisory Committee Symposium and the China (Sichuan)-Japan Economic and Trade Promotion Conference in Tokyo, the Sichuan-Hiroshima Corporate Exchange Matchmaking Meeting in Hiroshima and the China (Sichuan)-Osaka Economic and Trade Promotion Conference in Osaka. As the governor stated, Sichuan is responsible for implementing the central vision of ‘the great openness’. Moreover, the governor held talks with the former Japanese Prime Minister Yukio Hatoyama from the Democratic Party of Japan and Chairman of the Japan Trade Promotion Agency, Shi Maobo, in Tokyo (Ribencai 2019). Apart from the visits from the Sichuan governor, the critical role of Sichuan province is also evident when it comes to the visits of Japanese policymakers

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to Chengdu. Toshihiro Nikai, secretary-general of the Liberal Democratic Party, visited China in April 2018 as a special envoy of Prime Minister Shinzo Abe (JapanTimes 2019). After Abe’s visit to China in November 2018, both countries changed the direction of bilateral relations. The Chinese side, however, has kept on developing relations with policymakers from the Liberal Democratic Party through relations with Sichuan province. Apart from regular meetings with the Japan External Trade Organization (JETRO), and other business organisations, Party Secretary Peng Qinghua met with the Japanese Ambassador to China, Yutaka Yokoi. The provincial government organised the Sino-Japanese Regional Dialogue in January 2019 (ScFAO 2019a). The most high-profile visit to Sichuan province was made by a member of the Liberal Democratic Party (LDP), a deputy minister for the environment, and a deputy minister in the Cabinet Office in September 2019. What should be acknowledged is that this visit was on a party-party level with the LDP delegation being invited by the Sichuan Party’s International Liaison Office. Moreover, as presented by the Chinese side, the LDP policymaker was from the Shisuikai (志帅会) bloc of Toshihiro Nikai, the former Minister for the Economy, Trade and Industry, who has always been a significant driving force behind cooperation with Mainland China. Moreover, the governor of Sichuan province, Yin Li, invited more Japanese companies and investment to the western province. The delegation paid a visit to the China Telecom China Western Information Center where both sides discussed 5G cooperation (ScFAO 2019b). Finally, the Sichuan government’s proactive actions resulted in the opening of the China (Sichuan)-Japan Technological Park where both sides would conduct research and develop new 5G technologies, attracting further Japanese investment in the province (Hexun 2019). Furthermore, due to the intermediary role in China-Japan relations, Chengdu hosted the China-Japan-South Korea Trilateral Summit in December 2019. During the first bilateral meeting between South Korea’s Moon Jae-in and Prime Minister Shinzo Abe in 15 months, the three sides discussed ways to ease tensions between Tokyo and Seoul. These actions clearly show that both sides have a range of semi-official diplomatic channels and were arranged via local channels. The prominent role of the provincial government in Chengdu in both Sino-Japanese and East Asia relations is no longer in question (Interview, Lodz 2018a). From a qualitative analysis of provincial-level activities, it is noticeable that Europe is the most important direction for the province’s external actions and that the provincial government is responsible for handling relations with European local and central governments under the Belt and Road Initiative. As analysed by the frequency of visits under the BRI umbrella, the Sichuan government continued close relations with its traditional trading partners: the United States, Japan and South Korea. However, at the same time the province attempted to open new channels of cooperation with countries along the BRI: the Czech Republic, Russia, Poland, Israel and Italy (see Graph 3.2 and 3.3). In 2017, the most extensive political activities were with the Czech government and interestingly was combined with significant activity from Beijing. Followed by Ye Jianming’s, the leader of Huaxin company, nomination as the adviser in the Presidential Palace

Sichuan and Chongqing 141 25

20

15

10

5

2014

2015

2016

2017

2018

Italy

Russia

France

Germany

South Korea

Japan

Israel

Poland

Thailand

Nepal

Austrailia

Czech Rep

USA

0

2019

Graph 3.2 Sichuan provincial government foreign meetings by country 2014–2019 Note: information: due to the COVID19 outbreak the international activities of the local governments has been suspended. Source: author’s own compilation based on data from Sichuan Provincial Foreign Affairs Office (2014– 2019) www.scwqb.gov.cn (last accessed 30 April 2020, since when the webpage has been blocked).

18 16 14 12 10 8 6 4 2

2013

2014

2015

2016

2017

2018

Czech Rep

Poland

Japan

Canada

Israel

Thailand

Russia

Germany

France

South Korea

Australia

Great Britain

United States

0

2019

Graph 3.3 Chengdu municipal government foreign meetings by country (2013–2019) Source: author’s compilation based on data from the Chengdu Provincial Foreign Affairs Office (2014–2019). Available online at: http://cdfao.chengdu.gov.cn/ (accessed 20 May 2020).

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in Prague and Chinese promises of a million-dollar investment, the secretary of Sichuan province, Wang Dongming, paid an official visit to the Czech Republic, Poland and Russia. In fact, this political umbrella allowed Sichuan to explore new markets and maintain the province’s economic growth with Poland as a market for Sichuan products, and in the case of Czechia, more technologically advanced cooperation in the aviation industry. 3.2.3. Practising local railway diplomacy: the district of Qingbaijiang The Sino-European train from Chengdu’s Qingbaijiang district could be the most important example of Sichuan’s participation in the joint construction of the Belt and Road Initiative. The starting point, however, is not connected with the statesponsored Belt and Road Initiative but was a private initiative between Dell’s manufacturing facility located in the Polish city of Lodz, local businesses from Lodz, a logistics company from Poland and Foxconn. In late 2012, the Hatrans company visited China with the proposal of opening a cargo route between central Poland and western China. While discussing the deal in Chongqing, the Sichuan government approached the process with more incentives, and finally, Qingbaijiang district became the starting point of the Sichuan-Euro Railway (Interview, Lodz 2018b). Local companies then lobbied the local government to support the initiative, and quickly after the BRI was announced, regional authorities visited Chengdu and named this logistic cooperation as part of the BRI. This cooperation was attractive to such an extent that the regional government of Lodzkie became involved in the project. In June 2014, the Representative Office of Lodzkie and Lodz was opened in Chengdu. The major purpose of the office was to develop commercial, cultural and educational relations between the two regions. The next step was taken by the Polish central government who decided to open a Consulate General in Chengdu in 2015. Being located in central Poland, Lodz invested a great deal of political capital and hoped to utilise relations with Sichuan to open up its own landlocked region. Lodz organised the Sino-Polish Regional Forum in 2015, a special conference on self-governance cooperation with local Chinese counterparts. This led to the central government signing the ever first agreement between the central government and the Henan provincial government in higher education, with the University of Lodz being the most active contributor to the process (participant observation 2013–2017). This illustrates that a bottomup approach can cause political cycles to take action and stimulate further economic engagements (Mierzejewski 2019, 135–139). The cooperation prepares the ground for further investments in the logistic and building transportation hub in central Poland. Another form of cooperation has been the participation of regional authorities in the official delegations of the Polish central government to China. Marshal Witold Stępień was the only representative of sub-national entities during the Polish MFA Witold Waszczykowski’s visit to China in April 2016, the first foreign trip of the newly elected minister. It is worth mentioning that the delegation visited not only Beijing but also Chengdu, where the Polish minister

Sichuan and Chongqing 143 met the top regional politician, the Secretary of the Chinese Communist Party, Wang Dongming (Kamiński 2019). In June 2017, an official delegation with the party secretary of Sichuan Province, Wang Dongming, paid an official party visit to Poland, the Czech Republic and Russia. The visit was organised by party channels of the International Department of the Central Committee and the Chinese delegation, however, was not invited by the Polish central or local government but by the Polish Peasants’ Party. The very fruitful talks started with the opening of a new rail terminal in Kutno, a city located close to Lodz (Mierzejewski 2018, 165–166). Nevertheless, because of the rail connection, the popularity of Lodz in China makes the region quite irresistible to Chinese delegations. Over five years, more than 80 meetings were conducted in both Lodz and Chengdu, however, as said by a local official along with a growing number of delegates, there was no real benefit. Local governments complain that visits by Chinese delegations often do not produce tangible results. They argue that the Chinese side exerts pressure on signing cooperation agreements, which are not implemented, but only serve as proof of a foreign trip and once submitted to higher Chinese authorities promote the local leaders in the nomenclature system. Apart from the lack of benefits, as said by a local official in Poland, the involvement of the central government in Poland, and especially the Minister of Defense under American influence, played a critical role in limiting interaction with Chinese counterparts and finally led to the investment’s suspension (Interview, Lodz 2017). In the context of the BRI, Chengdu and Sichuan province position themselves as players with pivotal roles in shaping the development of connections between Europe, Russia, China and ASEAN with a ‘land-sea corridor’. The ‘Y’-shaped international logistics channel (‘Y’ zixiang guoji wuliu tongdao ‘Y’ 字形国际物 流通道) to ASEAN connects 14 foreign cities and by opening up ‘five regular trains’ services builds connections between 13 cities in China including Shanghai, Shenzhen and Nanning. As the central point of the railway hub, Chengdu has become the customs supervision centre for multimodal transport and the company established by the Chengdu municipal government, Qingbaijiang district and Chengdu Railway Bureau has become the management body for crosscontinental connections. The newly created Lingang Industrial Zone is designed to serve as a pilot zone for importing meat from the European Union and introduce ‘a pioneering mode of transport supervision and control of Sino-European trains’. This might be a visible sign of further foreign investment from multinational companies such as Dell, TCL, Lenovo, Gree, Volvo, Volkswagen, Geely and Philips that have established international businesses in Chengdu (Sichuan NDRC 2017). At the district level, Qingbaijiang became an actor in Euro-Asian land bridge and by sponsoring two international projects, ‘Sichuan-Europe’ (Rong-Ou 蓉欧) and ‘Sichuan-Europe+’ (Rong-Ou+), positions itself as the gateway to China and to Europe. According to the plan, in 2016 the Qingbaijiang logistics hub would send one shipment per day, 1,000 shipments in 2017 and planned 3,000 shipments per year up to 2021. Following this decision, Qingbaijiang district government

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presented its Free Trade Dry Port proposal in Beijing (May 2015) and planned to visit Sri Lanka, Germany and Poland. The Belt and Road Initiative has been perceived as a remedy for unequal and non-inclusive growth. In other words, the western provinces and autonomous regions were invited to open up their economies through cargo train connections with Europe and Southeast Asia. In May 2015, according to the plan passed by local government, Sichuan province was responsible for 48 logistic projects. The horizontal competition, however centralised, does not secure China from the further divisions. The local governments want to play a more critical and broader role than was expected in Beijing, and prefer to take stronger action to match Chengdu’s actions in the national BRI and ‘actually, other local governments have the same desire as Chengdu’ (Seminar, Chengdu 2018). Following local decisions in April 2017, Chinese, Belarusian, German, Kazakhstan, Mongolian, Polish and Russian railways signed an Agreement on Deepening the Rail Freight Cooperation. The agreement identifies important terminals – Chengdu, Lodz, Moscow, Almaty, Istanbul (shuniu jiedian 枢纽节点) – and distribution centres – Hamburg, Lyon, Budapest, Teheran and Hanoi (zhuanyun zhongxin 转运中心), with representative offices in London, Warsaw, Moscow, Islamabad (daibiachu 代表处), and domestic links with Shanghai, Tianjin, Shenzhen, Qingdao and ten other ports. Chengdu-Lodz became the most crucial line from Sichuan to Europe, as well as from Europe through Chengdu to three economic regions: Pearl River Delta, Yangzi River Delta and Hebei-Tianjin-Beijing economic zones (Xinhua 2017). But rail freight transport as a mode of foreign trade shipment, although politically attractive, in reality has become an exceedingly difficult challenge for the provincial government. Between 2014 and 2020, rail freight in Sichuan exports grew by 314.7%, while the import of products to Sichuan province grew by 180%; in 2017 this was the fastest-growing mode of transport in Sichuan’s foreign trade. Import by rail connection via China Railway Express noted extraordinary growth of 169% and 109.8% in 2019 and 2020, respectively. In the case of Sichuanese export, rail freight growth accounted for less than half of import transportation (see Table 3.5 and 3.6). In October 2017, following the successes of the Chengdu-Lodz cooperation, the China Railway Corporation and Sichuan Provincial People’s Government approved the ‘Chengdu Railway Terminal Plan (2016–2030)’ and agreed to finalise the Chengdu Hub General Plan. Based on this agreement, the local government will further strengthen cooperation with the Chengdu Railway Bureau. Both sides agreed to organise institutes and relevant departments to coordinate the process of implementation for comprehensive development and integrate them into overall urban planning, reserving and controlling the channel’s resources and construction (Sichuan Daily 08.11.2017). In all of these plans, Chengdu positioned itself as the central point between the domestic railway network and the international railway between Xiamen, Ningbo, Shenzhen, Nanning, Guangzhou and Kunming. Further coordination was announced in May 2017 when the government established a CRE Transport Coordination Commission with seven local

Sichuan and Chongqing 145 Table 3.5 Sichuan’s import by modes of transport by % growth Modes of transport Import 2020/2019 2019/2018 2018/2017 2017/2016 2016/2015 2015/2014 Total Air cargo Transport by water Road transport Rail freight transport Other Transportation by post

18.2% 34.0% −18.1% −21.2% 109.8%

9.9% 20.1% −24.7% 36.1% 169.0%

26.5% 15.2% 49.4% 105.6% 39.2%

46.2% 36.2% 80.6% 85.9% 180.0%

25.9% 34.4% −0.4% 14.4% 150.9%

−27.2% −34.5% −25.2% −14.9% 138.2%

384.4% −96.7%

−43.1% 7788.2%

1479.7% 76.3%

164.3% −24.2%

4.4% −75.3%

425.1% −10.4%

Source: author’s own research based on the Sichuan Custom Office statistics Sichuan jin chukou yunshu fangshi zong zhi biao deng (Mode of transport in Sichuan’s foreign trade), http://cws.customs. gov.cn (accessed 20 May 2020).

Table 3.6 Sichuan’s export by modes of transport by % growth Modes of transport Export 2020/2019 2019/2018 2018/2017 2017/2016 2016/2015 2015/2014 Total 0.1% Air cargo 21.4% Transport by water −38.7% Road transport 13.5% Rail freight 34.5% transport Other – Transportation by −92.9% post

31.4% 25.5% 42.4% 28.3% 22.3%

37.4% 46.4% 12.7% 38.7% 314.7%

12.6% 12.6% −27.4% −16.7% 67.7%

−25.3% −16.4% −32.4% −36.9% −43.6%

33362.5% −6.7% 23653.7% −3.6%

400.0% −59.6%

−90.7% 3.0%

−92.0% −68.1%

16.8% 25.7% −5.5% 37.5% 61.5%

Source: author’s own research based on the Sichuan Custom Office statistics Sichuan jin chukou yunshu fangshi zong zhi biao deng (Mode of transport in Sichuan’s foreign trade), http://cws.customs. gov.cn (accessed 12 May 2020).

companies operating block trains to Europe. Chengdu became one of 16 departure cities connecting 42 cities in 14 European countries (Seminar, Chengdu 2018). All cooperation and opening up would not be possible without special subsidies and additional incentives from the local government. The subsidies provided by local governments at the district level are on average 7,500 (USD 1,086) to 10,000 yuan for a 20-foot equivalent unit container (TEU), and sometimes as much as 20,000 yuan (Global Times 2019). In the Chengdu-Europe+ strategy, the government offered special subsidies for cross-border e-commerce. Trade companies can receive subsidies of 200,000 RMB if the company’s foreign trade is more

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than 50 million RMB, for manufacturing enterprises, subsidies of approximately 50,000 RMB if total trade is ten million RMB, and SMEs can receive subsidies of 50,000 RMB if they achieve one million RMB in foreign trade. But even more importantly, in acquiring capital for future development, further incentives were introduced: for China’s top ten companies that introduced a supply chain to the province an additional five million RMB (paid over a three-year period) was awarded by the local government, and the equality investment institutions who invested in local non-listed companies were awarded 2% (up to ten million RMB) of the actual investment (Seminar, Chengdu 2018). In the case of Sichuan and Chengdu, both governments have tried to utilise their comparative advantages in international activities. The bottom-up approach works in the case of stimulating rail freight transportation between Chengdu and Lodz. The earlier stimulated cooperation with the Polish city has been used as the leverage in both relations with central government and other provincial-level governments. Being stimulated by the horizontal competition, the government decided to subsidy to transportation costs, and hopes to be the hub for western China’s goods. But at the end of the day, nearly 90% of products exported by the China Railway Express originated from Sichuan. This unachievable goal creates room for the further self-reliance approach at the provincial level and in fact limits the possible areas for integration with the other provinces in China, and in the Yangtze River Economic Belt in particular. From the international economic cooperation angle, Sichuan positions itself as a part of the ASEAN-China-Europe Corridor, but at the same time needs to compete with Chongqing which uses the same framework for China’s economic diplomacy. Moreover, Sichuan as the most active player in the BRI, by supporting its enterprises in trying to meet local and central government quotas, has been awarded special financial assistance for major BRI projects. At the same time, relations between Sichuan and California and between Sichuan and Japanese counterparts have been guided by the central government and the province plays an intermediary role in state-level relations. This phenomenon was closely visible before Prime Minister Shinzo Abe’s visit to Beijing in November 2018. Apart from direct relations with Beijing that has been seen as the priority from the government in Chengdu, the Sichuanese international agenda has been impacted by closely observing how its neighbour, Chongqing, has acted in the city paradiplomatic arena.

3.3. Chongqing’s close relations with the centre and its international activities With its geographical location in China’s west and being a directly governed municipality by the State Council, Chongqing enjoys a rather unique position in western China. Beijing located in the Yangtze River upper reaches in Southwest China and with a population of more than 30 million people, the city was recognised by the political centre in Beijing as an important point for the development of western China. In recent history, Chongqing has played an important role in China’s recent history. The city was China’s wartime capital, was part of

Sichuan and Chongqing 147 the Third Front and famous for Bo Xilai’s Chongqing model. In the twentieth century, as was previously mentioned, Chongqing was the capital of China during the Sino-Japanese war (1937–1945). After the People’s Republic of China was established, and along with the preparation for a possible Third World War, massive anti-Western campaigns, the people’s war concept and clashes with the Soviet Union, the position of Chongqing was elevated even further. The critical decision concerning the city, then part of Sichuan province, was taken by the central government in 1997. Beijing officially established Chongqing as a provinciallevel city, by separating it from being directly administered by Sichuan province. The decision taken by principals from Beijing was mainly driven by two factors: first, the uneasy relations between Chengdu and Chongqing and de facto clashes over national resources, and second, the majority of industrial production plants which, due to their strategic nature, were owned by the central government. Chongqing became the first, and to date, the only city located in the western region to come under the direct control of the central government (Keane 2007, 109–110). After the construction of the Three Gorges Dam in 1994 and the Beijing government-sponsored programme of Opening the West, Chongqing as a city governed by the State Council and having a party secretary as a Political Bureau member had hopes to utilise its ‘guanxi’ in order to benefit more from Beijing. In 2011, Chongqing was officially named as a rural-urban integration pilot zone, and the majority of discussions stated that Chongqing had unique characteristics for economic development, echoing a conceptualisation of the city being sponsored under the patronage of the party secretary of Chongqing, Bo Xilai. But, after a political and social scandal, Chongqing’s secretary was removed from the post and replaced by Zhang Dejiang (Yang Zhou 2018, 44–56). Being the party secretary in the city of Chongqing is a position that is constantly ‘in the limelight’. Sun Zhengcai, the next leader was finally dismissed in July 2017 when the Discipline Commission accused him of being ‘highly bureaucratic, lazy and ineffective, who led a degenerate and corrupt lifestyle, and engaged in money-for-sex transactions’. As advocated by Hong Lijiang (2004), since being a provincial-level city, Chongqing has experienced a change of leadership, not just in terms of personnel but more specifically in terms of the relationship with Beijing and central government, which has brought both restraints and room for manoeuvre (Hong 2004). Regardless of these political turbulences, the city hopes to play a critical role in the Belt and Road Initiative and being governed by the central government is an important location for Beijing’s global planning. 3.3.1. The Chongqing municipal’s perspective regarding the Belt and Road Initiative As introduced by Li Zun from the Chongqing Academy of Social Science, Chongqing has strategically supported the ‘Belt and Road’ strategy because it intends to be a central hub (zhongxin shujiu 中心枢纽) in western China, and attempts to utilise its advantages to bolster its own position. The very first position as part of the BRI was given to Chongqing in a central government document

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entitled ‘Vision and Action’ (2015) when the city was nominated as an important node city in the Inland and Maritime Silk Roads, and the western region’s central hub for the YREB. In 2015, when the BRI concept appeared in a governmental report, the city’s mayor, Huang Qifan, declared that Chongqing would serve as gateway for landlocked Western areas, and with its rail connection to Duisburg, would optimise the transportation of Chinese exports to Europe. Part of the local narrative regarded the importance of integration within the YREB, but due to the global economic slowdown, and the post-2008 financial crisis downturn, the export-led economy did not provide the expected results. In this context, foreign direct investment, the acquisition of foreign capital for further investment and an export-led economy with foreign companies became crucial challenges for the government in Chongqing (CqLGR 2015–2020). Despite the uncertain international economic background, the Chongqing government declared its proactive integration into the national strategy of the BRI, positioning itself as the central point in western China for international cooperation as well as domestic integration. As a consequence, the city’s international outreach became an important incentive for domestic capital from the wealthier coastal provinces to invest in Chongqing. In this particular area, the city of Chongqing hopes to be an important force behind inland integrations as it perceives Chengdu from Sichuan province to be a minor player (Seminar, Chongqing 2018). Interestingly, what differentiates Chongqing’s reports from the same documents delivered across China is the frequency of discussing the ‘core leader’s thoughts’: Xi Jinping. In 2016, the governor of Chongqing quoted Chairman Xi Jinping, who during his visit to Chongqing said that the city was a strategic hub with ‘great hope’ for western China development (Xinhua 2016). Moreover, the governor praised the chairman for his ‘spirit’, ‘great ideas’ and ‘excellent plans’ and discussed the BRI within the context of Xi Jinping’s thoughts. By being appointed by the core leader from Beijing, Chongqing enjoys its unique and essential role in national and regional development, and the opening-up policy. Furthermore, Huang Qifan plays the game of saying that Chongqing is ‘a strategic hub and radiation belt of the BRI’, and by integrating the Open Up the West, YREB and the BRI, the city would fulfil its obligation of building a strong sector of China’s economy (CqLGR 2015–2020). The further praising of Xi Jinping was presented a year later when the newly appointed mayor, Zhang Guoqiang declared: ‘General Secretary Xi Jinping inspected Chongqing and delivered an important speech, which has greatly stimulated the cadres and the masses in the city. The city has implemented five major functional regional development strategies and deeply integrated itself into the “Belt and Road” construction and the development of the Yangtze River Economic Belt’ (CqLGR 2015–2020). Moreover in 2018, Chongqing’s local government assured the central government that all actions taken under the BRI would ‘satisfy the Central Committee and the people of Chongqing’ (CqLGR 2015–2020). These references to the paramount leader might also be rooted in the popular belief that Chen Miner, with his political career in Zhejiang province, might be the protégé of Xi Jinping. Furthermore, the city’s government

Sichuan and Chongqing 149 announced very ambitious plans: ‘by 2022, the business environment will be significantly optimized, private investment will be more active, the private economy will account for about 55%, total imports and exports will reach 600 billion yuan, service trade will exceed USD 50 billion, and the use of foreign capital will stabilize at more than USD 10 billion’. However, another thing should be noted: this report was unique in the sense that Xi Jinping as the core leader was mentioned 29 times, the largest number ever included in a Chongqing report, and became a symbol of Chongqing’s development (2019, 13, 2017, 8, 2016, 5, 2015, 4). The next year, Xi Jinping was less prominent with regard to Chongqing but important declarations were delivered in 2019 and shared in 2020 as Chongqing presented itself as a force that would stabilise the American market for Chinese products. At the same time the city would secure and deepen China’s position in traditional markets and anchor the country’s businesses in the European Union, ASEAN, Japan and South Korea. Regarding international activities, the city’s government promised to expand activities in the countries along the BRI and emerging markets such as South America and Africa, and support enterprises to deploy overseas production and marketing service networks (CqLGR 2015–2020). As a landlocked area, Chongqing presents itself as a defender of opening up, and a combatant in the Sino-American trade war. But without having direct access to the sea, the aforementioned declaration was clear: yes, we can help you, but we are waiting for extra central government subsidies or financing for BRI projects, similar to those given to neighbouring Sichuan province. Further discussions over the role of Chongqing in China’s BRI were revealed in the 13th Five-Year Plan issued in 2016. In fact, the rail connection with Europe was named Chongqing-Xinjiang-Europa Railway (Yi-Xin-Ou 渝新欧). The rail route was to be in the vanguard of pushing China’s west to opening up further. This promise, however, could not be achieved without increased engagement from provinces along the BRI in China: Qinghai and the Xinjiang Autonomous Region to the west, the Guangxi Autonomous Region to the south as well as the landlocked countries in Eurasia. Being surrounded by even less developed areas but interlinked with the developed regions, Chongqing could position itself as an ‘effective, functional, important hub and gateway’ in the BRI’s national strategy. But to attract more developed regions, the city government planned to diversify its international cooperation. Regarding international cooperation, the local government wanted to create a new direction: cooperation with Russian federal districts along the Volga River, and encourage local businesses to participate in the national projects of the China-Indochina Peninsula Economic Corridor, the Bangladesh-China-India-Myanmar Economic Corridor and the China-Pakistan Economic Corridor. The international aspect promised to deepen exchange and cooperation with foreign governments, international organisations and sister cities and to strive for more capital and greater technology transfer to China’s west (ChongqingGov 2016). The growing number of initiatives with Russia, Central Europe and Southeast Asian countries illustrate that the provincial-level government in Chongqing was also responsible for cultivating good relations with the

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transit countries, and securing the political will for future cooperation. At the same time, a growing number of international partners was an incentive for more developed areas such as eastern and southern China to invest in Chongqing. In 2018, the Chongqing government passed new regulations regarding its participation in the BRI. After the authorities called for further cross-provincial coordination, it promised to support ‘Made in Chongqing’ products and export them within the concept of an enclave economy, which is an economic system in which an export-based industry, dominated by global or non-local capital, extracts resources or products from another country or region. Consequently, the Chongqing government hoped to attract international and domestic interests to acquire capital for exporting goods made in the city. More to the point, the municipal government repeated Jiang Zemin’s promises from 1999 when the Open Up the West project saw foreign investment as an important element in boosting economic development. However, this did not dramatically change the dynamics in the city (ChongqingGov 2018). At the same time, since it is administered by the central government, Chongqing is the only municipality and national central city in the inland region which enjoys privileges that the other western provinces certainly do not. As the railway is the main transportation artery, the Chongqing government established a western logistics channel especially to Europe and including cargo trains to Duisburg. However, there needs to be further construction on the route along with a connection to the Kunming railway line and further extensions to continental Southeast Asia. The government has promoted its connectivity with seaports in Guangxi AR and Shenzhen, as well as access to the China-Europe railway to Duisburg, and has positioned Chongqing as a core intermediary intermodal hub connecting Europe and Southeast Asia. The city has done this by shaping three goals for the strategic support of the development and opening up of the western region, building the western hub of the YREB, and overcoming the ecological barriers in the upper reaches of the Yangtze River (Li 2015). In terms of infrastructure construction, by 2020, Chongqing plans to invest 1.2 trillion yuan to build a high-speed railway in the southwest corridor and an airport with a capacity of 45 million passengers per year. The capacity will reach 250 million tons, and nine million TEUs of waterway cargo. This will be followed by domestic plans which the Chongqing government hopes to take the form of a strategic railway channel connecting Europe and Asia, with the city’s surroundings and the entire country, and establishing Chongqing as a major domestic and international hub. According to Chinese documents, the ‘rise’ of this type of railway system (mizi xing gaosu tielu ‘米’字型高速铁路), with Chongqing as the central point, will connect Guangzhou through Lanzhou with Europe, through Kunming to Southeast Asia and with Central China’s dry ports of Wuhan and Changsha with Beijing (ChongqingNews 2017). From a domestic perspective, the BRI allows the central government in Beijing to put pressure on the horizontal cooperation between local entities. For the first time, it is proposing to jointly plan three major industrial corridors of urban consumer goods, oil and natural gas and special resources processing. The intention

