The Belt and Road Initiative: An Old Archetype of a New Development Model 9789811525643, 9811525641

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The Belt and Road Initiative An Old Archetype of a New Development Model Edited by Francisco José B. S. Leandro Paulo Afonso B. Duarte

The Belt and Road Initiative

Francisco José B. S. Leandro · Paulo Afonso B. Duarte Editors

The Belt and Road Initiative An Old Archetype of a New Development Model

Editors Francisco José B. S. Leandro City University of Macau Macau SAR, China

Paulo Afonso B. Duarte Research Centre in Political Science University of Minho Braga, Portugal

ISBN 978-981-15-2563-6 ISBN 978-981-15-2564-3 (eBook) https://doi.org/10.1007/978-981-15-2564-3 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover image: Architect Francisco Ricarte, March 2019 This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Cover photo: Hong Kong/Zhuhai/Macau Bridge, inaugurated in 2018, is the longest bridge ever built in the world. Therefore, it stands as an example of People’s Republic of China’s effort and determination not only in improving its communication network within the Pearl River Delta in Guangdong province, but also in further enhancing the connectivity with regions beyond the bridge physical’s reach, namely on Southwest Asia, as major airport hubs and seaports are located within the Pearl River Delta region. Thus, the cover photo is an expression of China’s ‘communication dynamics’ and highlights the role such infrastructure plays in ‘The Belt and Road Initiative’ strategy.

Foreword: Connectivity with Consent

In Brussels too, China’s Belt and Road Initiative (BRI) is on everybody’s lips. On 27 September 2019, Japanese Prime Minister Shinzo Abe and outgoing Commission President Jean-Claude Juncker opened the first EU-Asia Connectivity Forum by signing a partnership on sustainable connectivity. This is a signal to China and to the countries of Eurasia: BRI is not the only game in town. The European Union has in fact been investing in connectivity for a long time. Connectivity is the latest buzzword in Brussels. Like most buzzwords, it is a catchy term for what is an age-old practice. The strategic importance of connectivity is nothing new. Why did the Romans build all those roads? States and empires have always tried to secure access to markets, to create political conditions favourable to their interests along the way and, of course, to ensure that they could quickly deploy their armies to wherever they were needed. In the nineteenth century, the combination of great power rivalry and new technologies led to a frenzy of activity. Cape to Cairo! Berlin to Baghdad! The great powers attempted to construct roads and railroads to connect their colonies and to safeguard lines of communication with their allies. Britain eventually managed to create one contiguous ‘red zone’ of British-controlled territory on the map from north to South Africa. The railway to Baghdad underpinned Imperial Germany’s influence in the Ottoman Empire.

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Asia was no exception. Navies needed coaling stations, and states acquired bases along the sea lines of communication. In Manchuria, control of the railroads became the focal point for the geopolitical competition between the Russian and Japanese empires. The battle for the railroad hub of Mukden (now Shenyang), during the 1904–1905 RussoJapanese War, was the greatest land battle ever fought second only to the First World War. Russia specifically set the gauge of its railways so as not to be invaded. Afterwards, Japanese-controlled Manchuria was like a railroad company with its own army (the Kwantung Army). Connectivity has always been competitive. What is new, is that conquest and colonization no longer work as a means of ensuring connectivity. If anything, the Russian conquest of the Crimea has decreased its connectivity; rather than an asset, it is a drag on the Russian economy. Today, connectivity can only be established with the consent of the states through which one passes and that host the terminus. Indeed, when connectivity becomes too competitive, it becomes counterproductive. Forcing a state to choose between two mutually exclusive connectivity schemes can tear it apart, as the Ukraine crisis demonstrates, and can lead to dangerously high tensions between the great powers. Both the EU and China should take care therefore not to be seen as squeezing the countries located between them. The EU-Asia Connectivity Strategy and the BRI can be complementary—as long as China does not force any country to join the BRI, and as long as China does not force those who have joined to sever relations with the European Union. The EU’s aim certainly is not to push China out. It can hardly tell other countries to limit their links with China, while the European Union itself wants ever more trade and investment from and in China. Instead, the European Union seeks to put its own attractive trade and investment offer on the table, incentivising the countries of Eurasia to maintain an open economy and a level playing field for all foreign actors. The objective is to ensure that countries that matter for the EU’s connectivity do not put all their eggs in one Chinese (or Russian) basket and wake up one day to find that they have sold out their sovereignty. Connectivity should not lead to conquest by other means. The first EU-Asia Connectivity Forum, which like China’s BRI Forum is to become an annual event, was a success. The key countries of Eurasia were all represented at the senior political level, not an easy thing to pull off for an initiative that really only started a few months ago.

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Now comes the really difficult part: identifying productive investment opportunities that benefit the European interest and mobilising the resources to grasp them. Commission President, Ursula von der Leyen, announced that her commission would be a ‘geopolitical commission’: this is what it’s all about. Sven Biscop Ghent Institute of International Studies Ghent University Ghent, Belgium

Sven Biscop is currently the Director of the ‘Europe in the World’ programme at the Egmont Royal Institute for International Relations in Brussels, which he joined in 2002, and Professor at the Ghent Institute for International Studies (GIIS) at Ghent University.

Introduction

The main driver behind this book is the analysis of the developments associated with the Belt and Road Initiative (B&RI), five years after Xi Jinping announced both the Silk Road Economic Belt (SREB) and the 21st Maritime Silk Road (21MSR). Together, these two dimensions constitute the B&RI, providing the so-called Chinese ‘project of the century’ with regional, inter-regional and global dimensions. This volume aims at assessing the impact of the B&RI in all these dimensions and levels. This is a current and promising theme, not only in the short and medium terms, but also on a broader timescale, reflecting Chinese strategic thinking itself, since Chinese philosophy and culture are oriented towards longterm and intergenerational perspectives. Likewise, both the title of this publication (The Belt and Road Initiative: An Old Archetype of a New Development Model ) and the way it has been organized result from the empirical perception that China asserts a conservative attitude towards foreign affairs, redesigned in multiple dimensions, to create a perception of domestic unity and global prestige. In this vein of thought, the B&RI is already influencing and will continue to influence, directly or indirectly, the current economic and political order. It has been five years since Xi Jinping’s speech at Nazarbayev University in Astana, where the Chinese President unveiled the B&RI’s purposes to the world. A five-year time frame is neither too long nor too short for a comprehensive, enlightening, critical and even fair assessment, given

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that the implementation of large economic, political, military or institutional projects (such as the creation of the Asian Infrastructure Investment Bank) require some time. Along this line of reasoning, the editors wish to emphasize, as does Enrique Galan in his contribution, that one of the main cornerstones of all programmes of infrastructures development always depends on financing. In other words, assessing the impact and implementation of the B&RI in spheres ranging from the economic to the political and social domains requires a broader time frame than just three or four years. Certainly, many projects within the framework of the B&RI will arise, even if some of the dates are as yet undetermined. Other projects that already started in 2013 may require a longer period to reach completion. Because it does not make sense to postpone ad aeternum an evaluation of what has already been achieved and of the impact at the regional and global level, the five years, following the presentation of the B&RI in 2013, are in our opinion, extremely relevant. The year 2019 marks the 70th anniversary of the founding of the People’s Republic of China (hereafter China), the 20th anniversary of the retrocession of Macau and the 22nd anniversary of the retrocession of Hong Kong. This is an extraordinary moment to reflect upon the comprehensive and challenging initiative embodied by the B&RI, an initiative that will certainly result in a (re)structuring of the global geo-economy and geopolitics. This alone justifies the importance and relevance of the theme addressed in this book. Recalling the work of President Hu Jintao, the Chinese proposal aims at nurturing a community of common destiny along the B&RI. In short, through the B&RI, China’s vision is that its gains are those of the other countries and vice versa. Shedding light on the B&RI requires us to set the proper perspective. The B&RI is defined as a global infrastructural access strategy (Leandro 2018, p. 94) contributing to the creation of a network of economic flows and the shortening of the distance between industrial production centres, raw materials exporting zones and relevant markets, based on five pillars: policy coordination, facilities connectivity, facilitation of unimpeded trade, financial integration and developing people-to-people bonds. We understand the B&RI as a Chinese-led intergenerational strategy, involving cross-sectorial elements and departing from domestic functional economic rearrangements, to encompass far-reaching economic, social, cultural and political scopes. Regionalization, economic corridors, transit corridors, special economic zones, production centres and markets will certainly lead to a higher degree of interdependency. The B&RI uses multilateralism

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to promote a closer interaction between economic zones, stronger bilateral economic engagements, innovative conflict dispute resolutions and evolution of international law. Furthermore, the B&RI advances a new model of trade and economic cooperation and a new level of unprecedented global economic openness. It is important to point out the originality of this book compared to the existing studies and monographs about the B&RI. First, the added value of this book is that it brings together and reconciles the sometimes contradictory perspectives found in the literature about the B&RI. This book is based on a need to build a new narrative of complementary connectivity between the European Union and Eurasia, between the North Atlantic and Asia-Pacific regions. Second, this book is exclusive in its hybrid and holistic approach, offering readers a balanced, intertwined and multi-level and transcontinental perspective. Some studies focus on the B&RI land dimension, to the detriment of its, equally or even more important, maritime essence, since the overwhelming majority of international trade is carried out by sea. All credit to the monographs that discuss the maritime dimension of the B&RI, although many restrict their discussion to the Indian Ocean and, to some extent, to the Mediterranean Sea. The B&RI’s spatial scope requires an extended analysis of the Pacific and the Atlantic regions. In this analysis, the editors value different perspectives focusing on Latin America states, small island states, such as Cape Verde, and key geopolitical states such as Turkey and Germany. Finally, the wide and diversified educational and professional backgrounds of the contributors to this book bring additional value. This book diversifies and supplements more narrow or sectorial contributions to the B&RI studies. Indeed, the bone marrow of the book has been designed to be conceptually multi-domain, geopolitically covering the European Union, as the representative of the North Atlantic area Central and Eastern Europe’, Afghanistan, Turkey and Russia. Sports, international public goods, the cultural guanxi and environmental sustainability are certainly among the topics making significant contributions to a multidomain analysis. As a result, the book is organized into three parts.

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Part I—Presents and discusses the concept of the Belt and Road Initiative. This part contains nine chapters. Chapter 1 opens with a smart framework discussing China’s grand strategy ‘with Chinese characteristics’. Tanguy Swielande and Dorothée Vandamme unequivocally assert that China projects an image of a country with the objective and power resources of a great power that is ready and willing to take the lead in international affairs. They argue that China mobilizes and operationalizes all the dimensions of power to implement its grand strategy and achieve its aim. In their analysis, the centrality of the Chinese leadership and the year 2049 will be the determinants of China’s search to be a great power with a wide range of instruments and means of power at its disposal. These authors recognize that B&RI is also about geopolitics and spheres of influence, one of the main objectives being to reinforce China’s presence on the Rimland, and they acknowledge the fact that the more followers there are sharing a common social identity with China, the more the balance of power will tilt in Beijing’s favour. In Chapter 2, Cátia Miriam Costa adopts an international communication theory approach to the B&RI, while interestingly claiming that discourse is one of the B&RI tools for a global narrative, emphasizing that the Chinese value of non-intervention is one of the pillars of the principles of peaceful coexistence. China’s most important international actions are humanitarian in nature, carried out under the United Nations umbrella, avoiding any direct intervention in the domestic policy of other countries. This attitude gives way for China to develop a role as a mediator in international crises or conflicts. The main topic of Chinese international discourse is always about the peaceful resolution of international conflicts and respect for domestic policies. Cátia Miriam Costa further asserts that China needed a robust international discourse to attract different countries to the project. Therefore, China also depends on the coverage that the international media give to the B&RI. The idea of successively announcing the project in official visits provides evidence that the Chinese government counts on the international media to spread the B&RI narrative to a broader international audience. This strategy is often used in international communication in order to promote the

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projects or the will of states. According to Costa, one of China’s main challenges is the communication of the concept of guanxi which is not clear to the Western world. Thus, according to the author, if China wants to propose a guanxi mode of conducting international politics, the international community must first understand the principles of harmony, voluntarism, win-win relations, mutual trust, equality and connectivity for development. All in all, China has to adapt the discourse to a global audience. In Chapter 3, Amit Gupta revisits the vital topic of the United States vs. China rivalry, discussing the elevation of China’s relative standing in the international order and diminishing American global influence. The author believes that China’s phenomenal economic growth over the last three decades has enabled it to create an economic interdependence with some of America’s closest allies and, thus, has created a situation where these nations are increasingly hedging their bets in terms of whom to support in the Sino-US rivalry. In addition, Amit Gupta examines Chinese soft power, asserting that the Chinese have also explicitly recognized that they have to build the credibility of the B&RI through the use of soft power. And in this context, the Chinese have sought to create stronger people-to-people bonds through greater cooperation in the spheres of science, education and health. In the final part of this chapter, the author suggests that the B&RI is the first step towards integrating large parts of the world into a Chinese-constructed international economic order. In Chapter 4, Carlos Rodrigues and Emanuel Junior continue the soft power discussion, but this time from another stimulating and peculiar perspective: football. The authors are of the opinion that the B&RI is currently the most ambitious strategy pursued by the Chinese government and that China is also looking at other scenarios in international geopolitics. The discussion presented adopts the ‘people-to-people exchange’ perspective and recognizes that sport is one (among others) of the targeted fields. Clearly, the authors stress that China intends to have one of the world’s largest national sports economies. Rodrigues and Junior combine sport, infrastructure, tourism, public diplomacy and soft power to conclude that through the ‘Football Plan’ and the ‘Sports Tourism B&RI Plan’, China seeks not only to develop its sports industry, but also to establish diplomatic and trade relations, to promote exchange and exchange of knowledge, to bring the country closer to other nations,

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thus strengthening its economy and its leadership role in international geopolitics. In Chapter 5, Li Xing and Zheng Xiaowen present a thoughtprovoking B&RI analysis, through the international public goods approach which implicitly helps to project China as an emerging responsible ‘global normative power’. The authors assert that the undersupply of international public goods, including backward infrastructures and low economic development levels, in the Eurasian region has raised both awareness and concern. B&RI, as a new international development project, can in the short term create jobs and improve infrastructure and in the long run stimulate the vitality of the economy. With its openness and inclusiveness, the B&RI will definitely expand the benefits across national boundaries. Xing and Xiaowen recognize that China’s capital and trade expansion in the developing countries of the Global South represents two sides of the same coin, with one side showing great opportunities in terms of infrastructure connectivity and political and economic room for manoeuvre and upward mobility and another side exhibiting challenges in terms of debt burden and unequal trade relationship. In Chapter 6, Enrique Galán makes a decisive contribution to understand the sources and the tools available for the financing of the B&RI and the expected impact in promoting economic development, connectivity and trade in Asia. The author reminds us that Chinese banks held more than USD 22.6 billion in deposits in 2016 (Statista 2018) and foreign exchange reserves in China exceeded USD 3.1 trillion in August 2018, nearly 9% of the world’s total (Trading Economics, 2018). Liquidity is therefore rapidly available for the financing of B&RI projects. In addition, Galán stresses that the financing of the B&RI is based on two main sources, namely: (i) the main funding, estimated around USD 900 billion and (ii) the Silk Road Fund (SRF), estimated at around USD 40 billion. The author conclusively and decisively states that most of the risks identified are less severe than some critics suggest, that these risks are being mitigated, and that the inevitably increasing role that third parties are playing in the initiative can be extended to mitigate the risks even further. In the same vein of thought, in Chapter 7, Fernanda Ilhéu takes the discussion to another level, debating different scales of B&RI financing. In China’s vision, the world needs a more integrated

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and globally controlled world economic model, to achieve a more dynamic and balanced growth, where China must assume global responsibilities. China wants to have a role in the decision-making of the rules of the relationship model for the world’s countries, especially regarding international organizations and regional integration policy. Fernanda Ilhéu declares that the B&RI is an ongoing cooperation process between China and Third World countries, which creates a new vision for trade and investment relations with the objective of common development and destiny. This new vision aims to find a way for countries to interconnect their development strategies, which complement their competitive advantages. Moreover, this new vision aims to establish economic development corridors—hubs of cooperation platforms with inland distribution logistic networks, infrastructures and industrial parks. In Chapter 8, Richard Hardiman introduces the topic of sustainability in the B&RI, from the perspective of the environment, natural resources, ecology, biodiversity and climate change, in the light of the Paris Climate Agreement and the International Coalition for Green Development on the Belt and Road. Hardiman discusses the greenness of banks investing in B&RI, the existence of green bounds and advanced case studies such as the Lamu power plant, to emphasize that to date there has been no strategic environmental assessment conducted on the B&R economic corridors. Chapter 9 by Yichao LI and Mário Vicente concludes Part I. They present a chapter that first discusses the establishment and development of Chinese partnerships and the cooperation between other countries with China in the relevant areas of the B&RI. Then, the authors analyse the establishment and development of Chinese partnerships before and after the B&RI, how the situation has changed, as well as the evolution of the interactions and contributions between Chinese partnerships and the B&RI. The authors argue that the Chinese government has also tried to make some adjustments based on the challenges that have arisen in the development of the B&RI in recent years. Moreover, the Chinese government has made many efforts to improve the transparency of the B&RI, to ensure the openness and reciprocity of the project and to enhance mutual trust among participants. Despite the diversity of partnerships established by China, the hierarchical classification of partnerships is difficult to define due to the interpretation challenges of the Chinese language.

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However, no matter what kind of partnership, China should carefully manage and maintain these partnerships.