Sichuan and Chongqing 151 is to establish a nationally important, and first demonstration area for urban-rural development pilot zones in the Chengdu-Chongqing Agglomeration Zone that will be ‘internationally recognized, a domestic leader, and an important growth location for the development of the western region’ (People’s Daily 2011). According to the agreement with Sichuan province on building the Chengdu-Chongqing Metropolitan Area, Chongqing plans to cooperate with Chengdu on transportation, information, industry, market, public services and the environment. Apart from declaring cooperation with Chengdu, Chongqing supports cooperation with Hubei in order to create an industrial transfer centre along the Yangtze River and foster an industrial cluster with international standards (NDRC 2011). As was said before, international cooperation has brought forward the necessity of domestic integration. Further cooperation was announced in 2017, when Chongqing, Guangxi AR, Guizhou and Gansu provinces signed an agreement to create a ‘southern channel’ (nanxiang tongdao 南向通道) as part of the ChongqingSingapore Connectivity Project. This channel would comprise roads and railways, from north-western areas such as Gansu to the south through Chongqing and Guiyang, and from Guangxi to Southeast Asia, which will increase the connectivity to the south of China (ChineseGov 2018). Further regional cooperation was also stated in the State Council document for the opening of the Chongqing Free Trade Zone. The city was given the role of organisation management body for coordinated regional cooperation with the YREB and the Chongqing-Chengdu Agglomeration Area (StateCouncil 2017). After only two years of being involved in the BRI, and promoting the openingup policy, Chongqing’s vice chairman of the Development and Reform Commission, Wang Zhiqiang, while discussing challenges, pointed out that the opening up only by railway connection did not meet expectations. Furthermore, global changes, especially in the global economic division of labour, pose a threat to the local economy because the government cannot adjust its policies to a constantly changing situation (CqNews 2015). 3.3.2. Export markets, new technologies, capital rising and party-to-party relations As the basic understanding of the BRI is a symbol for go global and the securing of international markets, Chongqing government states that the city plays an active role in shaping its own go global policy. By focusing on new technologies, and financing international activities, the city hopes to establish itself as the financial and high-tech centre for western China. Chongqing is looking to achieve this through cooperating with the United States and Singapore as the city hopes to acquire more foreign technological and financial resources for local development, and by being an active player in the China Railway Express project. But it is not only economic interactions that have become a priority for the municipal government; due to the fact that the party secretary is a member of the Political Bureau. Party-to party relations with foreign political powers has also become a vital part of Chongqing’s activities. Since the Belt and Road Initiative was introduced,

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similar to Sichuan province, the United States has remained Chongqing’s main export market. Analysing foreign trade data in absolute value, on a yearly basis (year to year) the United States, Hong Kong and Germany were the top three export markets between 2013 and 2016, with Hong Kong being supplanted by South Korea in 2017. In 2017, exports to the United States, Germany and South Korea, grew year-on-year (YOY) by 21.4%, 37.6% and 24.7%, respectively. In fact, the export market might be seen as somewhat of a paradox. The BRI was about opening up less developed markets and promoting cooperation with the developing world and countries along the BRI. However, it has not changed the city’s foreign trade structure. In 2018, the USA had a 29% share of Chongqing’s foreign trade and the developed world accounted for approximately 70% of Chongqing’s foreign trade. Along with the implementation of the BRI, however, the city government has tried to diversify its international market. In 2019, after six years of conducting BRI policies, Chongqing’s import and export from and to countries and regions along the Belt and Road have a 27.9% share in the city’s foreign trade. The city’s major trade partners along the road are Russia and Central Europe, however, in absolute value they only account for 2% of Chongqing’s foreign trade. Central Europe, similar to Chengdu’s other international cooperation activities became part of the municipality’s activities and Chongqing headed a couple of conferences and meetings within the China-CEE 16+1 format, including the China-CEE Local Leaders Forum in 2015, with a particular focus on relations with Hungary which had a Consulate General in the city. In the China Railway Express project, Central European countries play an important role in the corridor to Western European markets and stable relations with this part of Europe are critical for the Chongqing-Duisburg rail connection (Seminar, Chongqing 2018). But good relations with Central European governments does not secure access to the American markets; the government in CEE has no capacity to bypass American sanctions, while along with rising trade friction between the United States and China, Southeast Asia had been seen as a possible location for bypassing American restrictions (Interview, Chongqing 2018). In fact, since 2019 ASEAN has become the largest foreign trading partner of Chongqing, with imports and exports of 108.67 billion yuan to ASEAN, a year-on-year increase of 43.2% (CqCustom 2020 and Table 3.7). In order to support economic interactions, political cooperation remains an important pillar for lobbying from the local level and pushing local economic internationalisation forward. The growing role of Singapore was driven by the fact that both sides had cooperated in the Chongqing China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (the Chongqing Connectivity Project). The Chongqing project became the third China-Singapore flagship government-to-government cooperation project, after two other government-led Sino-Singapore initiatives, the Suzhou Industrial Park in 1994 and Tianjin Ecocity in 2008 (Today 2016). According to the Implementation Agreement on ChinaSingapore (Chongqing) Demonstration Initiative on Strategic Connectivity, both sides established a management committee with four sub-committees dedicated to financial services, aviation, transport-logistics, and information-communication

Sichuan and Chongqing 153 Table 3.7 Chongqing export market by country and region as percentage of total provincial exports (2010–2020) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 USA 18% 25% 29% 27% 24% 22% 19% 19% 21% 16% 14% EU. 25% 26% 24% 24% 22% 19% 20% 25% 26% ND ND ASEAN 9% 10% 10% 11% 11% 15% 12% 13% 13% ND ND Germany 11% 11% 11% 13% 10% 9% 9% 10% 7% 4% 4% Hong Kong 9% 5% 4% 4% 10% 8% 20% 10% 3% 1% 3% Holland 5% 5% 4% 3% 4% 3% 4% 7% 6% 5% 4% Japan 4% 4% 3% 3% 3% 2% 3% 1% 1% 2% 5% South Korea 7% 5% 5% 5% 4% 4% 2% 1% 1% 1% 3% Singapore 1% 2% 2% 2% 3% 3% 2% 2% 2% 2% 1% Note: 2020 – trade between January and March. Source: author’s own calculations based on the Chongqing Statistical Bureau Yearbook 2010–2019 http://cws.customs.gov.cn/chongqing_customs/ (accessed 10 May 2020).

technology. The logic behind Chongqing’s cooperation with Singapore was mainly based on the aspiration of the local government to be the centre and pivot to the surrounding nine provinces and attract more private capital from wealthier regions in China; positioning itself as a financial hub in West China through this project, Chongqing corporations had raised 22 billion yuan in offshore financing from Singapore-based financial institutions by the end of 2016 (BusinessTimes 2017). As advocated by Li Jing (2019), the incentivisation of foreign business should be built around the connectivity with Chongqing as the centre of the North-South Corridor, cooperating with landlocked countries to build a coalition and lobby Beijing, especially with countries along the BRI (on the way to Europe) and propose projects with the named countries (Li Jing 2019, 68). In January 2019, the eight western provinces of Chongqing, Guangxi, Guizhou, Gansu, Qinghai, Xinjiang, Yunnan and Ningxia signed a framework agreement for cooperation in the construction of a new channel for international land and sea trade in the China-Singapore interconnection project (ChineseGov 2019). Although integration plans with Singapore sounds effective, in reality the participants from western China could only offer massive transportation corridors. The less developed areas could not contribute to China’s export-led economic development which is illustrated by Chongqing having western China’s biggest stake (1.75%) of the country’s exports, followed by Guangxi AR with 1.3%. From this perspective, it is hard to imagine that less developed landlocked areas could contribute to sustainable economic growth without special intervention from the central government, and even lucrative cooperation with Singapore would not be so beneficial (Zhang Longjuan, Wang Shangping 2018). In order to strengthen the comparative advantages of Chongqing, the government proposed closer relations with Ningbo, located in Zhejiang province, and the third-largest port in China. Ningbo-Chongqing relations were purely based on political connections: Chen Miner, the current party secretary, served as deputy mayor and deputy party

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secretary in Ningbo (1997–1999) when Zhejiang was ruled by Xi Jinping. But from an economic point of view, cooperation between the seaport on the eastern coast of China with the landlocked dry port in Chongqing has little rationale. At the same time, Ningbo’s city government established itself as a hub for cooperation with Central Europe by organising and leading China-CEE Import/Export Fairs. In fact, by building its own position as a leader of cooperation with CEE, the Ningbo government would not be willing to participate in the activities of competing forces from western China (Seminar, Beijing 2017). Nevertheless, in the domestic arena, Chongqing accepts its responsibility and serves as an international cooperation platform for other provinces, service platforms and intercommunication channels. It has created demonstration zones as an example to other regions in China and supports China’s external policies (Fen Renyong 2018, 27). After two years of operation in 2018, the Chongqing Connectivity Initiative has 64 cross-border financing projects such as overseas bond issuance, commercial loans and financial leasing worth more than USD six billion (BHI 2018). Moreover, this initiative allows Chongqing to position itself as a financial hub: in November 2018 during the Financial Summit organised by the Monetary Authority of Singapore (MAS) and the China Ministry of Commerce, Chongqing’s government signed an Memorandum of Understanding with MAS which approved fintech cooperation between Chongqing and Singapore. Moreover, under a separate MOU, the Oversea-Chinese Banking Corporation in Singapore, Chinese electronics company Xiaomi Inc and Chinese financial service Hanhua Financial Holding would explore fintech collaboration in retail and institutional financial services in China (The Strait Times 2019). Even before this financial cooperation boom: the China Chongqing International Economic and Technical Cooperation Group (established in 1984), was the first Chongqing state-owned enterprise to set up shop in Singapore, signing a memorandum of understanding with the United Overseas Bank (ChineseGov 2016b). This ongoing cooperation was further supported by political interactions between the Chinese and Singaporean governments. In November 2018, Premier Li Keqiang and Singaporean Prime Minister Lee Hsien Loong witnessed the signing of the memorandum of understanding for the construction of the Sino-Singapore (Chongqing) Strategic Interconnection Demonstration Project, ‘New International Land and Sea Trade’, and was officially renamed as the ‘New International Land-Sea Trade Corridor’. This led to a new position for Chongqing as an intermediary between Europe and Southeast Asia. In May 2020, the management body of the Chongqing Connectivity Initiative announced there were a total of 211 cooperation projects worth a total USD 31.8 billion (LiangjiangGov 2020). But the most important aspect of Chongqing’s activities is to attract American investment in the new technologies sector. Regardless of the BRI, Chongqing has become a powerhouse in foreign I.T. investment: in February 2017, Corning established an 8.5-generation LCD glass substrate factory; Foxconn who supplies Hewlett Packard, Acer Inc. and Apple Inc. opened its headquarters and production plant in the city. One of the most important projects was Chongqing Wanguo Semiconductor’s 12-inch power semiconductor chip manufacturing and

Sichuan and Chongqing 155 packaging plant opened in Liangjiang New District (2016) with a total investment of USD one billion. This project was jointly set up by American International Semiconductor Co. Ltd (AOS), Chongqing Yufu Group and the Liangjiang New District Strategic Emerging Industry Equity Investment Fund. What should be noted is that the investment was in line with China’s official policy of ‘Made in China 2025’ that contains two central pillars: ‘smart manufacturing’, and ‘green manufacturing’. The entire project was established with USD 400 million, including USD 270 million in chip manufacturing plant investment, and USD 130 million in investment in packaging and testing zones. The second important pillar of Chongqing’s development is the automotive industry where cooperation with American partners is also critical. Sino-American cooperation essentially began in 2001 when the Ford Motor Company and Changan Automobile established a J.V. plant named Changan Ford Motor Company. In 2010, the establishment of the Liangjiang New Area encouraged the American company to make further investments: Changan Ford Chongqing’s second and third automakers went into production. Then in 2017, Ford announced that its new Lincoln brand would be manufactured with Changan Automobile (SinaFinance 2017). Cooperation with its American counterpart has allowed Chongqing’s auto manufacturer to develop its global position. After closely cooperating with Ford, Changan Automobile R&D established branches in Italy, Japan, the United Kingdom and the United States. In fact, the success of Changan Automobile Company encouraged other Chongqing companies such as Chongqing Zongshen Motorcycle Manufacturing Co. Ltd, which set up factories in Thailand and Brazil, and sales companies or offices in countries including the United States, the Philippines, Pakistan, Colombia, Nigeria and Mexico. Another company, Chongqing Lifan Industry (Group) Co. Ltd, established automobile factories in Uruguay, Ethiopia, Iraq, Azerbaijan, Iran, Russia and Myanmar, and exported to more than 50 countries or regions, and established motorcycle factories in Turkey, Vietnam and Thailand for 117 markets (Zheng 2018, 51). Apart from the automotive industry, cooperation with the United States reached a new peak in April 2019 when Chongqing-Sacramento Business Matchmaking Meeting was established. The American side launched nine projects with a total investment of more than USD 300 million, including five investment cooperation projects, two R&D cooperation and equipment procurement projects and two marketing cooperation and trade cooperation projects, including the American professional basketball league (NBA) with the Sacramento Kings stadium renovation project, UC Davis Medical Research Center R&D cooperation project, a California-China online and offline trade cooperation platform and the California self-driving trolleybus (ART) R&D cooperation (ChongqingNews 2019). Following financial cooperation with Singapore, relations with the city’s American counterparts also have financial dynamics: financial acquisitions. In 2015, Chongqing Caixin Enterprise Group signed an acquisition agreement with the Chicago Stock Exchange worth about USD 22 billion. Lu Shengju, a shareholder of Chongqing Caixin, said in a statement in February 2016 that cooperation would bring unique opportunities to help China’s financial market development,

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and would also introduce exciting Chinese companies to US investors. Following this move, Chongqing Caixin signed an agreement with the Chicago Stock Exchange and obtained approval from the board of directors. However, Chongqing Caixin Group’s acquisition of the Chicago Stock Exchange was ultimately blocked (MorningWhislte 2017). From the political and economic perspective, the United States has remained a key partner. The frequency of meetings with US officials since the BRI was introduced in 2013 has only been exceeded by Singapore delegates in 2016 and 2017. In 2018, the local government opened a dialogue with Vietnam and the Philippines in the shape of four meetings. However, the United States still dominated the local authorities’ agenda. One of the last meetings, before the COVID-19 outbreak, was with United States delegates from California. This meeting illustrates the utilisation of the Chinese overseas community to assist in local cooperation. The meeting was co-sponsored by the US-Sino Friendship Association run by the overseas community, and allowed the Chongqing district-level government to sign sister city agreements with El Secundo, Woodland and Laguna Niguel (CqFAO 2019b). As already mentioned, Chongqing hoped to diversify its trade channels. However, another critical aspect is how Chongqing’s inhabitants perceive themselves vis-à-vis Sichuan: being located in mountain areas and compared to the Sichuan plateau, Chongqing people see themselves as people who can sacrifice more, and do more in a time of crisis. In fact, one interviewee said, in comparison to people in Sichuan, people in Chongqing regard themselves as ‘macho’ (nazihan 男子 汉). This reasoning implies that an important aspect of Chongqing’s international outreach is its horizontal rivalry with Sichuan (Interview, Chongqing 2018). From the protocol point of view, the highest ranking political figures from overseas were the South Korean president’s visit in December 2017, and the Prime Minister of South Korea’s visit in March 2019, the Singaporean Prime Minister Lee Hsien Loong meetings in September 2016 and the Sino-Russian deputy foreign ministers’ meeting regarding the situation on the Korean Peninsula in March 2019 (CqFAO, 2017–2019). The meeting with the South Korean and Singaporean leaders also had an economic aspect: South Korea is a key supplier to Chongqing, while Singapore is a key investment partner. After the Sino-Russia bilateral discussions, Chongqing was given the privilege of organising the Local Government Forum of the Shanghai Cooperation Organization in May 2019 (Central Government 2019, see Graph 3.4). Since Chongqing’s time of being governed by the State Council, and being represented by Sun Zhengcai and Chen Min’er on the Political Bureau of the CPC Central Committee, the province has been used by the Chinese government as part of people-to-people public diplomacy. Because China has a nomenclature system, being a member of this system offers leverage over other party secretaries at the provincial level and allows the secretary to play a more active role in shaping China’s external relations. As discussed in the Chongqing magazine, The World and Chongqing, inter-party diplomacy is an important part of the China’s diplomatic strategy. The province aims to strengthen open communication with the international community, enhance understanding, respect and recognition of the

Sichuan and Chongqing 157 10 9 8 7 6 5 4 3 2 1

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Graph 3.4 Chongqing’s municipal foreign meetings by country (2013–2019) Source: author’s compilation from data accessed from Chongqing Foreign Affairs Office www.cqfao. gov.cn (last accessed 3 April 2019, then the webpage was blocked) then as http://zfwb.cq.gov.cn/ (accessed 20 May 2020).

Communist Party of China and the People’s Republic of China with Chongqing in the vanguard of party diplomacy. The government of Chongqing has opened and cultivates party relations with the Portuguese Communist Party, ‘Forward’, Italian left-wing party leaders, two parties from the Colombian ruling coalition, Solly Mapaila of the South African Communist Party and the Indian People’s Party. In China’s overall foreign policy, these relations are perceived as minor, but the Chongqing government has developed party-to-party relations with important countries in Chinese foreign affairs: Cambodia, Singapore and the Philippines. As was observed from the activities of the municipality’s foreign office, Cambodia has become an essential part of Chongqing’s activities. In October 2014, Sun Zhengcai, the then secretary of the municipal party committee, met the Cambodian People’s Party delegation led by the head of the daily working group of the Central Committee of the People’s Party, and the first deputy chairman of the Senate, Sai Chong, for discussions about cooperation in the automobile and motorcycle manufacturing, and servicing outsourcing sectors (The World and Chongqing 2014). In April 2015, Sun Zhengcai visited the Eastern European countries of Slovenia, Bulgaria and Czechia (China Daily 2015). This was followed on September 2019 by Chen Miner’s official visit to Singapore to discuss local development, but also party-to-party relations. The main purposes of the visit, however, was to strengthen the relations between the Singaporean People’s

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Union Party and the Communist Party of China and establish closer relations between Chongqing and Singapore in the economic, administrative and political spheres (DWNews 2019). Chinese leaders see Singapore’s governance as a model that could be implemented in China; and Chongqing might be the testbed for such a model. To a certain extent the Singaporean model has been already implemented under Bo Xilai’s term in office, with the building of 40 million square metres of low-cost housing for two million people with a price tag of 140 billion yuan that was based on Singaporean experiences (SCMP 2019). The discussions in the Philippines centred on party relations between the PDP-Laban and CPC, with the Philippines’ energy secretary and PDP-Laban vice-chairperson, Alfonso Cusi, in attendance. In Davao City Chen Miner signed a ‘letter of intent’ to forge a ‘sister city’ agreement between Chongqing and Davao City while Chongqing’s delegation discussed possible cooperation in ‘economy and trade, science and technology, big data and smart technology, and logistics’ (IntDepCCP 2019). But the party secretary of Chongqing city’s visits were not limited to Southeast Asian countries. In 2019, before the COVID 19 outbreak, he met with Bill Clinton’s former Secretary of Defense, William Cohen, a Republican politician, author of Dragon Fire, chairperson of the Cohen Group, and Qualcomm, a multinational company that creates intellectual property, semiconductors, software and services related to wireless technology (CqFAO 2019a). 3.3.3. Developing the west through rail freight and Liangjiang New District In the strategic planning of the YREB and the BRI, both emphasise the role of the central hub of Chongqing in regional integration planning and enhancing the strategic support for the Silk Road Economic Belt. But without seaport access, the city faced the dilemma of having to incentivise foreign companies to establish their businesses in the region. This need is clearly illustrated by the fact that initially around 70% of the notebooks were shipped to Shanghai and Shenzhen. However, the shipment time was longer than the shipment time through the Eurasian Corridor to the European market. The very first block train service via the Inner Mongolia channel began in 2009, when HP and Foxconn’s logistic departments came to the conclusion that utilising the Eurasian land bridge would be more profitable than sea shipments (Shepard 2016). This way, however, needed to be further approved by the central government and the involvement of the local government was necessary. In fact, Huang Qifan, the local planner from Chongqing, and Tony Prophet, vice-president of HP, lobbied in Beijing for opening the inland channel. Central government support was needed because the train from China would cross the territories of Kazakhstan, Russia, Belarus and Poland to Duisburg. In this context, multinational business has been supported by local policymakers and the General Administration of Custom and the Ministry of Railway. Then during a visit to Moscow, Wen Jiabao’s administration pushed the project and reached an agreement with Russia and Kazakhstan to allow the first train through in March 2011 (Yun, Esteban 2019, 122). The situation in Chongqing,

Sichuan and Chongqing 159 similarly to Chengdu, illustrates one interesting phenomena. In order to achieve political and financial support from Beijing, the local government of Chongqing uses its relations with a multinational company to successfully lobby Beijing. Further political support came in the form of Xi Jinping’s visit to Germany in March 2014, when he visited Duisburg’s dry port and gave his approval for the Sino-German logistics cooperation. In 2014, the Yuxinou (Chongqing-XinjiangEurope) train became the first direct permanent rail connection between Germany and China. Currently, 30% of the total rail-based trade between Europe and China, in the form of 40–50 trains per week, run to and through the Duisburg logistics hub. But the local authority’s role in this cooperation, was quickly taken over by the national conglomerate China State Railway Group via a subsidiary of the China Railway Container Transport Corp (Duisport 2020). In Chongqing, a critical part of shaping its export-led economy is the newly opened Liangjiang New Area. It is the first national-level new area in inland China and the largest tariff bonded area managing the largest import and export volumes in inland China. Furthermore, to upgrade traditional industries, Chongqing has strengthened cooperation in high-end equipment and products, new energy and new materials with Germany, Russia and Central and Eastern Europe, and helped its surrounding automobile and motorcycle, chemical, materials, energy and other advantageous enterprises to expand in South Asia and Southeast Asia (Liangjiang Gov 2015). From the Southeast Asian aspect, the Singaporean terminal operator, PSA, is playing a crucial role in the further engagement of relations between Southeast Asia and Europe. Duisport has also signed a cooperation agreement with PSA to develop multimodal logistics platforms, bringing together their expertise in the development of inland and maritime hubs. In 2018, a total of 805 intermodal train shipments travelled through the Inland-Sea New Channel. The international railway transport from Chongqing to Hanoi had a total of 55 trains, and 661 train shipments were sent to the ASEAN countries of Vietnam, Laos and Myanmar, Bangkok and Phnom Penh, as well as Malaysia and Singapore. However, immediately after the Chongqing-Duisburg train service began, it created a snowball effect with province after province starting their own railway services to Europe. The first to follow Chongqing was the province’s major competitor, Chengdu, which was followed by Wuhan and Zhengzhou. Since the first China-Europe train (Chongqing to Duisburg, Yuxinou International Railway) was launched in March 2011, Chengdu, Zhengzhou, Wuhan, Changsha, Suzhou, Yiwu, Guangzhou, Xi’an and Shenzhen have all followed suit with 56 cities now sending and receiving 12,000 train shipments to and from Europe. This massive rail shipment from China was initiated by a document passed by the NDRC in 2016, when the central government obligated local actors to have 5,000 train shipments per year by 2020. This horizontal competition has created a number of challenges for Chongqing; first, it could hardly collect goods for shipment from western and Central China due to the constraints of horizontal competition; second, in order to compete with other local governments the city needs to have higher subsidies, and this could only be done by exporting only goods ‘made in Chongqing’. As Chinese researchers have stated, the most competitive centres for assembling

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goods to be shipped by train are located in Guangdong, Zhejiang (coastal areas) and Anhui and Henan in Central China, while Chongqing is number six on the list with Chengdu number seven (Dai Ying, Li Qin, Song Han 2018, 74). But cooperation with China-Europe Express is not free of problems or controversies. The first issue raised, especially by the European Commission, is local government subsidies for rail freight transportation. In the case of a Yu-Xin-EU block train to Duisburg, one FEU (Forty Foot Equivalent Unit) costs USD 8,000– 9,000, up to double the cost of transportation via the Yangtze River to the Port of Shanghai (USD 4,000 per FEU) (Shepard 2016). Similarly, Sichuan, without local protectionism that allows companies to reduce the cost of export via block trains, rail connections could prove to be economically unviable. Questions about how in the future an export-led economy in western China and in countries in the Eurasian area will be sponsored and developed remain unanswered. The second issue is one of functionality. which concerns the homogeneity of products shipped by block trains. The majority of shipped products are of the same category: computers and computers parts as well as automotive spare parts. Faced with the problem of Chongqing’s single product structure for foreign trade development and a lack of competitiveness, efforts should be made to promote the transformation and upgrading of the industrial structure and establish a diversified foreign trade industrial system. Chongqing has a permanent trade deficit, with imports outweighing exports by 53% to 47%. Furthermore, Chongqing’s exports are dominated by optical and electronic products which account for 80% of the city’s total export volume (Zhou 2017, 56). Moreover Chongqing, in order to be a cargo hub, has seen its economic woes increase as the growth rate of the electronics manufacturing industry slowed from 27.7% in 2017 to 13.6% in 2018, largely due to the limitation put on the export-led economy by the municipal government (Caibian 2019). Due to the relatively backward technological level in Chongqing and dominance of the processing trade sector in the city, imports have a significant role in promoting the introduction of technology and economic growth. In contrast, the role of exports is not as significant. However, with the improvement of Chongqing’s local technical level and independent foreign trade capabilities, the development of import and export trade will continue to promote industrial undertakings, transform and upgrade and could become a powerful engine for generating economic growth. The third critical point discussed by Li Jing (2015) is how to create a genuine logistic centre with the assembly of products in Chongqing that are then shipped from the city to neighbouring provinces. Here, the city needs to compete with other locations in China. According to the latest research, Chongqing is ranked 11th and is far behind locations from the southern and eastern coasts of China such as Guangdong, Zhejiang, Shanghai and even Guangxi AR. Being a landlocked area, Chongqing has limited options to open up and export more products from its own dry ports (Li 2015). However successful Chongqing’s railway diplomacy has been, it still needs further funding for development. In the case of Liangjiang New Area, the financial support might be given by the central government but may also by private investors who are located in the coastal areas of China. The international outreach

Sichuan and Chongqing 161 of local governments has persuaded the state to find the money for projects delivered under the umbrella of the BRI. The establishment of the Asian Infrastructure and Investment Bank and the Silk Road Fund was received with some relief: ‘With the establishment of these platforms (AIIB and Silk Road Fund), the financial pressures on Chongqing will be eased’ (Li 2019, 65). This view corresponds with the assumption given by Hong Lijiang (2004): ‘If it is unrealistic to wait for convinced foreign investors to spend money in an inland city more than a thousand kilometers away from the coastline, it may be more realistic to seek funds from the central government’ (Hong 2004). In contrast to Sichuan, Chongqing, which presents itself as the financial hub for western China, was not given additional state-sponsored funding. On the other hand, the BRI international activities of Chongqing objectivise the need for cross-provincial cooperation and raise capital from the wealthier coastal areas. In this context, the Chongqing Financial Department’s plans to cooperate with the Shanghai Stock Exchange (SSE) has become a major method of acquiring money from private investors through the SSE. In June 2018, the Chongqing government and the SSE agreed to develop a capital market service base in the Chongqing Jiangbeizui International Investment & Financing Roadshow Center, in Liangjiang New Area (China Daily 2018). Using its relations with Shanghai, CITIC Securities, a subsidiary of one the first SOEs in China, Chongqing Liangjiang New Area Development & Investment Group Co. Ltd, offered three-year corporate bonds (11 billion RMB) to be issued at the SSE in order to acquire further capital for development (SSE 2016). *** Using the BRI framework, many Chinese provinces, which were earlier not very active abroad, have started to build their international footprint by actively searching for new partners. This has been the case of Chengdu and Sichuan, as well Chongqing municipality. The very first outreach for international cooperation was stimulated by the horizontal competition of rail freight transportation to Europe. However, in both cases, these economic interactions were not stimulated by the central government, not even by the BRI slogan, but by the requirements of multinational companies. In the case of Chengdu, it was Dell located in Lodz, and in the case of Chongqing, Hewlett Packard located in Duisburg; both companies first lobbied the local governments and then together persuaded Beijing to accept the rationality of their respective projects. The local government used both projects as leverage in their interactions with the central government. With the inception of the BRI in September 2013, the provincial-level government discussed their participation in the project and applied for funding from Beijing. Interestingly, there was a similar situation in Poland, where the Lodzkie government used its relations with Sichuan as leverage to receive more funding from the central authorities in Warsaw. Hence, the convergence of mutual benefits based on central-provincial relations works, at least for the time being. The second common denominator between provincial-level governments has been seen in their political activities and trade destinations; both targeted the United States.

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In fact, both development plans involved advanced technologies, and militarycivil industry integration which had shaped economic development in the times of the Third Front under Mao Zedong. However, they have tried to cooperate with different American states with both hoping to develop relations with California; the powerhouse of the high-tech industry in the United States. Competing over American resources has increased the importance of worldwide horizontal competition in the provinces’ regional economic development. In Chengdu, relations with the United States and in particular projects with California, such as Meishan Smart City, and relations both political and economic with Japan, such as attracting Japanese businesspeople to take the lead in 5G testing in Tianfu New Area, were the priority in order to obtain more funding from Beijing. In the case of Chongqing, cooperation with American automotive producers, namely Ford, allows the local producer Chengda to conquer international markets. Moreover in 2019, local companies from California opened further projects including the California-China online and offline trade cooperation platform and the California self-driving trolleybus (ART) R&D cooperation in Chongqing. However, the commonalities end here. A part of developing the west has been the expansion of the provinces’ export market via the BRI through Eurasian continental areas. Although both provinces are responsible for developing the west, they have different functions: Sichuan has the more autonomous position, entrusted with greater autonomy in reform with the province serving as an international gateway for promoting trade with foreign partners. Chongqing, on the other hand, apart from the aforementioned international cooperation, is more domestically oriented and plays the role of connector between the Belt and Road Initiative and the Yangtze River Economic Belt. Further differences reveal two slightly different models of acquiring capital; Sichuan has been given additional funding by the central government for BRI projects, while Chongqing, being directly governed by the State Council, has been promoted as the financial hub for West China which involves developing their own financial resources by acquiring more private capital from the Shanghai Stock Exchange. Chengdu with its special RMB reserves for BRI projects supported local government-owned companies and has started to establish its own projects, for example in Africa, and lobbying governments in Latin America. On the other hand, without specific reserves, Chongqing has been less active in this field. However, both Chengdu and Chongqing’s international cooperation serve as an incentive for state and private capital to become more involved. Politically speaking, the government in Sichuan took a proactive position in Sino-Japanese relations before Prime Minister Abe’s visit to Beijing in November 2018. These Sichuan-Japan relations, apart from their political colour, resulted in Japanese companies’ investments in Tianfu New Area in the city of Chengdu. However, it was not only relations with the developed countries which were seen as a vital part of Sichuanese paradiplomacy. The provincial and municipal governments invested political capital in strengthening relations with two Central European countries: Czechia, due its technological potential in aviation and Poland due to its strategic location along the BRI. In the case of Chongqing, an important

Sichuan and Chongqing 163 development in the city’s economic performance was its cooperation with Singapore which began with the beginning of the Sino-Singapore (Chongqing) Strategic Interconnection Demonstration Project. This project plays an important role in both shaping the city’s economy and would allow Chongqing to be a vital node in binding the economies of the surrounding provinces. A political role was also given to Cheng Miner, who cultivated relations in Southeast Asia previously developed by Sun Zhencai. When Chen Miner, in his capacity as party secretary of Chongqing and a member of the Political Bureau, visited Sri Lanka, Singapore and the Philippines, it became clear that the Chongqing channel was dedicated to incentivising these countries. What is a critical factor in the city’s economic development is relations with Singapore. From a national perspective, the Lion City serves as a counterweight to the United States; business in Chongqing incentivises Singapore to support the national policy of Beijing. From a domestic perspective, the business interactions between Chongqing and Singapore serve as a catalyst for creating more coherent domestic policy planning and implementation. Of course, it does not mean that relations with Singapore are the preserve of Chongqing; once the Sichuan government saw the deepening of Chongqing’s relations with the Lion City, the province soon followed suit. The institutionalisation of Chengdu-Singapore cooperation was shaped by the Singapore-Sichuan Trade and Investment Committee, leading to the beginning of economic cooperation between them. But in Sichuan’s case, relations with Singapore had no major political overtones as is the case with Chongqing. Needless to say, in the case of Chongqing and Sichuan, predominantly due to their respective activities in the United States, horizontal competition between the two has occurred far beyond China’s borders. Both governments, through organising meetings with former high-ranking policymakers from the United States and high-tech companies mainly from California, have tried to influence American policy towards China and by incentivising American companies and policymakers’ hopes to soften the Washington position on China. Apart from incentivising foreign governments, the two provincial governments have both cooperated domestically by signing joint projects’ cooperation agreements, especially in transportation, and competed against each other for external resources to build their respective positions inside the system. The external horizontal competition between Chongqing and Chengdu symbolises that apart from more technologically advanced coastal provinces, two powerful landlocked political bodies from China’s west, which border each other, have started to compete for global financial and high-tech resources. As was previously said, the most important part of developing the western regions was to rely on the Eurasian Continental land bridge, the YREB and the southwest passage to the ASEAN countries. Both Sichuan and Chongqing, being located at the heart of these newly formed transportation corridors, hope to fulfil their obligation to open up the landlocked areas of China. This clearly shows at least one important direction: the export-led economy in landlocked provinces can only be successful by effective cross-provincial cooperation projects which bring a unification of the market and a strengthening of the capital flow from

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richer to poorer regions. However, even after seven years of combining the BRI, the YREB and the creation of a common cooperation platform, western China is still far from being a unified market. In fact, the country may be heading towards splitting into distinct macro-regions, partially co-managed and coordinated economic regions or even smaller provincial bodies, each with its own distinct means of production, as well as differing legal systems and regulations.

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Sina. 2016. Zhongguo zhizao 2025 Sichuan xindong jihua [Made in China 2025 Sichuan Action Plan]. Accessed May 20, 2020. http://finance.sina.com.cn/hy/hyjz/2016-09-30/ doc-ifxwkzyk0706271.shtml. SinaFinance. 2017. Over 30 U.S.-funded Companies in Chongqing Liangjiang New District. Accessed May 10, 2020. http://finance.sina.com.cn/stock/usstock/c/2017-05-13/ doc-ifyfeivp5673115.shtml. Sohu. 2018. Meiguo Jiazhou zhongxin zai Sichuan zhengshi luohu, Chuan Mei zhihui chengshi hezuo zengtian geng duo shizhi neirong [California Center Officially Settled in Sichuan, Sichuan-US Smart City Cooperation Adds More Substance]. Accessed May 12, 2020. www.sohu.com/a/82665894_386724. Song Jiatai, Gu Chaolin, Gu Xinhua, Cai Jianhui. 1987. “Changjiang daliuyu jingji kaifa zhanlue [The Strategy of Opening Great Basin of Yangzi River].” Dili xue yu Guotu yanjiu [Research on Geography and Cartography], no. 3: 2–7. Spence J. 1991. The Search for Modern China. London and New York: W. Norton and Company. SSE. 2016. Prospectus of the 2017 Corporate Bond (Phase I). Accessed May 20,2020. www.sse.com.cn/disclosure/bond/announcement/company/c/3008166762293020.pdf. StateCouncil. 2017. Guowuyuan guangy yinfa Zhongguo (Chongqing) ziyou maoyi shiyan qu zongti fang’an guo fa (2017) 19 hao [Notice of the State Council on the General Plan of China (Chongqing) Pilot Free Trade Zone]. Accessed May 20, 2020. www.gov.cn/ zhengce/content/2017-03/31/content_5182300.htm. The Strait Times. 2019. Singapore, China Ink Deals on Trade, Belt and Road Projects. Accessed May 1, 2020. www.straitstimes.com/asia/east-asia/singapore-china-ink-dealson-trade-belt-and-road-projects. The Third Front. 2009. The Third Front. Accessed May 23, 2020. www.globalsecurity.org/ military/world/china/third-front.htm. Today. 2016. PM Lee, President Xi Pleased with ‘Good Progress’ of Chongqing Project. Accessed May 11, 2020. www.todayonline.com/chinaindia/china/pm-lee-president-xipleased-good-progress-chongqing-project. UNCDR. 2019. Transport Challenges and Opportunities for Landlocked Countries for achieving Sustainable Development Goals (SDGs) (Background Paper for EST Plenary Session-2). Accessed April 28, 2020. www.uncrd.or.jp/content/documents/7009PS-2_ Robert%20Earley.pdf. USCongress. 2019. H.R.3571 – City and State Diplomacy Act. Accessed May 11, 2020. www.congress.gov/bill/116th-congress/house-bill/3571. Wang Yi. 2016. Waijiao bu juban Sichuan quanqiu tuijie huodong [The Ministry of Foreign Affairs Holds a Global Promotion Event in Sichuan]. Accessed May 12, 2020. https:// www.fmprc.gov.cn/web/zyxw/t1401899.shtml. The World and Chongqing. 2014. “Shenhua dang jia jiaoliu kuoda guoji hezuo wei Chongqing duiwai jiaowang zhuru xin dongle [New Impetus for Chongqing’s Foreign Exchanges].” The World and Chongqing, no. 19: 29. Xinhua. 2016. Xi Jinping Went to Chongqing for the First Domestic Inspection in 2016. Accessed May 10, 2020. www.xinhuanet.com//politics/2016-01/05/c_1117665612.htm. Xinhua. 2017. Qiguo tielu bumen qian shu “Guanyu shenhua Zhong-Ou banlie hezuo xieyi” [The Railway Departments of the Seven Countries Signed the “Agreement on Deepening Rail Freight Cooperation between China and Europe”]. Accessed May 13, 2020. http://news.xinhuanet.com/fortune/2017-04/22/c_1120856570.htm. Yang Gang, Ran Min. 2017. “2017 nian Sichuan waimao jinchang li xingshi fenxi yu yuce” [Forecasts and Analysis of Sichuan Foreign Trade Competitiveness].” In 2017

Sichuan and Chongqing 171 nian Sichuan jingji xingshi fenxi yu yuce [Analysis and Forecast of Economy of Sichuan (2017)], edited by Yang Gang. Beijing: Shehui kexue wenxuan chubanshe. Yang Zhou. 2018. “Do Ideology Movements and Legal Intervention Matter: A Synthetic Control Analysis of the Chongqing Model.” European Journal of Political Economy, vol. 51: 44–56. Ye Qing. 2016. “‘Shisanwu’ shiqi Changjiang jingji dai de xin fazhan [New Development of the Yangtze River Economic Belt during the ‘Thirteenth Five-Year Plan’ Period].” Dang Zheng Yanjiu [Party State Research], no. 1: 16–21. Yuan Weimin, Yuan Yongyou. 1997. “Changjiang jingjidai wai jingmao xietiao fazhan de jigenti [Several Problem of Coordination Foreign Trade along Yangzi River Economic Belt].” Jingji wenti [Economic Issues], no. 3: 22–25. Yun Li, Esteban M. 2019. “Motivation, Actors, and Implications of the New Silk Road Trains.” In How China’s Silk Road Initiative is Changing the Global Economic Landscape, edited by Yuan Li, Markus Taube. London and New York: Routledge. Zeng Peiyan. 2010. Xibu da kaifa juece huigu [The Memory of Open Up the West Policy]. Beijing: Zhonggong dangxiao chubanshe. Zhang Gongsheng, Pang Zhiqiang. 2015. “‘Sichou zhilu jingji dai’ guonei duan jianshe: zhanlue yiyi ji gongneng dingwei’ [Construction of the ‘Internal Section of the Silk Road Economic Belt’: Strategic Significance and Functional Positioning].” Jingji Wenti [Problems of Economy], no 4: 7. Zhang Longjuan, Wang Shangping. 2018. “Nanxiang tongdao: Yu gui qianlong quyu kaifang du shizheng fenxi [Southbound Passage: An Empirical Analysis of the Openness of Chongqing, Guizhou and Qianlong Regions].” Wuliu keji [Logistics Technology], no. 11: 111–112. Zheng Lili. 2018. “Yidai Yilu” Beijing xia Chongqing duiwai maoyi geju yanbian ji yingxiang yinsu yanjiu [The Evolution of Chongqing’s Foreign Trade Pattern under the Background of “One Belt and One Road” and Influencing Factors]. Chongqing: Chongqing Xinan Daxue. Zhou Qin. 2017. “Chongqing duiwai maoyi fazhan xianzhuang wenti yu duice cuoshi [Chongqing Foreign Trade Development Status Quo and Countermeasures].” The World and Chongqing, no. 22: 57–58. Zhu Rongji. 2000. Zhu Rongji hui jizhe wen [Zhu Rongji Answers the Journalist Questions]. Beijing: Renmin Chubanshe. Zhou Zhonglin. 2018. Changjiang jingji dai wuran zhili nanti he jie? [What Is the Solution to the Pollution Control Problem in the Yangtze River Economic Belt?]. Accessed May 12, 2020. http://finance.sina.com.cn/roll/2018-09-25/doc-ihkmwytp0113094.shtml.

4

Guangdong and Hainan Urbanisation, maritime economies and strategic encounters under the Maritime Silk Road

To the east of Guangxi, travelling through Guangdong province from Shenzhen via Dongguan to Zhuhai in the south, one might think that southern China is an endless city of concrete, interspersed by banana plantations. The reality, however, is very much different: Guangzhou and other cities within the Pearl Delta River (PRD) integration zone seek out fresh avenues of opportunity in the new round of economic growth stimulated by further reforms and opening-up processes. As part of the agglomeration economy, the government introduced the Greater Buy Area concept as part of the Belt and Road Initiative in the hope of guiding the future of regional development. But an important aspect of the southern China picture is its historical continuity of strained relations with Beijing. Having been conquered by the British Empire, the birthplace of the Taiping Revolution, and home of China’s revolutionary mindset, Guangdong has always been different. In the modern history of China, Guangzhou was against authoritarian tendencies from the capital city; when General Yuan Shikai hoped to consolidate his power and reign as monarch in the republican system of China. However, Sun Yat-sen arrived in Guangzhou in July 1917 and established a democratic government. The Constitutional Protection Movement quickly received the support of South China militants whose power was threatened by the centralised tendencies of Yuan Shikai. However, the entire Protection Movement failed to defend the constitution and a lack of a consolidated powerbase resulted in chaos across China as well as war between the nationalists and communists. Furthermore, the culture of southern China differentiates itself from those in central and northern China in terms of language, cuisine, customs and mentality. With its uniqueness, southern China became a pivotal area in Deng Xiaoping’s reforms in China. After more than one hundred years of humiliation by the Western powers, and Chairman Mao’s political experiments, the Chinese government followed the path of economic interdependence and opened up China’s south and east coasts for business with the foreign capital. However, after almost 40 years of cherishing Deng’s decentralisation, the government in Beijing, under the leadership of Xi Jinping, brought changes to the region in the shape of a new type of centralisation with the BRI and the 21st Century Maritime Silk Road leading the way. Within their encounters with centralisation, Guangdong and Hainan need to recognise the

Guangdong and Hainan 173 benefits for the local economy and adjust their interests to Beijing’s official policy. The local policymakers in both provinces have hoped to win the support from central government. But, for example, as China’s richest province, Guangdong has been expected to take the lead and utilise its own funds for BRI projects. The second issue discussed in the chapter is to what extent regional integration projects such as the Greater Bay Area between Guangdong, Hong Kong and Macau would contribute to the local economy, and to what extent it might play a role within the Sino-American ‘pressure points’; finally, how important a role would the military play in southern China, and Hainan in particular, in shaping China’s foreign policy? Contrary to Guangdong’s more independent status, Hainan’s situation is somewhat different: the province has been chosen as China’s ‘aircraft carrier’ in Beijing’s South China Sea policy and needs to contribute to China’s national policy in Southeast Asia. Needless to say, Hainan which was separated from Guangdong in 1988, also cherishes its Minnan culture, own dialect, which differs from its northern neighbour and naturally engenders closer relations with Fujian and Taiwan. Moreover, to secure employment, the Hainanese usually conduct business in their own dialect in order to limit the impact of newcomers from different parts of China (Vogel 1995, 309). By making comparisons, the chapter discusses the roles of Guangdong and Hainan in the BRI, their different adoption of centrally led projects and possible opportunities and challenges in horizontal relations between the two, and other provinces.

4.1. The further opening up of opened areas: southern China and the Maritime Silk Road The decision taken by the leadership under Deng Xiaoping, to change China’s economic model in 1978, has driven Guangdong and southern China into the international arena. Although the province’s export-led economy contributes significantly to the national GDP, it does create an environment for horizontal competition, meaning that the Chinese province has to be more self-reliant, and more dependent on foreign markets. This export-led growth lasted until the global economic downturn of 2020. Along with the Asian financial crisis in 1997, the global financial crisis in 2008 and increasing tensions between China and the United States, China’s domestic fragmentation has been even more exposed to global economic fluctuations. This in turn has led to more integration. From this perspective, the BRI with the 21st Century Maritime Silk Road are seen as centralisation vehicles which can drive further domestic integration. However, in the case of Guangdong, the province only creates projects that deepen integration and urbanisation within the province. After more than 30 years of reform and opening up, although China’s economy is now characterised by an export-oriented economy, it also needs to confront certain issues: first, the gradual narrowing of China’s traditionally cheap labour forces, raw material costs and secure markets by upgrading its technological advancement; second, to limit its over-reliance on European and American markets that due to global economic fluctuations may

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not be sufficient to secure China’s growth. On the other hand, southern China is no exception either when it comes to coordinated socio-economic development. 4.1.1. Southern China and the 21st Century Maritime Silk Road During the 18th National Congress of the CPC in November 2012, the then president of China, Hu Jintao, announced China’s ambition to become a major maritime power. A year later in Jakarta, Xi Jinping reiterated the continuation of this Chinese initiative by announcing the establishment of the Maritime Silk Road (MSR). Together with the inland road through Kazakhstan, Russia and Belarus to Europe, the maritime road reaches Europe through the South China Sea, the straits of Malacca, Lombok and Sunda, along the northern Indian Ocean, to the Persian Gulf, the Red Sea and the Gulf of Aden. From the perspective of the central government, the critical issue was to strengthen bilateral relations with its Southeast Asian neighbours as well as within China-ASEAN relations. As stated by Liu Jiajin and Wang Chun (2018) the Maritime Silk Road project faces both domestic and international challenges. The first is the United States-Southeast Asia relations with a special focus on Obama’s pivot to Asia, and Trump’s IndoPacific approach. The second challenge is Japan and South Korea’s interests that compete to develop economic and trade relations with ASEAN, along with European countries which are deepening their ties with India. By implementing its maritime strategy, China hopes to find partners and balance its relations with the United States in an indirect manner through both bilateral and multilateral arrangements. China’s Defence White Papers reiterated this understanding with the 2015 Military Strategy White Paper arguing that ‘the traditional mentality that the land outweighs the sea must be abandoned, and great importance has to be attached to managing the seas and oceans’, and for China ‘to develop itself into a maritime power’ (Defence White Paper 2015). This maritime aspiration is reflected in China’s domestic power structure as the core leadership needs to satisfy the military and state-owned oil companies in order to push forward with the government’s initiatives. The People’s Liberation Army Navy (PLAN) has since shifted its focus from coastal areas to open seas protection, and becoming a blue water navy that is capable of protracted operations in open seas as well as being able to project power in distant waters. However, this maritime aspiration, which is naturally supported by the military, faces various geo-economic and geopolitical counter-responses from other neighbouring Indo-Pacific powers (Scott 2019, 107). By announcing the MSR, China declared its readiness to participate in the global maritime economy, and challenged maritime governance, which was dominated at the time by the western leaning countries; as well as the American Indo-Pacific strategy aimed at counteracting China’s MSR: China’s maritime stance, aimed at securing the country’s territorial integrity especially in the South China Sea, is the driving force behind PLAN’s modernisation. But a central government-led policy does look to encourage common growth, development and closer relations with developing countries exclusively through hard power. From the perspective of South-South cooperation, China presents itself as

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a defender of the United Nations Convention on the Law of the Sea. In the early 1970s, developing countries, which were struggling to safeguard their marine rights and interests, effectively promoted the revision and improvement of international laws and regulations passed by the United Nations. Since the end of the Cold War, the collective rise of sovereign states represented by China, India and a group of countries represented by ASEAN and BRICS in maritime affairs has significantly changed marine security matters that had mainly been dominated by Western countries (Feng 2018, 2). From a domestic perspective, the MRS may cause more complex and fiercer horizontal competition. Both routes compromise the interests of different provinces, especially those in the west and coastal areas. This inter-provincial competition, as mentioned in the previous chapters, leads to a lack of effective integration of relevant domestic departments and resources, the fragmentation of relevant departments and an increase in provincial-level individualism. The communication and coordination mechanism with an enterprise is not perfect, and it is difficult to generate effective work (Jia, Wang 2015). By utilising the MSR’s signal to go global at the local level, governments have accelerated the construction of free trade park (port) areas in the coastal and border provinces of Guangdong, Guangxi, Fujian, Hainan and Yunnan. Although this has also led to the formation of an open area that nurtures international economic cooperation, local horizontal competition only values local development. Within the MRS, local international rivalry has increased, with provinces being responsible for the construction and development of overseas economic and trade cooperation zones such as the Thailand-China Rayong China Industrial Park and the Malaysia-China Kuantan Industrial Park, as well as the strengthening of policy coordination with countries along the route to further enhance trade facilitation and liberalisation. Apart from a purely economic agenda, provinces have also been asked by the central government to maintain marine rights and interests to counter challenges to China’s overall marine interests. The usage of local governments as soft-power entities rather than hard power institutions such as the People’s Liberation Army, should be seen as a positive and less controversial development in China’s maritime disputes. This is in line with China’s understanding of international law, which was seen as skewed to Western interests. China has always advocated the settlement of related disputes through political negotiations (Zheng 2016). These discussions indicate that for a national strategy such as the BRI, the central government should coordinate with specialised agencies to guide the local division of labour and international cooperation. For example, the southwestern provinces should face Southeast Asia and South Asia, focusing on expanding the GMS and the BCIM EC, as well as utilising the Beibu Gulf region as a sea route connecting these provinces. However, Guangdong, Fujian, Zhejiang, Shanghai, Jiangsu, Shandong and other provinces and cities were to focus on expanding trade in South Asia, West Asia and Africa along the coast of Southeast Asia and the Indian Ocean, as well as South Pacific island states and Latin America. The South China Sea and the Indian Ocean have important strategic national interests as 80% of China’s imported oil, 50% of natural gas and 42.6% of its imported and

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exported commodities must pass through these routes. Apart from these international aspects, domestic integration between provinces participating in the MSR is regarded as critical in achieving China’s national goals of becoming a major maritime power. According to the overall plan of the State Council, the Guangxi Free Trade Zone focuses on building a new international land and sea trade channel to ASEAN, forming an important gateway for land-sea connections under the BRI umbrella. In this regard, regional cooperation in the Pan-Pearl River Delta of 9+2 (nine provinces, Hong Kong, Macau) project ushered in multiple opportunities for open development. This strategy, passed by the State Council in 2019, of land-sea integration between the western regions and Guangdong-Hong KongMacao Greater Bay should bring benefits to all actors involved in the project (Xinhua 2019). As anticipated, the creation of megacities such as Guangzhou, Shenzhen, Xiamen, Shanghai, Qingdao and Tianjin, as windows for and leaders of economic growth, should play a synergistic role and drive the surrounding urban agglomerations and the region as a whole to participate in global economy. For example, in terms of ports and shipping services, neighbouring ports such as Shanghai Port and Ningbo-Zhoushan Port should divide their labour and shape coordinated development. Moreover, the urbanisation processes are to strengthen the level of regional integration and linkages. The Yangtze River Delta is not only an integral part of international competition and cooperation, but also the starting point of the Silk Road Economic Belt and the Yangtze River Economic Belt. It is necessary to give full play to the radiating role of economic development in inland areas, such as industrial transfer, innovation cooperation and industrial chain extension (Liu 2014, 7). Further roles for the localities were given in 2017 when a white paper recognised ocean cooperation focusing on building the China-Indian Ocean-AfricaMediterranean Sea Blue Economic Passage, by linking the China-Indochina Peninsula Economic Corridor, running westward from the South China Sea to the Indian Ocean and connecting the CPEC as well as the BCIM EC. In the document, the coastal cities in China were encouraged to launch sister city partnerships with their counterparts in the countries along the Road. The central government named only Fujian province, with the Matsu folk culture as a promotion of Matsu marine culture, as part of China’s maritime action (Xinhua 2017b). 4.1.2. Urbanisation and integration projects in the Greater Bay Area As early as 1984, 14 coastal cities were designated ‘open’ cities for overseas investment. However, due to a lack of progress, this number was reduced to four in June 1985: Shanghai, Dalian, Tianjin and Guangzhou as the leaders of the development of the Pearl River Delta (Dwyer 1989, 362–365). Guangdong enjoys great fiscal autonomy by being allowed to remit a substantial sum to the central government for five years, much to the envy of other provinces. In 1988, Guangdong was allowed a fixed quota, with adjustments for growth, in which the central government’s share was smaller. Shenzhen was exempt from remitting anything