Part II—Debates the central questions associated with the B&RI and the European Union. This part contains three chapters. In Chapter 10, Carmen Amado Mendes and Lorenzo Gagliano focus on the impact of the B&RI on the international order led by the West, raising the question: Is the B&RI a threat or an opportunity? The authors have taken an important stand by acknowledging that as the Chinese interest in Europe expanded geographically and substantially, new trends in investment and trade emerged, highly differentiated across Europe and across sectors, despite the existence of some common patterns. China’s increasingly important role as a global economic player and its attempt to reform its economy to achieve a ‘new normal’, in which economic growth is increasingly based on technology and services, make dialogue and continued cooperation with Beijing a top priority for the EU. In addition, Carmen and Gagliano argue that given the limited progress made in Europe in terms of B&RI projects started and completed (especially in comparison with the Asian region), it is difficult to predict exactly the impact of China’s initiative in Europe. Finally, both authors seem to be clear about the real nature of China-EU relations in the framework of the B&RI. Indeed, this new Chinese proposal for international cooperation—to improve multilateralism and tackle global issues—is not an aid plan. It is a rather pragmatic ongoing process without specific planning behind it, which develops on the basis of commercial interests. In Chapter 11, Laura C. Ferreira-Pereira and Livia Brasil Carmo Grault returned to the topic of partnerships as previously presented by Yichao Li and Mário Vicente, to discuss specifically and comprehensively the EU-China bilateral maritime cooperation (2003– 2019). The authors asserted that this cooperation has not unleashed its full potential yet, due to power competition as well as prevailing differences between the two actors when it comes to their nature, identity, values and worldviews. Laura and Livia further stressed that when it comes to maritime security against the backdrop of

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Maritime Silk Road, cooperation apart from practices is hard to achieve. At the political level, cooperation is limited insofar as each partner has its own strategy regarding EU-Asia connectivity. This occurs because the relationship in the realm of maritime cooperation is marked by reciprocal mistrust, as well as conflicts deriving from diverging background knowledge. In Chapter 12, Sten Idris Verhoeven concludes Part II and argues that EU has not yet adopted any common position on the B&RI. Whereas southern and eastern EU member states are generally enthusiastic, northern and western EU member states are more hesitant. Therefore, projects under the B&RI may conflict with EU rules, as evidenced by the EU Commission’s investigation into the Budapest-Belgrade Railway for possible violation of EU public procurement rules. This contribution looks into the potential legal obstacles posed by EU law for the successful implementation of the B&RI and proposes that China and the EU should set up a comprehensive international framework through which both the B&RI and the EU-Asia Connectivity Strategy may be accomplished.

Part III—Overviews Belt and Road Initiative key areas such as Latin America, North Atlantic, Central Europe and Central Asia. This part also contains nine chapters: In Chapter 13, Gretchen Small reviews how and in what way the BRI has developed into a political and economic force in Latin American and the Caribbean (LAC), and its prospects going forward. The author examines two proposed great projects, in particular—South America’s Bioceanic railroad and a railroad connecting the continents of North and South America through Central America—to illustrate the interplay of history and current forces shaping the direction of this unique endeavour in the region. In Chapter 14, Ivete Silves Ferreira and João Paulo Madeira introduce a particular discussion on the B&RI, from the perspective of a small archipelago state, Cabo Verde. The authors declare that Cabo Verde shares an auspicious relationship with China. The country has a high geopolitical value that makes it comparatively unique, in part due to its geographical proximity to important geopolitical and

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geoeconomic areas, in particular the African continent. Furthermore, the authors acknowledge that for Cabo Verde, the strategic partnership represents the renewal of the partnership model implemented so far. Ivete and Madeira conclude that after six decades of relationship with Cabo Verde, Chinese priorities have changed. China presents itself as a capitalist power, with an imperialist project on the African continent. Gradually, we have been witnessing the extension of China’s presence in Cabo Verde, not only through the implemented projects and agreements, but also in the context of private investment. The signing of the strategic partnership in 2006, the inclusion of tourism in the set of pillars of this partnership and the progress in the construction of the large ongoing tourist complex by a Macanese company mark a new phase in this relationship. In Chapter 15, Francisco B. S. José and Paulo Afonso B. Duarte argue that the B&RI makes a positive contribution to the implementation of the ‘de-bordering concept’ between China and European Union. At the same time, they assess the relevance of Portugal within the B&RI. The authors stress that de-bordering does not necessarily suggest the removal of physical borders nor does it entail terminating the demarcation of sovereign limits. Indeed, de-bordering refers to simultaneous processes of boosting cross-border interactions, through the implementation of facilitating mechanisms compatible with the exercise of sovereign power. Leandro and Duarte discuss the geopolitical value of the Beja Airport, Praia da Vitória, Leixões and Sines deep-water seaports, Lajes Aero naval base in the Azores, the Blue Economy Partnership, the establishment of the technological labs and the triangular or trilateral cooperation, and conclude that Portugal is literally the ultimate European border. In Chapter 16, Jorge Tavares da Silva and Rui Pereira further elaborate on the importance of the B&RI in the context of the Atlantic Ocean, assuming that one of the main objectives is to extend the B&RI to the  Portuguese Sea , particularly the port of Sines or even islands in Azores. The authors aim to evaluate the cooperation that is increasing in the maritime port area between China and Portugal. The chapter begins with an analysis of Chinese investment in the European continent after the sovereign debt crisis and tensions with the United States. Then, the focus shifts to the investment in Portugal in the so-called second wave, particularly the maritime domain. In conclusion, Tavares da Silva and Pereira argue that the

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Portuguese maritime assets are important in the Atlantic area, where trade flows cross with those of northern Europe. It is also a gateway into Europe if we consider the Panama Canal and Nicaragua Canal and the Chinese strategic interests. The authors also point out that Lisbon is also under pressure from Washington and Brussels due to its ‘excessive’ cooperation with Beijing in strategic areas and technology sectors. In Chapter 17, Weiqing Song and Lilei Song provide a systematic analysis of China’s cooperation with Central and Eastern European Countries (CEECs) in the context of the One Belt, One Road Initiative. The authors argue that China’s cooperation with the CEECs is motivated by the desire to serve the mutual interests of the participatory states by providing public goods that foster international connectivity and cooperation. In the authors’ view, the 16 + 1 cooperation framework between China and the CEECs can be understood as China’s attempt to strengthen the public good of connectivity. It is mainly an inter-regional public good, but has substantial implications for global connectivity. China has devoted enormous resources to develop this new approach. Weiqing Song and Lilei Song conclude that the 16 + 1 cooperation framework, part of China’s BRI, was established to expand and deepen exchange and cooperation between China and the CEE region. Therefore, it can be understood as an effort to construct a global public good, specifically connectivity. If successful, it would add an important component to global economic governance. In Chapter 18, Joanna Ciesielska-Klikowska presents the issue of German-Chinese cooperation in the context of the development of the B&RI. The main supposition is that in Germany, the shape of cooperation with China is not only influenced by the political perception of benefits resulting from bilateral relations and pursuit of interests of national actors in accordance with the spirit of Realpolitik, but also by the impact that non-state actors exert on the decisions taken by the government in Berlin. Germany sees China as its crucial economic partner in Asia, mainly because of China’s economic potential and impressive dynamics of growth in recent years. Ciesielska-Klikowska concludes that while German-Chinese cooperation has lasted several decades, the B&RI certainly gave a perfect frame for it. The chapter implies that Germany—through close cooperation with the People’s Republic of China—wants to

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maximize the benefits of the BRI and create a synergy effect, based on the ‘win-win’ principle—a position that China has declared as well. ˙ In Chapter 19, Ahmet Salih Ikiz discusses the role of Turkey in the context of the B&RI. Indeed, he declares that China’s One Belt, One Road initiative represents a strategic process towards strengthening the economic and political cooperation between regions that will be home to 83% of the world population, and it will provide a great impetus to Turkey as a crossroad. In his study, he draws some projections for the coming decades according to those arguments ˙ as well as the possible benefits of B&RI. Salih Ikiz concludes that the B&RI makes Turkey a potential transportation hub. Modernization and updating the customs union agreement with Europe could yield benefits for Turkey’s role in the B&RI project. Multi-level EU enlargement would improve dialogue on Turkish membership in the EU. Since EU members have different growth patterns and development levels, different levels of integration with member states may be needed. In Chapter 20, Carlos Branco presents a twofold objective: to understand how China cooperation with Afghanistan has served the purposes of the B&RI and to assess the role played by Afghanistan in the implementation of that project. The author begins by declaring that Afghanistan’s relative importance to the B&RI is not determined by geography but mainly by security reasons. Moreover, the author clearly states that China is very uncomfortable with the American presence in Central Asia. One significant part of ‘Chinese efforts in Afghanistan are aimed at restricting U.S. influence in the region’ (Shams 2017). China’s security interests in Afghanistan as a main gate to Central Asia are closely connected with its security interests in Central Asia. Branco asserts that China used the Shanghai Cooperation Organization as an instrument to attract attention to Central Asian security and concomitantly to Afghan security. While contributing to fight insecurity in Central Asia, the Shanghai Cooperation Organization simultaneously improved China’s own security, i.e., reducing and/or eliminating the footprint of competing powers close to its borders and the aspirations to autonomy in Xinjiang. In his final concluding remarks, the author clearly takes an important stand: Afghanistan is important to China, but the key reason is not the B&RI.

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In Chapter 21, Sandra Dias Fernandes and Vera Ageeva analyse the Russian perspective on the greater involvement of China in the Eurasian space, namely under the B&RI. They argue that the Russian turn to the East undertaken recently by the Kremlin has a complex prequel rooted in Russian modern history, when Moscow sought to establish a new international identity and place in global politics. According to the authors, the turning point in the reorientation of Russian foreign policy to the East took place in period 2008–2014. During this period, Russia entered into a profound conflict with European and American political elites, and arguably, this state-ofplay did not leave a room for any manoeuvre in world politics except the turn to the East. Fernandes and Ageeva discuss the BRICS, the World Trade Organisation, the Eurasian Economic Union and the Shanghai Cooperation Organization to make a very simple and clear point: China and Russia are close partners, but not allies.

In a nutshell, the editors aimed to deliver a varied input to the current literature on the B&RI. The array of contributors was selected according to three criteria. Firstly, their earlier work on the B&RI and among them, we have widely recognized authors. Secondly, with the right combination of geographical origins, academic backgrounds and professional experience, this volume brings together three dozen senior and young researchers, based on four continents: Africa, America, Asia and Europe, and sharing a passion for academic research in the field of the B&RI. Finally, among these researchers are new young talents, to whom Palgrave has given a chance to publish in a book with global range. Based on analyses provided by the contributors to this volume, the conclusion will outline the strengths and weaknesses of the B&RI. The editors will make policy-oriented recommendations to scholars and policymakers in the context of the new global order that the B&RI will certainly influence. There is in fact an additional contribution of the Chinese-led initiative: a framework for numerous regional material and immaterial silk roads, such as the Sahel silk road, the polar silk road, the Balkans silk road, the digital silk road, cultural silk road, green silk road, information silk road and the space silk road. However, it is important to bear in mind the words of Tanguy Struye and Dorothée Vandamme at the beginning of this book: this all about China as a status-seeking great power, looking at

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the year 2049 as a milestone, which represents the symbolic achievement of its rise to the status of the world’s greatest power. The editors wish to state that to ensure the strict observation of academic freedom of all contributors, all chapters are published in their original form, following review by the authors themselves. The editors hereby disclaim their own understanding and express their free adhesion to the ‘One-China policy’ since it is the official position of the United Nations. Macau SAR, China Braga, Portugal October 2019

Francisco José B. S. Leandro Paulo Afonso B. Duarte

Bibliography Leandro F. J. 2018. The OBOR Global Geopolitical Drive: The Chinese Access Security Strategy. In Julien Chaisse and J˛edrzej Górski (Eds.), The Belt and Road Initiative Law, Economics, and Politics (pp. 83–106). Brill Publishers. Statista. 2018. Bank Deposits in China from 2006 to 2016 (In Trillion Yuan). Statista [database]. Retrieved on September 19 from: https://www.statista. com/statistics/278004/bank-deposits-in-china/. Shams, Shamil. 2017. What Does China Want to Achieve in Afghanistan? Deutsche Welle. [online] Available at: https://www.dw.com/en/what-doeschina-want-to-achieve-in-afghanistan/a-39406187. Accessed 19 April 2019.

Contents

Part I The Belt and Road Initiative Concept 3

1

The New Silk Roads: Defining China’s Grand Strategy Tanguy Struye de Swielande and Dorothée Vandamme

2

The Words of the Belt and Road Initiative: A Chinese Discourse for the World? Cátia Miriam Costa

23

Global Strike vs. Globalization: The US-China Rivalry and the BRI Amit Gupta

45

Belt, Road and Ball: Football as a Chinese Soft Power and Public Diplomacy Tool Emanuel Leite Junior and Carlos Rodrigues

61

Understanding China’s “One Belt and One Road” Initiative: An “International Public Goods” Approach Li Xing and Zheng Xiaowen

85

3

4

5

xxv

xxvi

6

7

8

9

CONTENTS

The Financing of the Belt and Road Initiative: Blessings and Curses Enrique Martínez-Galán

111

BRI—Sustainable, Inclusive Growth, and Financial Sources Fernanda Ilhéu

149

Environmental Considerations of the Belt and Road Initiative Richard Hardiman

173

The Chinese Partnerships and “the Belt and Road” Initiative: A Synergetic Affiliation Yichao Li and Mário Barbosa Vicente

203

Part II

10

11

12

The Belt and Road Initiative and the European Union

The Belt and Road Initiative: A New Platform in EU-China Cooperation? Carmen Amado Mendes and Lorenzo Gagliano Maritime Cooperation in the European Union-China Relations and the 21st Century Maritime Silk Road: What is at Stake? Lívia Brasil Carmo Grault and Laura C. Ferreira-Pereira EU Legal Obstacles to the Belt and Road Initiative: Towards a China-EU Framework on the Belt and Road Initiative Sten Idris Verhoeven

239

255

283

CONTENTS

Part III

13

The Belt and Road Initiative and Latin America, North Atlantic, Central Europe and Central Asia

Latin America and the Caribbean Bring the Western Hemisphere into the Belt and Road Gretchen Small

14

China and the Great Urban Projects in Cabo Verde Ivete Silves Ferreira and João Paulo Madeira

15

The Ultimate European Border: The Belt and Road Initiative Discovers Portugal Francisco José B. S. Leandro and Paulo Afonso B. Duarte

16

17

18

19

xxvii

319

343

363

China and the Portuguese Atlantic: The BRI’S Last Puzzle Piece Jorge Tavares da Silva and Rui Pereira

389

Assessing China’s ‘16+1 Cooperation’ with Central and Eastern Europe: A Public Good Perspective Weiqing Song and Lilei Song

411

Germany’s Attitude Towards the Belt and Road Initiative: The Impact of Non-state Actors on German Foreign Policy Towards China Joanna Ciesielska-Klikowska New Silk Road and Prospects for Turkey ˙ Ahmet Salih Ikiz

433

459

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CONTENTS

20

Afghanistan and the Belt and Road Initiative Carlos Martins Branco

489

21

Facing China in Eurasia: The Russian Perspective Sandra Dias Fernandes and Vera Ageeva

523

Index

541

Notes on Contributors

Vera Ageeva (Russian Federation) holds master’s degrees in philosophy, French, and in international relations. She received a Ph.D. in political science from St. Petersburg State University in 2016 and served as international relations expert at St. Petersburg City Administration in 2008–2016. Since 2017, she has been Associate Professor at the Higher School of Economics (St. Petersburg), and since 2019 deputy head of the Department of Political Science at the same institution in St. Petersburg. Her most recent studies focus on the soft power of competing actors in Eurasia. Carlos Martins Branco (Portugal) is a Major General (retired) who served in the Portuguese Army. Currently, he is a Ph.D. candidate at Universidade Nova de Lisboa. He is a researcher in the Portuguese Institute of International Relations (IPRI) and associate researcher in the National Defense Institute (IDN). He authored two books and more than 70 scientific articles on conflict resolution, security and defence matters published in books, periodicals and newspapers, and co-edited four books. He lectures at various higher education schools and defence institutions on security and defence, and international relations (United Nations Peacekeeping, NATO, CSDP and conflict resolution) and was the scientific co-director of postgraduate studies in media and crisis management at Instituto Superior de Ciências Sociais, do Trabalho e da Empresa (ISCTE). He was the Director of the Cooperation and Regional Security Division of the International Military Staff at the NATO HQ (Brussels), xxix

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Deputy Director of the Portuguese War College and National Defence Institute and is a member of various think tanks and civic organizations. Joanna Ciesielska-Klikowska (Poland) is Assistant Professor in the Department of Asian Studies at the University of Lodz, Poland, scholarship holder of the Deutscher Akademischer Austauschdienst (DAAD) at the Technische Universität Chemnitz, visiting lecturer at the Universität des Saarlandes in Saarbrücken and Otto-von-Guericke-Universität in Magdeburg, and member of the Polish Society for International Studies and Poland-Austria Society. Cátia Miriam Costa (Portugal) is Guest Professor at ISCTE-IUL and a researcher in the Centre for International Studies—Instituto Universitário de Lisboa. She is the director of the Chair Global Ibero-America of the European Institute of International Studies (Stockholm). Her research focuses on international communication and discourse analysis, specifically concerning the cases of Macau, Hong Kong and China. She is also developing her academic work on China’s international relations and Macau’s public diplomacy towards Eurasia, the Portuguese-speaking Countries, and Latin America. Jorge Tavares da Silva (Portugal) holds a Ph.D. in international relations from the Faculty of Economics at the University of Coimbra, in the specific field of international politics and conflict resolution: ‘Channels of Non-Governmental Intermediation in the Transformation of Sino-Formosan Conflict: The Case of the Taiwanese Business Community’ (dissertation, 2012) and degree in international trade at the Institute of Information and Management Sciences (ISCIA): The Impacts of China’s Integration on the Global Economy (monograph, 2004). He is a researcher at GOVCOPP—Research Unit on Governance, Competitiveness and Public Policy. He is Visiting Assistant Professor at the University of Aveiro, Department of Social, Political and Territorial Sciences (DCSPT), and Master of Chinese Studies and also teaches at the Faculty of Letters, University of Coimbra. From 2012 until 2017, he taught at the University of Minho (Braga, Portugal). He is a founding member of the Observatory of China (Portugal) and the Center for Studies and Research on Security and Defense of Tras-os-Montes and Alto Douro (CEIDSTAD). Between 2012 and 2016, he was President of the Observatory for Trade and International Relations (OCRI); member of the Scientific

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xxxi

Council; coordinator of the Department of Management and International Relations and coordinator of ISCIA’s master’s in Security, Defense and Conflict Resolution programme; auditor, National Defence Course of 2013–2014, National Defence Institute (IDN); member of the European Association for Chinese Studies (EACS), the Association of Chinese Political Studies (ACPS) and the Portuguese Institute of Sinology (IPS); and member of the Editorial Board of the Zhongguo Yanjiu—Journal of Chinese Studies and Tempo Exterior (Spain). He sat on the Scientific Committee of the 20th Congress of the European Association of Chinese Studies held in Portugal (2014). He is the author of multiple articles and chapters of books in international journals, particularly on political, economic and social issues facing contemporary China. He is the author of the book BRICS and the New International Order (Caleidoscópio, 2015) and co-author of the book Em Bicos de Pés e de Olhos em Bico—Experiences and Living Together Between the Chinese and Portuguese (Mare Liberum, 2012). Tanguy Struye de Swielande (Belgium) is Professor in International Relations at Université Catholique de Louvain and director of the Centre for Studies in International Crises and Conflicts (CECRI). Paulo Afonso B. Duarte (Portugal) is Assistant Professor at Universidade Lusófona do Porto and Guest Professor at the University of Minho. He is a postdoctoral researcher at Centro de Investigação em Ciência Política, University of Minho. He holds a Ph.D. in political science (Catholic University of Louvain). His research focuses on China’s Belt and Road Initiative and Central Asia, where he has carried out an extensive on-the-ground research. Recent publications are: La Nouvelle Route de la Soie chinoise et l’Asie centrale, Presses Universitaires de Louvain, 2018; ‘Whose Silk Road? The Chinese, US, European Union and Russian Strategic Projects for Regional Integration in Central Asia’, in C. Mendes (ed.), 2018, pp. 38–49; The New Silk Road in the Context of East Asian Relations and Wider International Implications, Routledge; ‘China’s Momentum: The “One Belt One Road” Triple’s Securitisation, pp. 143– 165, and Conclusion written with Li Xing, ‘The OBOR in the Politics of Fear and Hope’, pp. 279–289, in Li Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative, Palgrave, 2018.