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at all to the central government from 1993 to 2003 (Yeung 2011). Based on the concept of agglomeration economies, Guangdong hopes to bring more benefits of concentrating on output and housing in specific areas. If an area specialises in the production of a certain type of product, all firms can benefit from various factors such as good supply networks; supply of trained workers; infrastructure built specifically for that industry and good transport links. This process has shaped a new role for the megacities which have become gateways between developing countries and the developed world. The organisation of production in China, and the regional division of labour between China and the world economy, have resulted in de facto processes of micro-regionalism linked to the globalisation of cross-border production networks. Inevitably, this dynamic has led to further interdependence between southern China and the developed world, while at the same time differentiating the region from the rest of the country (Sasuga 2004, 78–79). According to Lewis (1954), urbanisation is driven by capital accumulation in urban industries. Companies group together to minimise transportation costs or to take advantage of internal economies of scale by selling to a larger market. Thus, urbanisation is simply a result of industrialisation; this assumption proved to be a challenge for southern China, which, during Mao’s period, was left behind in industrialisation processes (Lu, Wu 2015, 87–88). In order to attract more new industries, China, by joining the WTO in 2001 and the signing of the Closer Economic Partnership Agreement with Hong Kong (CEPA) in 2004, signalled further integration led by the southern provinces of China and the possible co-opting of Guangzhou into the Guangdong’s economic administration. At the beginning, the agreement allowed Mainland China’s wholly state-owned commercial banks and certain joint-equity commercial banks to relocate their international treasury and foreign exchange trading centres to Hong Kong; support the full utilisation of financial intermediaries in Hong Kong during the process of reform, and restructure and develop the financial sector in the mainland; as well as declare cooperation in tourism and free trade, reduce taxes to 0% and implement them gradually (CEPA 2004). Reading between lines, the ‘Fragrance Port’, offering a highly internationalised business environment and based on the rule of law, was to play an incentivisation role for raising financial funds and be positioned only to be an intermediary in the Chinese economy, particularly in the growing role of Guangdong province in China’s system. Further integration with Hong Kong was initiated in the ‘Pearl River Delta Urban Cluster Cooperative Development Plan 2004–2020’ and endorsed in early 2005 by the Guangdong People’s Congress. According to the plan, two urban cores in Guangzhou and Shenzhen were designed, one sub-core in Zhuhai and other cities. By positioning Guangzhou-Foshan, Shenzhen-Hong Kong and Zhuhai-Macau as the ‘spine’, all six cities were positioned as radiation centres within the province. For the first time, Hong Kong and Macau were included in the regional planning in southern China. But an important fact was that the regional GDP per capita was 135,000 yuan, with the proportion of the added value of the service industry rising to 60%; average life expectancy increased to 80 years, and the region’s society enjoyed a high level of social security; the urbanisation of Guangdong is

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approximately 85%, and the energy consumption per unit of GDP and environmental quality meeting or approaching the level of the world’s advanced nations would be delivered by the cluster cities (Wong 2009, 374–375). Following earlier plans, and as early as 2008, Guangdong planned an interprovincial urbanisation project dubbed the Greater Bay Area (GBA) with Hong Kong, Macau and cities from the PRD region. In official plans, the government planned the development based on new technologies and innovations. However, along with a growing role in China’s export-led economy, the province faced a number of hurdles. Guangdong’s cities’ inward-looking development has given rise to tensions among the cities’ governments, increased environmental degradation and ramped up competition over local and global resources. While implementing provincial micro-regionalism, the provincial government has faced the dilemma of how to develop in the future. As a consequence, a certain level of the division of labour among cities was introduced. The administrative bodies in Guangdong declared that they would create and support joint research and development of science and technology and build an innovation platform that would be managed by the cities themselves: the Guangzhou National Development Zone, Shenzhen National High-Tech Industrial Innovation Center and Guangzhou International Bio-Island. The critical thing was to develop large data centres in the Greater Bay Area as well as platforms for international innovation in the Hong Kong-Shenzhen Innovation and Technology Park and the Sino-Singapore Guangzhou Knowledge City, the innovation and technology base in Qingsheng of Nansha and the Traditional Chinese Medicine Science and Technology Industrial Park of Cooperation between Guangdong and Macao in Hengqin. Another important task was to strengthen the mechanism for intellectual property protection training of Intellectual Property professionals in a comprehensive manner in the Greater Bay Area. Apart from this, the plan included the construction of large petroleum reserve bases in the PRD, facilitating the coordinated construction of new liquefied natural gas terminals (GovHK 2015). Moreover, according to these plans, cities like Guangzhou and Shenzhen were to become local leaders that would allow smaller cities, which tend to be at earlier stages of industrialisation, to move up the value chain and away from heavily polluting industries. At the same time, more developed areas would move further up the value chain by focusing on innovation and the ‘Made in China 2025 industrial strategy’. The development plan for Guangdong-Hong Kong-Macao Greater Bay Area, passed by the State Council in February 2019, comprises the two Special Administrative Regions of Hong Kong and Macao, and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong Province (Li, Chen, Hu 2016, 515–518; see Table 4.1). Then, the urbanisation clusters were promoted by the central government’s National Plan on New Urbanization for 2014–2020, outlining that 11 ‘urban clusters’ (regions incorporating multiple cities and smaller towns) would receive additional investment. The largest would be the Beijing-Tianjin-Hebei Metropolitan Area; the region around Chengdu and Chongqing (a projected population of 60 million); the Yangtze Delta cluster around Shanghai (around 90 million); and

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Table 4.1 Major urbanisation projects in Guangdong province (1989–2019) Year

Six rounds of regional planning

1989 1994 2004 2008 2014 2019

Urban system planning in the PRD of Guangdong province (1991–2000) The planning for urban agglomeration of the PRD economic region The PRD Urban Cluster Coordinated Development Plan (2004–2020) Outline of the Plan for the Reform and Development of the PRD (2008–2020) The PRD Regional Plan (2014–2030) Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area

Source: Yutian Liang, Zhengke Zhou, and Xun Li. 2019. ‘Dynamics of Regional Planning and Sustainable Development in the Pearl River Delta, China’. Sustainability no 1:3.

the Yangtze River Middle Reaches cluster around Wuhan (projected population of 29 million). But due to their low fertility rate, the rapidly growing southern provinces need to attract labour resources from other parts of China. According to the data of the National One Per Cent Population Sample Survey of 2015, the interprovincial migrant population was the largest in Guangdong (24.79%), followed by Zhejiang (12.07%), Jiangsu (8.95%) and Shandong (2.28%). In recent years, the net inflow of Guangdong’s inter-provincial population is still relatively large. In 2018, the total net inflow of the province’s inter-provincial was 18.438 million. This reflects that Guangdong’s economic development is significantly more dependent on foreign labour than Jiangsu, Shandong and Zhejiang (GdStat 2018). But this process might be limited by the growing needs of provinces surrounding Guangdong, the decreasing number of new migrants moving to Guangdong, with the rate of migrants returning home gradually increasing. It is necessary to respond to shifts in the labour pool as early as possible. The issue regarding human resources is creating another front for inter-provincial competition, for example, between Guangxi AR and Guangdong (Seminar, Guangzhou 2018). In 2018, Guangdong’s population numbered 113 million people, 3.08 higher than 1949 (27 million people). Guangdong’s urban population has also been increasing over the last seven decades. In 1953, the combined urban population of Guangdong stood at only 3.8 million, accounting for 12.03% of the total population; in 1982, it had grown to 10.3 million, accounting for 19.28%. With the reform and opening up, the urbanisation rate of Guangdong’s population has increased year by year, with the urbanisation rate exceeding 50% by 2000. By 2018, the urban population of Guangdong was 80.162 million, accounting for 70.7% of the total population (21Jingji 2019). A centrally taken decision in 2019 allows the central government to compare the Greater Bay Area with a similar economic structure found in the United States: the New York Metropolitan Area, San Francisco Bay Area and Japan’s Tokyo Bat Area. From a Guangdong perspective, it stimulated further competition for domestic and international resources. The BRI means the reinforcement of its roles as the nation’s pilot zone for reform and opening up, as well as infrastructure connectivity. However, the new roles, without having closer integration with

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Hong Kong, would lag far behind expectations. The local government in Guangzhou has encouraged people from Hong Kong and Macao to invest, set up businesses and take up employment in Guangdong, which provide Hong Kong and Macao residents with more development opportunities, and provide more suitable conditions for Hong Kong and Macao residents to live and work in the mainland’s global technology and innovation hub. What is critical for the integration process is to coordinate the use of global technology and innovation resources, improve the systems and mechanisms for cooperation in innovation and enhance cross-regional cooperation in innovation development. Needless to say, southern China has the advantage with officials’ willingness to experiment, which offers entrepreneurs and investors opportunities to take risks that in other cities might be frowned upon or blocked by local authorities determined to pursue a highly formalised development plan (Breznitz, Murphree 2011, 171–172). Looking beyond this provincial integration project, cooperation with Hong Kong has resulted in tensions over the future status of Hong Kong: the cities in Guangdong, while establishing financial centres, have undermined the current status of Hongkongese business circles. The situation brought to light a further problem with the effective, coordinated integration embedded in Hong Kong’s different political structure: while Guangdong is a province, Hong Kong enjoys the status of a Special Administration Region, has its own currency, policy planning and is based on the ‘one country, two systems’ policy. Finally, with future integration projects with mainland Guangdong, the future status of Hong Kong had come under threat. The tension between Hong Kong and the mainland is illustrated by the Hong Kong-Zhuhai-Macau Bridge (HZMB), a 55-kilometre bridge-tunnel connection. The process, which began in 2002 when the China/Hong Kong Conference on Co-ordination of Major Infrastructure Projects agreed to a joint study on a transport link between Hong Kong and Pearl River West, took more than 16 years to complete. A critical divergence of interests was in securing Hong Kong workers job places as well as securing environmental protection. The bridge, which was finally opened by President Xi Jinping in October 2018, means that Hong Kong is more easily accessible from the mainland (Chen, Yang, Tan 2017, 21–22). The ongoing urbanisation process is a response to the recognition of an economy that is slowing down. This move ensures the rebalancing between a reliance on export and investment-led growth, and a shift towards consumption-led growth. The integration of clusters with more developed hubs, and less developed peripheral cities, may assist China with its policies of supply-side reforms and high-quality growth. As argued by Dan Breznitz and Michael Murphree (2011): through clustering, resources will be reallocated from bigger cities to smaller cities. Nevertheless, integration within the province has been mainly driven by the balance of interests, different normative dimensions, and the workers’ unemployment in the area from which the factories have been relocated. Being rooted in an institutional structure developed during the Maoist era: the cities seek local self-sufficiency, and remain detached through the division of

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administrative power in various jurisdictions, which leads to problems in cooperation and a lack of coordination in the construction of infrastructure. The lack of coordination between cities has led to both a lack of infrastructure and overlaps in the existing infrastructure. The horizontal city competition has resulted in an overinvestment in infrastructure and a wasteful and widespread duplication of industrial parks and facilities. These issues in China’s local development remain unresolved (Breznitz, Murphree 2011, 176). Apart from the integration within provinces and stimulating economic growth by urbanisation processes, after the announcement of the Belt and Road Initiative, the provinces were encouraged to initiate cross-provincial cooperation as part of integration projects. However, according to data discussed by Sun Jun, Gao Yanyan, Xuan Changyong (2018), between 2008 and 2016, the provinces concentrated on intra-provincial and intra-regional trade, and limited inter-regional trade. Guangdong’s trade dependency on the PRD grew from 46.47% to 60.59% while Lower Yangtze Delta’s trade flow with the PRD decreased from 3.39% to 2.65%. From the perspective of Guangdong, the key external area in trade flow was located in Southwest China, however, even here the trade dependency between the two regions fell from 17.59% to 13.17% (see Table 4.2). 4.1.3. The maritime economy and provinces’ sea border management From the perspective of the coastal provinces, as well as implementing the BRI, all concentrate on the maritime economy and sea border management. The former includes various areas of trade and industry associated with international trade exchange by sea, which is conducted within the operating area of the sea and river port (sea shipping, the port industry, sea fishing, inland shipping, sea and inland waterway administration, maritime education and academic and scientific activity). Of course, what is very important for the maritime economy is how changing conditions both in the port environment (international and national) and inside the port system may affect future development. The Standardization Administration of China defined the maritime economy as covering the exploitation, usage and protection of oceanic resources and their associated activities. China’s maritime economy can be categorised into several categories: marine fishery and aquaculture industries, the salt industry, the offshore oil and gas industry, the mining industry, the shipbuilding industry and the pharmaceutical industry based on marine resources; and the transport industry and coastal tourism, and their associated service industries and contributions from three coastal regions (To, Lee 2018, 1–13). The primary objective of the ‘blue economy’ is to recognise the oceans as the latest frontier of economic development – essentially as a strategy to explore the ocean’s potential as a source of resources, livelihoods and services. The core question here is how to conduct sustainable, long-term development with the effective utilisation of oceanic resources. The second objective involves technological development, which plays a vital role in improving the economic potential of the blue economy model, as well as in terms of facilitating the aforementioned

62.75 8.55 2.26 20.01 9.41 4.90 11.96

65.70 6.14 2.81 16.33 8.43 4.25 7.16

9.43 42.24 2.16 13.07 3.74 8.96 16.05

5.15 38.56 2.19 9.75 3.35 8.78 15.20

0.85 3.39 46.47 1.77 0.27 17.59 14.75

2008 1.11 2.65 60.59 1.94 0.40 13.17 8.43

2016

Pearl River Delta

6.72 8.92 3.36 39.20 5.37 5.41 3.38

2008 8.05 14.95 1.73 40.88 6.59 7.20 4.50

2016

North-West China

3.81 6.64 0.27 10.44 75.98 1.20 1.79

2008 2.33 1.45 0.18 10.63 76.24 1.20 1.25

2016

North-East China

0.66 3.14 16.56 1.07 0.68 39.10 5.16

2008

0.69 3.04 18.95 2.21 0.72 46.18 7.26

2016

South-West China

15.40 27.49 28.22 14.16 4.35 22.00 44.54

2008

16.78 31.95 13.44 18.02 4.15 18.28 53.81

2016

Central China

Source: Sun Jun, Gao Yanyan, Xuan Changyong. 2018. ‘“Yidai yilu” changyi xia de Zhongguo shengji maoyi yanbian tezheng yu liuxaing tibian’ [The changes and evolution in cross-provincial trade under the Belt and Road Initiative]. Cai mao jingji (Economy of Finance and Trade) no 6: 86–87.

Bohai Rim Lower Yangtze Delta Pearl River Delta North-West China North-East China South-West China Central China

2016

2008

2008

2016

Lower Yangtze Delta

Bohai Rim

Table 4.2 The percentage of trade dependency between economic regions (2008–2016)

182 Guangdong and Hainan

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‘sustainability’ component of this development (Gamage 2016). According to the 12th FYP (2011–2015), China’s major objective in developing an ocean economy was to optimise the structure of the marine sector through the development of marine industries through scientific planning. Moreover, this new concern is reflected in the inclusion of language about the need to protect China’s ‘maritime rights and interests’ (haiyang quanyi 海洋权益) (Rui, Guang 2014, 165–166). The 13th FYP also calls for further geographical expansion of China’s maritime activities and ‘expanding space for the blue [i.e., maritime] economy’. The development of new maritime spaces will create a ‘new motivational force’ for China’s national development especially on a coastal provincial level as five ocean economic zone development pilot plans have also been approved by China’s central government for Guangdong, Shandong, Zhejiang, Fujian and Tianjin. As declared in the plan, Hainan is also supported in its efforts to take advantage of the resources of the South China Sea to develop a marine economy and build a demonstration zone for marine economic development such as the Qingdao Blue Valley. The purpose of these pilot zones is to establish a new sustainable development pattern for China’s coastal regions that are heavily involved in marine economic activities (13th FYP 2016). Zheng Guibin believes that the choice and implementation of the path of innovation in marine economic development must not only establish the concept of innovative development as well as following the objective laws of marine economic development, but also strengthen integrated management and learn from the experience of developed coastal countries. From the perspective of the marine industry, Zhang Ying concluded that the innovation and development of the marine economy in Jiangsu Province should focus on promoting seawater desalination and the marine equipment industry. Technological innovation can drive consumption, increase investment, enhance foreign trade competitiveness and promote the upgrading of industrial structures, which plays the most important role in promoting the development of marine economic innovation. In 2015, the total revenue of Guangdong’s marine scientific research institutions was 4.13 billion yuan. The number of projects in this sector exceeded 2,000, and ranked first among 11 coastal provinces, municipalities and autonomous regions. The discussions about innovations allow the government to rank provinces according to their advancement. In the first echelon, Guangdong, Shanghai and Shandong as the strongest were classified, while Fujian Province, Hainan Province, Guangxi Zhuang Autonomous Region and Hebei Province were positioned as the least advanced. Taking Hainan as an example, it has good environmental conditions and beautiful coastal scenery but the island’s scientific research lags way behind other provinces and needs to be urgently improved. The lack of scientific and technological capital, talent investment and scientific research strength led to a decline in overall innovation capacity with marine production accounting in 2016 and 2017 for 6.7% and 7.1% of regional GDP respectively. This illustrates the province’s failure to exploit the economic advantages of the coastal regions (Peng Mingming, Chen Dongjiang 2019, 85–90). Official statistics show that China’s USD 1.2 trillion maritime industry has been growing at a rate of 7.5% annually

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for the past five years and accounts for nearly 10% of its GDP. The country is looking to have the marine sector account for about 15% of its GDP by 2035. In order to achieve this, the country is establishing world-class, high-end marine industrial clusters in the Guangdong-Hong Kong-Macao Greater Bay Area. However, transforming Shanghai and Shenzhen into global marine centres would also be necessary to meet this ambitious target (Wartsila 2018). In 2016, the State Oceanic Administration and the Ministry of Finance approved the 13th FYP for Marine Economic Innovation and Development Demonstration Cities, identifying eight marine economy innovation and development demonstration cities and implementing a ‘first trial, first implement’ project which would encourage the selected cities to compete and develop their respective infrastructures through project competition (Peng, Chen 2019). However, a year later, another document was published by the SOA and NDRC. Here the critical decision refers to the construction of an evaluation index system for the innovation and development capability of the marine economy that was mainly based on GDP growth, the maritime economy’s percentage share in China’s overall economic growth. Then, the central administration listed the numbers of requirements: the intensity of funding for marine research and experimental development (percentage growth), the conversion rate of marine scientific and technological achievements (percentage growth); the annual growth rate of value-added performances of emerging industries (percentage growth); the value-added performance of the marine service industry as a proportion of gross marine product (percentage growth); the number of newly employed persons involved in sea activities; the marine Science Popularization and Education Base; the proportion of excellent water quality in coastal waters (percentage growth); and the mainland natural coastline retention rate (percentage growth). The last two indicators were categorised as binding requirements (yue shuli 约束性), while the rest were anticipated (yufangxing 预期性) and a guidance target (zhidao xing 指导性) (NDRC, SOA 2017). But what was noticeable was that instead of discussing the cross-provincial integration project, the documents discussed the project with reference to the 11 coastal provinces. While selecting three maritime economic spheres dubbed north, east and south, the document still instigated the old-provincial division approach instead of nurturing more cross-provincial cooperation by strengthening marine economic competition between different provinces. The question of how to incentivise more advanced provinces to develop trade with the less developed areas remained unanswered (Li, Fan, Shen 2018, 4–9). Furthermore, as a part of developing the maritime economy, the Chinese provinces are responsible for providing the platform of military-civil fusion, a strategy that seeks to enable transfers between the civilian and defence sectors to support defence-related science and technological advancements. A critical factor is to create an effective vehicle for developing cohesion in China’s military and civilian research efforts, and as a result, would reorder the country’s economic growth, enabling China to become a global technological leader. The second part of guiding China’s coastal provinces under the BRI is territorial in nature involving China’s sovereignty and sea border management.

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From the provincial perspective, their major responsibility, while being the major administrative body for artificial island in the South China Sea, is managing their part in the People’s Armed Forces Maritime Militia (PAFMM). The militia is defined by China’s Military Service Law of 1984 and revised in 1998, and calls for the ‘militia to undertake the duties related to preparations for war, defend the frontiers and maintain public order; and always be ready to join the armed forces to take part in a war, resist aggression and defend the motherland’. Moreover, Article 22 of the National Defense Law passed by the National People’s Congress in 2007 stipulates that ‘The PAFMM is a subset of China’s national militia, an armed reserve force of civilians available for mobilization. Militia units organise around towns, villages, urban sub-districts, and enterprises and vary widely in composition and mission’ (NPC 2007). Further regulations were introduced by the State Council in 2011. Referring to the local governments’ roles, ‘Regulation on the Militia Work’ stated that the local people’s governments at all levels must strengthen their leadership over militia work, make overall arrangements for the militia and organise and supervise the completion of the militia’s work tasks. Moreover, dedicated departments of local governments at all levels should assist military organs in carrying out militia work and solving any ensuing problems. Interestingly, according to the law, private enterprises and institutions shall, following the requirements of the local government and military leadership and command organs in the region, incorporate militia work into the management plan and complete the militia’s tasks (StateGov 2011). In 2004, a defence white paper outlined the People’s Armed Forces’ command militia operations; however, this may not be as simple for the Maritime Militia, as a mission or scale of mobilisation could vary greatly. The Maritime Militia introduces a command and control between its unit’s work and many non-military forces such as those operated by the Fisheries Law Enforcement under the Fisheries Bureau, and the Maritime Safety Administration under the Ministry of Transport. In governing the Maritime Militia, the local military organs and civilian leadership enjoy the priority places, and military commanders assume greater operational control, that to a certain extent lead to responsibility overlapping the problem. The most explicit definition of the Maritime Militia was quoted by Kennedy and Erickson (2016) and is understood as ‘an irreplaceable mass armed organization not released from production and a component of China’s ocean defence armed forces [that enjoys] low sensitivity and great leeway in maritime rights protection actions’. As was said before, the PAFMM contributes to China’s overall national defence mobilisation and is subject to the dual-leadership of local civilian and military organs. By fulfilling the people’s war concept, it is a unique component of China’s armed forces as discussed by D. Shambaugh (2002). In building the Maritime Militia the government agencies such as the Maritime Safety Administration and the China Coast Guard assist with aspects of training in search and rescue, and instruction on maritime law and regulations relevant to their operations. China has built a state-owned fishing fleet as at least part of its Maritime Militia force in the South China Sea (Annual Report to Congress 2019). Moreover, the Maritime Militia has been dictated a special role within what it refers to as the ‘Maritime Rights Protection

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Force System’ and has a role in assisting the PLA and PLAN. The major role was to strengthen transport capacity through delivery of troops, vehicles, equipment and materials; conduct medical rescue and retrieval of casualties; provide navigational assistance; conduct emergency repairs and refitting of vessels, docks and other infrastructure; provide fuel and material replenishment at sea, and conduct other various logistical functions. The ongoing reforms consolidated four of its five major maritime law-enforcement agencies into a new agency called the China Coast Guard. But in fact the coastal management is a mixture of different types of Beijing-based administrative bodies. On the one hand, China Marine Surveillance; the former Maritime Police and Border Control, previously administered by the Ministry of Public Security; the former Fisheries Law Enforcement, previously administered by the Ministry of Agriculture; and the former Maritime Anti-smuggling Police, previously administered by the General Administration of Customs were consolidated are the former SOA and its subordinate. On the other hand, when further reform was taken in 2018 and the China Coast Guard was transferred from civilian control of the State Council and the State Oceanic Administration to the People’s Armed Police, ultimately placing it under the command of the Central Military Commission (Erickson, Kennedy 2016). Along with a growing international presence, China’s central government has strengthened its position vis-à-vis relations with southern China’s provinces with the Maritime Silk Road but does face challenges predominantly from the domestic horizontal competition that influences the country’s global policy. As discussed in this chapter, in both technological developments with urban integrations projects, maritime economy and even the involvement of paramilitary units, China’s policy shows the problem of coordination between various regions and is seen as a critical factor in shaping Beijing’s sponsored project. After the economic belt and the 21st-century MSR became national strategies, the state has assumed more responsibility for large-scale investment projects, which have given rise to competition among various locations. In southern China provinces, while labelling themselves as the starting point of the Ancient Silk Road and the Maritime Silk Road, ‘blind competition’ has manifested itself in various places and especially in Southeast Asia. Although in theory the aforementioned official documents guide the policy direction and creates a framework for the division of labour, in practice, as discussed in the chapter, the reality is very different. In the context of southern China’s provinces, Guangdong and Hainan have become the most exposed areas in China’s economic and military involvement in the 21st Century Maritime Silk Road. On the one hand, both have a clear distinction: Guangdong is responsible for international markets, technological progress, the urban accelerator of economic growth and cooperation with Hong Kong and the developed world. At the same time, Hainan, with the Maritime Militia and administrative roles prescribed for governing the artificial island of Sansha is planned to be part of China’s policy in the South China Sea Basin. However, the competition between both is also evident and mainly focuses on taking over the role of Hong Kong; Guangdong sees the intermediary role of Hong Kong as a

Guangdong and Hainan 187 hurdle in its own development, while Hainan has declared itself the second Hong Kong and ultimately wants to take the intermediary role off Hong Kong’s hands.

4.2. The Southern Gateway: the self-made Cantonese Belt and Road Initiative The interaction between east and west occurred fairly early on in this southern area of China and played a crucial function in shaping China’s economic and social development. In the era of reform, it was Guangdong that took the lead in the opening up and reforms in China. When governed by Xi Zhongxun, Guangdong was responsible for setting up economic zones and strengthening China’s ability in the global economy. This was in contrast to the Maoist era, when national resources were allocated to the western part of China, and Sino-American rivalry limited the possible economic growth of the province which had previously been driven by private initiatives (Cheung 2016, 23–24). Since the BRI was announced as the next round of reform and opening up, integration with the global economy has been seen as necessary for China’s technological rise. To this end, Guangdong hopes to regain its leading position in the country’s economic development (Tobin 2018). In this regard, close relations with the external world, its geographical position and bordering Hong Kong has created strategic opportunities for the development of Guangdong’s structures and economic power. Using its cultural proximity, Guangdong quickly made good use of its potential as Hong Kong became the most prominent investor in Mainland China with Guangdong being the most prominent beneficiary, particularly in the Pearl River Delta area. By exercising its relations with the former British colony, Guangdong became a location that attracted foreign investment from the manufacturing sector, for example, the technology industry in Shenzhen as well as high-value-added agriculture, real estate, construction, transport, telecommunication and other sectors (Cheng 586– 587). This state of affairs with the historical continuation of being less dependent on central government resources gave the southern province leverage to negotiate with Beijing over the formulation of economic policy in the province. In a sense, the BRI has not changed conditions on the ground. The persistent lobbying of local policymakers in Beijing for enlarging Guangdong’s provincial power by interacting with the outside world has remained largely unchanged. Moreover, the domestic cultural peculiarities of the Lingnan culture, a different type of Chinese dialect – Cantonese ‒ and the province’s close relations with the Chinese diaspora of Cantonese origins has helped it build a more unique position inside the system. This Guangdong exceptionalism led the provincial government to secure its position as a gateway to China, but still needed to be carefully managed by Beijing which limits independence tendencies within the province. Finally, through multilateral platforms with other global cities, the province and Guangzhou city in particular, by promoting a low-carbon economy and new environmental solutions, hope to secure international markets for Cantonese products. This, however, led to Guangdong becoming more dependent on cooperation with foreign entities than

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of those inside China, and once globalisation was challenged by the US-China trade disputes, the position of the province was a challenge and the leaders needed to manage growing domestic pressure and international headwinds. 4.2.1. Does the BRI matter? Guangdong’s responses to official policy Ever since Guangdong became the leader of reforms in China, it has hoped to secure its frontrunner status vis-à-vis other provincial bodies. Apart from engaging in national policies like opening up, reforms and the BRI, local authorities with their own local integration projects hoped to secure their leading role in China. In July 2003, the Guangdong Provincial Government first proposed the idea of the Pan-Pearl River Delta Regional Cooperation. After strong promotion in Beijing by the then party secretary, Zhang Dejiang, the provincial concept was approved by the State Council in May 2004. Along with the signing of the CEPA with Hong Kong, the regional cooperation framework was given fresh impetus by allowing Guangdong to have easier access to Hongkongese financial and human resources. The next stimulus came through the announcement of the BRI and in March 2015, the future role of Guangzhou was defined in the document, ‘Vision and Actions’: ‘as an internationally recognized seaport, the central government declared its support for strengthening the air cargo hub in Guangzhou’. The district of Nansha, together with Shenzhen Qianhai, Zhuhai Hengqing and Fujian Pingtan, were described as being in the vanguard of the free trade economic zone (Vision and Actions 2015). In reports delivered by governors and mayors, the province of Guangdong and the city of Guangzhou were portrayed as being dynamic, having their own traditional and unique position in China, and being less subordinated on the central level. Both governments present the province and the city as being at the forefront of Chinese reforms and opening up. By doing so, they place themselves as an important pillar for the BRI. In 2015, the local government passed two documents; first, a special three-year plan concerning the construction of an international shipping centre, and second, the List of Priority Projects with 68 projects worth 55 billion yuan (GdRDC 2015). Following this, the 13th Five-Year Plan argued that the most important project to be realised by Guangdong province was to build scientific, innovative and productive international alliances (guoji chanxueyan chuangxin lianmeng 国际产学研创新联盟). The arguments about investment and productivity cooperation clearly show that the local governments were also responsible for exporting overcapacity. Moreover, the provincial government was to accelerate the expansion of high-tech industries in the Guangzhou Nansha, Shenzhen Qianhai, Zhuhai Hengqin and Sino-Singapore (Guangzhou) Knowledge City, Sino-Germany (Jieyang) Metal Eco-city, Sino-Germany (Foshan) Industrial Service Zone, Sino-Israel (Dongguan) International Technology Cooperation Industrial Park, Zhuhai Aviation Industrial Park and, finally, with the bordering Hainan Zhanjiang Southern Sea Valley. The important role of the Chinese overseas community has been presented in the provincial developmental plan and the government hoped to attract Cantonese and Taiwanese money by

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establishing the Shantou Overseas Chinese Economic and Cultural Cooperation Pilot Zone and the Meizhou Strait Exchange Base. By the end of 2020, foreign agreement investment will have exceeded USD 50 billion, with an average annual growth rate of 20%, and by 2020 will have achieved a bilateral trade volume of USD 215 billion with countries along the BRI (Gd13thFYP 2017). Furthermore, according to the development plan for the Pearl River Delta, this part of China is planned to be at the forefront of new technologies and the most advanced products. As stated in the development plan, by 2020 Guangdong would be in a position to achieve its target of being a well-off society, have an economic structure with more than a 60% share of services, a GDP per capita of 135,000 RMB, an average lifespan of 78 years and 85% of the entire area of Guangdong being urbanised. International cooperation, as pointed out in the 13th FYP for Guangdong, was to strengthen relations with the most advanced countries, for example, with Germany and Israel. A very visible sign of cooperation between Guangdong and Israel comes in the shape of two projects: first, the joint project of a technical school, the Guangdong Technion-Israel Institute of Technology (GTIIT) based in Shantou in Southern Guangdong province (Technion 2017), and second, the Guangzhou Sino-Israel Biotech Investment Fund (GIBF) established in March 2016, which focuses on life science investment with an initial investment of 600 million RMB. The former project is the result of a historic partnership between the Li Ka Shing Foundation, the Guangdong Provincial Government, the Shantou Municipal Government and the Technion-Israel Institute of Technology, while the latter is predominantly managed by the Guangzhou Industrial Investment Fund, Guangzhou Pharmaceuticals Company, Guangzhou International Bio-Island and Guangzhou Hengyun Enterprises (GIBF 2019). But to ensure economic development runs smoothly, the local government needs to locate resources, and as stated in provincial 13th FYP, what was critical was to promote the integration of the three chains of innovation, industry and capital. Moreover, the city government in Guangzhou have realised that human resources is the main contributing factor in the creation of material wealth, exploitation of natural resources and enhancement of social reforms. Interestingly, as said by the mayor of Guangzhou in 2018, in order to attract talented people from Southeast Asia, the city as the centre of Lingnan culture would like to utilise its Chinese overseas network because of the province’s cultural proximity to neighbouring countries (GzLGR 2018). But due to domestic shortages and serious horizontal competition, the raising of capital and searching for human resources needs to be conducted through the province’s international activities, which, due to Guangdong’s southern location and culture, is mainly targeted at countries in Southeast Asia. This also means that the provincial government is also responsible for navigating strategies towards a new labour market (Interview, Guangdong 2019). In order to fulfil these imposed obligations and secure its position as a gateway to China, the local government declared to take action on a global scale. From the perspective of the province, the most important foreign destinations are ASEAN, Japan, South Korea, Central and Eastern Europe and Africa (2019), while for

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Guangzhou, the most important destinations are Europe, namely Germany, the United States and Israel (2016). The strengthening of city seaport alliances and promoting cargo train connections from Guangdong-Mangzhouli-Russia should also contribute to the export quotas presented in 13th FYP. But, by having access to seaports the provincial government’s acknowledgement of the land route to Europe should be understood as nothing more than a courtesy. For the government in Guangzhou, international cooperation with cities is also important, with special regard to triangular relations with Los Angeles and Auckland and developing relations with Malacca Industrial Park and the Jizan Economic Zone in Saudi Arabia (2017). Moreover, Wen Guohui the mayor of Guangzhou has declared it will open foreign science and technological offices in Silicon Valley, Boston and Tel Aviv. There is also growing competition concerning labour resources. However, the emerging Pan-Pearl River Delta bloc within the concept of nine provinces along with Hong Kong and Macau will facilitate Guangdong’s access to cheap labour from poorer provinces such as Guangxi, Guizhou, Yunnan, Hunan, Jiangxi and Sichuan, which would thereby strengthen Guangdong’s economic status vis-à-vis its northern competitors. The poorer provinces hope to benefit economically by linking up with the more affluent coastal provinces and Hong Kong, but in reality a dominant Guangdong uses the neighbouring provinces’ labour pools to develop its own economy (Seminar, Guangzhou 2018). Being one of the most internationalised areas in China, Guangdong and Guangzhou have become an essential part of China’s external strategy. Interestingly, Guangdong and Guangzhou were dubbed ‘pawns’ or ‘checkers’, especially with regard to the 21st Century Maritime Silk Road (Zhang Jinping 2010, 4). A similar meaning was given to the paitoubing, which refers to opening China up to the international market and acting as a bridge between international markets and China’s interior. The pawn definition also has a different meaning. As the author understands it, the pawn (or checker) is only a small and not very important piece on the chess board. For people in Guangdong, however, the meaning is different. In the eyes of the Guangdong and Guangzhou bureaucrats, the assigned role of the pawn is perceived as being ahead, being in the vanguard and being better than any other region in China. This also clearly shows that horizontal competition is important in China’s local authority global outreach. Without the pawn, the government would have failed to start the chess game, as well as the subsequent moves towards the United States made by Guangzhou. This implies that the Cantonese see themselves in the vanguard of reforms, opening up and internationalisation processes, and even at the forefront of political changes and China’s diplomatic strategy. For local authorities, being a ‘pawn’ or ‘checker’ means being exceptional and playing the most crucial of roles (Interview, Guangzhou 2016 and 2019). Apart from its position in China’s external actions, Guangdong will look to change its image from ‘made in Guangdong’ to ‘invented in Guangdong’, and in fact, from an economic point of view, all actions taken by the local government have been subordinated for the desired goal. The plan supports the government by being an ‘international gateway’ to the entire country, but the provincial

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government does need to coordinate the local division of labour. Guangzhou is responsible for trade cooperation as well as small to medium-sized company cooperation, Zhuhai holds the position of promoting and establishing the aviation industry as well as hosting exhibitions, while Shenzhen has been positioned as the principal location for new technologies and high-end products. Furthermore, Hong Kong, Macau and the CEPA framework is named as an important pillar of the Pearl River Delta’s future development. The division of labour approach limits horizontal competition, although this is unlikely to disappear. 4.2.2. International markets, provincial lobbying and high-tech gateway In the case of the southern province of China Guangdong, the international cooperation of regions and sister cities is projected via different channels in order to achieve the desired goals. It includes high-ranking leader exchanges, economic exchanges, cultural exchanges, social interaction and mutual investments. First, diplomacy at governor and party secretary level is the main form of inter-region and inter-city exchanges, driving both bilateral and multilateral relations. Based on the guanxi/network imperative, this top-down arrangement stimulates further cooperation. The second point is the economic exchange and investment cooperation. As a highly urbanised province, the provincial government has paid more attention to urban development, which, along with sister city relations, are perceived as vehicles for economic development and cooperation between states. The key point here is that a city-based economy allows for self-development, self-improvement and an efficient way to improve overall competitiveness. From the perspective of Guangzhou’s international cooperation, it is worth noting that the city has differentiated its partners into four hierarchical categories: those that are well developed with a high-tech profile (Fukuoka, Los Angeles and Tampere), commercial partners (Frankfurt, Lyon, Bristol), locations with natural resources (Surabaya, Arequipa) and those that are designated for limited cooperation (Bari, Durban and Oita) (Yang 2008, 146). Through a proactive policy as well as its historical position as a gateway to China, Guangdong has secured export markets for its products. Since 2010, the markets in the USA, the European Union, Japan and South Korea have remained stable, while the ASEAN’s importance to provincial export markets has been growing. However, the role of Hong Kong as an intermediary has diminished and dropped from 41% in 2014 to 25% in 2019 (see Table 4.3). But still, regardless of the situation in Hong Kong, the city is seen as the launchpad for Guangdong’s go global strategy and utilises the principle of ‘united go abroad’ (bao tuan chuhai 抱团出海). In other words, the role of Hong Kong, in the short term, within the provincial go out strategy, is auxiliary in nature; the market information connected with being a ‘going out’ destination, as well as related investment consultation and investment risk. Moreover, mainland Cantonese companies might resolve many problems caused by overseas investment in a Hong Kong court. Companies from Mainland China might also use Hong Kong’s international competitiveness in finance, commerce and other fields (Chen 2018,

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Table 4.3 Guangdong’s export market by country and region as percentage of total provincial exports (2010–2019)

Hong Kong United States EU ASEAN Japan South Korea Russia

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

34% 19% 15% 7% 5% 2% 1%

35% 17% 14% 7% 5% 3% 1%

38% 16% 12% 7% 5% 4% 1%

41% 15% 11% 7% 4% 4% 1%

35% 15% 12% 8% 4% 4% 1%

32% 17% 13% 9% 4% 4% 1%

30% 17% 14% 10% 4% 3% 1%

27% 17% 14% 10% 4% 4% 1%

27% 17% 14% 10% 4% 3% 1%

25% 16% 16% 11% 4% 3% 1%

Source: author’s own calculations based on data from the Guangdong Statistical Yearbook 2010–2019. Accessed 20 July 2020. http://stats.gd.gov.cn/gdtjnj/

135–136). But tensions over Hong Kong in 2019 and 2020 have resulted in the limitations of Chinese companies on the Hong Kong stock exchange, where they acquire a greater proportion of capital resources from the United States and other countries. According to the Hong Kong Trade and Development Council, as of year-end 2018, 1,146 mainland companies were listed in Hong Kong, with a total market capitalisation of USD 2.6 trillion (68% of the market’s total market capitalisation). According to the SWIFT global payments processing service, in May 2019 over 75% of offshore RMB-denominated payments were cleared through Hong Kong (USCC 2019). However, as discussed by Liang Ganghua (2019), this dependency on Hong Kong limits the potential of Guangdong province, and the government may terminate cooperation as soon as possible. The ‘illness of dependence’ limits Guangdong’s position vis-à-vis Shanghai, as well as provincial independence in global geo-economics (Liang Ganghua 2019, 194, 214). On the other hand, for international financiers, Hong Kong with its legal system acts as a magnet for international capital. The ongoing limited role of Hong Kong in the trade and finances of Guangdong might have a negative impact on the Greater Bay Area project, and with the ongoing tensions undermine the integration programmed. In fact, due to its reliance on an export processing and labour-intensive manufacturing development model, Guangdong faces a limitation on developing its own capital-intensive industrial base, given the importance of revenue and employment of traditional manufacturing for local governments (Cheung, Leung 2018, 42). At the same time, the government in Hong Kong seeks to foster an innovation and start-up environment. Moreover, since July 2017, the Hong Kong government has committed ‘over HKD 100 billion’ to promote innovation in biotechnology, artificial intelligence, smart cities and financial technology (USCC 2019). Apart from Hong Kong, which is seen as the source of finances for Chinese companies, Guangzhou places itself as an important pillar in the fourth industrial/ technological revolution. In the ongoing controversies with Huawei 5G projects, the city of Guangzhou uses its trade missions in Boston, Silicon Valley and Tel Aviv to promote cooperation and technology transfer (GzFAO 2018a). In this regard, being less controversial than the central government, the local level plays

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a pivotal role in limiting controversies and preserving China’s position as an international tech giant, but at the same time, international activities are limited by horizontal competition with other provinces and high-tech companies. In other words, these ‘shadow actions’ are very natural but have resulted in less effective global expansion. Nevertheless, by positioning themselves as a high-tech gateway to China, the cities in Guangdong seek global funds in the hope of finding more resources in terms of financial and human resources in order to stay ‘one step ahead’ of other provinces. Another component is the relationship with the most advanced countries of ASEAN. By using the framework of the China-ASEAN Free Trade Agreement, Guangdong’s cities foster positive relations with their counterparts from Southeast Asia as stated in the Pearl River Delta Plan (PRD Plan 2008). Along with its local transformation, Guangdong is looking for global food supply chains which is what it sees the ASEAN countries can assist in: Thailand, the biggest rice exporter, with auxiliary roles from Vietnam and Cambodia, together with Heilongjiang, based on the province’s mutual assistance presented in Chapter 2, play the role of Guangdong’s breadbasket. Nonetheless, the developing status of Southeast Asia is not only about playing the role of food provider. Singapore, similarly to the discussed case studies of Sichuan and Chongqing, plays a decisive role in incentivising foreign capital. In 2008, both central governments with strong support from the local leadership began the joint development of the SinoSingapore Guangzhou Knowledge City (SSGKC) that started operations in 2010. The project aimed to foster closer cooperation between China and Singapore and expand Guangdong’s and Guangzhou’s global outreach. The project was also purposed to accelerate the industrial transformation and upgrading of the Pearl River Delta region and represents Guangzhou’s and Guangdong’s future internationally as a competitive economic platform. The Guangzhou project became one of three joint projects with Singapore in Mainland China along with Tianjin Eco-City and Suzhou Industrial Zone, and the Connectivity Project in Chongqing which was discussed in Chapter 3. In July 2016, the Guangzhou government during a summit in Singapore announced the opening of a new project between the cities of Guangzhou and Singapore. Sino-Singapore Guangzhou Knowledge City Investment and Development Co. Ltd (GKC Co.) signed a Memorandum of Understanding with Siemens Ltd China to jointly develop the Smart Eco Technology Demonstration Centre. This project became Siemen’s first urban sustainability hub in AsiaPacific (World City Summit 2016). Weak intellectual property rights (IPR) can directly harm innovators and innovation by lowering the incentives to innovate. Guangzhou has already taken steps to help firms with patenting and enforcing patents, including setting up a high-level IPR service centre in Science City. The number of PCT (Patent Cooperation Treaty) applications from Guangdong stood at 24,725 in 2019, accounting for 43.5% of China’s total, ranking the province first in the country, with Shenzhen leading the way in the provinces with a 70% share in Guangdong patents. In April 2020, Guangdong’s court issued the nation’s first Guidelines on the Trial of Civil Dispute Cases regarding online gaming intellectual property rights (GBA 2020). Moreover, cooperation with more developed

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countries like Singapore with the Knowledge City flagship project, a zone of IPR enforcement acts as an example for the entire country with other provinces across China following suit. This put Guangdong in pole position for China’s next round of reforms (Crane, Shatz, Nataraj, Poppers, Xiao 2012, 18–21). Apart from being a ‘radiation centre’ for the whole country, Guangdong needs this regulation because of the extremely fierce competition among high-tech companies. Chinese companies in Guangdong province, as said by Li Dequan, must pay close attention to the following three points when going out: refrain from rushing for quick gains and lay down roots for long-term benefits; avoid self-harm (killing) and start healthy competition; and focus on integrity and building a reputation for Cantonese businesspeople (Li Dequan 2010, 30). In 2019, Huawei had 4,510 patents, and was followed by Guangdong OPPO Mobile Telecommunications with 2,614, Tencent 2,146, Zhuhai Gree Electronics 1,739, ZTE 1,472 and Vivo Mobile from Dongguan 1,389 (CCPIT 2019). This illustrates that cooperation can further incentivise foreign companies to invest in Guangzhou, however, the municipal government has failed to receive the expected support from the central government unlike Chongqing, Tianjin and Suzhou which do receive central government support. This was summed up by scholars in Guangzhou: ‘the Singaporean project is made by the city itself and this is not fair because Guangzhou operates on the market principles while other actors in China are supported by the central government. Although Guangdong’s party secretary is a member of the Political Bureau in Beijing, the province’s governor has less cordial relations with Xi Jinping than, for example, Chen Miner from Chongqing (Interview, Guangzhou 2019). Furthermore, a more centralised government and the limitation of foreign trips to one per year by the party secretary challenge the degree of successfully entering and maintaining a presence in international markets. However, the province has even ceded this responsibility to local business people (Sina 2013a). Apart from the purely economic aspect, which is coordinated by the Foreign Affairs Leading Group (省委外事工作领导小组 sheng wei waishi gongzuo lingdao xiaozu) with the party secretary as a leader, the provincial government plays a role in China’s public diplomacy and incentivises foreign companies in order to persuade a foreign government to deepen cooperation with the region. The party secretary of Guangdong province, mainly during Hu Chenhua’s reign, talked to leaders from Japan: a pro-Beijing faction leader in the LDP, Toshishiro Nikai – former Minister of Economy, Trade and Industry ‒ arranged meetings with Angela Merkel and former French PM Jean-Pierre Raffarin. In 2016, the Cantonese party secretary paid an official visit to Canada, the United States and Mexico. During his first stop, an MOU for cooperation on industrial research and development between the Guangdong Science and Technology Department (GSTD) and the National Research Council of Canada was signed. In the United States, apart from signing 28 cooperation projects worth USD 4.14 billion in New York City, the Guangdong government signed a partnership agreement with Michigan with special regard to agricultural cooperation as well as paying visits to Massachusetts with MIT, Harvard University and companies such as Qualcomm, Tesla, Fiat Chrysler Automobiles and IBM (CPC News 2016b). Technological

Guangdong and Hainan 195 cooperation was also high on Hu’s list when he visited Israel. After meeting with Benjamin Netanyahu, agreements for 21 cooperation projects worth USD 1.465 billion were signed (Xinhua 2017b): in the United Kingdom, during the China (Guangdong)-UK Economic and Trade Cooperation Exchange Conference, both sides signed 26 cooperation projects totalling USD 1.831 billion (GdGov 2017). More to the point, the then-future deputy prime minister, Hu Chenhua, met the leader of the Solomon Islands and discussed the possible recognition of the PRC instead of Taiwan; this finally happened in September 2019. The provincial level, however transactional, plays a more politicised role in overall Chinese foreign policy, while the municipal government is more focused on more practical dimensions such as meeting with major foreign multinational companies such as Pepsi, Cisco, General Electric, Amway, Plug and Play, Chrysler/Fiat, rating and investment companies like GLK from Israel as well as representatives from the higher education sector. Provincial lobbying directly targeted international companies for Guangdong’s economic global engagement during the US-China trade war. This is illustrated when even the American and Chinese sides decided to open a new production line, jointly run by Boeing and Guangzhou Aircraft Maintenance Engineering Company Limited (GAMECO), which will be dedicated to the 737–800 Boeing Converted Freighter (BCF) project (CnBay 2020). According to data analysis, from 2011 to 2018, the primary destinations of Guangzhou’s international activities were located in Los Angeles, Vancouver, Birmingham, Lyon and Auckland (GzFAO 2011–2018). Further data analysis from the Guangzhou Foreign Affairs Office in 2017–2019 shows that Europe was the most important location for cooperation, followed by Asia, North America, South American (nine meetings), Australia and Oceania and Africa. However, a pivot in Guangdong’s international activities took place in 2019. After Prime Minister Abe visited China in October 2018, Guangzhou’s relations with its Japanese counterparts intensified with 21 meetings being held, mainly with the sister city of Fukuoka (25 meetings), followed by North America (nine meetings), Europe (eight meetings) and Australia and Oceania (seven meetings) and Africa (three meetings) (GzFao 2011–2018). The number of meetings with Australia and Oceania, and Fiji in particular, should come as no surprise; about 95% of the Chinese diaspora in Fiji are from Guangdong Province and, therefore, speak Cantonese. Chinese Overseas Clubs, such as the Philippines Filipino Chinese Amity Club, play a decisive role in shaping pro-Beijing policy (Jian Yang 2011, 117, see Graph 4.1 and 4.2). These relations with the Chinese diaspora and sub-national diaspora diplomacy has eased the way for further investment engagement. Since 2013, Guangdong’s financial institutions have been used to support projects in trade, investment and construction totalling more than USD 37.03 billion, as well as nearly USD six billion in financing the Belt and Road Initiative for over 300 projects in countries such as Russia, Vietnam, Jordan, Cambodia, Thailand, Indonesia, Malaysia, Laos, Pakistan and Egypt (Yidaiyilu 2020). One example from these 300 projects is the investment in the Kral Canal (Thai Canal), which will shorten sea routes by not having to travel through the Strait of Malacca; but the Strait of Malacca itself has also been in the interests of Cantonese business people. In May 2015,

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8 7 6 5 4 3 2 1 0 United States

Germany 2013

France 2014

Japan 2015

South Korea 2016

Vietnam

2017

2018

New Singapore Zealand 2019

Graph 4.1 Guangdong Provincial Government’s foreign meetings by country (2013–2019) Source: author’s own calculations based on data retrieved from Guangdong Foreign Affairs Office. Accessed 20 January 2020. www.gzfao.gov.cn/.

30 25 20 15 10 5

2017

2018

Multilateral

Singapore

Fiji

Israel

South Korea

New Zealand

France

Germany

United States

Japan

0

2019

Graph 4.2 Guangzhou municipal government’s foreign meetings by country (2017–2019) Source: author’s own calculations based on the data retrieved from Guangzhou Foreign Affairs Office. Accessed 23 June 2020. www.gzfao.gov.cn/.

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a memorandum of understanding was signed by the China-Thailand Kra Infrastructure Investment and Development company and the Asia Union Group in Guangzhou; the Kra Canal project will take a decade to complete at a cost of USD 28 billion (IndependentSg 2018). In 2018, Guangdong’s actual investment abroad was USD 13.8 billion, increasing by 57.71% year-on-year with foreign contracted projects standing at USD 17.57 billion. In September 2015, Guangdong also signed a friendship agreement with its Malaysian counterpart, the state of Malacca, followed by investment cooperation in the shape of seven additional agreements. KAJ Development, as the leading contractor in the infrastructural project from the Malayan side, signed three agreements to develop infrastructural projects with the Malacca Gateway China World Trade Group (formerly Guangzhou Tianhe District Dep. of Planning), with the Guangdong Foreign Construction Co. in land reclamation projects, and the China Volant Industry Co. in retailing projects (GdGov 2015). Although these projects suggest that this a good opportunity to conduct business in Malaysia, there are two issues: first, the questionable economic feasibility of the project and the ensuing environmental protection problems, and second, the horizontal competition with similar projects in Kuantan port by Guangxi AR companies. The first issue was raised by Mahathir Mohamad specifically citing the Gateway and its cost, stating ‘we are very concerned because in the first place we don’t need an extra harbour’ (Hutchinson 2019). A potential environmental disaster caused by land reclamation was also seen as a key factor in slowing down the investment (Arnez 2019). In addition, the gateway investment was not in line with the 11th Malaysia Plan (2016–2020), the National Physical Plan (2015–2025) or the Logistics and Trade Facilitation Masterplan (2015–2020) and was not recommended by the World Bank. The second, more important issue, illustrates the horizontal competition that occurs outside China. Since 2013, two Guangxi local government enterprises solely funded by the State: Guangxi Beibu Gulf International Port Group Co. Ltd and Yinzhou city-owned company Opening Investment Group have invested in China-Malaysia Kuantan Industrial Park to the tune of RMB 5 billion. However, the project was mentioned by the governor of Guangdong in 2017, when the project was taken by China Power Construction Group, Shenzhen Yantian Port Group and Shandong Rizhao Port Group led by the vice governor of Fujian province Li Dejin (MOFCOM 2017). But apart from working closely with Southeast Asian countries, Guangdong has sponsored investment projects in developed countries as well. In 2014, according to Chinese data, these projects were mainly located in the United States (27 investment projects worth USD 110 million), and in Europe (10 investment projects worth USD 690 million). The majority of the projects were sponsored by small and medium enterprises (91.28%) in contrast to large companies (more than 200 employees) of which only three invested their resources abroad (GzBluebook 2016, 125–126). In 2016, Guangzhou companies invested in 263 projects worldwide. Asia led the way with 151 projects, with the majority in Hong Kong (+28.94% (YOY)), followed by Europe with 23 (six in Germany, five in the UK (+ 394% YOY), North America with 56 projects (48 in the United States) and

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only three in Africa (GzBluebook 2017, 14–15). In 2016, the European Union was Guangzhou’s most prominent trading partner (13.84%). The United States came next (13. 08%) with ASEAN (12. 04%) completing the top three. When it comes to export markets, apart from Hong Kong, the EU and the United States were the most significant destinations, accounting for more than 40% of Guangzhou’s foreign trade. Between 2011 and 2016, the percentage shares of the European Union, the United States and Hong Kong in Guangzhou’s export market were 65.57%, 64.6%, 60.6% in 2011 and 55.5%, 45.3% and 46.4% in 2016 (Mierzejewski 2020, 110). As for the developing world, predominantly Africa, Guangzhou has only two sister cities: Durban (South Africa) and Harare (Zimbabwe). Interestingly, this low level of relations is contrary to the high number of Africans working and living in the city of Guangzhou. The reason Guangzhou and Guangdong have relatively low interactions with African cities and regions is that relations with Africa are predominantly managed by the central government. One example is Guangzhou’s participation in the China-Africa Local Government Forum led by Wang Qishan – vice-president of the PRC (GzFAO 2018a). Interestingly, the forum with African policymakers took place after strong lobbying through the UN-Habitat forum, which will be discussed later in this chapter. In the case of business cooperation with Africa, the African community is seen as an important part of Guangzhou’s semi-official relations with Africa. The majority of African people in the city work as businesspeople (87%), traders (9%), artists, education service officers, housewives and lecturers (1% each). As far as nationalities are concerned, the largest African minorities are Nigerians, Malians, Ghanaians and Guineans. This community acts as a bridge between Chinese businesspeople and African companies. In Guangzhou, 90% of Africans act as intermediaries between local businesses in Africa and China (Bodomo 2010, 693–707). But in the foreseeable future, Guangdong and Guangzhou will strengthen their presence in Africa. As the role of the European Union and the United States in Guangzhou’s export destination has declined, Africa and other developing countries are increasingly recognised as an important market. In 2015, the total value of trade with African nations grew by 22%, while business with the European Union dropped by 1.5% (GzBluebook 2016, 14–15). 4.2.3. City multilateralism and market securitisation: Guangzhou goes global In recent initiatives, the central government of China has strategised urbanisation as one of the four pillars of China’s new modernisation drive. In doing so, China sets an example for urbanisation as an important component of the national policy for development. Furthermore, in 2013, China adopted its National Plan on New Urbanization 2014 to 2020, which formulated plans to promote the common development of urban and rural development, the integration of rural migrants in cities, the optimisation of urban forms and models, and improvement in local governments’ capacities for sustainable growth through institutional reform. As