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Sandra Dias Fernandes (Portugal) has been Professor of International Relations and Political Science at the University of Minho since 2001. She has a Ph.D. in political science, with a specialization in international relations, from Sciences Po (Paris). She received the Jacques Delors Prize 2005 for research on the relationship between the European Union and Russia, focusing on political dimensions and security (in The European Union, Russia and NATO: The Institutionalization of a Strategic Relationship, Lisbon: Principia, 2006). She was assigned two consecutive mandates to provide direction for the B.A. and M.A. programmes in international relations, and she was also Deputy Director of the Department of International Relations and Public Administration at the University of Minho. She was also a member of the Steering Committee of the Ph.D. in political science and international relations of the University of Minho. She was elected president of the Section of International Relations of the Portuguese Association of Political Science (APCP) in 2016–2018 and is currently Deputy Director of the Research Centre in Political Science (CICP). Her research interests focus on European studies, the post-Soviet space, the European Union’s external actions, the relationship between the European Union and Russia, foreign policy analysis, international security and multilateralism. She has published books, book chapters and papers, including Estonia and Portugal in Europe: Escaping Peripherality, Capitalizing on Marginality, Journal of Contemporary European Studies (2019, with A. Mkarychev); ‘The European Union and Russia during the Two Waves of Enlargement: New Political and Implementation Rationales on Old Issues’, in T. Hasimoto & M. Rhimes (Eds.), Reviewing European Union Accession (pp. 275–292; 2017), Leiden and Boston: Brill. She has also been a speaker at national and international scientific conferences, seminars and lectures, and given interviews for national and international media. Ivete Silves Ferreira (Cabo Verde) received a Ph.D. in geography from the Federal University of Pernambuco (Brazil) and his dissertation was entitled ‘Great Urban Project in a Small Island Country: The Chinese Project Cape Verde Integrated Resort and Casino (2014/2018)’. From 2006 to 2011, she was a member of the Cape Verdean Parliament and member of the Specialized Commission of the Economy, Environment and Land Use. Between 2012 and 2014, she coordinated the Urban Development Service in the Directorate General of Spatial Planning and Urban Development (DGOTDU). She is currently Technician at the

NOTES ON CONTRIBUTORS

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National Institute of Territorial Management (INGT) in Cape Verde and member of the Research Group on Innovation, Technology and Territory (GRITT) of the Federal University of Pernambuco (UFPE). Laura C. Ferreira-Pereira (Portugal) is Full Professor of Political Science and International Relations at the University of Minho and Visiting Professor of the University of São Paulo. She has published extensively on the EU’s Foreign Policy (CFSP/CSDP) and Portuguese Foreign Policy in the journals such as International Politics, Journal of Common Market Studies, Journal of European Integration, Cooperation and Conflict, International Politics, Global Society, European Politics and Society and European Security as well as in several edited volumes. Her current research explores the nature and significance of the EU’s strategic partnership diplomacy, Europeanization within and beyond Europe, comparative regional governance and integration processes, and Euroscepticism and its impact upon the process of European (dis)integration. She is a member of the editorial board of the journals Contemporary Politics and European Review of International Studies. She is a founding member of the European International Studies Association (EISA). Lorenzo Gagliano (Italy) completed his bachelor’s degree in political science and received his master’s degree in international relations at the University of Palermo (Italy). His thesis was entitled ‘The Belt and Road Initiative, what role for the European Union?’ He furthered his academic career with numerous postings abroad: Kozminski University in Warsaw (Poland), Finnova Foundation in Brussels (Belgium) and the University of Coimbra as a visiting researcher. He is a member of the Mediterranean Institute for International Studies (IMESI) based in Southern Italy where he is a researcher and adviser of the board. His research activities mainly concern China and the European Union. Lívia Brasil Carmo Grault (Federal Republic of Brazil) holds a Bachelor of Laws and Social Science degree from the Federal University of Rio de Janeiro. She is pursuing a master’s degree in international relations at the University of Minho and is currently on an exchange programme at the University of Macau. Her current research interest is the European Union’s strategic partnerships with Brazil and China.

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Amit Gupta (United States of America) is Associate Professor in the USAF Air War College, Alabama. His writings have focused on arms production and weapons proliferation, South Asian and Australian security policies, diaspora politics, popular culture and politics and, more recently, on the US-China rivalry and the impact of demography on US foreign policy. His articles have appeared in Orbis, Asian Survey, Security Dialogue, The Round Table and Mediterranean Quarterly. He has published seven books (as author or editor), the most recent of which are Air Power: The Next Generation, Amit Gupta (ed.), Howgate Publishing, 2019; Maritime Heritage and Challenges in the Indian Ocean and the Western Pacific, Howard M. Hensel and Amit Gupta (eds.), Routledge, 2018. Richard Hardiman (Israel) is Professor at Lisbon’s NOVA School of Business and Economics in Portugal, and also a senior lecturer and research fellow of the Hebrew University of Jerusalem, Israel. His research areas include: China’s geopolitical and economic development and impact upon global natural resources and environment, geopolitics of energy, fossil fuels and impact upon climate change, water and air pollution. He has lived and worked in China over a period of 30 years both with the European Commission and as a consultant to central and provincial governments. ˙ Ahmet Salih Ikiz (Turkey) received a Ph.D. in economics from Dokuz Eylül University of Turkey in 2000. He has been involved in Civic Education Project of OSI in 2001 in Bulgaria. He was visiting faculty in Macedonia, Hungary and Russia. He edited several books such as Political Economy of Muslim Countries and Economic Dynamics of Global Energy Geopolitics. He has also written books on the Turkish economy and has ˙ plans for more of such books. He used to work at Ege University. Dr. Ikiz is currently faculty in the Department of Political Sciences and International Relations in Mu˘gla Sıtkı Koçman University. Fernanda Ilhéu (Portugal) is Professor at the Lisbon School of Economics and Management (ISEG), Lisbon University, and a researcher at the Lisbon School’s Centre for African, Asian and Latin American Studies. At ISEG she also coordinates ChinaLogus, a Business Knowledge & Relationship Center. She completed her undergraduate studies in economics at ISEG and received her Ph.D. degree in management and marketing from Seville University. She is the President of the New

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Silk Road Friends Association, a think tank on the B&R Initiative. Ilhéu has lived in Macao for 18 years, serving in the government and directing private business institutions. Francisco José B. S. Leandro (MSAR, People’s Republic of China) received a Ph.D. in political science and international relations from the Catholic University of Portugal in 2010. From 2016 to 2017, he took part in a post-doctoral research programme on state monopolies in China—One belt one road studies. In 2014 and 2017, he was awarded the Institute of European Studies in Macau (IEEM) Academic Research Grant, which is a major component of the Asia-Europe Comparative Studies Research Project. From 2014 to 2018, he was the Programme Coordinator at the Institute of Social and Legal Studies, Faculty of Humanities at the University of Saint Joseph in Macau, China. He is currently Associate Professor and Assistant Dean of the Institute for Research on Portuguese-Speaking Countries at the City University of Macau, China. His most recent books are Steps of Greatness: The Geopolitics of OBOR (2018) and The Challenges, Development and Promise of Timor-Leste (2019). Emanuel Leite Junior (Federal Republic of Brazil) is currently a Ph.D. student studying public policies at the DCSPT, University of Aveiro. He is also an integrated researcher in the Governance, Competitiveness and Public Policy (GOVCOPP) research unit at the University of Aveiro. He holds a bachelor’s degree in law from the Catholic University of Pernambuco and a bachelor’s degree in social communication—journalism, from the Mauricio de Nassau University Center. He is the author of two books As cotas de televisão do campeonato brasileiro and A história do futebol na União Soviética. Yichao Li (People’s Republic of China) is a Ph.D. candidate at the Institute for Research on Portuguese-speaking Countries, City University of Macau. She has received a master’s degree in comparative civil law (in Chinese) from the University of Macau and a Bachelor of Laws, from Nanjing University of Information Science & Technology, China. The main research area of her master’s degree was the testamentary trust system in mainland China. Her current research area is ‘the Belt and Road’ initiative and Portuguese-speaking countries and she has developed an academic interest in Chinese ‘partnerships’ in the context of the B&RI.

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João Paulo Madeira (Cabo Verde) is Assistant Professor at the University of Cape Verde (Uni-CV), and researcher at the Center for Public Administration and Public Policies (CAPP-ISCSP-UL) and the Centre for Political and Social Sciences Research (CICSP-Uni-CV). He has received Ph.D. in social sciences, University of Lisbon, Institute of Social and Political Sciences (ISCSP-UL), is a postdoctoral fellow at the Calouste Gulbenkian Foundation, Faculty of Science and Technology, New University of Lisbon (FCT-UNL) and is a member of the Network of REALP— Network of Environmental Studies of the Portuguese-Speaking Countries. Enrique Martínez-Galán (Philippines) has received a Ph.D. in economics from ISEG-Lisbon School of Economics and Management of the University of Lisbon. He is also a researcher, lecturer, reviewer and author of several books and book chapters in development finance, international trade and foreign direct investment and co-author of several scientific articles published in the following academic journals: The World Economy, Applied Econometrics and International Development and Portuguese Economic Journal. The author has more than 15 years of experience in development finance, financial macro policy, project finance, business development consulting and international trade and investment policies, as well as in strategic consulting for several national governments in Africa, Asia and Europe. He is currently the Alternate Executive Director on the Board of Directors of the Asian Development Bank (Philippines) and on special leave from the Finance Ministry of Portugal. He has previous professional experience in: the Asian Infrastructure Investment Bank; European Investment Bank; World Bank; European Commission; Council of the European Union; Portuguese and Cape Verdean Ministries of Foreign Affairs; and the Portuguese Agency for Public Debt. Carmen Amado Mendes (Portugal) is Professor and Head of the International Relations Office at the School of Economics of the University of Coimbra. She also designed and coordinated the course ‘China and the Portuguese-speaking Countries in World Trade’. She received her Ph.D. from the School of Oriental and African Studies, University of London; her master’s degree from the Institut des Hautes Études Européennes, Université Robert Schuman, France; and her bachelor’s degree from the Higher Institute of Social and Political Sciences—University of Lisbon

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(Portugal). She is the co-founder of the consulting company ChinaLink and of the Observatory for China in Portugal. Rui Pereira (Portugal) is the Head of the International Relations Unit at the Directorate General for Economic Activities within the Portuguese Ministry of Economy. He is the Portuguese Focal Point of the Economic and Trade Forum between China and the Portuguese-speaking Countries (‘Macau Forum’). He has a Master of Arts in European studies and a completed postgraduate course on contemporary China. He is a founding member of the Observatory of China in Portugal. His research interests include Portugal-China economic relations, economic relations between China and the Portuguese-speaking countries, the Chinese economy and economic diplomacy. Carlos Rodrigues (Portugal) is Assistant Professor at the DCSPT, University of Aveiro. He holds a Ph.D. in social sciences and conducts research at the Research Unit GOVCOPP. He carries out research work on territorial innovation systems, focusing on the triple helix dynamics affecting socio-economic development and on the roles science, technology and innovation policy play in the configuration of innovation systems. He participates in several national and international R&D projects and has accumulated much experience in carrying out research for many public and private non-academic entities. He has published in several international journals. He teaches courses in the areas of territorial innovation systems, science and technology policy, planning theory and Asian studies (science, technology and innovation). He is currently Head of the Department of Social, Political and Territorial Sciences, Coordinator of the Center for Asian Studies and Master in Chinese Studies at the University of Aveiro. Gretchen Small (United States of America) has been a senior IberoAmerican analyst for Executive Intelligence Review (EIR) since its founding in 1974, specializing in US-Latin American relations, military and anti-drug policy, and in recent years, the impact of the BRICS and China’s Belt and Road Initiative on the region. She was the principal editor of EIR’s 1987 White Paper on the Panama Crisis and co-editor of the book El complot para aniquilar a las Fuerzas Armadas y a las naciones de Iberoamérica (The Plot to Annihilate the Armed Forces and the Nations of Ibero-America), published by EIR in 1993 and in 1994 by the Ministry of Defence of Mexico. She was also a co-author of the

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Schiller Institute’s 2018 Special Report, The New Silk Road Becomes the World Land-Bridge: A Shared Future for Humanity, Vol. II. She attended Swarthmore College in Swarthmore, Pennsylvania. Lilei Song (People’s Republic of China) is Associate Professor at the School of Political Science and International Relations, Tongji University, Shanghai, China. She holds a Ph.D. from Fudan University, China, and was postdoc at the Corvinus University of Budapest in 2014–2015. Her research interests include: China-EU relations, Chinese public diplomacy and European Union neighbourhood policy. She is the author of European Neighborhood Policy and EU’s External Governance, Shanghai Renmin Press, 2011. Weiqing Song (MSAR, People’s Republic of China) is an associate professor of political science and holds the Jean Monnet Chair in European politics at the University of Macau, Macao SAR, China. His research focuses on Chinese foreign policy, with respect to transnational norms and global governance. He also conducts research on European politics, with an emphasis on the European Union and European foreign policy. He has published widely in these areas. Dorothée Vandamme (Belgium) is a visiting lecturer teaching international relations at the Université de Mons and the Université Catholique de Louvain. She is also a research associate at the CECRI and Genesys Network and research fellow at the European Foundation for South Asian Studies. Sten Idris Verhoeven (Belgium) obtained his law degree at the KU Leuven in 2002. In 2002–2003, he studied international relations and conflict prevention at the same university. From 2003–2009, he was a research and teaching assistant at the Institute for International Law at the KU Leuven. In September 2009, he joined the University of Macau as senior instructor. In 2013, he became an assistant professor and teaches international and European Union law. His interests are in legal theory as applied to international and EU law, constitutionalism in international and EU law, human rights and international criminal law. Mário Barbosa Vicente (Cabo Verde) is a Ph.D. candidate at the Institute for Research on Portuguese-speaking Countries, City University of Macau. He has received a Master of Business Administration degree from the University of Saint Joseph in Macau and a Bachelor of Tourism

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Management degree from Estoril Higher Institute for Tourism and Hotel Studies, Portugal. His current research area is on the China-African Portuguese-Speaking Countries Partnership and Belt and Road Initiative. Zheng Xiaowen (People’s Republic of China) is a Ph.D. fellow at the School of Government, Beijing Normal University (China). She is also a research affiliate attached to the Research Centre on Development and International Relations, Faculty of Social Sciences, Aalborg University. Li Xing (Denmark) is Professor and the Director of the Research Centre on Development and International Relations, Faculty of Social Sciences, Aalborg University. He is also the Editor-in-Chief of the Journal of China and International Relations. In addition, he is adjunct professor at a number of Chinese universities, as well as the Director of the Research Center for Soft Power and Regional Development at Jiaxing University, China. His research interests include international political economy, international relations, emerging powers and world order. Apart from publishing numerous articles in international and Chinese journals, he has edited a number of books in a series on the rise of China/emerging powers and the existing world order.

List of Figures

Fig. 2.1

Fig. 2.2

Fig. 2.3

Fig. 6.1

Fig. 6.2

Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 8.1

Number of articles/chapters about the B&RI in Scopus database by year (Source The author. Data from Scopus, 12 July 2019) Number of articles/chapters about B&RI in Scopus database by discipline (Source The author. Data from Scopus, 12 July 2019) Articles about the B&RI published in Scopus journals by affiliation (Source The author. Data from Scopus, 12 July 2019) The Belt and Road Initiative: six economic land corridors and three sea routes spanning Asia, Europe and Africa (Source Wang [2017]) The Belt and Road member countries (as of May 28, 2019) (Source Author, based on the official portal of the BRI, in https://eng.yidaiyilu.gov.cn/info/iList. jsp?cat_id=10076&cur_page=1) EU AID 2007–2019 per continent (Source EU Aid Explorer [2019]) Angola Mode (Source Author’s adaptation from Foster et al. [2009]) SEZ Economic Development Model (Source Hao and Ilhéu [2014]) Types of BRI infrastructure projects (Source Greening the Belt and Road Initiative report, WWF-HSBC [2018, p. 8])

24

25

26

115

116 156 159 161

176

xli

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LIST OF FIGURES

Fig. 8.2

Fig. 8.3

Fig. 8.4

Fig. 8.5 Fig. 8.6 Fig. 9.1

Fig. 18.1

Fig. 18.2

Fig. 19.1 Fig. 20.1

Fig. 20.2

Graph 18.1 Map 19.1

Map 19.2 Picture 19.1 Picture 19.2

BRI infrastructure heat map (Source Greening the Belt and Road Initiative report, WWF-HSBC [2018, p. 14]) Green bond issuance from BRI countries (by Q3 2018) (Source Green bonds in Climate Bonds Initiative) Funding BRI by source using 2016 data (Source ICSB, Standard Bank in partnership with Oxford Economics, April 2018) Funding BRI by source using 2016 data (Source Financial Times, May 2017) Investments in energy in 56 BRI countries 2014–2017 (Source Gilbert et al. World Resources Institute 2018) Growth in the number of countries that have established, upgraded, or deepened partnerships with China (1993–July 2019) (Source By the authors) Germany’s and China’s GDP annual growth rate (2010–2018) (Source TRADINGECONOMICS.COM) Amount of German imports and exports from/to China in 2005–2008 (in billions of EUR) (Source Own study based on Statista [2019]) OFDI of China (Source Zhang 2017) Afghanistan’s exports to China (2001–2017) (Source OEC [https://oec.world/en/visualize/stacked/ hs92/export/afg/chn/show/2001.2017]) Afghanistan’s imports from China (2001–2017) (Source OEC [https://oec.world/en/visualize/ stacked/hs92/import/afg/chn/show/2001.2017]) The “triple helix model” of the German cooperation with China

176

181

182 184 185

210

441

443 472

502

502 437

Baku–Tbilisi–Kars railway (Source Giorgi Balakhadze, https://commons.wikimedia.org/w/index.php?curid= 52167737) B&RI Corridors (Source http://natoassociation.ca/ bridging-eurasia-the-new-silk-road/)

480

Turkish GDP in globe Top 10 economies in world by 2030

464 468

481

List of Tables

Table Table Table Table Table Table

3.1 3.2 5.1 5.2 5.3 5.4

Table 7.1 Table 8.1 Table 9.1

Table 9.2 Table 9.3 Table 9.4

Table 9.5

2018 major holders of US treasury bills in $ billions China’s top trading partners in $ billions Summaries of IPGs from different theory schools Governance mechanisms newly established under OBOR Increased financial support from Beijing to OBOR OBOR road and rail projects, completed, on-going, and planned People affected by grave food insecurity in 2019 (million people) Countries included in the six main economic corridors of the BRI List of countries that have established partnerships and countries with deepened or upgraded partnerships with China List of countries that have established partnerships with China (according to partnership types) List of countries that signed cooperation documents related to the BRI with China List of countries that have established partnerships with China and signed cooperation documents related to the BRI (N = 81) The situation in Portuguese-speaking countries (PSC) for establishing partnerships with China and signing cooperation documents related to the BRI

50 51 94 99 100 102 156 175

208 214 219

221

226

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LIST OF TABLES

Table 9.6 Table 17.1 Table 19.1

List of countries that practice strategic docking of the BRI onto their national policies Three approaches to the provision of global public goods China’s outward FDI to B&RI countries (USD mn)

232 417 472

PART I

The Belt and Road Initiative Concept

CHAPTER 1

The New Silk Roads: Defining China’s Grand Strategy Tanguy Struye de Swielande and Dorothée Vandamme

Introduction The first decade of the twenty-first century was characterized by the advice given by Deng Xiaoping: “Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership”. However, since the economic crisis of 2008, China has become more assertive on the international scene, especially in the economic, military and political fields. The latter has been accompanied by a new, nationalistic form of discourse, which perspired throughout President Xi’s speech to the 19th Congress in October 2017. Indeed, careful analysis shows China’s willingness to assert itself as a powerhouse in the making. Specific excerpts, presenting the country as a future “socialist country, prosperous and powerful”, willing

T. S. de Swielande (B) · D. Vandamme Université Catholique de Louvain, Louvain-la-Neuve, Belgium e-mail: [email protected] D. Vandamme Université de Mons, Mons, Belgium e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_1

3

4

T. S.

DE

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to achieve the “Chinese dream”, being “closer, more assured and more capable than ever to achieve the objective of the great national renaissance”, characterize this tendency. In order to carry out these objectives, Xi Jinping establishes that the military will have to “achieve the modernization of the army and national defence by 2035, and make the army a world-class power by the middle of the century”. Indeed, 2049 will see China celebrate the centenary of its Popular Republic. It is upon this date that its authorities wish to achieve the status of number one on the international scene and realize the “Chinese Dream”, a project put forward by Xi Jinping since ascending as the leader of the Chinese Communist Party (CCP) in 2012. The chapter analyses China’s Belt and Road Initiative (BRI) as Beijing’s grand strategy to assert and legitimize its foreign policy objective of becoming world leader by 2049. In parallel to Chinese rhetoric about BRI being a project that will benefit the international community and which is in line with the current international order, realpolitik factors also inform and drive the project, as China reinforces its exports, increases its spheres of influence, and increasingly sets tomorrow’s norms. In doing so, China projects an image of a country with the objective and power resources of a great power that is ready and willing to take the lead in international affairs. The chapter argues that China mobilizes and operationalizes all the dimensions of power to implement its grand strategy and achieve its aim. Thus, coercion, threats, predatory economics, soft power projection, norms contestation and rules- and institution-building are concealed by social and discursive power of cooperation and connectedness.

A Grand Strategy “with Chinese Characteristics”? As a Chinese idiom goes, “the real good strategist is the one whose strategy isn’t even noticed, and which we don’t even consider to praise” (Jullien 2015). Despite Beijing’s denial of a grand strategy (both by officials and academia), many factors point to the BRI as being China’s grand strategy. Many researchers doubt or refute the idea that China could have a grand strategy because it appears to be too difficult to decipher and not explicit in speeches and official documents. These are the symptoms of a Western analytic framework where every step of the policy-making process is planned beforehand, and tend to be openly stated. It also results from the reasoning that China is a case sui generis in global affairs, a country which uniqueness prevents us from applying certain conceptual

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frameworks. Such state of mind is evident when we consider the number of cases that are characterized “with Chinese characteristics”, arguably to make the Chinese case stand out from any other case studies. This mindset restricts our understanding of China. If Chinese politics, whether domestic or external, are so distinct to other countries’, it is doubtful that we can grasp either China’s behaviour or its relation with other international actors. Presumably in fact, all countries are sui generis case studies, therefore constraining scholars into a relativist epistemology which prevents knowledge structuration and understanding of Chinese behaviour. Our understanding of China’s behaviour is the following: while China can be considered as a distinctive case in many instances, it is also a twenty-first-century state with many similarities to its counterparts. All countries are impacted by their history, and historical narratives are used across the globe to justify foreign policy decisions. State identity is built upon both the history of the state and its interactions with the outside world. Likewise, most countries1 have a foreign policy objective, ranging from maintaining the status quo of the international order to reforming it to completely overthrowing and replacing it. What is however specific to China is the ability that it has had in developing a long-term, coherent and structured road map to inform and guide its foreign policy. Beijing has shown an exemplary ability to integrate in one coherent frame the mobilization and implementation of its resources, thereby both structuring its world vision and legitimizing its foreign policy for domestic audiences. Layne identifies these two conditions (coherence of world vision and legitimation vis-à-vis domestic population) as necessary for an effective and well-defined grand strategy (in Wang 2006, p. 3). Grand strategy must help build domestic support and bring clarity to external policy by determining the pathways that give the political elite the tools to act according to the state’s values and identity. Grand strategists have a precise understanding of the main interests of the state that they wish to defend, as well as a clear perception of the existing threats and the political, military and economical means at their disposal to defend those interests. In the long run, this means of interpreting allows to (re)define priorities. In the absence of such structuring frame, answers to specific

1 It is arguable that some countries have very limited foreign policy objectives vis-àvis the global international system, other than ensuring that the order guarantees their survival—one of the few objectives that is common to all countries.

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situations risk being incoherent and reactive, while resources allocated to these responses are mainly planned for the short term. Pointing to the stark difference in Chinese and Western perceptions, François Jullien highlights the specificities of Chinese culture and philosophy and their impact on strategic thinking. Unlike the Western world, which takes part in an established theory–practice relation, China values the situation’s potential: “as soon as the situation reveals itself as not only a frame – or even a context – but an active potential, its relationship with a ‘subject’ thus reconfigures itself” (Jullien 2015). According to Womack, Western thought determines itself by a “transaction logic”, which is characterized by a contractual relationship, and a will to create a win–lose, cost–benefits relation (cited in Pan 2016, p. 306). In other words, Western grand strategies will often be preestablished in well-delineated frames, which proves difficult to get out of—the facts having to match, sometimes forcefully, the conceptualization or modelling. Chinese thinking emphasizes the relationship itself and its mutual benefits by playing on respect in order to obtain a relative advantage in the long run. Taking a long-term approach to relationships, China prefers partnerships to alliances, because “one makes enemies when one makes alliances” (Pan 2016, p. 306). Beijing has no friends or enemies; it has partners. Such an approach implies a “constant implication” and the importance of “discernment”. Moreover, the dimension of reciprocity lies at the core of the aforementioned situation potential (Jullien 2015). This also explains China’s defence of the principle of non-interference, as well as its refusal to take a firm and definitive stand on international affairs (e.g. Syria, Libya…). By refusing to see the world through a binary grid (good-evil, democracy-dictatorship), China continually secures room for manoeuvre and avoids having to force or impose a situation. This in turn enables to benefit from the situation’s potential, an ability the Western world cannot pride itself upon. The 2049 Chinese objective to achieve the status of the world’s greatest power is the country’s ultimate objective, the one that informs its behaviour both in domestic and external affairs. The BRI embodies the intellectual architecture giving structure to Chinese foreign policy. It in fact helps the Chinese nation find its path in the world. While adaptable and flexible to each situation, the BRI project remains a macro view. In that sense, it is not too specific and guarantees flexibility and leeway; it simplifies reality and supposes specific action and implementation by setting clear priorities. The project is long term and balances means and ends, and costs and benefits, to avoid overstretch. In that sense, if it does

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indeed outline the broad lines or logics for its foreign policy (according to the country’s objective of reaching the “Chinese dream” by 2049), it relies much more on each situation’s potential, making its overall process more difficult to decipher. By bringing clarity to the country’s foreign policy, China’s BRI ensures continuity across generations of political leaders. As pointed out above, it also legitimizes its external actions to national audiences, thereby ensuring domestic approval of resource allocation and mobilization. In one word, China’s BRI project is a road map for China’s engagement with the world; in that sense, it is the country’s grand strategy. Feaver defines a grand strategy as A coherent statement of the state’s highest political ends to be pursued globally over the long term. Its proper function is to prioritize among different domestic and foreign policy choices and to coordinate, balance, and integrate all types of national means – including diplomatic, economic, technological, and military power – to achieve the articulated ends. In effect, grand strategy provides a framework of organizing principles that in a useful way help policy makers and society make coherent choices about the conduct of foreign policy. (Quoted in Martel 2015, pp. 33–34)

To sum up, while it is certain that China’s BRI project is both contextand country-specific, and is drafted according to certain Chinese features, it should not preclude us from analysing it as a grand strategy. Indeed, it holds characteristics particular to grand strategies, such as its long-term vision, providing the elite and society clarity and consistency in the country’s foreign policy, and delineates a structured and coherent world vision. While clearly articulated and well-defined, it is broad enough to allow flexibility and leeway, and legitimize the state’s allocation and mobilization of resources. Grand Strategy on the Ground Defining a grand strategy supposes a continuous reassessment of ends and means. A grand strategy cannot be seen as fixed, passive, immobile or immovable, it is an ongoing process of adaptation, revision, reworking and adjustments because of new domestic and international realities and circumstances (Martel 2015, p. 41). For Rumelt, this implies:

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1. A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical; 2. A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis; 3. A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy. (Rumelt 2011)

Consequently, if articulating a grand strategy is necessary, implementing it holds as much importance, i.e. “to coordinate the actions of the state among and between different types of national power” (Martel 2015, p. 35) (cf. infra.). This coordination requires effective and strong leadership which is able to articulate the country’s objective, gather support for the definition and implementation of foreign policy. Tellis, Bially, Layne and McPherson insist on “the importance of implementing a goal”, in the sense that “the ability to make a decision or set a goal is not the same as the ability to take action on that decision or to actually fulfil the goal” (Tellis et al. 2000, p. 113). The state has to be politically able to “extract wealth from its society in order to develop the comprehensive resources base necessary for a productive economic system” in order to avoid the paradox of unrealized power (ibidem., p. 130). Grand strategy is thus an overall process that includes three steps: (1) strategic analysis, i.e. “a theoretically informed understanding of the environment in which an organization is operating, together with an understanding of the organization’s interaction with its environment in order to improve organizational efficiency and effectiveness by increasing the organization’s capacity to deploy and redeploy its resources intelligently” (Wheelen and Hunger 2004; see also Worrall 1998); (2) strategic planning, i.e. the definition of tactics to be applied and the identification of resources and their use to reach the tactical objectives (Haycock et al. 2012, p. 1); and (3) strategic implementation, i.e. the operationalization of tactical objectives on the ground. Adaptation to context and specific situations is determined at the level of strategic analysis and then percolates all the way down to implementation. The coherence and structuration of policies and their consistency with the country’s foreign policy objectives guarantees their integrativeness. Analytically, this is how one can identify a country’s grand strategy: not by the fact that policy-makers state it out loud, as they rarely, if ever, do, but because all the policies that

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are being implemented by the state answer to the same logic and are at least coherent among each other, at best integrative in the sense that they complement and reinforce one another. Chinese Statecraft: Assessing Xi Jinping’s Centrality This implies a leader who brings a sense of direction, continuously adapts, does not lose sight of the grand strategy, is conscious of the existing gap “between the current reality and the intent for the future” and one who is “open to new experience” (Liedtka 1998, p. 122). Statecraft is primordial: the government’s ability to effectively use its resources in pursuing its goals is critical in order to mobilize the country’s power potential and achieve its final objectives. The type of political regime influences decision-making and therefore the efficiency of the use of resources: institutional openness, citizens involvement, legal and institutional constraints, rights of individuals…all are the intervening factors. Democratic leaders may in that sense face more structural constraints: power diffusion (bargaining, votes, checks and balances, countervailing powers), constitutional limitations at the executive level, tradition of compromise, decentralization, power sharing, etc. While autocracies have their fair share of divisions, these are mostly situational and not institutional. Profound divisions that lead up to full-fledged revolts are exceptions; arguably, they deeply change the country’s foreign policy objectives. We can thus conclude that non-democratic countries are less hampered and freer in the enunciation and implementation of their foreign policy, thereby making it easier for non-democratic leaders to follow the guideline provided by the grand strategy. For instance, in the past Germany and Japan have been able to mobilize their resources efficiently; today, “China and Russia represent a return of economically successful authoritarian capitalist powers” (Gat 2007), facilitating the leaders’ strategic analysis, planning and implementation. In addition to regime type, resource mobilization is impacted by the decision-making process and actors involved in it. Statecraft, understood as the process whereby the political leadership skilfully manages state affairs and the relationship between the political community and society, is thus central. It is “the robustness and effectiveness of a country’s governing institutions to direct the changes needed to transform its potential capability into an actual capability that would determine the outcome of a struggle with other comparably positioned countries” (Tellis et al. 2000, p. 21). It refers to the state performance to use

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resources and actors, which implies ensuring elites and ideologies cohesion, securing institutions stability and avoiding social groups fragmentation (ethnic and religious divisions). Statecraft also refers to the ability of the political leadership to successfully project its country’s policies internationally. In that sense, intents, perceptions, determination, prestige and reputation play an important role (Holmes 2014). While the way to achieve this objective seems to be a matter of debate among Chinese academics, think tanks and the political elite, it is interesting to observe that the people surrounding President Xi are often close acquaintances of his, directly involved in BRI projects and the “Chinese dream” narrative. One must indeed underline the political efforts undertaken by President Xi to concentrate and centralize powers, thus ensuring that the grand strategy will be implemented according to his understanding and without internal contestation. For instance, new members of the Politburo and the Politburo Standing Committee such as Wang Yang and Yang Jiechi were also part of the leading small group dedicated to the BRI. Wang Huning, another member of the Politburo, is the thinker behind the “Chinese dream” concept. Lastly, Wang Xiaotao—defender of the BRI—has been promoted to the new China International Development Cooperation Agency, dedicated to the BRI development (Eder 2018). One can also point to the communist party’s decision to award President Xi the symbolic title of “core”, thereby establishing his absolute authority and legitimacy. In addition, the president granted himself the title of commander-in-chief of the army, emphasizing power concentration, although he was already assuming this function as chief of the Central Military Commission. This centralization penetrates the institutional level: in March 2018, four leading small groups have been promoted as Commissions. The objective is twofold: strengthen the PCC’s authority on foreign policy and increase coordination between departments. This centralization appears to have been made also to avoid endangering or questioning the president’s authority on the BRI and the Chinese dream (Legarda 2018). Finally, of interest is the fact that the Chinese diplomatic body has regional or country expertise. Chinese diplomats are rarely generalists, but regional specialists who remain in office in the same country or regions for long periods of time, sometimes even for their entire career (Mokry 2018). This specialization gives them particularly deep knowledge of the country or region where they are stationed, its culture, history, language, thereby facilitating ground cooperation and penetration of Chinese ideas and projects.

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Inclusive Mobilization of Resources To defend its national interests and realize its grand strategy, the state first needs to mobilize its power determinants (economy, military, geography, regime, ideational…). But listing capacities without social contextualization has little sense. Foremost, a grand strategy has to be devised since as the Sprouts demonstrate, the capacities only acquire a political interest whenever “such data (for measuring national power) acquire political relevance only when viewed in some frame of assumptions as to what is to be attempted, by whom, when and where, vis-à-vis what adversaries, allies and unaligned onlookers” (Baldwin 1979, p. 172). Power operates thus as a dynamic process and within a specific relationship that is the result of a social construction. Undeniably, contextualization is often neglected, yet it is impossible to determine a state’s power without acknowledging the situation in which it wields it. Before assigning a given power to a specific state, it is necessary to “discuss (the state’s) ability to convert his putative power into actual power” (ibidem., p. 168). As a consequence, the realist perspective ought to be supplemented with a constructivist approach. According to Wendt, there are two ways to think about power in IR: some insist on “brute material forces’ as bases of power” while others view power “as ‘constituted primarily by ideas and cultural contexts’” (Wendt quoted in Baldwin 2001, p. 16). The latter emphasizes the importance of the socialization process and how the dominant systemic socializer persuades other states to adopt its vision of the world order—with the expected result that as a norm-setter, it increases its legitimacy.2 Consequently, a complementary approach towards determinants is one of the relationships, that can be divided into four faces or dimensions of power. The remaining of this chapter develops China’s implementation of these dimensions. Transactional Power The first dimension is principally characterized by coercion, threats, sanctions, punishments, rewards… This approach is based among others on Weber and Dahl’s research. Traditionally, power according to Dahl’s wellknown definition is the ability of state A to make state B do something it

2 As a normative power, the United States has endorsed the role of norm-setter; yet, they have not automatically followed and abided by these norms. This behaviour is a source of tension with their followers and contenders, as they are accused of double standard or hypocrisy in their foreign policy.