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was mentioned in the second subchapter, Guangzhou’s international agenda goes beyond bilateral arrangements by promoting multilateral cooperation as well. These actions illustrate that China is giving sustainable urban development the thought and planning it needs, and is illustrated in the progress being made in China’s expanding towns and cities. The leading role of local authorities from Europe and especially those from the United States can be put down to the individual relations between Guangzhou and Europe and the United States. Cooperation with Europe is mainly driven by the EU-China Urbanization dialogue and tripartite relations between Guangzhou, Lyon and Frankfurt. The former serves as a platform for knowledge and experience sharing while the latter serves as a vehicle for trade and investment cooperation. The EU-China Urbanization PartnershipGuangzhou Forum, originally a local initiative and established in 2013, has become an important platform for EU-China relations at the city level. During the forum’s most recent meeting in Brussels in the autumn of 2019, Guangzhou promoted Huangpu District ‒ the City Development District whose great achievements so far are high-end medical projects such as China Cambridge Science and Technology Innovation Park, Barcelona International Hospital and the south China headquarters of the Fresenius Group (Jiang Zhou 2019). In June 2015, Guangzhou, Lyon, Frankfurt and Birmingham signed a joint declaration of cooperation in the fields of trade, investment and culture. However, these relations went beyond the traditional formula of sister cities and created a zone for multilateral cooperation named the Cities Economy (Business) Association (chengshi jingji lianmeng 城市经济联盟). Ultimately, the closest cooperation remained within the triangular formula of the Guangzhou-FrankfurtLyon economic mechanism, which is seen as the future vehicle for an innovative economy and platform for sharing resources. From the perspective of the Chinese city, this cooperation with these European cities generates new high-tech opportunities; in 2018 Merck, the German tech conglomerate, signed an agreement with Guangzhou Development District to establish an innovation hub; companies such as BASF and Lufthansa have established 160 projects in Guangzhou while 17 Guangzhou companies and institutes have been set up in Germany with a total investment of USD 221 million (NewsGD 2018). This internalisation and securing of markets are also embodied in the three ports of Guangzhou, Auckland and Los Angeles’ agreement on a tripartite seaport alliance which was established in 2015. Since then, the three cities have discussed practical cooperation in the field of new technologies in city management and on increasing trade and investment between them. The three cities have signed 22 cooperation agreements involving port logistics, film and television production, advanced manufacturing and other fields. The alliance was re-signed in 2017, and cooperation has been steadily deepening. During an investment summit in Los Angeles, Guangzhou and Auckland signed a USD 20 million investment agreement between New Zealand’s HMI Technologies (HMI) and the SinoEurope Innovation Centre of Heshan Industrial City in Guangdong Province for a manufacturing facility to produce autonomous vehicles (AucklandNZ 2019). Being interested in biomedical cooperation and seeking more advanced human

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resources, Guangzhou pushed forward cooperation between the Guangzhou Institute of Biomedicine and Health with the University of Auckland (PressTelegram 2015). Acknowledging the timing of the meeting in November 2019, policymakers in New Zealand, by utilising a sub-national channel, hoped to create more stability by bringing southern China and the United States’ west coast together during escalations in the trade war. As Phil Goff, the mayor of Auckland said: ‘City to city cooperation is another level of trade and people-to-people relationships which can be very productive. Particularly in light of the strained national relationships between the US and China, the city-to-city relationships can encourage cooperation and better global relationships’ (Online interview, 2020). Frederick Hong, the former chair of the Sino-American City Friendship Association and a lawyer in California who serves Chinese investors in the United States, looks into the custom similarities between people in southern China and the southern USA: ‘both do like food and doing business, and do not care about politics’, he mentioned (GzDaily 2015). But, from the Guangdong policymakers’ point of view, being an intermediary in Sino-American disputes on the central level might be of secondary importance and at the very least a direct approach to this particular issue may not be adopted. From the local point of view, the critical objectives are to have access to California capital, human resources and high-tech innovation. Only by having access to more advanced resources can Guangdong secure its position as a high-tech gateway to China, otherwise it may be supplanted by Shanghai or even Zhejiang (Interview, Guangzhou 2019). Moreover, Guangzhou has actively taken part in multilateral forums. Since the 1990s, Guangzhou has associated itself with four global organisations: Metropolis, the United Cities and Local Governments, UN-Habitat and C-40. The World Association of the Major Metropolises (Metropolis) is the leading global organisation that brings together areas with more than a million inhabitants. Created in 1985, Metropolis with more than 140 members looks to build a platform for local policymakers to discuss all policies related to the cities’ development. In 1993, Guangzhou acceded to the World Association of the Major Metropolises, and in 1996 became a member city of Metropolis’ board of directors (Yao Yi 2015, 35–36). Since the beginning of its membership, Guangzhou has attached great importance to developing its relationship with Metropolis by proactively engaging in the activities of the organisation. Since the beginning of the 21st century, Guangzhou has twice held Metropolis’ board of directors meetings. The second important body is the United Cities and Local Governments (UCLG). The association offers a means of contact and facilitates the exchange of information and ideas among all organisations or persons interested in the issues affecting major metropolises and their respective futures. Since 2010, Guangzhou has hoped to be regarded as a global leader in urban innovation and has promoted its own solutions; mainly connected with low-carbon economy in both organisations. To this end, the municipal government established, together with UCLG and Metropolis, the biennial Guangzhou International Award for Urban Innovation, which rewards innovations to improve the socio-economic environments in cities and regions (Tavares 2016, 177–178).

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Guangzhou, while sharing its experiences in spatial planning along with developing rural and urban areas, participated in the UN-Habitat. Guangzhou’s action has been supported by the central government in UN-Habitat which has pledged to further bolster the cooperation between the organisation’s members (GzFAO 2015–2020). More to the point, the Guangzhou Planning Institute was an implementation partner in the UN-Habitat sponsored programme for the Wuzhou district. The predominant idea of the project was to rethink and redraw the Wuzhou District Plan, in response to the policy of shifting industrial progress from the coastal areas of China towards the country’s mid-west (TDCP 2015). Being a member of the C-40 Cities Climate Leadership Group, an organisation that deals with climate change at the city level, Guangzhou has actively participated in the innovation and new model of the low-carbon economy. In 2012, Guangzhou launched the Pilot Low Carbon City Implementation Plan to reduce greenhouse emissions through systematic measures in an expanding city. The plan includes the elimination of outdated industrial capacity and equipment along with the promotion of energy-efficient technologies and green, low-carbon buildings. Apart from sharing experiences and winning awards such as the Green Development Prize in November 2019, Guangzhou’s government has used the C-40 platform to promote its own companies, especially electric bus companies. ‘To be simple, we hope to explore the new markets for our companies and export more electric buses, the city of Rome is much interested in such cooperation’, as declared by bureaucrats in Guangzhou. This pragmatic nature of Guangdong’s people is the primary driver behind their participation in sub-national international forums. In this respect, the city’s government is eager to support leading local electric bus vendors: Shenzhen Wuzhoulong Motors Group, BYD Co. Ltd and Zhuhai Guangdong Automobile. To identify markets, local relations with South America helps; BYD exported 686 electric buses to Columbia, Uruguay, Ecuador and Chile, and 500 buses to India; the European markets were also important with Sweden leading the way in the purchase of BYD buses (SuistanaleBuses 2017–2020). But from a policy point of view, relations within UCLG and Metropolis do touch the political arena. Unsurprisingly, relations with Taiwanese cities are perceived as the most challenging. Taiwanese cities, for example, Taipei, New Taipei and Taichung, all members of the UCLG, are more experienced and well known than the city of Guangzhou, and due to political reasons might limit the activities of cities from Mainland China. On the other hand, Guangzhou, as a member of an international organisation, might test policy solutions, try to impose red-lines vis-à-vis its Taiwanese counterparts and be part of Beijing’s policy towards Taiwan. Furthermore, Guangzhou, as an active member, should lobby for more projects sponsored by the World Bank and special UN agencies in China. Although Guangzhou sometimes has different interests to Beijing, it can still prove to be a vital intermediary for China’s interests in the global arena. This implies that all actions, statements, and so on, should be consulted with the Ministry of Foreign Affairs at the local level (Xiong, Quan 2014, 8–13). Along with the US-China trade controversies, and COVID-19, Guangdong province’s foreign trade in April 2020 fell 9.8% (counted in RMB) and 12.4%

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(counted in USD), while exports dropped by 12.4% and 14.3% in RMB and USD, respectively. From January to April 2020, the province absorbed 44.17 billion yuan of foreign capital, a YOY decrease of 7.2%; 3,498 new foreign direct investment projects were established, a year-on-year decrease of 34.2% (GdDepCom 2020). *** The Guangdong case illustrates three dimensions of local policy-making: first, relations between the central government and Guangdong, second, relations within the province, and finally, horizontal competition for domestic and global resources. As an example of the first dimension, which is visible in the Melaka Gateway project, the dynamic is the Guangdong government testing the ‘red line’ regarding how far it can go with its own projects. Ongoing centralisation limits the ability of local government companies to take the lead in strategic infrastructure investments without prior approval from the central government. Nevertheless, testing the level of independence is not the only thing that the southern province is doing. Conversely, Guangzhou plays a political role in gaining more support and influence for the whole country and increasing China’s power to shape international discourse (话语权 huayu quan) as well as positioning Guangzhou as part of China’s public diplomacy (民间外交 minjian waijiao). Moreover, by participating in the multilateral forum, the provincial and municipal governments can test various solutions vis-à-vis Taiwan, and provide policy recommendations for the central government; second, the provincial government can secure access to international markets for products made in Guangdong. Insufficient coordination and fierce rivalry over industrial and infrastructural development between the nine cities in the Pearl River Delta are evidence of the second dimension. In order to secure its position as a leader in China, the provincial authorities seek closer cooperation and coordinated development with other PRD cities, Hong Kong and Macao. Guangdong has nine different cities with divergent models of development because of their traditional advantages and interdependence in terms of economic development. This raises the question of how to incentivise competing cities within the province while access to global resources is limited, and domestic resources cannot meet the demand of all the players. In addition, the integration led by the provincial government in Guangdong faces strong competition from cities such as Shenzhen and Hong Kong in the GPRD region, and Beijing and Shanghai as high-tech bases which limits the possibility of deepening cooperation and is a hurdle to further economic integration in China (Shen, Kee 2017, 29–30). In the current context, relations with Hong Kong appear to be of paramount importance; if the situation worsens, global capital might consider southern China as a rather unstable market and seek an alternative location. The third aspect of competition with other provinces also plays an important role, however in Guangdong’s case, it is not as strident as others. For example, instead of targeting California (with which Guangdong has stable relations), the province opened an ‘East Coast front’ by lobbying for more Cantonese companies

Guangdong and Hainan 203 listed on the NASDAQ such as EHang, one of the world’s leading autonomous aerial vehicles, and strengthening cooperation with Boston, with its high-tech innovation potential where the city of Guangzhou has a Trade and Technological Office (EHang 2020). Guangdong’s policy differs from those of Chongqing and Chengdu which both seek cooperation with California. With regard to high-tech resources, the direction adopted by Guangdong limits horizontal competition. However, in other sectors such as agricultural products, with increasing food supply demands from Guangdong’s population of 100 million people, the province adopts similar policies to those of Chongqing and Chengdu.

4.3. Hainan: an auxiliary player in China’s foreign policy? Throughout its history, Hainan has either been a place of exile for intellectuals who were in opposition to the monarchs in Beijing, or a platform for huge amounts of Cantonese money that was invested during the Opium War period. Since 1912, when the Qing Empire collapsed, the central government could hardly organise a unitary state, and Hainan in the late 1920s became a Nationalist-Communist conflict theatre with guerilla warfare as the major tactic taken up by the Communist Party of China. Having been treated as a military ‘outpost’ in the era of the Maoist ‘people’s war’, the island province of Hainan began from a very weak economic base. During this period, Hainan assumed greater military importance: first, during the Vietnam War, and second, in the late 1970s when the Soviet-backed military confrontations in the Indochina Peninsula occurred. In 1981, as part of the new chapter of reforms and the opening-up policy, Hainan Island was opened up to investment from foreign and overseas Chinese companies. The first joint venture for onshore oil exploration in China was arranged for northern Hainan with an Australian consortium which led to the central government’s decision to develop the then-future role of Hainan as an outpost for China’s energy security (Michalk, 115–140). However, a pivotal decision was taken by the Central Committee and the State Council in September 1987, when Hainan was to be separated from Guangdong province. In April 1988, the government in Haikou started exercising its own economic and political agenda. In line with the new administrative decision from the central government, the policy to open a Special Economic Zone (SEZ) was issued by Beijing, and Hainan became the first province to be entirely subject to SEZ policies. This decision was signalled by Deng Xiaoping in 1987, when during a meeting with a Yugoslav delegation, he said, ‘We are working on a larger special zone, and this is the Hainan Island Special Economic Zone’ and ‘once Hainan development will be in good shape, it will be remarkable’; Deng Xiaoping’s words still resonate in Hainan today and is a local motto (Lin Xue 2019, 384–385). With this decision Hainan, hoped to gain momentum, but with a lack of capital, and less technological development than its northern neighbour of Guangdong, the Haikou government found it extremely difficult to attract foreign capital and locate suitable international markets. The Guangdong model, based on an export-led economy, failed to play a critical role in the local economy, and the Hainan government needed to present different solutions. When the BRI was

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initiated in 2013, Hainan, China’s southernmost province, named itself as a ‘big maritime province’ and the ‘southern gateway’ responsible for China’s maritime development with a particular focus on ASEAN. As a result, the Haikou government positioned itself as an important part of China’s foreign policy. Hainan, as a major strategic point, hopes to serve Beijing’s policy in China’s strategic engagements in the Strait of Malacca, and is itself rich in natural resources. 4.3.1. Hainan serves China’s foreign policy: understanding the BRI in Haikou The fact that Hainan itself did not have much industry and is economically weaker than Guangdong or Guangxi Autonomous Region are hurdles in creating a more independent role in developing southern China’s economy. However, this does not mean Hainan has been passive under the BRI or even before the initiative was announced. Long before the BRI was announced by the Chinese central government, the Hainan provincial government had decided to focus on tourism as a long-term developmental strategy for the island. In December 2009, the State Council issued an opinion regarding the Hainan International Tourism Island and provided ‘special conceptualization’ that supported the development of tourism industry as the priority of local growth. This reasoning was also embodied in the ‘Vision and Action’ document, published in 2015, when international tourism played a significant role in Hainan’s economy with the construction of the Haikou and Sanya seaports (Vision and Action 2015). The document, in order not to exacerbate international concerns, failed to mention the growing role of the island in China’s South China Sea policy and its growing assertiveness in Southeast Asia. But this position has been recognised by both scholars and policymakers. As indicated by Li Hongjie (2018), Hainan knows that its position is as a bridgehead (qiaotoubao 桥头堡) and pioneer area (xianxing qu 先行区) in the 21st Maritime Silk Road (Li 2018). The position of Hainan was similarly introduced by Zhu Haoyou (2018) who named the island as a maritime bridgehead (haishang qiaotoubao 海上桥头堡). Hainan’s government hopes to utilise its unique position as the only province in China which has maritime jurisdiction (haiyang guanxia quan 海洋管辖权). This means that the province is responsible for developing and managing the maritime economy and the artificial islands in the South China Sea (Hainan Gov 2017). These policies, in fact, received the central government’s blessing when Hu Jintao in 2012, the then party secretary, presented the concept of China as a maritime power (Hu Jintao 2012). But regardless of who was first, the central government’s shift in its maritime policy allowed Hainan to exploit the situation to its fullest, by positioning itself as part of the national strategy and by lobbying for more incentives and special privileges distributed by Beijing. When the Belt and Road Initiative was established, the provincial and municipal government in Haikou approached it with great enthusiasm, unlike other local policymakers across China. From the perspective of being the southernmost province of China, Hainan’s government concentrates on the maritime economy and supporting the central government in increasing China’s maritime

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power. In 2014, when for the first time the government mentioned the 21st Century MRS, Liu Cigui, the then governor of Hainan, used his previous experience as director of the State Oceanic Administration and announced closer relations with ASEAN. Hainan also conducted public diplomacy through the Boao Forum and developing demonstration zones (Bases) for ‘Leisure Diplomacy’, namely the city of Wanning’s China-Africa Cooperation Center and the Haikou Overseas Chinese Affairs Exchange Demonstration Zone. Through these initiatives, the government promised to promote, particularly in ASEAN countries, a positive image of China’s action in the South China Sea (HnLGR 2014–2020). At the city level, an important direction was given to inter-provincial cooperation and domestic city alliances (HkLGR 2014–2020). In January 2015, Luo Baoming, the provincial party secretary, in his capacity as the leader of the Provincial Foreign Affairs Leading Small Group, assured the central government that Hainan would take responsibility for China’s action as in the Boao Forum, strengthening relations with countries along the BRI, building a strong civil-military industry and developing sister cities relations (Luo 2015). Then, in 2015, a governmental report stated how Hainan could benefit from the BRI. First, the BRI presented a rare opportunity for the island to strengthen the close relations with the Central Committee and the State Council that ‘had shown great care and earnest expectations’ and by ‘important instructions’ given by Xi Jinping, the province could look to further development. Second, as part of the state-led strategy of building China’s status as a maritime superpower and the BRI, Hainan, as Liu Cigui said, enjoyed the position of being a strategic fulcrum and pawn. The last two points, discussed in the governmental report, referred to the economic potential of the province, first, based on the island’s SEZ status, and second, the province’s advantage as having a good ecological environment and geographical location which could be utilised by building the Hainan International Tourism Island (HnLGR 2014–2020). Moreover, in 2015, the local government issued a special document, ‘Hainan Provincial Diplomatic Planning (2015–2020)’, and in the overall planning signalled three major directions of the province’s ‘foreign policy’: first, leveraging the Boao platform, second, playing the ‘overseas Chinese card’, and third, by improving the construction of rules and regulations in provincial foreign actions. As Luo Baoming said, the international agenda in Hainan serves China’s foreign policy and is part of China’s big strategy (HainanGov 2015). Interestingly, the Hainan government used the term waijiao-diplomacy, which is seldom used by the provincial and lower authorities when discussing their international actions. In 2016, the BRI was a combination of internet plus projects, innovation development, maritime power and civil-military industry. Top priority was given to Hainan to transform itself from a ‘major marine province’ to a ‘strong marine province’ and serve as a ‘blue engine’ (lanse yinqing 蓝色引擎) in the MSR. Moreover, the province promised to shape connectivity between port cities in the South China Sea and bring more economic benefits to the island. The governor did not forget about the importance of local cooperation and hoped to expand relations with regional integration projects like the PRD, Lower Yangtze Delta Zone and the Beijing-Hebei-Tianjin Metropolitan Area. Having its ‘own Chinese

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overseas community’, the province actively seeks the advantages of overseas Chinese affairs, and resources allow for communication with cities along the BRI, and improves the ability of public diplomacy and non-governmental outsourcing in order to develop the province. Haikou city concentrated more on practical industrial cooperation and sister city relations. The municipal government formed a friendship city agreement with Ulaanbaatar in Mongolia and Haeundae, Busan in South Korea, as well as establishing relations with the port of Klang in Malaysia. Interestingly, by bypassing Guangdong, it shaped the province’s closest relations with Fujian province, especially with the city of Xiamen (HkLGR 2014–2020). In January 2016, the NDRC published its Provincial Five-Year Plan which included strengthening Hainan’s role in China’s foreign policy. During the last four years, Hainan has made efforts to build national foreign affairs activity bases in Haikou, Sanya, Qionghai (Boao) and Wanning. Strong emphasis was placed on the Boao Forum for Asia and by shaping an effective platform, the province serves the central government by participating in high-level diplomatic activities. These actions including the next ‘China-ASEAN Provincial Mayors Dialogue’, the ‘21st Century MSR Island Economic Cooperation’ as well as BRI sub-forums on inclusive financial issues and South China Sea issues were regarded as important parts of Hainan’s activities under the BRI (HainanDRC 2016). In 2017, the governor Liu Cigui declared the province ‘had taken the initiatives to serve the country’s overall diplomacy’, maintaining the position of being a southern gate to the motherland well, and shouldering the responsibility of protecting and developing rights and stability in the South China Sea. Then, the local policymaker listed the following international activities: the Boao Forum for Asia Annual Meeting, the first leaders’ meeting of the Lancang-Mekong Cooperation, the China-Africa Cooperation Roundtable, the China-Central Asia Cooperation Dialogue, the Shanghai Cooperation Organization member states and the BRICS general prosecutors’ meeting. Furthermore, the province announced the optimisation of its port functions, integrating the national customs inspection, quarantine and customs clearance systems, implementing the customs clearance of diamonds in a special customs supervision area, as well as the re-exporting of refined oil in bonded warehouses. All of these activities have improved Hainan’s foreign trade with the hope of creating foreign trade as an important vehicle for the local economy (HnLGR 2014–2020). Apart from international relations, the most important point was for the province to build an effectively coordinated mechanism for regional development and follow the instructions from the central government in Beijing. Interestingly, in the 19th Congress of the CCP in 2017, Xi Jinping, while referring to the maritime power concept, did not refer to foreign policy being the paramount factor in transforming China into a strong maritime country but rather to a coordinated land and marine development policy (Xi Jinping 2017). In 2018, the Hainan government announced its intention to increase the province’s gross marine production to 200 billion RMB by 2022 through ‘vigorously implementing a military-civilian integration development strategy’ (HnLGR 2014–2020). The provincial government followed this up with a promise to strengthen national defence education and national defence mobilisation systems, build a new type of

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Maritime Militia system and using poetic language, stated: ‘to take responsibility to build Sansha (an artificial island) as a bright pearl of the South China Sea with a beautiful ecological environment and in-depth development of military and civilian integration’ (HnLGR 2014–2020). While positioning itself as part of China’s national strategy, Hainan hoped to receive more incentives and compensations, for example, for using fishing boats as an important component of the maritime militia system. By ‘issuing a bill’ to the central government, local policymakers hoped to attract more capital for local development. Then, the positive image of China’s policy towards the region, as declared in 2018, would be transferred to relations at the city level with Tagung City in the Philippines and North Lombok City in Indonesia. Apart from international cooperation, Hainan needs to closely cooperate with Zhanjiang city (Southern Guangdong) and construct the Qiongzhou Strait Economic Belt. But cooperation with Guangdong faces certain cultural issues: the Hainan dialect belongs to the Minnan language family; naturally the dialect is very close to those of Fujian and Taiwan. Therefore, Hainan and Guangdong need to overcome linguistic and other cultural differences when jointly running projects (HnLGR 2014–2020). The next sign of a stimulus, which directly referred to Hainan, was given by the Central Committee and the State Council in 2018 when they jointly published an opinion on future reforms in the island province. Regarding the BRI, the document dictated the centrally allocated roles as ‘the national major strategic services safeguard area’. The province is now deeply embedded into major state-led strategies such as maritime power, the construction of the Belt and Road, the integration of military and civilian development, comprehensively strengthening and supporting capabilities, effectively fulfilling the important mission entrusted by the Party Central Committee and enhancing Hainan’s position and role in the national strategic landscape. According to the document, Hainan was embedded into the national grand strategy and had become responsible for defending China’s rights in the South China Sea (ChineseGov 2018). In April 2018, the Chinese government, with the support of Xi Jinping, decided to develop the entire island of Hainan into a pilot free trade zone. Consequently, Hainan was transformed into a pilot zone for extensive overall reform and opening up, a pilot national ecological zone, an international tourism and consumption centre and a major national strategic logistics zone (Xinhua 2018). However, all of the provincial government’s intentions of utilising its strategic position in China’s foreign policy disappeared from the province’s reports of 2019 and 2020. This clearly means that the growing consolidation in the centralised island of Hainan has intensified even more. A critical trend now was the shift towards domestic integration: the government promised to strengthen cooperation not only with regional integration projects like the Hebei-Beijing-Tianjin Metropolitan Area, but also with particular cities and provinces, namely Hong Kong, Macau, Shanghai and Zhejiang. The provincial international agenda was only mentioned in terms of praising the MFA for making possible the island’s promotion among foreign diplomats in Beijing and promotional events in the United Kingdom, Hong Kong, Germany as well as Shanghai and Beijing. Paradoxically, the strategic initiatives related to the South China Sea in 2020 were replaced by

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debating the development of amusement parks, leisure centres and a Hello Kitty project (HnLGR 2014–2020). Reading between the lines, while the provincial government has pulled away from strategic initiatives, all international activities have been placed under the control of centralised management. However, it has become bolder in its attitude concerning the ‘small government, and big society’ concept. By implementing such an approach, Hainan hopes to be a leader (ling touyang 领头羊) in China’s domestic reforms. This might be of particular interest in the light of the activities of Chi Fulin, the director of the China Institute of Reform and Development, based in Hainan. But at the same, he was in the vanguard of local patriotism and named Hainan as a core area (hexin qu 核心区) and leading area (xiandao qu 先导区) in national policy as well as domestic discussions on internal reforms regarding foreign policy strategy. However, once the provincial-level government limited its discussions on the BRI, the city of Haikou took the lead in supporting national policy. In 2019, when the provincial government was silent, Haikou’s mayor declared the city’s readiness to serve the maritime power strategy; accelerating the construction of a national demonstration city for the innovation and development of the marine economy, organised the China (Hainan) Marine Industry Expo and intensified the construction of marine research institutions and key laboratories. In addition, the city began to develop cooperation with countries along the BRI with a particular focus on the Philippines, Hong Kong and Singapore (HkLGR 2014–2020). But apart from being chosen by the central government and fulfilling its obligations, Hainan was also asked to be more active as an economic player. The first task was to deliver economic growth by promoting is own industrial power. However, the provincial government lamented that, in fact, there were only three or four local champions to be promoted worldwide. Furthermore, the province’s economic foundations are weak and the industrial structure is not well developed, limiting its possible international outreach. Being dependent on the oil and gas international markets, and being affected by commodity price fluctuations, the development of Hainan’s offshore oil and gas industry has been affected to some extent, which has led to a slowdown in industrial growth. This shows that Hainan’s industrial foundation is relatively vulnerable, and its development depends too much on petrochemicals and its downstream industries. At the same time, the government in Haikou was asked to follow other coastal provinces and open its own Silk Road Fund. Guangdong Province leads the way in this respect, and the first phase of the Guangdong Silk Road Fund with a tranche of 20 billion yuan has already been opened. In addition, Fujian, Guangxi, Jiangsu and other key regions that are connected to the ‘Belt and Road’ have also successively designed and launched local versions of the ‘Silk Road Fund’ of varying sizes. However, Hainan has not yet initiated its own Silk Road Fund. As said in ‘Hainan Province’s three-year (2017–2019) action plan for the Belt and Road Initiative’, by the local government, financial resources are limited. Although it recommended the Provincial Department of Finance take the lead, and with the participation of Hainan Bank and Hainan Rural Commercial Bank, establish a ‘Hainan Maritime Silk

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Road Fund’ or any other form through ‘government-led, market-oriented operation’ investment, a fund has not yet been established (HainanGov 2018). 4.3.2. Economic integration and limited international political outreach The former status of Hainan, being subordinated to Guangdong, did not allow the island to play a more independent role in China’s development and foreign policy. Since 1988, Hainan has positioned itself as the ‘Motherland Southern Big Gate’, ‘Mainland China the first stop’ pawn, pivot and by framing its own status, the government in Haikou has to compete with other provincial-level bodies for central government resources. By opening a Special Economic Zone, the regulations offered incentives to foreign business in the field of foreign trade. Thus, they stipulated that foreign investment enterprises and enterprises with at least 25% foreign equity, which were established in Hainan, were to enjoy foreign trading rights. Machinery, equipment, raw materials, assembly parts, means of transportation and other materials imported by a Hainan Island enterprise for use in its construction or operations should be exempted from customs duty, product tax and value-added tax (Brodsgaard 2009, 30–31). Apart from being chosen by Beijing’s governmental bodies, the government in Haikou hopes to lobby for its own project that would benefit the province the most. Being surrounded by the sea, Hainan needs the South China Sea for its economic development. In this context, the development of Hainan’s marine fishery industry, apart from tourism, has been dictated by development priorities on land; what is critical is access to fisheries. In the 1980s, recognising the problem of demarcation of sea borders, scholars proposed a ‘Pan South China Sea Community of Shared Interests’ (Nanhai liyi gongtongti 南海利益共同体). The very first idea was to combine the East and South China Seas as a core location, with Fujian and Guangdong provinces as leading forces with a huge influence on Hainan, Guangxi, Hong Kong, Macau and Taiwan. But later the conceptual framework of two seas had to be rejected and only the South China Sea remains as a critical element of the cooperation framework. While debating future integration projects, two different concepts appeared: the first said that the core area should be in south China with influence over seven neighbouring countries, the second said that only Hainan, Guangdong and Guangxi should be the core area and radiate towards 12 countries and regions in the South China Sea region. After discussions, the latter view was accepted by most scholars and further defined as a ring structure of the South China Sea Economic Circle. Hainan is a key location with its tourism cooperation seen as a breakthrough, and was consequently embodied into the concept of the Pan-South China Sea Tourism Economic Circle. Apart from the very first initiative that was discussed in the 1980s and sponsored by the National Institute for South China Sea Studies, a local think-tank based in Haikou named the initiative the Pan-South China Sea Economic Circle (fan nanhai jingji quan 泛南海经济 圈), with Hainan becoming the heart of the economic zone. The originators of this idea believed in the independent position of the island, along with the fact that

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Hainan was the largest Special Economic Zone, with a unique geographic location, and who targeted the great potential of the maritime economy in the South China Sea. Finally, with its three zones the Pan-South China Sea Economic Circle was planned to integrate China and ten countries in Southeast Asia. The first zone that was announced was the South China Sea Regional Economic Integration and Cooperation Circle (nanhai jingjiquan 南海经济圈). In this project, however, the closest province, Guangdong, has only occasionally been mentioned in official documents. In contrast, Guangxi AR and Hainan Province have many synergies, which is illustrated by the construction of ‘two corridors and one ring’ in the shape of the Pan Beibu Gulf (Tonkin Gulf). Then, positioning itself as the intermediary for the development of the marine economy in Guangdong, Guangxi, Hong Kong, Macao and Taiwan, Hainan could guide the coordinated domestic integration in the South China Sea. Apart from the domestic outlook, Hainan serves China’s overall opening up and strengthens the regional economic integration between China and Southeast Asia. The second economic ring is the Ring of the South China Sea Regional Economic Integration and Cooperation Circle (huan nanhai jingji quan 环南海经济圈). This concept was with the South China Sea being the focal point with an area of 3.5 million square kilometres, radiating out to the countries around the South China Sea and creating closer economic ties with the Philippines, Malaysia, Indonesia, Brunei, Singapore and Vietnam. The third zone, the ‘Pan’ South China Sea is more extensive than the second ring whose focal point is the South China Sea, and radiates to four continental ASEAN countries that border the South China Sea: Thailand, Cambodia, Laos and Myanmar. The Pan-South China Sea Economic Circle, however, radiates out to 10 ASEAN countries and forms a 1 (China) + 10 (ASEAN) structure. Compared with the 10 +1 structure of the China-ASEAN Free Trade Area, the Pan-South China Sea Economic Circle further highlights China’s core and strategic position in the South China Sea (Liu, Wu 2018, 114–135). At the time, when the proposal was put on the table, Hainan was still searching for an overall long-term development strategy and the central government in Beijing helped with a grand design for Hainan’s future development, as reported by the Xinhua News Agency (Xinhua 2020). But the problem for the province with promoting its own industries were twofold. First, economic development was for provinces to promote foreign trade enterprises to maintain their core competitiveness. To this end, the Hainan Provincial Government needs to formulate a series of insurance, fiscal and financial policies based on the actual foreign trade situation of Hainan Province to strengthen support for foreign trade enterprises (Li Yao 2014, 19). However, the go global policy of the local conglomerates is limited. Hainan possesses only three big companies FAW Haima Automobile Co. Ltd, Haiken Agricultural Group and Hainan Haiyu Minning Company which can push forward a go global policy. In this respect, what was vital was to build infrastructure and connectivity to facilitate the trade under CAFTA framework, and then by using its geopolitical location, strengthen the relations with countries along the Belt and Road Initiative. One effective method to increase trade partners’ dependence on Hainan is to strengthen the importing countries’ dependence

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and irreplaceability on Hainan’s exports. As official documents state, Hainan should mainly concentrate on three areas: agriculture, fishery, tourism and building a financial hub for RMB internationalisation. Agriculture cooperation should be the most important part of closer cooperation with ASEAN when both sides have complementarities in agricultural resources, structures, technologies and international markets. In development plans that were revealed, Hainan planned a framework for a tropical agricultural multinational industry chain, linking the island and other countries’ scattered industrial sectors, broken and isolated links and integrate the resources and production factors of transnational countries, strengthening industrial cooperation between Hainan and Southeast Asian countries, achieving industrial integration development and deepening mutual trade between the two sides (Fu, Lin, Zhang 2015, 15). Apart from agriculture projects, the fishing industry is a lucrative business opportunity. However, nothing is without costs and the Hainanese enquired about how to raise the capital to develop the Hainan-ASEAN cooperation. As stated by Peng Mingming, Chen Dongjing (2019), Hainan is a less innovative province in marine science and technology while innovation has been seen as a critical factor for China in providing solutions for the maritime economy; the province was ranked 10 out of 11 coastal provinces in 2015, while neighbouring Guangdong led the field (Peng, Chen 2019, 89). Once the lack of funding for more advanced development had been identified, the China-ASEAN Maritime Cooperation Fund approved by the Ministry of Foreign Affairs supported Hainan. The fund sponsors a maritime cooperation project with the coastal provinces of ASEAN countries and explored the joint construction of a fishery production base. Through legislation, the fund clarified standard procedures for the approval of China-ASEAN fishery joint development projects. But for Hainan the problematic area is, in fact, that the province was not given a specific role in the newly opened Cooperation Fund, with only two provinces given specific projects: Fujian (China-ASEAN fishery industry platform and China Indonesia Fishery Industry project) and Guangxi (China-ASEAN port city cooperation network) (Kang, Luo 2014). Apart from these two provincial-level governments, the central administrative institution of the MFA, the Ministry of Transportation, the Ministry of Land and Resources, the Ministry of Science and Technology and the State Oceanic Administration have had their projects incorporated into the general framework (Li 2018). The third part of Hainan’s development is the tourism industry. According to the ‘Outline of the development and development plan of Hainan international tourism island’, the scale of tourism should be RMB 124 billion, which would account for 60% of Hainan’s GDP. Recent research shows that in February 2018, the number of tourists who visited Hainan was 9.0823 million and tourism revenue was 10.827 billion RMB, with a 44.5% and 44.7% increase between 2016 and 2017, respectively. Although Hainan is not well known globally as a tourist destination, it does mean that there is potential to increase these numbers in the future (Bassiounigroup 2018). The last point as advocated by Zheng Lu (2018) was that Hainan should be like a magnet for international business, and in the future should compete with

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Hong Kong to be the centre for RMB internationalisation. The province may become a bond market with RMB as the major currency, and attract sufficient funds for BRI projects. At the same time, Hainan Free Trade Area, as part of the BRI strategy, would be allocated more capital and resources from domestic as well as international markets and then utilise them for BRI projects (Zheng 2018, 85). In this particular area, an important role was given to the Free Trade Zone, when the majority of trade should be settled in the Chinese currency. In current international trade, however, as stated by Chen Lin and Yang Guoxing, the global hold of the US dollar cannot be shaken. But reducing the risk of currency fluctuations is critical for future stable development and Hainan Province can take advantage of this policy by inviting foreign companies to establish offices and then export their goods to China. After obtaining the Renminbi, they can then purchase the commodities required by their country. By taking these measures, Hainan Province can secure more stable trade for the entire country (Chen, Yang 2019, 25–26). In this context, Hainan’s role is diminishing the role of Hong Kong in the island’s economic interactions. The ultimate goal for the government in Haikou, as said in an official document, is for Hainan to build a position that in the future will allow the island to replace the intermediary roles of Hong Kong and Singapore, and conduct more self-reliant policies. This promise was repeated by the local government in June 2020, when because of the fear of decoupling from the United States, Hong Kong would lose its intermediary role in Hainan’s trade (SCMP 2020b). However, this declaration was nothing new: in August 1988, the local government announced that the new provincial authorities were considering opening China’s first ‘free port’ in Yangpu similar to the free ports operating in Hong Kong and Singapore with a view to overtaking both ports in the future (Brodsgaard 2009, 71). This was a local government self-fulfilling prophecy. In 1993, Hong Kong was Hainan’s main export market, accounting for 50.1% of exports. Japan ranked second with 12%, followed by the US with a of 7.1% share. In 2000, Hong Kong still ranked first among Hainan’s export markets, accounting for 44% of total export value. Japan still ranked number two, taking 10.2%, and the US came in third with 10.1%. In 2005, Hong Kong was still ranked as number one but its share had dropped to 31.4%. With a share of 14.1%, the US had risen to second position, ahead of Japan’s 10.8% (Brodsgaard 2009, 67–70). Along with the BRI policy, Singapore became a more important partner, while Hong Kong’s role decreased from 31% in 2012 to 13% in 2019. The Southeast Asian countries like Vietnam and Malaysia now enjoyed direct trade with the Hainan Island, and Hong Kong’s intermediary role had come to an end (see Table 4.4). By being dominated by the bureaucratic forces from Beijing, the provincial and municipal government had very limited international activities. According to the local Foreign Affairs Office from 2014 to May 2017, a total of 47 provincial-level leadership missions were organised in 50 countries and regions along the Belt and Road. The province signed more than 60 cooperation agreements in areas such as friendship city exchanges, health care, tourism, service trade, offshore finance and tropical high-efficiency agriculture. A major meeting took place between China, the United States, Russia and neighbouring countries, but interestingly

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Table 4.4 Hainan’s export market by country in and region as percentage of total provincial exports (2010–2020) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Hong Kong Singapore Vietnam Malaysia Japan United States India Australia Germany Russia

4% 4% 5% 6% 0% 2% 1% 3% 0% 0%

13% 13% 10% 6% 10% 14% 28% 31% 29% 24% 22% 13% 10% 5% 10% 8% 9% 7% 2% 5% 18% 4% 3% 3% 11% 16% 3% 3% 3% 2% 1% 2% 9% 3% 2% 5% 2% 4% 1% 3% 4% 4% 5% 17% 6% 3% 3% 5% 6% 3% 12% 6% 6% 12% 8% 8% 13% 11% 10% 9% 7% 4% 4% 4% 3% 2% 1% 1% 3% 2% 15% 5% 5% 4% 8% 10% 2% 1% 1% 1% 1% 1% 1% 1% 1% 2% 3% 5% 8% 4% 3% 2% 1% 3% 1% 1% 1% 1% 2% 0%

Note: data of 2020 January‒March. Source: author’s own calculations based on data retrieved from Hainan Statistical Yearbook 2010– 2020. Accessed 23 May 2020. http://stats.hainan.gov.cn/tjj/tjsu/ndsj/.

when in other cases a provincial capital city is very active in international outreach, Haikou was less active than it was at the provincial level. Since the BRI was announced, the province’s most important visit was held in September 2016. Lu Baoming, the party secretary of Hainan, led a delegation to Canada and the United States, the major purposes of which was to strengthen relationships at the local level and ‘making a deal’ between HNA and Boeing as well as visiting Microsoft. During the meetings in Ontario and Prince Edward Island as well as in Seattle, Lu Baoming assured the American side about the positive motivations of the Chinese government. The meeting, organised by the Chinese Embassy in Washington DC, was mainly with retired American policymakers, including a former deputy secretary of state and secretaries of defence (CPC News 2016a; see Graph 4.3 and 4.4). 4.3.3. Extension of Beijing’s bureaucratic cycles: Hainan and the South China Sea policy Analysing the economic development and foreign policy nexus in the case of Hainan, what is most important is to see the island through the lens of China’s foreign policy strategy; second, without having a creative role in China’s foreign policy, Hainan is seen as an extension of Beijing’s government bureaucratic circles of Ministry of Foreign Affairs, Ministry of Defense and the SOE with regard to petrochemicals. From the perspective of the MFA, Hainan with its ‘leisure diplomacy’ plays a critical role in shaping China’s positive image, and by setting the diplomatic agenda in the most favourable conditions, Chinese diplomacy though elite cultivation can achieve more benefits for the country. Hainan is an innovative promoter of the three-in-one mechanism of ‘small province and big foreign affairs’, ‘small province and big overseas Chinese affairs’ and ‘foreign affairs and

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6 5 4 3 2 1

Singapore

Israel

2018

Malaysia

Thailand

2017

Cambodia

The Phillipines

2016

Germany

Sri Lanka

Japan

Russia

USA

0

2019

Graph 4.3 Hainan provincial government’s foreign meetings by country (2016–2019) Source: author’s own calculations based on data retrieved from Hainan Provincial Foreign Affairs Office, and Haikou Municipal Foreign Affairs Office. Accessed 20 May 2020. http://dfoca.hainan.gov. cn/a and http://wsb.haikou.gov.cn/.

6 5 4 3 2

2017

2018

Thailand

Japan

Canada

The Philiphines

France

Australia

South Africa

South Korea

Cambodia

0

USA

1

2019

Graph 4.4 Haikou municipal government’s foreign meetings by country (2017–2019) Source: author’s own calculations based on data retrieved from Hainan Provincial Foreign Affairs Office, and Haikou Municipal Foreign Affairs Office. Accessed 20 May 2020. http://dfoca.hainan.gov. cn/a and http://wsb.haikou.gov.cn/.

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foreign affairs specialist’. While international activities at a local level are limited, as just mentioned, Hainan plays host to the central government-sponsored Boao Forum for Asia. In 2018, Minister Wang Yi declared that Hainan ‘is a hot spot for foreign relations, and sincerely has open arms to all the countries in the world’. In fact, this quote is used by the MFA to cultivate their foreign policy activities in Boao – a small village, located south of Haikou city (Wong 2018). The institution is governed by Li Baodong, secretary-general of the Boao Forum for Asia and a former deputy minister of foreign affairs of China. The board members include Ban Ki-moon, chairman of the Boao Forum for Asia and the 8th secretary-general of the United Nations, Hiroaki Nakanishi, chairman of the Japan Business Federation and chairman of the board of Hitachi, Ltd and Kudo Yasumi, former president and chairman of NYK Line. The Boao Forum is also advised by a council of advisers with high-ranking policymakers including Yasuo Fukuda, Jean-Pierre Raffarin and Henry M. Paulson (Boao 2018). As seen from the listed policymakers there is an overrepresentation of Japanese policymakers and businesspeople. In fact, Fakuda is known for his pro-Beijing sentiments and is even affiliated to the pro-Beijing faction in the LDP, the ruling party in Japan (Zakowski, Bochorodycz, Socha 2017, 112–113). However, with respect to Hainan’s international position, the most notable are the military-oil cycles. In the 1930s, the Nationalist Government began to publish maps that showed a maritime boundary line, indicating that the South China Sea belonged to China, and in 1947 the country established a special unit, the Hainan Special District. Under the People’s Republic of China, the government recognised the importance of Hainan in future South China Sea policies. China’s Law on the Territorial Sea, when it was enacted in February 1992, declared that the disputed South China Sea islands was Chinese territory. But with China’s changes in imported natural resources, Chinese companies have become more active and have started to compete against each other. Natural resources regarding fishing potential became a driving factor for Hainan’s centrally given roles through different bureaucratic bodies. Since Guomindang’s time, it has served as a bridgehead for China’s oil and military policies in the South China Sea. But whatever the Hainan scholars would discuss, the economy of Hainan is largely dominated by big petrochemical companies such as Beijing-based SOE: the China National Offshore Oil Corporation (CNOOC), Sinopec and the China National Petroleum Corporation (CNPC). Hainan with its southern island location plays an important role in China’s petrochemical industry. Interestingly, Wei Liucheng, the former governor and party secretary who governed Hainan, was also a businessman with a professional career as CEO of CNOOC. This fact established the role of Hainan in China’s economic and foreign policies; it was to attract different companies and organise a platform for global petrochemical cooperation. In April 2011 and July 2012, the SOA successively granted Hainan more than ten policy measures to support the development of Hainan’s marine economy and marine undertakings. At that time, the Party Secretary Luo Baoming, during his trip to Qionghai city, encouraged the fisherman: ‘You have linked fishing for a living and protecting national rights and interests together’; this signals a deeper

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military-civil integration (CPC News 2012). When Xi Jinping made an inspection tour of Hainan Province in April 2013, he demanded that Hainan Province fulfil the four aims in the South China Sea entrusted to it by the Party Centre, namely protecting rights, protecting stability, preserving the maritime environment and development. During the meeting with the maritime militia of Tanmen Township, the Chinese president demanded that maritime militias actively collect information in the far seas and support the construction of reefs (Sina 2013a). Making full use of the central government’s policy measures to support Hainan provided the policy conditions for building a base in the South China Sea. Since 2012, when Sansha City became part of Hainan, relations with Beijing, different ministries and military bodies have become even more close and especially with the petrochemical SOE and military agencies. In 2012, the SOA approved a plan by the Ocean and Fishery Agency of the Hainan provincial government to enlarge Drummond Island and construct a port on the island. CNOOC executives lobbied the government for support and by playing the territorial sovereignty card in the South China Sea won central government support. In 2010, CNOOC announced that it would invest 200 billion yuan (USD 30.75 billion) over the next 20 years to build another ‘Daqing’ field in the South China Sea. In July 2010, Dai Bingguo, the state councillor, presented the South China Sea as being part of Beijing’s ‘core interests’ (hexin liyi 核心利益), which, like Xinjiang and Tibet, was part of China’s sovereign territory. It reflects the national interests for the natural resources in all of the mentioned regions. When Xi Jinping made an inspection tour of Hainan Province in April 2013, he demanded that Hainan Province fulfil four aims in the South China Sea entrusted to the province by the Party Centre, namely protecting rights, ensuring stability, preserving the maritime environment and development. In July 2015, the Hainan Military District built dozens of militia outposts and created a reconnaissance-information network. Moreover, Sansha City established militia outposts equipped with radar identification and surveillance systems to transmit information to the Military-Police-Civilian Coordination. The state councillor signalled the importance of the PLA engagement in securing SOE action in drilling for natural resources in the South China Sea. The role that CNOOC had successfully lobbied for gave the company priority in excavating natural resources in the region and called for deeper international cooperation. The Dutch Royal Shell Company leads the way in collaborating with the Chinese chemical giant; Shell, CNOOC and CNPC signed a cooperation agreement in drilling for oil in Gabon, and in 2013 Shell conducted 3D seismic data surveys (Reuters 2013). A year later, Shell and CNOOC signed a Global Strategic Alliance Agreement to explore the potential in promoting further cooperation in natural resources exploration. This cooperation with Shell in the South China Sea and West Africa can help Chinese companies to learn from foreign companies (China Daily 2012). In July 2012, the State Council issued the 12th FYP for the Development of National Strategic Emerging Industries, in which the state attached great importance to developing the capabilities of deep-water resource exploitation technology by 2015. CNOOC launched the ‘Second Leap Forward’ programme for

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exploring and developing the maritime oil industry, with an emphasis on developing resources in the deep waters of the South China Sea (Xue Gong 2018, 313–314). As argued by Shinji Yamaguchi (2016), the party branch in CNOOC was the key player in shaping the project in the South China Sea. Positioning Hainan as the core in Beijing’s foreign policy in Southeast, Asia, Luo Baoming, in Beijing in March 2016, stated publicly that the fishermen in his province participate in the protection of maritime rights and interests, and undergo training in self-defence. This understanding was followed in the provincial 13th FYP, when the Hainan government clearly stated its goal of being a testing ground for improving the organisation, management, work operations and policy systems of military-civilian integration, as well as specifically supporting national defence construction and improve the national defence mobilisation work system. Finally, the government’s position as a genuine bridgehead: with the ability to safeguard rights and stability at sea, and safeguard national sovereignty and the nation’s blue waters rights and interests (13th Hainan FYP 2016). Hence, the concept of the fishing militia has played a part in the Hainan government’s lobbying of the central government to provide more support for its marine fishery sector. The necessity of using military support was driven by the growing fish consumption in China ‒ that is 35.1 kilograms per person a year and is as twice high as the global average of 18.9 kilograms. In order to meet supply and demand, the local government provides fuel subsidies of USD 320‒USD 480 per day and special renovation grants to USD 322,500 for larger fishing companies (Heydarian 2015). The Hainan provincial government, adjacent to the South China Sea, ordered the building of 84 large militia fishing vessels which the militia received at the end of 2016, along with extensive subsidies to encourage frequent operations in the Spratly Islands. With 31 maritime militia units under the Hainan Military District, the Chinese government has indeed been providing financial support to fishermen, and there are three major fishery subsidies: a fishing fuel subsidy; a subsidy for ship construction; and a special fishing fuel subsidy for fishing in the Spratlys (Zhang, Bateman 2017, 289–291). In order to receive less attention in 2012, China officially established Sansha, based on Woody Island and included in the greater Hainan Province. Then this decision was extended and in April 2020 the government in Haikou became responsible for managing new districts in the Paracels and Macclesfield Bank – an area claimed by Vietnam and Taiwan (SCMP 2020a). In this context local policymakers play a role of Beijing agents in the South China Sea. In response to central government demands, Luo Baoming in August 2013 emphasised the importance of the Sansha construction and said: ‘development based on civil-military integration, and realizing the Party Centre’s strategic intention to set up Sansha City, and fulfilling the divine mission of rights protection, maintaining stability, protecting the environment, and development’. The Sansha City construction has become a high priority project in Hainan, and the province without any further compensation was given the role of a centrally planned action defender, and responsible for local maritime militia. Locations such as Weihai City in Shandong Province, and China’s newest prefecture, Sansha City, are organising military-police-civilians

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into joint/integrated defense systems, which include Maritime Militia units, and have promised to develop more territories on the contested waters (Reuters 2017). The city has also established a joint defence coordination centre, an integrated monitoring command centre and a ‘Hainan Province Paracel’s Islands Dynamic Monitoring System’. In economic terms, the fishermen-military units hope to boost the marine economies of local areas and are considered an important force in creating ‘Great Maritime Provinces’. Hainan develops its maritime militia in three phases. The first phase entails finding the proper regulations through pilot projects, research and discussion of tactics and at-sea testing. The second phase would then focus on increasing capabilities through intensified training of new, elite maritime militia and improving its support system. There should also be further testing and evaluation to ensure that the maritime militia is readily available and operationally effective. The third phase would focus on the ‘regular use’ of the maritime militia (mechanisms for sustaining maritime militia organisation and employment). However, the core problem is, as discussed earlier in the book, who will pay for it, how will it be paid and when will it be paid. The role of the local government concerns vessel mobilisation and preparing the financial compensation to vessel owners and personnel for lost income (Erickson, Kennedy 2016). However, in general, Hainan’s role has been limited and the province is often locked in battle between the ministries of the MFA, MOD and MOFCOM. Finally, Hainan has only had very limited influence on the exploitation of oil and gas resources in the region. CNOOC, which is directly under control of the central authorities, monopolises the right to explore and drill in China’s maritime waters; what is even more striking is that the southern CNOOC headquarters is located in Zhenjiang, Guangdong province. Hainan only has a passive-supportive role. This creates irritation and tension. Hainan does have more influence on marine fishing in the region (Xu 2018, 1–5). Finally, as argued by Li Mingjiang (2018), Hainan’s ‘successful role’ in China’s overall policy is only based on the intensification of the conflict over the South China Sea (Li 2018, 623–625). But, the problem for future provincial development lay not in the province itself, but 2,600 km away in the capital city of Beijing. When the central government agencies or military will be more involved they would consequently pay more attention to local development. However, this would create a competing platform for bureaucrats from ministries in Beijing with which local policymakers would need to manage and manoeuvre in-between in order to gain more benefits for the island’s development. But there is no super-ministerial agency to coordinate these various agencies, which often results in confusion and conflict between institutional interests. Nonetheless, the intra-ministry rivalry has a life of its own on the Hainan Island. *** The decision to separate Hainan from Guangdong in the late 1980s has had strategic consequences and has created a situation where Beijing deals with two extremes: an independent Guangdong and a subordinated Hainan. The central government developed Hainan as a location for future, controversial, actions in the South China Sea, while Guangdong has become a self-made economic

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powerhouse. In the long term, this decision enabled the bureaucrats from Beijing to control the island through its own initiatives. But of course nothing is gained without bargaining. As argued by Wong (2018), Hainan’s trailblazing involves lobbying in Beijing, ‘often in collaboration with other sub-national actors such as state-owned enterprises or the military, and sometimes present a fait accompli by starting projects before formal approval’ (Wong 2018). And the joint actions of ‘Hainan plus’ have resulted in different initiatives taken by different bureaucratic spheres of influence in Beijing: the Ministry of Foreign Affairs: the Boao Forum for Asia, the Ministry of Defense: strategic location for further defending China’s sovereignty, a petrochemical SOE location for the exploration of natural resources and developing their global position in oil and gas markets, and finally the local government and its own role in organising the fishing industry and maritime militia. Once Dai Bingguo announced the concept of China’s core interests, all Beijing-based players used arguments that were all in line with the state’s maritime interests, with Hainan presenting itself as a defender of China’s national interests, while the central government utilised its position in Hainan for its own bureaucratic visions and interests. Under such conditions, the island can no longer hope to create a vibrant SEZ such as Shenzhen and needs to rely on closer integration with Guangdong. In fact, the development of Hainan in the shadow of the economically powerful Guangdong is only possible by maintaining close relations with Beijing. However, many people in Hainan are anxious not to get too close to Guangdong, as they are eager to maintain the independence that they gained from Guangdong in 1988. The competition in the documents and long-term actions taken by the provincial government has resulted in shaping self-reliance entities, while limiting cross-provincial cooperation. There have also been tensions between Guangdong and Hainan which have been triggered by different military structures. Even though the SCS is nominally administered by Hainan, the SCS branch of the State Oceanic Administration, which commands a unified China Coast Guard, is headquartered in Guangzhou. This means that the naval bases of the South Sea Fleet of the People’s Liberation Army Navy, though located in Hainan, are under the control of Guangdong province. From this perspective authorities in Haikou need to be active in Beijing, persuading the central government to support local development, while the central government plays the role of mediator between two competing provinces. Moreover the government in Haikou positions itself as the food provider to China; the growing consumption of seafood in China pushes the provincial government to discover new waters in the SCS and, with the support of the Beijing-based government, satisfy the growing consumption expectations of the middle class in China. By these means Hainan is a part of securing legitimacy of the Communist Party of China and positions itself as the critical part of China’s domestic political system. Nevertheless, in the maritime economy, Guangdong positions itself as a technology provider to Hainan and other coastal provinces’ development. But, in reality, the provincial-level international agenda ‒ meetings, lobbying and engaging in multilateral forums ‒ provides a solid base for intra-provincial development. Hainan has its free trade zone, and Guangdong needs to cultivate its own

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international agenda, while competing with other coastal regions and driving its own development to secure a dominant position as an intermediary of new technologies to inland China, and be in the vanguard of reforms as it used to be. The highly urbanised areas of Guangdong utilise their obligations through city cooperation. Guangzhou is a pawn in international cooperation and with a trilateral agreement with Los Angeles and Auckland, has secured its own markets while participating in global governance. Shenzhen, as was said, is competing for new high-tech resources under the umbrella of the central government. In the Greater Buy Area Project, the Guangdong Provincial Government needs to coordinate local development, limit possible tensions with other cities and develop a strong position inside China. At a time when inter-provincial integration is benefiting local communities, Guangdong is less interested in cross-provincial integration, but more focused on developing itself as an intermediary between the developed world and the rest of China. Moreover, contrary to Hainan, Guangdong is not overdependent on Beijing and hopes to act more independently. The case of investing in Malacca Gateway illustrates that the government in Guangdong tests where the ‘red line’ is with the central authorities; sometimes the province succeeds, but sometimes it is either replaced by other local companies from Beijing or other provinces. Interestingly, both provinces have one common denominator. They both look to limit the role of Hong Kong as an intermediary in provincial international trade and the raising of capital for future development. Of course, this common goal does not translate into common actions with both provinces shaping their own distinct actions and often competing against each other. Both provinces’ narratives and actions, which are supported by the central government, have led to Hong Kong’s diminishing role. In the case of Hainan, by sharply criticising the movement in Hong Kong, the government officially declared its goal in a very open manner by saying that in the future the island will take over the roles of Hong Kong (Asia Times 2020). From the perspective of Guangdong, as stated by Liang Ganghua (2019), the dependence on Hong Kong has possibly been limiting China’s future role in geo-economics and ‘the dependence illness’ should be replaced with Guangdong’s own capacity. In fact, what is critical for Guangdong’s future is to take over Hong Kong’s position as a primary provider of business and financial services in south China. However, this process would be limited by the central government, which, along with the international community, would support neighbouring Hainan as well.