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would not have done by itself (Dahl 1957). In this regard, power refers to hard power and is mainly understood as encompassing economics, military, geopolitical determinants. From an economic standpoint, the New Silk Roads are an extension of the “Go West” and “Go out” policies launched in the 1990s—an economic policy aimed at rebalancing the highly unequal development of the provinces, through the development of infrastructure, communication routes, etc. In addition, it was intended to encourage companies to export their goods to regional and global markets because of an often too low domestic consumption, and to promote Chinese investment abroad. Beijing often presents its new project as beneficial for the entire international community. Yet, the New Silk Roads are primarily being built to defend Chinese economic interests. The guarantee of economic growth is crucial for the survival of the CCP, so as to maintain a certain social stability, as well as to ensure China’s status as a major power. Thus, Beijing must find markets to sell its products and import raw materials. This explains the inconsistency between the Chinese discourse and its behaviour on the international scene. While the speech expresses solidarity and win-win relations with the countries of the South, China is in fact pursuing objectives based primarily on its national interests through its companies and soft power. Moreover, since contemporary China is primarily an economic power—and still feels too vulnerable at the military level—it favours the economy as a means of increasing its power. This is accentuated by the fact that the rivalry between the major powers is moving towards the geo-economic chessboard because of the improbability of a hegemonic war (although the latter cannot be excluded because of Thucydides’s trap; Allison 2017). In its essence, geo-economics combines geopolitical logic with economic tools. The economic actions and options of a state are perceived as part of state power. As a result, geo-economic approaches are often in tension with economic assumptions (Blackwill and Harris 2016, p. 24). Wigell establishes a geo-economic typology based on two criteria, strategic framework (competitive or cooperative) and economic power (as a means or objective) (Wigell 2016, pp. 141–146), on the basis of which he identifies four ideal types: neomercantilism, neo-imperialism, liberal institutionalism and hegemony. The first two approaches are characterized by a rather competitive/coercive approach and a zero-sum game. Both strategies deploy economic power as an aggressive lever to obtain economic and political concessions. They differ in the fact that neomercantilism approaches geo-economics as an objective, while neo-imperialism

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identifies it as a means. The other two approaches emphasize a win-win approach and mutual benefits but can easily be distinguished. While hegemony guarantees above all the supply of public goods, liberal institutionalism defends multilateralism, integration and symmetric interdependence. While Beijing projects a state image defending institutional liberalism, characterized by more idealistic economic objectives—symmetrical interdependence, economic integration, multilateralism and loans—in practice, China adopts a more neo-mercantilist approach, with a neo-imperialist tendency in the medium term. Neomercantilism characterizes commercial powers such as China and is identified by five elements. (1) the desire to achieve economic objectives, (2) competition in a zero-sum game for the control of markets, technologies and resources, (3) the maximization of economic power, (4) a national interest defined by economic interests and (5) a strategy based on avoiding political commitments—applying free-riding (Marè 1988) and buck-passing (Mearsheimer 1994) instead, in order not to get distracted to ensure maximum economic development. Neo-imperialism, which also correspond to China’s geo-economics, is characterized by the desire to create an informal empire, not through territorial but economic control (asymmetric interdependence, dependence, coercion, centre–periphery relationship, debt-trap diplomacy). In that sense, the BRI is also about geopolitics and spheres of influence, one of the main objectives being to reinforce Chinese presence on the Rimland. This concept, developed by Spykman in 1942, geographically comprises a continuous belt going from Scandinavia to maritime China: “the Rimland of the Eurasian area must be seen as an intermediate region located… between Heartland (heart of the world) and peripheral seas. This region is equivalent to a large buffer zone of conflicts between maritime and land power. Oriented on both sides, it must function in an amphibious manner and defend itself both on land and in sea” (Spykman 1944). The aim is to reinforce connectivity among stakeholders of the Rimland. It is an important tactic of the game of Go3 that aims at 3 While Western culture favours games such as chess, which postulates a direct confrontation aimed at the defeat of the opponent, the Asian culture, particularly Chinese, favours a more indirect approach. In the game of Go, the actions appear at first sight unrelated, while the logic of the action is revealed later, through the junctions of the actions. Success is not achieved in one fell swoop or through one movement; it is the result of a multitude of actions with varied objectives, but in the service of a grand strategy. Moreover, victory does not result in uncontested domination but rather in an advantageous sharing of the territory (acquisition of areas of influence). The emphasis is

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surrounding an area and incorporating it in the Chinese sphere of influence. Consequently, it seems that the Chinese intention in the long run is to control the Rimland by isolating, or allying with,4 Russia, while competing with the American naval power (Struye de Swielande 2013). Furthermore, we should not either separate the Chinese policy in Africa from the one on the Rimland, placed in the continuity of Go’s logic. Indeed, China follows a well-defined strategy on the African continent to dominate not only Spykman’s Rimland but also Mackinder’s Worldisland—a “Mackinderian” expression referring to the Eurasian region and the African continent (Struye de Swielande 2016). Since 2017, the BRI has become even more ambitious including Latin America, the Arctic and Oceania—including, in fact, almost all the regions of the world. These last advances show that nothing is rigid regarding the Silk Roads and that the projects evolve depending on the opportunities to reinforce the schemes of the 2049 objective. In fine, for Cheng Gang, the project geopolitically covers the developed countries as well as the developing ones, in reference to the Three Worlds Theory of Mao, increasingly isolating the West (cited in Roland 2017, p. 6). This increasing presence of China on the world scene through the BRI is complemented by a security logic: (a) yearly increase of the military budget; (b) development of power projection; (c) building and militarization of artificial islands in the South China Sea; (d) implementation of military bases abroad (inauguration in 2016 of a first base in Djibouti, other projects in Afghanistan and Pakistan seemingly being studied); (e) private military companies; (f) military exchanges of personnel; (g) bilateral and multilateral military exercises; and (h) arms exports;… Institutions, Agenda-Setting and Norms Some authors such as Bachrach and Baratz (1962) have taken into consideration a second dimension of power: agenda-setting, which defines the parameters within which debating issues and questions occur. The

on relational strategies rather than confrontational strategies (Struye de Swielande 2011). The game of chess attempts to reduce uncertainty, while the game of Go “recognizes and accepts it”. The Go player will consider the Shi—the momentum, knowing that he cannot control everything and that uncertainty must be accepted and therefore taken into consideration in adjusting one’s strategy (Chen 2015, p. 80). 4 China currently aims to reinforce its partnership with Russia through supporting several international questions, and, among other things, by sealing contracts on gas (see the two deals signed in 2014 for about 800 billion dollars).

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second dimension controls the process to deny or limit access to agendasetting. A state able to include or exclude questions, subjects and actors through the process of agenda-setting will be in a position of strength. This “outflanking” (Mann 1986) can occur for different reasons: to avoid putting an issue on the agenda or to guarantee a certain stability of the system. Indeed, “the attempt to stabilize social order is a necessary condition for, consequently functional to, the maintenance of social order, hence a prerequisite for social power in general” (Haugaard 2003, p. 96). The third dimension is about the manipulation of interests: “wants and desires are manipulated to the point that actors’ real or objective interests become shrouded from the actors themselves, replaced by the subjective interests produced by the various structures that surround them” (Reed 2013, p. 212). It is in that sense closely related to agenda-setting, the second dimension, and often overlaps with it empirically. To exert power also means to influence or lead a process of socialization aiming to adjust, model, configure or change the state’s profile (Struye de Swielande and Vandamme 2015). The underlying idea is that an order based on the use of force is reinforced by order based on legitimacy (Ikenberry and Kupchan 1990, p. 286). Although China keeps participating in the institutions created by the United States (and the West) because they are still beneficiary for Chinese economic growth, this does not preclude Beijing from developing new institutions and launching new initiatives as alternatives to their Western counterparts, including the Asian Infrastructure Investment Bank and the New Development Bank (new banks serving as substitutes to the World Bank and the Asian Development Bank), the BRICS, the Silk Road Initiative, also known as the “One Belt One Road” (OBOR), the Silk Road Fund, the Regional Comprehensive Economic Partnership (RCEP) and the Shanghai Cooperation Organization. These institutions promote the Beijing Consensus in the economic field, and increasingly “socialism with Chinese characteristics” in the political field. China does not hesitate to sabotage liberal norms and values in international organizations from within based on a two-part strategy: “1) block international criticism of its repressive human rights record, and 2) promote orthodox interpretations of national sovereignty and noninterference in internal affairs that weaken international norms of human rights, transparency, and accountability” (Piccone 2018, p. 1). China reshapes the rules and instruments to empty the organizations from norms, values and rules that are not compatible with its national interest

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and pressures some states to change their positions. Piccone in his study talks about a like-minded group of states supporting and aligning with China and each other on these issues in the UN Commission on Human Rights: Bangladesh, Bolivia, Burundi, Cuba, Egypt, India, Indonesia, Kyrgyzstan, Pakistan, Qatar, Saudi Arabia, United Arab Emirates, Venezuela and Vietnam and to a lesser extent: Ethiopia, El Salvador, Iraq, Nigeria and the Philippines (Piccone 2018, p. 14). The fact that the United States has left this commission leaves China in a central role to influence both states and agenda-setting. In the long run, China seeks to influence the regional and international organizations and institutions from within by reinforcing its representation and influencing agenda-setting. In parallel, it creates new institutions when dissatisfied. China has applied both exclusive and inclusive institutional balancing. The former “intends to exclude a target state from an institution and utilize the unity and cohesion of the institution to exert pressures towards or countervail threats from the target state” (Feng and He 2018, p. 171). The latter is characterized by playing the rules of the institution, but weakening these norms and rules (ibidem., p. 166). China’s Strategic Narrative The fourth dimension, as Digeser explains, is about “producing interests and engendering desires” (Digeser 1992, p. 989). Power resides here in “the way in which political actions and arrangements encourage some identities and marginalise others” (ibidem., p. 990). In order to strengthen the above-mentioned socialization process and its legitimacy, China uses a narrative strategy to modify cognition of target countries and influence their identities around a Chinese-led order. As early as 1948, Morgenthau recalled in Politics Among Nations that “a government must (…) win the support of the public opinion of other nations for its foreign and domestic policies” (Morgenthau 1948). In the twenty-first century, images and other signals are an integral part of the toolbox of means available to defend a state’s national interest and therefore implement its grand strategy. Beijing invests in particular in the discursive chessboard by developing alternative narratives and discourses to manipulate the interests and identities of Western societies. According to Nye, “the countries that are likely to be more attractive and gain soft power in the information age are those with multiple channels of communications that help to frame issues, whose dominant culture and ideas

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are closer to prevailing global norms; and whose credibility is enhanced by their domestic and international values and policies” (Nye 2004, p. 31). Since 2014, every year Beijing hosts the World Internet Conference in Wuzhen (Zhejiang, China). This conference, which gathers officials and CEOs from all around the world, aims at legitimizing the Chinese vision of cyberspace and promoting international norms in China’s view (Kerry 2018). Following the 2018 Freedom House Report on the Freedom of the Net, China has “hosted media officials from dozens of countries for two- and three-week seminars on its sprawling system of censorship and surveillance” (Shahbaz 2018, p. 1). “Digital authoritarianism” is being encouraged “as a way for governments to control their citizens through technology, inverting the concept of the internet as an engine of human liberation” (ibidem., p. 2). This is also the reason why the Digital Silk Road, first unveiled in July 2015 and including telecoms, optical fibres, mobile networks (5G), e-commerce, cloud, artificial intelligence… (The Economist 2018) is so important for the Chinese: it offers an opportunity to determine the rules, standards and norms of tomorrow in these fast-developing sectors (Grace 2018). Another recent example is Beijing’s decision in March 2018 to create a Voice of China, similar to the Voice of America, which will bring together CCTV, Radio China International and Radio China National. This new tool will be used to improve China’s image, hence its interests, in the world. Lastly, China has developed television channels—New Silk Road channels, based on three components: “documentaries, an economic component that includes the case study and finally interviews on relations between China and other countries that have signed the new road” (Branche 2018). China is thus increasingly defending and promoting its authoritarian model and willing to export “socialism with Chinese characteristics” and therefore to propose an alternative to the liberal model. To this end, it strengthens its discursive power by proposing new ideas, concepts and institutions in order to strengthen the control of the regional and the international agenda-setting at the political, economic and security levels. This is how Beijing persuades other states to adopt its vision of the world order and with already some success in regions such as Africa, the Middle East or Central Asia. Building on what has been developed, China has become an “entrepreneur of identity” (Simon and Oakes 2006, p. 119) who recruits followers “by encouraging some identities and marginalizing others” (Brauer and Bourhis 2006, p. 604) and consequently fashion identities

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to manage and manipulate consent: power successfully being employed without the sanction of the reason or the conscience of the obedient (Schattschneider quoted in Gaventa 1980, p. 9). It is what Bourdieu called the power of suggestion (Bourdieu 1991, p. 52). This is characterized by subjectification: if structuration practices are internalized through constant repetition, social actors are constituted who feel compelled to respond in a particular way to certain stimulus … A highly disciplined socialization has the potential to deliver highly predictable social subjects who respond like automatons based upon socialization through repetition and rote learning. (Haugaard 2012, p. 49)

By encouraging reproduction and routine, standards and predictability, states are socialized into compliance (Mueller quoted in Gaventa 1980, p. 18). The more China is able to have followers sharing a common social identity, the more the balance of power will tilt in China’s favour. Of course, these are long-term policies and suppose strategic patience because people’s minds change only over time and they are complementary to the other determinants of power.

Conclusion Despite the easiness with which political leaders, scholars and other analysts identify China as a sui generis case, we should not refrain from applying theoretical models and framework to this case study. Failing to do so would, in fact, lead to a near-sighted vision of China. It would also wrongly suppose that China is an exception, and all other countries are more normal case studies. The chapter has shown that China, as a statusseeking great power, behaves with a wide range of instruments and means of power. Far from being short-term and contextual reactive actions, Chinese policies are embedded within and serve a broader long-term plan, which is in essence China’s grand strategy for the twenty-first century: the Chinese Belt and Road Initiative. The BRI is integrative and planned out in order to guarantee that Beijing will reach the 2049 objective of world leadership, therefore fulfilling the Chinese dream. Through the careful analysis of the government’s domestic and international positioning and actions, the analysis demonstrates that Chinese leaders are capable of seeing in the long-term and apply a logic of return on investment. In sharp

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contrast, Western leaders and countries have shown remarkable inaptitude in understanding and grasping long-term processes and dynamics, posing little challenge to a growingly assertive China. Finally, China has displayed notable success in integrating various factors to define and present a strong, coherent and integrative grand strategy, thinking the process from its definition to its implementation stages with careful examination and understanding of power and social relations at play in international affairs. What remains to be examined are the reactions that Beijing’s policies provoke, and the acceptance or rejection that its plan and objective receive.

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CHAPTER 2

The Words of the Belt and Road Initiative: A Chinese Discourse for the World? Cátia Miriam Costa

Introduction The Belt and Road Initiative (from now B&RI) is a Chinese international project, announced by President Xi Jinping in 2013. Since then, many researchers from academia or the think tanks have produced a relevant number of studies, reports, articles and books about this topic. The Scopus database provides us with non-exhaustive proof of this relevance and shows us the evolution of the issue as a scientific subject. In a sample taken from the years 2015 to 2019, we can observe the number of articles and book chapters produced by year, the author’s affiliation, and the disciplines with more production. We used the keyword “Belt & Road Initiative” and considered all the scientific areas. The data gathered in the sample permit us to know who is producing the scientific discourse about the B&RI and the progression in the number of articles. The most prolific year was 2018, which can be the result of two conditions: the need of

C. M. Costa (B) Instituto Universitário de Lisboa (ISCTE-IUL), Centro de Estudos Internacionais, Lisbon, Portugal e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_2

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some time to mature the subject and the consequence of President Xi Jinping’s international visits with the opening of new diplomatic agreements (see Fig. 2.1). Considering these data, it seems that the scientific production on the B&RI is decreasing, yet this is a rushed conclusion because we still have four months ahead this year. Thus, there are some 2019 articles to be included in the database. Therefore, the only conclusion we can take is that researchers considered the B&RI as a significant object of study. The years 2017/2018 more than doubled the previous years in the number of articles and book chapters, which means the topic became more attractive for researchers as producers and readers about the B&RI. Mayer described this phenomenon as a mushrooming (Mayer 2018, 3). As for the disciplines, we conclude that the majority of the researchers published in the social sciences’ disciplines, being economics and management the following disciplines. It is also important to mention that the social sciences area includes such different disciplines as anthropology, communication, development, cultural studies, education, geography, law, political science, international relations, public administration, sociology, urban studies or transportation. The diversity of disciplines gathered on this area of studies explains the prevalence of the B&RI texts with this classification. It is also significant to refer that most of the articles and chapters are classified 500 450 400 350 300 250 200 150 100 50 0

2015

2016

2017

2018

2019

Fig. 2.1 Number of articles/chapters about the B&RI in Scopus database by year (Source The author. Data from Scopus, 12 July 2019)

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in more than one discipline (see Fig. 2.2). The data show us social sciences, economics, econometrics and finance, and business management and accounting completely dominated the scientific production of the B&RI. The analysis of these data arouses another question: Who was responsible for the booming on this topic? Who was writing and publishing about the B&RI, to inscribe the subject as an academic theme? Following the data provided by Scopus, the significant producers of the texts on the B&RI were affiliated to Chinese institutions. The National University of Singapore is the first foreigner institution in the number of articles, occupying the eight place (see Fig. 2.3). This data lead us to the main conclusion that the People’s Republic of China was the main responsible for the political discourse concerning the B&RI and the Chinese academic and scientific research institutions were also the primary producers of the scientific discourse about the B&RI. One may think that as China is the designer of the B&RI economic and political project, to be the one producing the scientific discourse about this topic is a natural consequence. Nevertheless, we must analyse this issue from multiple perspectives. China is not the dominant producer of the scientific discourse and only recently became a relevant scientific producer. From this viewpoint, one

Social Sciences

6% 4% 9%

Economics, Econometrics and Finance

42%

11%

Business, Management and AccounƟng Environmental Science

12% 16%

Engineering

Fig. 2.2 Number of articles/chapters about B&RI in Scopus database by discipline (Source The author. Data from Scopus, 12 July 2019)

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Renmin University of China Nanyang Technological University NaƟonal University of Singapore Peking University Chinese Academy of Social Sciences Tsinghua University Zhejiang University University of Chinese Academy of Sciences InsƟtute of Geographical Sciences and Natural… Chinese Academy of Sciences 0

10

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40

50

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Fig. 2.3 Articles about the B&RI published in Scopus journals by affiliation (Source The author. Data from Scopus, 12 July 2019)

can understand that there was an effort to create at the same time a political discourse and a scientific discourse which entailed a notorious determination of China to spread the idea of the B&RI, and the acceptance of this new project by the international community. Some authors even refer to the official investment of China in this kind of research (Mayer 2018, 3). Therefore, the discourses produced by Chinese politicians, representatives or researchers are not only words. They have a specific message for the international community. The production of articles and chapters specifically in the area of social sciences, economy and management is noteworthy. The concentration on these scientific areas means that China considers that the main challenges are the issues in areas like politics, international relations, economy and business. When exploring the scientific articles on the B&RI, it is interesting to note that there is an absence of texts resulting from studies dedicated to the political discourse of the B&RI. There are still few publications resulting from the analysis of political discourse, even when studying the most important political personalities of this project, as President Xi Jinping. This situation is rather peculiar since researchers have access to these discourses (He 2019, 450, 465). The absence of publications on the area of discourse analysis is somehow awkward because China had the concern to present to the world the project through President Xi Jinping speeches delivered in Kazakhstan

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and Indonesia, in 2013. Hence, China was concerned about an international narrative on the B&RI’s project and decided to act using an international communication strategy to make it public. When announcing the project abroad, Chinese politicians were aware of the global impact they would get. They worked the discourse in a way that these actions of international communication could guarantee the message was received by the international community, firstly at a regional level, but afterwards as a global message. The analysis of the narrative of the B&RI is critical because every political or social fact needs a story. A good story captures the reader or listener and maintains his or her curiosity to know more or even to participate (Popova 2015, 1). Consequently, a narrative is essential to have a process of communication and to induce reactions towards the narrated fact or story. In this case, the Chinese politicians decided to communicate internationally, meaning they were producing their discourses for a non-Chinese public at the highest level. They delivered their speeches in international political events, having as listeners the representatives of foreign governments, which represents an act of international communication (Thussu 2000, 1). Thus, the use of international communication theory combined with the discourse reception theory (Jauss 2003, 56–57) will help us to understand how the representation of the B&RI was developed by the Chinese government. Many scholars still recognise that international communication is determinant for public diplomacy, not only towards governments but as a critical element for other international actors like international organisations (Thussu 2000, 3). The fluidity of space and time gave more prominence to the acts of international communication (Semati 2004, 89) and to the circulation of communication. Public spheres are now networked through different channels and with the ability to produce and receive contents simultaneously (Couldry 2014, 45). While using transnational spaces of communication, like summits or bilateral encounters (Adolphsen 2012, 92), the Chinese government was boosting the message about the B&RI which would travel along different channels, from the official political communication to the media and the organisations of entrepreneurs. The transnationalization of public spheres and the use of strategic political communication became the axes of public diplomacy and consequently of international communication. Through the merge of spaces, time and channels, political discourses became a product to be received by peers and by the public sphere in general. Media and political communication share attention and develop

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different channels of communication, which are mingled (Volkmer 2014, 7). The globalisation of the communicational flows made of international communication a much attractive way to design international relations. Discourse became a crucial factor for the international narrative of the countries. Although the rich Chinese traditions in the areas of philosophy and political thought, the truth is the intellectuals of this country lost their international voice when meeting the West, mainly because China failed to modernise herself and to integrate the international system as a peer (Qin 2010, 37). Despite the humiliation China suffered with the colonisation of some of her territories or with the internationalisation of part of her cities, Chinese intellectuals never felt the burden of colonialism. Chinese particular situation regarding West resulted in a social sciences discourse which does not intend to resist or to battle against a coloniser or even the dominant perspective of the world (Shih 2013, 64). It is also significant the fact some social sciences teaching had to be updated in the past decades after the isolation of Chinese academic during the Cultural Revolution and Great Leap Forward Movement. Partially, Chinese academics in foreign countries were the ones bringing up to date the social sciences’ production on Chinese topics. Therefore, China was and is not a dominant provider of either political or scientific discourses. The country had to conquer its own space in the international public sphere to introduce the B&RI like a project. The transformation of China from a mass producer to a service provider and sophisticated producer reflected on the new type of participation of the country in the international relations scenario and the international public sphere. China had to adapt its discourse and to discover how to come back, holding its traditions but adapting to new times. To change its international representation, China found new ways of expressing herself, as we will see (Cambié, Yang-May 2009, 5). China drew an international discourse based on tradition, recovering the ancient Silk Road and revitalising its historic regional scope (Mayer 2018, 24). The use of a historical background also favours the rehabilitation of the Chinese philosophical tradition, including political thought and arousing a new interest in Chinese intellectual history. The speeches President Xi Jinping delivered in Kazakhstan and Indonesia are the foremost examples of the use by the People’s Republic of China of an international communication strategy to gain international community attention and to conquer its approval. The analysis of the speeches delivered internationally,

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and the informative documents produced by China are determinant to understand how the Chinese government is engaging with the international community, and if there is any change on discourse depending on the public sphere, they want to intervene. Consequently, the B&RI words are essential instruments to analyse the project itself and the impact it is expected to have. In the next sections, we will combine an international communication approach with a discourse analysis methodology to understand how China designed the spreading of the B&RI message so that could attract other countries to this Chinese project.

The Rise of China as an International Player The rise of China is understandable if interpreted as one more step of the historical process of capitalist expansion (Xing 2019a, 3–4). The People’s Republic of China follows capitalism rules and has been using it to enlarge her economic resilience and political power. It is possible to look at China’s progressive rise as an international power from different international relations theories. Li Xing argues that realistic and liberal theorists understand Chinese dynamics in different ways. Where a realist academic sees the repetition of a hegemonic transition, challenging the contemporary status quo, a liberal scholar observes and assertion of interdependence from the international system, making very difficult or even impossible to China to contest or negatively interfere in the global status quo. As from a world-system perspective, the probable rise of China results from a system based in cycles which redefines from time to time which is the core, semi-periphery and periphery countries (Xing 2019a, 5). The fact that different theoretical perspectives are producing knowledge about Chinese global rise in diverse ways signifies this topic became a concern for scholars and an issue under research. Despite this academic interest, China is still subject to misinterpretations resulting from an exotic perspective of the country or a tendency for the demonisation of the unknown. Some authors suggest China should change her cultural diplomacy in order to promote a broader comprehension of her society and culture. Thus, China should provide the West with what “Europeans want to know” instead of what “Europeans should know” (Song, Qiqi 2018, 64). One of the challenges for Chinese politicians is to find a way to transmit China’s national identity and culture in such a way that the international community understands and recognises her perspectives.

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Despite the probable misconceptions, China is nowadays a significant international stakeholder, who turned into one of the global actors of international relations. China participates in the global market as well as engages in projects of aid and assistance to the less developed countries, becoming an excellent example of alternative for these countries to integrate the international market. China is going global, supporting a foreign policy based in two major regions, Eurasia and the Pacific. These two regions that are the western and eastern frontiers of the country were determinant for the emergence of China as a global actor. After the redefining of the US politics for these regions, China emerged as a Eurasian power with the capacity to project to the Pacific. As stated by Mayer, China influences from Portugal to Vladivostok (2018, 3). The Chinese global impact does not only result from its economic or foreign official policies. It also depends on a noteworthy investment in soft power through organisations like the Confucius Institutes (more than 500 in the whole world) and the think tanks or activities as tourism and educational exchange programmes (Forough 2019, 286). Simultaneously, the rethinking of China’s role as an international player through the Chinese international relations theorists and the revival of ancient traditions also contributed to China’s projection in a global context (Mayer, Balázas 2018, 207). This soft-power strategy is essential for the legitimisation of China’s perspective of international relations, beyond the Western conceptions for the globe (Wang 2018, 277). Ideas like win/win, common interest, the international community as a community of shared interest or common destiny appear as an alternative to Western status quo and outcome as a new perspective for globalisation and international relations. Therefore, in most of the cases, the projects China needs to develop to assure her domestic growth have international projections, like the Greater Bay project or the Belt and Road Initiative. Consequently, when presenting these projects with economic and political impact, China must propose at once a domestic and an international discourse (Mulvad 2019, 454). The term of President Xi Jinping has changed the style of Chinese foreign policy which came to be more assertive even if towards the disputes with their neighbours (Gong 2019, 635). Accordingly, discourse grew in importance for Chinese diplomacy. China’s involvement in international organisations and its role in the creation of new ones as Shanghai Cooperation Organization (SCO) or Forum Macau result in need of

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a Chinese global discourse. Through these organisations, China accomplished a way to establish new links with the member states of these institutions. In the case of SCO, there was an expansion from a security organisation to a security organisation assisting trade and contributing for the integration of China in the regional and global economy (Na-Xi, MengFang, Sah-Bin 2019, 58). At the same, this organisation enables China to coordinate its external policies with Russia, avoiding a climate of confrontation or competition in the region of Eurasia. The project of the B&RI is partly a result of the development of Chinese diplomacy in this organisation. The Secretary-General of SCO somehow recognises the role of the B&RI in the growing economic cooperation among the members of the organisation. Simultaneously, China invests in knowledge in the field of international relations. Traditionally, Chinese scholars do not contest the Western perspective of international relations. However, at the same time, they feel the Western theory of international relations without the contribution of the Chinese philosophers and thinkers does not explain the way China sees herself in the international community (Shih, Yu 2015, 2). Therefore, China does not see herself as a menace or a defying international power and needs to provide to the world an explanation that goes beyond diplomacy. This justification of Chinese global presence and her new ways of diplomacy needs scientific support, given by political scientists and international relations scholars. China’s foreign policy has not been clear, causing some scepticism on the part of other international powers. The principles of no intervention were sometimes interrupted, and before 2012 there was a mixed policy, choosing to intervene when intervention suited China’s interests (Huang, Shih 2014, 1). China’s international behaviour thus caused some apprehension of the Western countries regarding Chinese international expansion. While China followed a conformist policy, being just a member of the international hierarchy, Western powers thought the international community would remain with the same status quo. However, the B&RI, creating stronger alliances with the Eurasian countries and with the Pacific countries, and even the Greater Bay project launched the suspicion China might want to change the international power balance. The ambiguous Chinese policy concerning the external intervention and the dubious involvement in the actions taken by the international organisations gave space this lack of confidence. Nowadays, with the new international projects, China has to create an international discourse explaining

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her intentions and the way the country will participate in international organisations. Most of all, China looks for a way to participate in the global order, without defending the international intervention directly in domestic affairs as a way to maintain herself out of any foreign intervention. Chinese foreign policy is pragmatically orientated and based on her national culture of balance and pragmatism (Huang, Shih, 23). Confucianism still is the heart of Chinese discourse, providing a theory of balance that fits the principle of stable bilateral relationships and peaceful multilateral relations. The Chinese value of non-intervention is one of the pillars of the principles of peaceful coexistence. The Chinese most important international actions are the humanitarian ones, taken under the United Nations umbrella, avoiding any direct intervention in the domestic policy of the countries. This attitude gives way for China to develop a role as a mediator in international crisis or conflicts. The main topic of Chinese international discourse is always about the peaceful resolution of international conflicts and respect for domestic policies. Maybe the most challenging issue for Western countries to understand in the international Chinese discourse is the need to proclaim harmony between countries, in a way disagreements are easily solved through dialogue (Shih 2013, 175). In this way and without threatening the international order directly, China introduces new elements to the international relations that are not totally understood by Western countries and mainly by the USA (Xing, Duarte 2019). Sooner than later, the USA and other Western countries will have to position themselves in an international order that accommodates a new discourse based on win-win strategies and peaceful relations. This peaceful and harmonious policy and discourse are very vital for China when presenting the B&RI project to the world. Simultaneously, China has to prove her peaceful intentions are coordinated with these new economic and financial projects. The B&RI project became the major challenge for the Chinese agenda in China’s approach to a global framework.

The Belt and Road Initiative as a Chinese Political Project The B&RI is an economic project and at the same time, a political project. The project evokes the historical past of China, in the inland the “Silk Road”, complemented by a new Maritime Silk Road based on the routes maintained by the Ming dynasty in the fifteenth and sixteenth century

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(Xing 2019a, 6), when the first Europeans arrived by sea. This New Silk Road recovers not only the economic and trade relations but also suggests the cultural and intellectual connections as part of the project (Duarte 2019, 146–147). B&RI is a project bringing together cultures, civilisations and economies. This global idea for the B&RI gains a stronger universal dimension if we look at the number of population and the world’s GDP involved in the project. The B&RI covers about 65% of the world’s population and one-third of the world’s GDP, resulting in a global project. B&RI turned into a global hot academic and media topic. In China, it is a useful instrument to accomplish the Chinese dream, meaning to bring back the restoration of the Chinese significance in the international community. China presents the B&RI project as a new international project, developing a proactive strategy towards new partners, providing more conditions for production and trade (Xing 2019a, 15). Free trade, international cooperation, economic and social development and win-win relations became the keywords of the project (Cheng 2018, 3). There is the temptation of comparing the B&RI to the Marshall program, developed by the USA in the post-Second World War (Zeng 2019, 207). However, China rejects this comparison, arguing the B&RI is an international project based on equality and in the principle of nonintervention in domestic affairs, and also without the need of political condition to engage the project neither is focused on the establishment of collective security. The B&RI represents the most significant instrument of Chinese diplomacy to globalise the principle of the “Chinese Dream”, founded on the pillars of peace, coexistence, development, cooperation, win-win relations and mutual benefit (Xing 2019b, 43–44). The success of the B&RI determines if China will occupy a central role in regional dynamics, becoming one of the vital global partners. China chose different approaches for each region or country. In this way, Chinese diplomacy guaranteed the reception of her message by very diverse states. Multi-level and multi-channel relations complemented bilateral cooperation, and if needed with the support of the organisations China participates in (Vangeli 2019, 64). China accepts different development models and political regimes, which facilitates the spreading or her message and the acceptance of her proposals under the B&RI. This fact contributes to strengthening her bilateral and multilateral relations through the existing organisations or by the participation and creation of new ones (Yuan 2019, 94–96).

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The B&RI is the most challenging and ambitious China international project. Despite its imprecision about the steps of the process for implementing this international plan, the B&RI has a continental and a maritime programme of bilateral and multilateral international agreements, as well as the support of some existing institutions. Simultaneously, the Chinese government also aims to achieve vital domestic results through the B&RI, for example, the convergence of income and wealth distribution among the different Chinese provinces (Mayer 2018, 12). The B&RI is a programme to integrate all provinces of China in the world economy (Mitrovic 2018, 18). Although it is not clear how this project will function as a whole, China intends to organise it step-by-step, adapting to the conditions of each moment. These two dimensions, keeping at the same time a domestic and an international level, led to multiple discourses, adapted to domestic public and the several international audiences. Again, organisations like the Asia–Europe Meeting (ASEM) or the BRICS (Brazil, Russia, India, China and South Africa) were essential for China to create and re-create an appropriate discourse to the multilateral and bilateral level. Since its beginning, more than 50 countries agreed to participate with China in the B&RI (Song, Qiqi 2018, 55). The new Chinese discourses and international projects have very different receptions among the international community. Specifically, the B&RI project brings to Western powers, mainly in the USA, the fear of having Chinese rule in new axis ruling or critical regions like Eurasia and the Pacific Ocean (Mayer 2018, 27). The way China compromised with Russia through SCO and could achieve an agreement about her expansion in the Eurasia axis changed the balance of powers and this region and somehow decreased USA and European Union direct influence in this region. As for the Pacific Ocean and while the relations with the USA maintain tense, Chinese government combined bilateral diplomatic relations with institutional approaches, which resulted in an expansion of Chinese influence in the region, directly competing with the USA. Even though, the possible future reactions to the B&RI and its success are still unknown and may bring new international tensions led by countries such as the USA, India, Russia or even regional powers like Japan and others (Cheng 2018, 8). Some authors raise the hypothesis of the B&RI to be a project to expand China’s power and challenge the US international domain. So, the B&RI would be a kind of proposal for the creation of a Sino-centred world (Zeng 2019, 207). To understand how the B&RI is communicated

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and received by the international audiences (politicians, academics, business people), it is vital to keep in mind that the B&RI is more than an official economic discourse or an economic narrative. The B&RI is a project that reflects the changes going throughout China and her transformations from the world factory into the world builder, providing alternatives to the ancient and still current international order (He 2019, 181–183). The perspectives to approach the B&RI are multiple. Paradoxically, it seems while the government tries to avoid an international perception based on geopolitics, the Chinese academics and military scholars have preferred this approach (Zeng 2019, 209). The Chinese official position is easy to understand because of the fear that some countries expressed about this project becoming a geo-economic way for China to rule all the region (Gong 2019, 647). Following a historical discourse China, through the President Xi Jinping and other official representatives, remakes the history and proposes an international project in which the regional actors are as important as the global actors, bringing into the present a memory of the past (Forough 2019, 276). China’s international discourse prepared for international communication reflects this trend, weakening the potential perception of a Chinese threat in a regional context. For the Chinese government, the B&RI is an opportunity to change China’s international perception and, simultaneously, to promote the domestic convergence between provinces. Official authorities added new concepts to the ancient Silk Road in order to promote specific regions and products, using the historical discourse as a justification (Zeng 2019, 211). By doing this, they could join in the same project a Maritime Silk Road to a Continental Belt. Therefore, the discourse was and is essential to the success of the B&RI, as much as for the domestic or international audiences.