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Conclusions

The Belt and Road Initiative tends to compromise the interests of coastal and inland provinces alike. From this perspective it differs from previous policies; Mao Zedong’s extensive industrialisation in Northeast China and the western part of the country; Deng Xiaoping’s opening up of coastal areas; Jiang Zemin with the Open up the West policy when the leadership concentrated exclusively on one area of the country. Without growth in the central and western part of the country, and the support of more advanced provinces in its coastal areas, China realises it will face escalating tensions between rich and poor. As a consequence, the central government has taken the next initiative to open up the western part of the country. However, in order to limit further disintegration, and one month after the announcement of the inland Silk Road in Astana, Beijing proposed the Maritime Silk Road when the coastal provinces were given their chance for development. China’s need for comprehensive economic development along with national integration has become a challenge for the government led by Xi Jinping and Li Keqiang. The domestic unification plan faces hurdles from within. The more prosperous provinces to the east of the country prefer to develop their territories and are not so eager to share their resources with other, less wealthy provinces. In this case, the BRI was accompanied by different integration plans such as the Yangtze River Economic Belt or the less extensive Greater Bay Area initiative in southern China; however, these projects have failed to deliver expected results. That is why the central government has encouraged western provinces, and especially the border provinces, to take the lead in the development of neighbouring countries. The cases of Heilongjiang, Yunnan, Sichuan and Chongqing, and Guangdong and Hainan illustrate that local governments also undertake significant initiatives and actively lobby the central government to advance their own interests. As shown in the first chapter, the Chinese political system, although seemingly centralised, is characterised by the constant need to reconcile central policies with provincial concerns for economic development. For these sub-national concerns, which have already influenced the reform process during the adoption of specific laws, policy formation is even more evident during the policy’s implementation when Chinese provinces play a significant role. As discussed in six case studies, on the one hand, the Belt and Road Initiative encourages provinces to start

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their global outreach for resources, while on the other, local international initiatives received central government support. At the same time, with central government incentives for international cooperation, Beijing hopes to expand domestic integration with cross-provincial economic belts and intra-provincial integration projects. The BRI allows the central government to nationalise a local project and appease local voices of concern. From this perspective, Allison’s model of government was followed by Zheng Yongnian’s bargaining process within China’s political system. This reasoning is also reflected in Hockings’ concept of ‘multilayered diplomacy’, when local governments promote regional interests – interests related to powers and responsibilities in the domestic economic area, especially in global outreach. However, the promotion of localities, culture, peculiarities and economic interests in a highly centralised country, and the international action taken by provinces follows the Kuznetsov’s definition of a form of political communication for attaining economic, cultural, political and other types of benefits. In the case of China, the provinces, while being responsible for economic development and the promotion of culture, need to develop their own international agenda. At the same time, political gains such as having a political career are guaranteed by the central government. In the Chinese narrative, an interesting point is ‘embodied diplomacy’, discussed by Zhao Kejin, when a province becomes an agent of the central government. In this regard, Beijing, by using personal relations with party secretaries and governors, assigned roles in the country’s foreign policy as in the cases of political relations between Sichuan and Japan, Yunnan and Myanmar, as well as Chongqing and Singapore. A vital responsibility undertaken by the provinces, is to present a softer image of China’s political structure, and economically incentivise countries that, at the end of the day, would support Beijing’s government as can be seen in Sichuan-China-Japan relations. The bottom-up perspective, and institutions who are involved in the bargaining process, are revealed by local projects which are further nationalised in the process of negotiation and lobbying. Local pressure ensures that a national project is feasible although it can be a long, drawn-out process. For example, in the case of the BCIM EC international project, it took 14 years of discussions between the Yunnan provincial government and the central authorities, and 17 years in the case of the YREB domestic integration plan. However, ultimately, provincial policymakers succeeded in their attempt to attract funding from the Beijing government. Heilongjiang took a similar approach with the China-Russia-Mongolia Economic Corridor. Needless to say, both projects were based on a common denominator: competition with neighbouring provinces; in the case of Yunnan, it was Guangxi AR, with Heilongjiang’s provincial competitor being Jilin province. Another long, drawn-out bargaining process was witnessed in the Greater Bay Area project. The plan, which involved the continuation of Guangdong’s urbanisation development, along with Hong Kong and Macau as part of the project’s coordinated regional integration, began in the late 1980s and was completed with an agreement being signed in Beijing in 2019. The same pattern can be seen in the case of the China Railway Express, when private multinational companies with

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local authorities approached the central government with their ideas regarding rail connections to Europe. The central government’s role in persuading the Russian, Belarus, Kazakhstan and Polish governments to make this rail connection possible was limited, with the majority of responsibilities being undertaken by the provinces. In fact, all of these projects were first sponsored by the local institutions, and after years of lobbying, finally became national foreign policy projects, with the most prominent being awarded to the province that initiated the project. However, the BRI gave rise to ‘train competition’, resulting in more than 80 cities having their own cargo train project. This same overlapping of projects was also witnessed in the ‘horizontal commodity wars’ of the 1980s, when provinces competed against each other. However, provinces now not only look to protect their own markets, but actively compete against each other for global resources; for example, in the case of the Eurasian land bridge, provinces are responsible for securing their locations. As a result of shadow paradiplomacy, these locations can be found in the same countries and even the same cities. From this perspective, the central government is not an omnipotent body but rather a passive, receptive arbiter, whose strengthening of vertical relations makes China’s unity possible. However, this dominant position in the Middle Kingdom is only possible by skillfully manoeuvring between local interests, and utilising ‘the stick and carrot’ approach. The paradox of Chinese policy is that the majority believe that Beijing is the ringmaster in China’s economic and foreign policy, however, the reality is somewhat different. The central government remains an effective counterweight against particularism and local economic interests. In this context, as illustrated in the book, the Belt and Road Initiative is an umbrella institution and Beijing is highly dependent on political will for the cooperation and effectiveness of local policymakers. By announcing the New Silk Economic Belt, with its Eurasian outreach and 21st Century Maritime Silk Road, Xi Jinping sparked a great deal of enthusiasm among the broader public and at the provincial level in particular. However, this resulted in a great deal of local initiatives coming under the management of central government. The critical issue, here, is that the BRI secures the province-to-province status quo, and by signalling a new round of horizontal competition over centrally sponsored resources mainly of a financial nature, it has strengthened the nomenclature system. This means that in an appraisal system, the number of external trade or foreign visits can build the position of a particular province or policymakers within the political system. The second important feature that creates space for competition in China’s development is based on the policies that support the ‘first-in-trial, first-in-carry’ right, mainly based on the establishment of a comprehensive reform pilot zone, often referred to as a ‘new special zone’. The horizontal competition that ensues stems from increasing local protectionism, the strengthening of a self-reliance mentality and the lessening of the possibility of cross-provincial cooperation both domestically and internationally. Ever since local governments have been predominantly driven by horizontal competition, the ‘how’ and ‘why’ neighbouring governments have responded to central government proposals, meaning that horizontal cooperation sounds like

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a ‘flight of fancy’. The BRI also signals the opening-up policy; provinces going global. The provincial governments have failed to implement more coordinated actions, and continually shadow each other in their internationalisation, with their competing over the same resources mainly in Western Europe and the United States which undermines the effectiveness of the Belt and Road Initiative. But as illustrated in the book, very slowly, the central government has been achieving its designed goals: more unity to the unitary state, but preferably on a limited scale. The provinces rarely integrate with the cross-provincial formula, preferring integration processes within their own provinces or with economic regions, for example, in the Lower Yangtze River. Heilongjiang, unlike Yunnan, was at the less favourable Russian end of the Heihe-Tengchong line. Because the project was centrally led, and the fact that Russia, China and Xi Jinping and Vladimir Putin in particular enjoyed cordial relations, the province was pushed into the arms of Russian administration. This has limited the choices in the province’s rural development, resulting in Heilongjiang plummeting to 30th position out of 31 provinces in GDP per capita rankings. The highly centralised relations with Russia limit provincial initiatives and means that Heilongjiang’s development is more dependent on Russia and the Russian Far East. The only role that the government in Harbin hopes to play is one of an intermediary between more developed areas like Guangdong and its trade with Russia. But being a landlocked area, Heilongjiang can hardly play this role, and coastal provinces use direct shipments from their own ports. However, to the south, Yunnan has made progress with the province’s GDP per capita and economic development improving. However, Southwest China needs to manage the local political situation in Upper Myanmar, in order to ensure further development. Governing the tensions between minorities across the border with Myanmar puts constraints on effective development. The government in Yunnan needs to closely monitor the situation, and once the need arises, organise peace talks either in Kunming or in Ruili. It also has to incentivise the competing forces in order to keep stability across the border – as discussed in the second chapter. In contrast to Heilongjiang, Yunnan has utilised its position, with the central conglomerate of CITIC investing in Kyaukphyu port, and provincial, prefectural and city governments all playing their role accordingly. Paradoxically, by stimulating bottom-up railway connections through Eurasian continental areas along with building the Chengdu-Chongqing agglomeration in China’s western province of Sichuan, Chongqing hoped to develop the province’s economic growth led by an export economy. This model had previously failed; however, the Belt and Road Initiative promised to develop China’s west. Developing landlocked areas by internationalisation has become a vital part of discussions and actions in China’s western provinces. Through the province’s subsided rail connections of the China Railway Express, both Chengdu and Chongqing serve as an incentive for state and private capital to become increasingly involved. This meant that the cost of transportation would be limited, and that foreign companies could regard western China as a lucrative place for their investment. Being aware of horizontal competition, the central government has tried to differentiate

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functions: Sichuan has a more autonomous position, entrusted with greater autonomy in reforms with the province serving as an international gateway for promoting trade with foreign partners. Interestingly over the eight years of implementing the BRI, Sichuanese trade is more dependent on the American market now than at any time before 2013. Chongqing, on the other hand, is more domestically oriented and plays the role of connector between the Belt and Road Initiative and the Yangtze River Economic Belt. This national integration has been placed as the most important aspect in ensuring the domestic feasibility of the BRI; however, the limitations of the legal, cultural and nomenclature systems remain untouched. In their external actions, Sichuan has been given additional funding by the central government for BRI projects, while Chongqing, being directly governed by the State Council, has been promoted as a financial hub for western China. This role for the province involves developing Chongqing’s own financial resources by acquiring more private capital from the Shanghai Stock Exchange and other foreign sources. Moreover, the central government gave authorities in both Chongqing and Sichuan the political task of influencing foreign governments. Sichuan took a proactive position in Sino-Japanese relations before Prime Minister Abe’s visit to Beijing in November 2018. Sichuan-Japan relations, apart from their political tone, has resulted in Japanese companies investing in Tianfu New Area in the city of Chengdu. A similar situation appeared in the context of relations with the United States, when in December 2019, the leaders of Sichuan hosted the son of George H. Bush, Neil Bush. In the case of Chongqing, more visible were partyto-party relations with the province’s party secretary taking the lead in the city’s foreign affairs. When Chen Miner, in his capacity as party secretary of Chongqing and a member of the Political Bureau, visited Sri Lanka, Singapore and the Philippines, it became clear that the Chongqing channel was dedicated to incentivising these countries. Cooperating with Singapore, as is the case with Sichuan and Guangdong, allows Chongqing to develop a more coherent domestic policy plan and attract an increasing number of foreign direct investments. With its own cultural peculiarities and being seen in the vanguard of reforms, Guangdong hopes to secure its provincial frontrunner status in China. From a provincial perspective, the BRI is a combination of intra-provincial integration between the province’s urban areas, and Hong Kong and Macau in the Greater Bay Area project, as well as international expansion for raising capital, technology and human resources. In this particular case, relations with Hong Kong is of particular importance. On the one hand, Guangdong accommodates the role of Hong Kong, but on the other hopes to be more independent and free itself from the fluctuation created by the uncertain status of the Fragrance Port. Acknowledging the importance of the outlined three dimensions, Guangdong’s government can sometimes toe the line with regard to Beijing-based policies. However, the province has been known to test the central government’s red line. This policy of testing the red line was particularly visible in the Malacca Gateway project. In fact, in the majority of Guangdong’s projects, the province is required to utilise its own capital in investments in Africa and Southeast Asia. Guangdong uses its

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Lingnan cultural capacity as well as the fact that the majority of the Chinese overseas left Guangdong and settled in different countries in the region. But being exposed to global economic fluctuations, the province and cities like Guangzhou and Shenzhen need to seek out capital and technology around the world. In this particular area, Guangzhou is the leader. With city offices in Boston, Silicon Valley and Tel Aviv, the provincial government skillfully uses its ‘apolitical stance’ to attract more investment and technology transfers from more developed areas. A similar situation can be found in Guangzhou’s multilateralism approach and its participation in UN-Habitat, C-40 and Metropolis. However, securing markets for local high-ended products is seen as a priority. The final point concerns the province’s administrative tasks given by the central government; relations with American states might be seen as creating back channels during rising tensions between China and the United States. At first glance, it might be understood as such; however, the government in Guangdong sees its position as being more independent and is not eager to take on Beijing authorities’ responsibilities; however, Guangdong’s partner city of Auckland hopes to be an intermediary during this period of heightened tension between the two superpowers. Hainan’s local government, which might be seen as a paradox, has become pivotal in the intensifying conflict over the South China Sea. With its limited foreign trade and foreign investments resources, the Haikou government plays ‘the Blue Water card’ in the hope of receiving the attention and financial resources from Beijing to become the driving force behind China’s ‘core interests’ narrative, as well as oil and military-political groups involved in the Southeast Asia region. Along with the involvement of the petrochemical giants, the need to secure China’s investment has increased the importance of Hainan’s role as a military base to the point that it is more important than any other southern province. In fact, Hainan’s position inside China is now very much part of the military-oil industry alliance. The different bureaucratic departments in Beijing have their own responsibilities in the island province, with the role of local authorities seemingly limited. The Ministry of Foreign Affairs has its own Boao Forum initiative, the Ministry of Natural Resources, with major state-owned conglomerates such as CNOOC or Sinopec being responsible for excavating blue water natural resources, while the military play its role in securing China’s claims over the South China Sea. In this regard, the province of Hainan is responsible for playing host to maritime militia and providing special subsidies and compensations for the fisherman that serve the PLA. With its southern location in the South China Sea, the government in Haikou positions itself as the guarantor of China’s sovereignty and territorial integrity. However, this position might be limited by competing bureaucratic and business interests in Beijing. In a competing project, located in the city of Kyaukphyu in Myanmar, Yunnan province serves as an intermediary in the CITIC group’s investments. Due to the fact that the Myanmar port is on the edge of the Indian Ocean, routes for Middle Eastern resources that are exported to China are considerably shorter in distance. Once the Chinese side manages effective investments, it will have an impact on Hainan’s position. As was said in the introduction, Chinese political life is mainly driven by 30-year cycles of decentralisation and centralisation. In the context of the BRI,

Conclusions

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centralisation means taking up local initiatives under central government control which lead to more reciprocal relations between central and local governments as Zheng Yongnian stated; however, decentralisation means less reciprocity in the relationship between the central government and the provinces. However, Beijing may dictate an economic policy and five-year plan which looks to develop the majority of interactions not between the centre and province but rather between the provinces themselves. Due to the historical continuation of diverging interests, the process of domestic integration faces multiple challenges. China is a culturally diverse country, and people in different parts of the country cherish their different cultural rituals, languages and attitudes. Second, the nomenclature system creates the need for competition; once the leader of a province achieves positive economic results and can provide social stability, it will be elevated to a more important position. Third, Beijing is the only power in China that can incentivise development at the provincial level. With its private financial transfers, it may bring more opportunity to intra-provincial areas while limiting cross-cooperation projects. Needless to say, the Yangtze River Economic Belt, negotiated over nearly two decades, has given the provinces along the belt the same critical industries for future development. This has undermined an active division of labour and the potential of future domestic supply chains. Looking beyond provincial borders by announcing the BRI, Beijing hopes to guide horizontal competition far from China’s borders. This creates a zone for multilayered diplomacy when local governments promote their own economic interest, by looking for investors and financial resources as well as being responsible for their own growth. Consequently, the provinces use the BRI as a vehicle for paradiplomacy. However, at the same time, local governments, with their different activities, should acknowledge that without interstate cooperation, they could have difficulty in conducting practical external actions. Domestic integration, although visible, is limited to areas such as the Lower Yangtze River and the PDR. In fact, at the provincial level, governments compete against each other in foreign countries, and around the globe. Following the BRI, provinciallevel governments with differing degrees of intensity follow the previous model of horizontal competition; if Chongqing sends a delegation to the United States, Chengdu or Guangzhou follow and vice versa. These processes constitute the definition of shadow paradiplomacy, when a provincial government, by having its own local foreign policy agenda, competes against other provinces in foreign countries. From the perspective of local policymakers’ international outreach, the BRI does not change the previous structure of inter-provincial relations. Overall, through the policy of Xi Jinping, Beijing has tightened vertical relations. However, the horizontal status quo persists, and the provinces have been given an additional tool for competition: relations with foreign local and central governments, and at the same time Beijing secures its position as the paramount arbitrator.

Index

Allison, Graham 12 ASEAN 37, 41, 43, 45, 90, 93, 94, 135, 143, 146, 149, 152, 159, 163, 174–176, 189, 193, 198, 204–206, 210, 211 Bangladesh 33, 37, 41, 45, 85, 86, 130, 149 Bangladesh-China-India-Myanmar Economic Corridor (BCIM EC) 85, 86, 97, 99, 124, 175, 176, 230 Beijing-Tianjin-Hebei Metropolitan Area 7, 19, 39, 41, 48, 178 Blagoveschensk 4, 55, 81, 84 Boao Forum 44, 205, 206, 215, 219, 234 Bo Xilai (party secretary Chongqing) 147 BRICS 175, 206 bridgehead (term) 3, 37, 39, 40, 41, 43, 45, 55, 58, 59, 86, 89, 93, 99, 102, 103, 125, 126, 127, 204, 215, 217 Bush, Neil 139, 233 CAFTA 210 Chengdu 4, 20, 30, 38, 45, 90, 114, 117, 120, 124–129, 131–138, 140, 142, 145–148, 151, 152, 160–163, 178, 203, 232, 233, 235 Chen Hao (party secretary Yunnan province) 87, 88, 97 Chen Miner (party secretary Chongqing) 45, 148, 153, 157, 158, 163, 194, 233 Chen Zhimin 3, 23 Chi Fulin 208 China-Pakistan Economic Corridor 41, 149 Chongqing 2, 4, 20, 38, 40, 44, 45, 90, 113, 114, 116, 117, 118, 119, 120–135, 142, 146–163, 178, 193, 194, 203, 229, 230, 232, 235 Curtis, Simon 3, 22, 23

Deng Xiaoping 9, 10, 67, 113, 114, 121, 129, 135, 173 Duchacek, Ivo 3, 22 Greater Bay Area (GBA) 20, 173, 176, 178, 179, 184, 192, 229, 230, 233 Harbin 39, 47, 67, 68, 70–78, 81, 103, 128, 323 Heihe 4, 55, 61, 64, 67, 69, 80–84 Heilongjiang 2, 3, 16, 25, 27, 37, 39, 42, 43, 47, 55–57, 61, 65–78, 80, 84, 102, 103, 117, 119, 139, 193, 229, 230, 232 Hong Kong 20, 23, 32, 46, 70, 76, 131, 135, 137, 152, 173, 176–180, 184, 186–188, 190–192, 197, 198, 202, 207, 210, 212, 220, 230, 233 Huang Qifan (mayor Chongqing) 148, 158 Hu Jintao 3, 19, 25, 55, 58, 59, 68, 114, 174, 204 India 33, 37, 41, 44, 45, 85, 86, 92, 97, 98, 130, 132, 133, 137, 149, 174, 175, 201 Japan 4, 26, 27, 32, 40, 41, 43, 67, 74, 77, 78, 81, 85, 103, 112, 119, 129, 135, 136, 138, 149, 155, 162, 174, 189, 191, 194, 212–215, 230, 233 Jiang Zemin 19, 32, 48, 59, 85, 113, 121, 122, 139, 150, 229 Kuznetsov, Aleksander 23 Lee Hsien Loong 156, 158 Liangjiang 154, 155, 158–161 Li Dejin (vice governor Fujian) 197 Lieberthal, Kenneth 7, 12 Li Keqiang 34–35, 55, 86, 123, 124, 139, 154, 229

Index Liu Cigui (governor Hainan) 205, 206 Lodz 127, 133, 140, 142, 143, 144, 146, 161 Lodzkie (region) 142, 161 Lu Baoming (party secretary Hainan) 213 Lu Hao (governor Heilongjiang) 68, 76 Macau 23, 42, 46, 131, 173, 176–178, 180, 190, 191, 207, 209, 230, 233 Mao Zedong 9, 10, 67, 113, 119, 120, 129, 162 Maritime Silk Road 4, 5, 37, 38, 43, 44, 129, 172, 173, 174, 186, 190, 204, 229, 231 Mike Pompeo 138, 139 Myanmar 4, 33, 37, 41, 45, 55, 56, 57, 64, 85, 86, 88, 89, 91–101, 103, 104, 130, 149, 155, 159, 210, 230, 232, 234 National Defense Law 183 National Development of Reform Commission (NDRC) 3, 67, 68, 91, 93, 116, 117, 124, 126, 128, 133, 137, 151, 159, 184, 206 Nikai, Toshihiro 140, 194 Oksenberg, Michael 12 Pan-Pearl River Delta 90, 176, 188, 190 Pan-South China Sea Economic Circle 209, 210 People’s Armed Forces Maritime Militia (PAFMM) (also as Maritime Militia) 185, 186, 207, 216–219, 234 peripheral diplomacy (term) 3, 55, 56, 59, 60, 87 Ruili-Muse Demonstration Zone (RMDZ) 89 Russia 7, 33, 37, 40–42, 45, 46, 56, 59, 64, 66–84, 102, 103, 128, 130, 133, 134, 140, 142, 143, 149, 152, 155, 156, 158, 159, 174, 190, 195, 212, 230, 232 Sansha (city) 186, 207, 216, 217 Shirk, Susan 3, 12, 13 Sino-Singapore Guangzhou Knowledge City (SSGKC) 178, 193 Song Xinbin (mayor of Harbin) 70 South China Sea 5, 37, 44, 59, 173–176, 183, 185, 186, 204–207, 209, 210, 213, 215–218, 234 South Korea 26, 30, 32, 35, 42, 43, 67, 69, 70, 71, 72, 74, 76, 78, 103, 131–136, 140, 149, 152, 156, 189, 191, 206

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Soviet Union 59, 67, 81, 119, 120, 123, 147 Su Changhe 3, 23, 30 Sun Yat-sen 8, 113, 119, 120, 172 Sun Zhengcai (party secretary Chongqing) 156, 157 Su Zhe (mayor of Harbin) 70 Taiwan 23, 27, 32, 43, 45, 76, 95, 97, 136, 138, 173, 188, 195, 201, 202, 207, 209, 210, 217 Trump, Donald 174 United States, The 4, 7, 25, 43, 45, 60, 69, 73, 74, 94, 96, 103, 119, 123, 129, 130, 132, 135, 136–140, 151, 152, 155, 156, 161, 162, 163, 173, 174, 179, 190, 194, 197–199, 200, 212, 213, 232–235 Vision and Action 2015 (document) 30, 36, 87, 148, 204 Wang Dongming (party secretary Sichuan) 138, 142, 143 Wang Huning 18 Wang Wentao (governor Heilongjiang) 69, 76 Wang Xiankui (party secretary Heilongjiang) 76 Wang Yi 69, 130, 215 Wei Hong (governor Sichuan) 131 Wei Liucheng (Hainan governor and party secretary) 215 Wen Guohui (mayor Guangzhou) 190 Xi Jinping 1–7, 10, 18, 20, 32, 34, 39–41, 44–45, 47, 69, 73, 86–88, 113, 123, 135, 138, 149, 154, 159, 172–174, 180, 194, 205, 206, 207 Xi Zhongxun 10, 187 Yangtze River Economic Belt 2, 7, 19, 20, 32–34, 38–40, 43–46, 48, 87, 90, 104, 113, 123, 125, 128, 129, 146, 148, 162, 176, 229, 233, 235 Ye Jianming 140 Yin Li (governor Sichuan) 131, 139, 140 Yu Keping 14 Zhang Dejiang (party secretary Chongqing) 147, 188 Zhang Guoqiang (mayor Chongqing) 148 Zhao Ziyang 10, 113, 121, 129 Zheng Yongnian 11, 12, 20, 230, 235