A New Discourse for the World The Chinese authorities recognised the B&RI like a challenging project since the beginning and somehow understood the impact this proposal would bring internationally. Therefore, while China decided to announce the project domestically and internationally, the official authorities also launched new ways to spread soft power and to measure the impact the project could have in China and abroad. As never before, China tried to promote the country and area studies through a new kind of institutions in the national context: the think tanks

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(Hu 2018, 192). The idea was to promote the exchange of ideas and knowledge among academics, policymakers and businessman. The activities of the think tanks allowed China to get new interpretations of the past, one of them replacing the cartography of “national humiliation”, that resulted from imperial conquest and colonial occupation, with cartography of a glorious past, based on peaceful trading with other peoples (Mayer 2018, 210). This new way of seeing China was of the most significance for the Chinese people to embrace the project, as a way to conquer the Chinese dream. Concurrently, a “road diplomacy” based on knowledge and the reinvention of history started to develop. Looking back, the Chinese diplomatic and domestic efforts in building the B&RI have one decade and are now reflected in the agreements the Chinese government achieved in many countries to facilitated new infrastructures (Mayer 2018, 211). The role of knowledge and the studied adaptation of the discourse are remarkable. For instance, the maps promoting the B&RI do not draw frontiers or natural boundaries, suggesting how easy it would be to connect people, capitals, products and ideas. The aim of permanent connectivity based on free trade agreements is graphically expressed either in maps or in other images and followed by thoughtful discourse based on how transnational cooperation makes a profit for every country. The success think tanks had in Chinese domestic context, led the Chinese authorities to experiment the creation of a Secretariat of the Silk Road Think Tank Network, gathering think tanks from diverse countries in order to debate the B&RI. The network brings together for discussion and ideas exchange more than 55 think tanks from three different continents (America, Asia and Europe) and is still expanding. China needed a robust international discourse to attract different countries to the project. Therefore, China also depended on the coverage media gave to this project. The idea of successively announce the project in official visits gives evidence that the Chinese government counted on the international media to spread the B&RI to a broader international audience. This strategy is often used in international communication in order to promote states projects or wills. Following this method, China could get a space not only in the news but also in opinion articles or interviews, even if not always favourable (Cheng 2018, 7). Some authors argue that China should engage in cultural diplomacy, promoting the critical ideas of the B&RI: mutual trust, equality, mutual benefit, inclusiveness, mutual learning and win-win cooperation (Song, Qiqi 2018, 56). These authors include “media diplomacy” in this broader sense of public

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diplomacy. In this diplomatic area, scholars include the radio, television, press, films and even Internet sites. China’s efforts in this area, mainly towards East and Central Europe, are notorious. Recently China Radio International started to broadcast in seven different European languages (Albanian, Bulgarian, Czech, Hungarian, Polish, Romanian and Serbian). The main objective is to use cultural diplomacy through media diplomacy and increase China’s soft power. Although all the importance discourse has in the creation and maintenance of the B&RI, scholars remained more attentive to President Xi Jinping as a politician than to the B&RI message itself (Mulvad 2019, 449). This lack of interest in the B&RI has persisted and concepts like “win-win” or “common development” area still associated to official propaganda (Zeng 2019, 207), without further exploration of the concepts. In 2018, a Special Issue of the Journal of Chinese Political Science, titled “Ideology, propaganda and political discourse in the Xi Jinping Era”, confirms this trend, having some articles focused on the general political discourse and analysing them in relations with ideology, but without any part dedicated to the B&RI. The same happens with the “guanxi” concept, based on reciprocity and permanent social connection, which China wills to adopt in international relations (Huang, Shih 2014, 134). This concept also introduces the idea of voluntary relation and harmony while developing contacts. However, “guanxi” is not understood outside China’s culture and symbolism, which makes essential to have a discourse prepared for international communication and able to transfer this behaviour and way of relating with others in an understandable manner. The most significant aim of Chinese foreign policy is to build a harmonious international community and the B&RI integrates the way China foresees international relations. This kind of concepts has some difficulty in penetrating the international communication discourse, because although some claim for the universalism of some values and the human understanding of respect, peaceful understanding and non-interference, hardly all cultures and governments will understand the concept in the same way (Nikolaev 2011, 3–5). So, if China wants to propose a “guanxi” mode of doing international politics, firstly the international community has to understand the principles of harmony, voluntarism, win-win relation, mutual trust, equality and connectivity for development.

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To better explore the field of Chinese discourse towards the international community, we decided to use an international communication perspective combined with the discourse analysis. We examined the speeches delivered by President Xi Jinping in Kazakhstan and Indonesia translated into the English language, considered as the first ones announcing the B&RI. We aim to confirm if these documents present the same principles and if there is any adaption of content or aesthetical format of the texts. Simultaneously, we will analyse if somehow the political discourse influenced academic production, considering the more productive scientific areas about the B&RI topics. In this way, we compare how China communicates her perspective globally and if there is any correspondence between the political contends and the scientific topics represented in the Scopus database. We accessed the texts of President Xi Jinping’s speeches in Kazakhstan and Indonesia through the book The Governance of China, in which there is a note specifying that these speeches are not complete. Accordingly, we have access to the part the editor selected as the vital message, so the discourse we refer to was already adapted for publication. The speech delivered in Nazarbayev University, in Astana (Kazakhstan), on 7 September 2013, and titled “Work Together to Build the Silk Road Economic Belt” starts with a historical approach. In the first paragraph, President Xi Jinping gave a historical perspective of the millenary voyages and contacts between China and the Central Asian countries, based on peace and friendship. In the second paragraph, he moves forward and gives his experience as a testimony of an alive memory of the traditional trade between the two regions. Following this strategy, although the discourse is formal and official while evoking a personal memory, the message leaves the national and collective domain to touch the individual emotions. The next step is to announce Kazakhstan role in the ancient Silk Road, as the platform for exchanges between the Eastern and Western civilisations, going more profound than just looking for trading or economic relations and entering the cultural sphere. He announces that like Kazakhstan, other countries participated in the Silk Road with this friendly spirit. The next moment is to join past and future through the present speech saying, “This is the valuable inspiration we have drawn from the ancient Silk Road”. President Xi Jinping makes the bridge between the past and the present, the collective and the individual memory to open the way to the future. This mention comes when mentioning the last 20 years of rapprochement between China and the Eurasia region. At this

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point, the speech focuses on the present, and the gains future can bring if there is a harmonious neighbourhood, supported by the principle of non-interference and the consultation and coordination with Russia and all Central Asian countries. Shanghai Cooperation Organization appears as one of the pillars to help this convergence. Circulation without barriers, cooperation and understanding between all the peoples along the Silk Road are the vital concepts used as discursive tools to gain the audience’s reception and support. The speech delivered in the People’s Representative Council of Indonesia, on 3 October 2013 (a month later than the previous one), titled “Work Together to Build a 21st Century Maritime Silk Road” begins by focusing on the relations between China and the Association of Southeast Asian Nations(ASEAN) countries, from which Indonesia is a member. China declares her interest in a good neighbour relation and in a strategic partnership in order to share prosperity and security. The next step, after the first paragraphs, is to propose specific stages of action. President Xi Jinping starts with the concept of “trust”. Again he brings to the speech the need for collective and individual reception of this principle, referring how vital is “trust” in state-to-state relations, but also between individuals. Then, he goes further and talks about the need for “innovation and open mind” to find development going against the “one-sizefits-all” development model, famous because of the use Western states and institutions made of it. China suggests discussing ways to cooperate and to guarantee that every country is following a “win-win” strategy. During all his discursive action and though making his speech in the Indonesian parliament, President Xi Jinping always refers to the members of ASEAN and urges the understanding of the need to abandon the Cold War mentality and to build new relations among these countries part of a specific region of the world. Simultaneously, he brings to his speech the historical element, recognising how this region was vital for the development of the ancient Maritime Silk Road. The speaker closes the speech by sharing the idea of a community of common destiny, based on mutual trust, development and benefit. Despite mentioning common topics, by analysing the discourse, we conclude the way President Xi Jinping presents those changes. If history and the past are determinant in the first speech and justify the present need to keep with the old regional arrangement, in the second one is the present and the future that justify bringing to nowadays the past. Likewise, the mention of the collective interest as the only argument for the

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success of the B&RI is part of both speeches. In the first speech, the speaker uses his memory to appeal for an individual interpretation. In the second case, the individual arises when referring to trust. Again, the message receives another form to adapt to the context. Albeit referring the same concepts and having the same concluding message, based on harmony, cooperation, development, win-win relations and respect for local sovereignty while searching for mutual models to good neighbouring, the discursive format and the contents to which the key concepts were associated were adapted to each audience. Curiously, we can also observe that the audiences of these discourses were broader than the place where President Xi Jinping delivered the speeches. In the first case, there was a political speech made on a university and refers not only to the host country but also to all the others surrounding this state. It is possible the presence of ambassadors and other responsible politicians as well as of students and civil society, meaning that with a single speech, the Chinese president was targeting very different audiences. Yet, the belonging to one region somehow connects this diverse public, and to specific memories, only local individuals can know. President Xi Jinping uses his memory to connect the audiences, even though he also refers to regional organisations like SCO. In the second case, President Xi Jinping delivers his speech in the national parliament of Indonesia, but at the same time, he focuses the message on ASEAN and in building a regional understanding. Again, it is possible international political actors were in the room, but it is sure that in both events, the media covered the speeches and highlighted some discursive passages to communicate to local society and other countries. Both acts of communication suggest being acts of international communication, not just directed for the audiences present in the room, even admitting they were diverse, but targeting domestic and international audiences, including the Chinese domestic public, which received through the media these speeches. Thus, Chinese authorities chose to disseminate the idea of B&RI through an act of international communication. They used two official visits to perform conferences that guaranteed a more extensive range of audience, because of the context of regional cooperation included in these visits. President Xi Jinping could get the attention of the politicians, media and civil society. In the case of Kazakhstan, he even involved academia, when chose this place to discourse about the B&RI. Despite the fact the core discourse was towards specific regions of the world, having a regional frame;

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these speeches represent a new message for the world, where China proposes to engage other countries in win-win cooperation exporting her view of international relations in a regional and global context.

Conclusions The B&RI discourse gathers the same concepts one can find in the general political discourse of Chinese authorities, meaning that China is exporting her view of the world order and her way of participating in the international relations. Despite this resemblance with the Chinese general political discourse, the B&RI discourse benefited from the adaptation of the message to the audience the Chinese authorities found in their different moments of communication. The acts of communication primarily thought as opportunities to communicate in diversity, for not only a nondomestic audience, but also trying to achieve different publics such as politicians, scholars and journalists. The content of the analysed speeches fits on topics such as development and cooperation, peaceful international relations, international and national security, and circulation of people, goods and services. These topics fit into the group of disciplines (social sciences, economics, business, management) we found as dominant in the database Scopus for scientific production on the B&RI, which can indicate scholars are responding to the B&RI political challenge by trying to produce knowledge about the subject. B&RI scientific production and B&RI political discourse thus present similarities and explore the paradigm China is presenting as a new model for international relations at the regional or even global level. Therefore, we can consider that the B&RI discourse and the way Chinese authorities use it as a tool for international communication, is a discourse for the world, which China adapts for different circumstances and audiences.

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CHAPTER 3

Global Strike vs. Globalization: The US-China Rivalry and the BRI Amit Gupta

In the United States, the US-China rivalry is viewed primarily through the military-strategic lens with planners thinking in terms of weaponry that include long-range bombers, stealth ships, and new submarines to counter the People’s Liberation Army.1 Additionally, in the Trump era, there has been a push to try and make the Chinese adhere to a Western-imposed economic order that Beijing views as partially disadvantageous to its future economic growth. The Chinese are not close to matching the US military capabilities so they are using a different set of strategies to successfully compete with Washington in the global arena. Central to the Chinese strategy is the development of the Belt and Road Initiative (BRI) which, if successful, will transform the Eurasian economies, increase China’s relative standing in the international system, 1 See the US Nuclear Posture Review that explicitly states the need for such systems to counter the changing strategic balance with China.

A. Gupta (B) USAF Air War College, Montgomery, AL, USA

© The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_3

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and work to reduce American global influence. This chapter looks at how this rivalry is playing out, what advantages either side possesses, and the implications for global order.

The Basis of American Power America’s ability to create a post-1945 international order was based on its overwhelming military power but also on its economic strength and its ability to build a set of international institutions and trade structures. Thus, the United States-led Western alliance set up the World Bank and the International Monetary Fund and, more importantly, Washington agreed to the establishment of the Gold Standard which made the US Dollar as good as gold and the premier currency for trading. Additionally, the United States created economic plans that led to the rejuvenation of Western Europe (the Marshall Plan) and Japan.2 The Marshall Plan was an imaginative and impressive program and was followed in the 1960s by a series of foreign aid programs to attempt to build up the economies of the newly independent non-Western nations. The most successful of these aid projects was the transfer of US agricultural practices to first Mexico and later India that led to the “Green Revolution.” The positive consequences of such assistance are very significant because they made these nations self-sufficient in the production of food.3 American supremacy in the world, therefore, depended on military, economic, and humanitarian efforts. Subsequently, soft power also came into play as the growth of a global market saw American preferences become globalized and led to the first writers on globalization calling it Americanization.4 America’s current position in world affairs, however, rests to some extent on past laurels, and it needs a new and comprehensive plan for world order. The current plan was based on the expansion of global markets and did lead to hundreds of millions emerging from poverty, especially in China and India, but is now seen as creating inequality and 2 Barry Machado, In Search of a Usable Past: The Marshall Plan and Postwar Recon-

struction Today (Lexington, VA: George C. Marshall Foundation, 2007), pp. 5–12. 3 See Nick Cullather, The Hungry World: America’s Cold War Battle Against Poverty in Asia (Cambridge, MA: Harvard University Press, 2010), pp. 11–20. 4 Yoichi Shimermura, “Globalization vs. Americanization: Is the World Being Americanized by the Dominance of American Culture?” Comparative Civilizations Review, Vol. 47, No. 47, Fall 2002, pp. 80–81.

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what the Filipino scholar Walden Bello called deglobalization.5 A new plan, therefore, would include military, economic, and soft power instruments as well as a long-term plan to solve the most pressing problems of poverty and deprivation in many of the countries in the world. Further, in a globalized world, other nations have begun to push ahead of the United States in contributing to the expansion of certain parts of the global economy. Instead, there is a growing emphasis on American military capability because the United States is the remaining superpower and finds it, therefore, easier to project military power than to provide an economic template for global growth.

America’s Military Supremacy As Barry Posen has argued, America’s military supremacy rests on its control of the commons—the deep seas, airspace over 15,000 feet, and outer space.6 While no nation has sovereignty over these environments, a country must have control over them to prosecute modern warfare successfully. America has control over all three commons and is likely to retain this advantage for some time because of its commitment to military research and development (R&D) that provides it with a growing technological edge over potential challengers (as Posen points out, current US R&D expenditure almost matches the combined defense budgets of Germany and France).7 This capability is enhanced by two additional factors: a world-wide network of bases that extend the US military reach and the division of the world into a series of commands that can work together effectively to prosecute US military strategy.8 This military capability can prevail over any standing military in the world as was the case with the rapid defeat of the Iraqi Army. While the United States has control over the commons, one environment in which its military preponderance can be challenged is the land environment. There, regular and irregular forces that have sufficient manpower, are motivated, and know the terrain will fight American forces.

5 Walden Bello, “Pacific Panopticon,” NLR 16, July–August 2002, Available at https:// newleftreview.org/issues/II16/articles/walden-bello-pacific-panopticon. Accessed on July 19, 2019. 6 Barry R. Posen, “Command of the Commons: The Military Foundation of U.S. Hegemony,” International Security, Vol. 28, No. 1, Summer 2003, pp. 7–15. 7 Ibid., p. 10. 8 Ibid., pp. 16–19.

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As we have seen in Iraq and Afghanistan, such forces, despite their technological backwardness, have been able to exact a considerable toll from the technologically superior and better-trained US forces. In short, technology does not successfully substitute for personnel on the ground. Having said that, the costs are high for a regime that opposes US interests. Any country opposing US security interests, therefore, runs the risk of having its regime overthrown unless it has a high level of domestic legitimacy. Second, the US economy remains attractive enough for foreign and domestic investors to continue to keep their investments in the United States. Neither Europe nor Japan will be able to completely take over as an economic alternative to the United States. Even with the withdrawal from the Trans-Pacific Partnership (TPP), the renegotiation of NAFTA, and the imposition by the current administration of higher tariffs on China, the US economy remains the largest and most influential one in the world. The third factor that works in favor of the United States is its soft power, particularly its attractiveness to global intellectual labor. The United States has been able to attract the best intellectual minds from around the world to work in its universities and high-technology industries for several reasons. These three factors have made the United States not just the military leader of the world but also its economic and cultural leader. As mentioned earlier, the problem for the United States is that it has not been able to formulate a new plan for global economic growth that would bring economic hope to the hundreds of millions of people who are not the winners in the current globalized economy—and the losers in this globalized economy exist in both the Western and non-Western world. Instead, the United States continues to restate the argument that has been made since the Reagan Administration—that free markets and investments by private corporations offer the best opportunities for global growth and rising living standards. Further, in an era where multilateral trading blocs still predominate, witness recent trade agreement between

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the EU and Mercosur, the current US administration is preferring bilateral arrangements.9 In contrast, China has built its foreign policy around using the phenomenon of globalization to its advantage.

China and Globalization China’s response to the United States has been based on a shrewd understanding of the international strategic context and the changes in the international system that have been brought about by globalization. In the military-strategic context, the Chinese recognize that they are a long way from matching the US military capability so they are preparing for what the American security analyst Xiaoming Zhang calls “a hightechnology war in local conditions.”10 Such a war could take place over Taiwan or the islands in the South and East China Seas and the Chinese want to ensure that the costs of such a conflict are so high for the United States that Washington will think long and hard over starting a conflict. The Chinese, therefore, have invested in anti-satellite weaponry, longrange missiles, hypersonic glide vehicles, and a new generation of combat aircraft that would significantly raise the costs of a US-China conflict. The Chinese policy of Anti-Access/Area Denial has made the United States think in terms of basing in the second island chain since the first island chain is vulnerable to the weapons that the Chinese have developed. This has led to among other things a Nuclear Posture Review by the Trump Administration that has called for the development of low-yield nuclear weapons, stealth submarines, dedicated combat aircraft to launch against Chinese high-value targets, a new long-range standoff cruise missile, and a long-range bomber named the B-21 Spirit.11

9 Emre Peker and Jeffrey T. Lewis, “EU, Mercosur Reach Agreement on Trade,” The Wall Street Journal, June 28, 2019. For Trump’s being in favor of bilateral deals see Harry G. Broadman, “Trump’s Misplaced Penchant for Bilateral Trade Deals, Forbes,” January 31, 2018, Available at https://www.forbes.com/sites/harrybroadman/2018/01/ 31/trumps-misplaced-penchant-for-bilateral-trade-deals/#fa0baef57b95. Accessed on July 19, 2019. 10 Interview with Professor Xiaoming Zhang, USAF Air War College, Montgomery, AL, January 19, 2019. 11 U.S. Nuclear Posture Review 2018, Office Secretary of Defense, Washington, DC, 2018, p. II.

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In contrast, the People’s Liberation Army is not putting money into developing a global strike capability. While it has just introduced its second aircraft carrier and a new generation of destroyers and submarines, it is not seeking, for now at least, to develop a naval capability that can dominate the Indian and Pacific Oceans and perhaps even get into the Atlantic. Instead, Beijing’s global strategy is based on the belief that a strategy of economic globalization can compensate for China’s lack of global military reach. China’s phenomenal economic growth over the last three decades has given it the economic power to create an economic interdependency with some of America’s closest allies and, thus, has resulted in a situation where these nations are increasingly hedging their bets in terms of whom to support in the US-China rivalry. These calculations are being driven by the new international economic realities that now shape trade, investment, and future linkages. The following tables show the extent to which the Chinese have made the international economy their own. Tables 3.1 and 3.2 show just how integrated the world has become. As Table 3.1 shows, the Chinese are now the largest holders of American treasury bills and part of Beijing’s calculation has been that such investments help stabilize the global economy. But the Chinese want to take this one step further and increase their investments in the United States thus making the linkages of economic interdependency much stronger. The reason for this is that the interest accrued on these treasury bills barely covers inflation. Buying into the US economy, however, gets access to a huge market and to emerging technologies. Thus, the Chinese would like to buy American companies and eventually acquire stakes in what the economist Nouriel Roubini calls America’s strategic jewels—i.e., high-tech and financial services companies like Boeing, Apple, Microsoft, Table 3.1 2018 major holders of US treasury bills in $ billions

1. China 2. Japan 3. Brazil 4. Ireland 5. United Kingdom 6. Switzerland 7. Cayman Islands 8. Hong Kong 9. Saudi Arabia 10. Taiwan

1165.1 1029.9 317.9 315.8 272.6 197.9 193.2 169.5 169.5 163.2

Source US Department of Treasury/Federal Reserve Board, October 2018

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Table 3.2 China’s top trading partners in $ billions

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1. European Union 2. United States of America 3. Japan 4. Hong Kong 5. South Korea 6. Taiwan 7. Australia 8. Vietnam 9. Malaysia 10. Brazil

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631.080 599.255 382.752 294.620 285.646 202.963 136.95 125.12 98.36 89.13

Source EU Directorate General of Trade, 2017

and Goldman Sachs.12 So far, the United States has kept the Chinese from making such acquisitions and even prevented it from building a highspeed rail from Los Angeles to Las Vegas. But given the need for foreign investment to bring about an increase in manufacturing and other jobs in America, it is possible that in the future the doors will be opened to the Chinese. Table 3.2 brings out what American economists and diplomats are concerned about: China is an economic behemoth that has built a network of trade and economic relationships that now trump (no pun intended) the military-strategic networks that dominated the Cold War. If you look at Table 3.2, it becomes apparent that with the exception of Hong Kong, Russia, and Brazil, all the countries on the list have major military and political ties to the United States. Further, as the World Trade Organization data shows, China has become the largest trading nation in the world and more countries have China as their largest trade partner than anyone else.13 In Latin America, Chile and Brazil have China as their largest trade partner and Santiago has the most vibrant economy in that continent. Moreover, in 2019, Chile, where the TPP was signed by member nations, became a signatory to the BRI. In sub-Saharan Africa, South Africa has China as its largest trading partner while in Oceana, Australia and New Zealand have China as their major partner. Australians thus say China is our major economic partner 12 Nouriel Roubini, “The Decline of American Empire,” RGE Monitor, August 13, 2008. 13 World Trade Statistical Review 2018, World Trade Organization, Geneva, Switzerland, 2018, p. 13.

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while the United States is our major strategic partner. This has led to countries around the world telling the United States that while they want Washington to keep its military presence in different parts of the world, “please don’t make us choose sides between you and China.”14 Economic interdependence, therefore, is limiting the ability of both Washington and Beijing to act aggressively around the world. This was brought out a decade back when the Great Recession of 2008 took place. Russia, which despite all the protestations about its importance, was and is an economic bit player in the international system, came to the Chinese and suggested that they dump their shares in key American companies and tank the already weak US stock market thereby forcing the United States to use its emergency authorities to support these companies. The Chinese not only refused but also told then Treasury Secretary, Henry Merritt Paulson Jr., about what the Russians were seeking to do.15 Beijing recognized that if the US economy collapsed, it would have a negative impact on the Chinese economy. More recently, President Trump has imposed tariffs on China in a bid to get the Chinese to change the terms of trade between the two countries, which have currently lead to a huge trade surplus for Beijing, to respect intellectual property rights, and to restrict the continued rapid growth of the Chinese economy particularly in areas like artificial intelligence.16 In a globalized world, however, old-fashioned tactics of levying tariffs are less useful than they were in the past. While the Chinese, given the adverse trade balance between the two countries, have less room to maneuver than the United States, Beijing does have two advantages that it can play on. First, the relative costs of goods sold in the United States, including items like the iconic I Phone, would balloon if further tariffs are put in place. This could make them less affordable in a tight American consumer market. That is why over 600 American firms signed a letter

14 Michael Schuman, “The U.S. Can’t Make Allies Take Sides over China,” The Atlantic, April 25, 2019, Available at https://www.theatlantic.com/international/ archive/2019/04/us-allies-washington-china-belt-road/587902/. Accessed on July 19, 2019. 15 Henry M. Paulson Jr., Dealing with China: An Insider Unmasks the New Economic Superpower (New York: Twelve, 2015), pp. 249–250. 16 Yanis Varoufakis, “Trump and Trade Tariffs: Big Lies Founded on Small Truths,” The Guardian, March 18, 2018, Available at https://www.theguardian.com/commentisfree/ 2018/mar/18/trump-trade-tariffs-debate-yanis-varoufakis. Accessed on July 2, 2019.

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to President Trump calling for an end to the trade war.17 The second is that the Chinese leadership has the luxury of working in an authoritarian system that can take greater pressure than a democratic one like the United States. That is because the adverse effects of a trade war would take a few years to pose as a problem for the Chinese leadership. In contrast, President Trump has to run for reelection in 2020 and, therefore, is more vulnerable to economic headwinds in the economy. In part, this may explain the American decision taken at the 2019 Osaka G20 summit to not impose further tariffs on China and to, instead, carry on further trade talks with Beijing. The US-China rivalry, therefore, is being shaped by the forces of globalization and while both nations are seeking to enhance their military capabilities they are also getting increasingly interlocked in an economic relationship that Trump has found difficult to both break and shape to America’s advantage. Analysts around the world do not see this rivalry as a zero-sum game in which one side has to lose. The Australian strategic analyst, Hugh White, almost a decade ago suggested that the United States and China not fight but share power in Asia and create a concert of powers on the continent to manage security, stability, and prosperity (White argued that the concert first bring together the United States, China, and Japan and, eventually, India and maybe even Australia).18 Most Asian leaders have come to this conclusion. Before being elected, President Duterte of the Philippines said he would jet-ski to the disputed islands in the South China Sea. After being elected, he changed his tone and called upon China to help in the economic development of the Philippines. China’s Belt and Road Initiative is the reason we are seeing Asian nations taking the position they are on Beijing’s foreign policy and its activities in the South China Sea. BRI is going to be an $8–12 trillion initiative that many economists believe will reshape the economic map of Asia and dwarf the TPP. It is this initiative, more than the other Chinese move to have a Regional Comprehensive Economic Program (their counter to the TPP), that will be the game-changer in Asia. Asia today is 40% of global GDP but, more 17 James Langford, “600 Plus US Companies Urge Trump to End China Tariffs,” Washington Examiner, June 13, 2019, Available at https://www.washingtonexaminer. com/business/600-plus-us-companies-urge-trump-to-end-china-tariffs. Accessed on July 3, 2019. 18 Hugh White, The China Choice: Why America Should Share Power (New York: Oxford University Press, 2013), p. 33.

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importantly, it is 70% of global growth and the Chinese are positioning themselves to forge Asia’s economic destiny. The BRI has been viewed with suspicion by some nations, notably India, because it is seen as version of Chinese style neo-imperialism but this ignores two crucial elements of the BRI. First, the BRI shows that the Chinese have ambition, vision, and resources and all three are required to formulate a future international economic order. The Chinese have come up with what some call a new Marshall Plan for the world where nations that were starving for external investment and on the margins of the emerging global knowledge economy were given the opportunity to buy into the system and grow their national wealth. Thus, the original plan was to connect the Eurasian continent but the initiative has become increasingly ambitious by including parts of the African continent in this new economic connectivity. Further, even countries of the TPP have seen the writing on the wall and agreed to join the BRI. Chile, one of the early proponents of the TPP, has now signed on to the BRI since it recognizes that its economic future lies beyond the confines of the Eastern Pacific and Latin America. The fact of the matter is that while nations may not like China, be suspicious of its long-term intentions, and complain about terms and conditions of loans, but these same countries recognize that BRI may fundamentally transform the global economy and, therefore, no one wants to be left out of this newly emerging trade and economic system. Secondly, the West has not been able to offer a competing economic alternative to the world and, in fact, has had problems shoring up its own liberal international economic order. The economic crash of Greece was not marked by a well thought out Western economic bailout or a plan to restore Athens’s economic competitiveness. Instead, the European Union hit Greece with punitive economic measures that led to the stagnation of its economy, a flight of young labor, and opened the door to Chinese investments. Thus, the Chinese have bought the Greek port of Piraeus and stated that they will make it ship a larger volume of goods than Rotterdam. Again, China’s ambition, vision, and resources are not trivial but forward thinking. A similar argument can be made for the Arctic where the Chinese came into Iceland after the financial collapse of that country in 2008. China’s financial presence helped rebuild the Icelandic economy but it also made China into a near-Arctic nation.

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The BRI and Soft Power The other factor that makes the BRI important is that it will increase Chinese soft power. Joseph Nye’s description of soft power is the one that has gained the maximum usage in the analysis of international relations. Nye described soft power as all the attributes of a society that make it liked by other nations and that, therefore, allow a country to better prosecute its foreign policy: Soft power is the ability to get what you want through attraction rather than coercion or payments. When you can get others to want what you want, you do not have to spend as much on sticks and carrots to move them in your direction. Hard power, the ability to coerce, grows out of a country’s military and economic might. Soft power arises from the attractiveness of a country’s culture, political ideals, and policies. When our policies are seen as legitimate in the eyes of others, our soft power is enhanced.19

Given that Nye’s formulation of soft power emerged in the 1990s, in the early phases of globalization, it was based on a description of American society (and to a lesser extent other Western nations) in a post-Cold War international order. In that system, the United States was the world’s strongest economy and was directly shaping the consumer culture of the rest of the world. Thus, the world was buying American sneakers, watching American basketball teams, and flocking to Hollywood movies. It was for this reason that sociologists were talking about Globalization actually being Americanization. American military and economic superiority led to formulation by Charles Krauthammer of the “unipolar moment” where America because of its might and economic primacy could create, and set in stone, a liberal international order. Yoshihiro Francis Fukuyama, similarly, stated that we had reached the end of the history of ideas since liberal democracy had won the debate for structuring domestic societies as well as the international economic order. Such definitions of order and soft power, however, may not hold true in the coming decades as the liberal democratic societies have begun to entertain formerly taboo right-wing ideas and their own economies are beginning to slow down. For the purposes of this discussion, therefore, 19 Joseph Nye Jr., “Soft Power and American Foreign Policy,” Political Science Quarterly, Vol. 119, No. 2, 2004, p. 256.

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the early definition of soft power made by the classical realist Edward Hallett Carr would make more sense. Carr talked about the power of opinion and saw it as important as the military and economic instruments of power. While discussing the power to shape opinion in terms of propaganda efforts he also recognized the power over international opinion that an organization like the Catholic Church had and even that of the Bolsheviks over international revolutionary and workers groups in the early stages of the existence of the Soviet Union.20 Carr’s definition of the ability to shape opinion was more value neutral than that of Nye whose exposition of the concept was grounded in liberal democratic theory (even though to his credit Nye did point out that the Soviet state in the 1950s and 1960s had been able to exert a similar soft power due to its high levels of productivity)21 and if we view soft power through the lens of Carr, then the role of the BRI in enhancing Chinese soft power.

The BRI as Soft Power To understand the soft power implications of the BRI, one must look at the nations through which the belt and road will traverse. Quite a few of these nations have authoritarian or quasi-democratic governments for whom liberal democratic norms are less important than the developmental agenda that China brings to their doorstep. In other countries like the Philippines, where the president has displayed authoritarian tendencies, the economic assistance from China is a welcome contrast to the criticism of human rights abuses that emanate from Western governments. In this context, therefore, China’s role as a creator of jobs and economic growth can only work to enhance its image in these nations as opposed to the West which has not brought about an alternative economic program and, increasingly, is caught up with its own domestic problems. This has led Vladimir Putin, in an interview to the Financial Times, to state that, the liberal idea had “outlived its purpose as the public turned against immigration, open borders and multiculturalism.”22

20 Edward Hallett Carr, The Twenty Year Crisis 1919–1939: An Introduction to the Study of International Relations (London: Macmillan, 1949), pp. 132–138. 21 Joseph S. Nye Jr., “Soft Power,” Foreign Policy, No. 80, Autumn 1990, p. 167. 22 “Vladimir Putin Says Liberalism Has Become Obsolete,” Financial Times,

June 28, 2019, Available at https://www.ft.com/content/670039ec-98f3-11e9-9573ee5cbb98ed36. Accessed on July 2, 2019.

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Further, the Chinese have also explicitly recognized that they have to build the credibility of the BRI through the use of soft power and in this context have sought to create stronger people to people bonds through greater cooperation in the spheres of science, education, and health with Beijing providing 10,000 scholarships annually to countries in the BRI. For as a Deloitte study points out, China knows that the success of the BRI depends in large part upon public support in its host countries.23 This is not to suggest that the Chinese model promises greater individual freedom but, as Carr pointed out with his analogy of the Catholic Church, it does give immense power over global opinion (interestingly, Carr was to argue, citing historians of his time, that the Catholic Church was, in fact, the first totalitarian state).24 If the BRI raises prosperity in areas where the West is less willing to invest, and creates an infrastructure that binds these nations both eastward and westward, then it can only mean that the influence of China over global public opinion will increase. A good example of these trends is Pakistan which has had a long and positive relationship with China. One of the major parts of the BRI is the China Pakistan Economic Corridor which was initially going to see a Chinese investment of nearly $63 billion in the enterprise—although it has now come down to $48 billion and may be reduced further as Pakistani economic planners remain unsure about how much money their country can successfully absorb. While the West has successfully put pressure on Pakistan to hold democratic elections, to the extent that Pakistan has now had three successive democratic administrations, Western economic endeavors in Pakistan have not led to broad-scale economic development. On the other hand, the BRI is expected by its proponents to precisely achieve the developmental objective which a country like Pakistan, with a median age in the low twenties, desperately needs. Thus while the West, particularly the United States, is viewed with suspicion, China is the “all-weather friend” who has stood by Islamabad and has devised an economic program that will benefit the common man.25 23 “Embracing the BRI Ecosystem in 2018: Navigating Pitfalls and Seizing Opportunities,” Deloitte Insights, 2018, p. 8. 24 Carr, The Twenty Year Crisis, p. 133. 25 For a discussion of the pros and cons of CPEC, see China-Pakistan Economic Cor-

ridor: Opportunities and Risks, International Crisis Group, Asia Report No. 297, June 2018.

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The BRI as a Challenge to Western World Order This brief analysis of the BRI explores how it strengthens Chinese economic interdependency with a large portion of the world and also helps build up China’s soft power for the future. Both of these factors will pose a challenge to the post-1945 Western-created world order because they undermine the premises the order was built on. Economically, as countries of Europe, Asia, Africa, and Oceania have greater trade and infrastructure links with the Chinese, it will lead to higher levels of interdependency that will loosen the traditional Western alliance system. We have started to see some of this already as was the case when Greece exercised its veto in the European Union to prevent a resolution that condemned China for its human rights abuses from being passed. Within Asia, connections to the BRI will also likely make those countries take the position that while they welcome both the United States and China being in Asia, they would prefer not to take sides. Recognizing this inevitability, the United States, in its Nuclear Posture Review, has sought to build a new series of weapons that will not require basing in host nations and facing possible opposition from these countries.26 A US security network that was created with alliances and basing in mind may be shifting to a more caseby-case approach thanks to China’s formidable global economic presence. In the case of soft power, the old argument that while everybody wanted to be China, no one admired China does not work anymore. As mentioned earlier, the Western liberal order faces challenges from within because of disaffected populations while externally the model is showing to be less appealing in some parts of the world. On the other hand, China’s efforts to win friends and influence people are working to gather the support of the rest of the world. Chinese television’s English channel is broadcast globally and is seen as: “But over the past decade or so, China has rolled out a more sophisticated and assertive strategy, which is increasingly aimed at international audiences. China is trying to reshape the global information environment with massive infusions of money – funding paid-for advertorials, sponsored journalistic coverage and heavily massaged positive messages from boosters. While within China the press is increasingly tightly controlled, abroad

26 U.S. Nuclear Posture Review 2018, Office Secretary of Defense, Washington, DC, 2018, p. 54.

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Beijing has sought to exploit the vulnerabilities of the free press to its advantage. In its simplest form, this involves paying for Chinese propaganda supplements to appear in dozens of respected international publications such as the Washington Post. The strategy can also take more insidious forms, such as planting content from the state-run radio station, China Radio International (CRI), on to the airwaves of ostensibly independent broadcasters across the world, from Australia to Turkey.”27 China’s Ministry of Foreign Propaganda also decided to put $6.6 billion into reshaping China’s image in the global media.28

China has also become a serious investor in Hollywood as its investors claim they have big stomachs and big pockets. This has led to Hollywood taking pains to not paint a negative picture of China in its movies.29 This is because now over 60% of a Hollywood movie’s revenues come from overseas sales and China is one of the major markets for these productions. Thus, through the ability to use a fusion of soft and economic power China has managed to create a positive image for itself in the global media.

Conclusion: The American Dilemma The BRI, therefore, is more than an infrastructure project (albeit a very expensive one) because it challenges the existing Western economic and political order, and as of now, there is no planned response to it. Instead, there are analyses which suggest that the BRI will run into more problems than the Chinese will be able to deal with and that most of the projects may be stillborn because while many countries have joined the initiative very few projects have commenced. As one analyst critical of the initiative has written: “The BRI is also breathtakingly ambiguous. There is no

27 Louisa Lim and Julia Bergin, “Inside China’s Audacious Global Propaganda Campaign,” The Guardian, December 7, 2018, Available at https://www.theguardian. com/news/2018/dec/07/china-plan-for-global-media-dominance-propaganda-xi-jinping. Accessed on July 2, 2019. 28 Ibid. 29 Hannah Beech, “How China Is Remaking the Global Film Industry,” Time, January 16, 2017, Available at https://time.com/4649913/china-remaking-global-film-industry/. Accessed on July 2, 2019.

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official definition for what qualifies as a BRI project. There are Chinesefunded projects in countries not participating in the BRI that share many of the same characteristics. The BRI was officially launched in 2013, but projects started years earlier are often counted. The BRI brand has been extended to fashion shows, art exhibits, marathons, domestic flights, dentistry, and other unrelated activities. The BRI’s loose, ever-expanding nature, and a lack of project transparency, have led many observers to exaggerate its size. When assessing the BRI, there is always a risk of imposing order where, by design, it does not exist.”30 From a Chinese perspective, however, the BRI is the first step toward integrating large parts of the world into a Chinese-constructed international economic order. Given this ambition, and the staggering size of the program, one must expect hasty and poor decisions along with more wisely taken ones for in any project there are false starts and a gestation period to iron out the problems. Yet, from a Western perspective, even if a significant portion of the BRI comes through it will lead nations to hedge between America and China. So what should America do? Several things come to mind. Reentering the TPP could be the first step toward providing an alternative to the nations of Asia, Africa, and Latin America as well as portions of Europe. A second one would be to create a program of economic and technical assistance that would help the weakest nations in the world and not make the argument in economic terms but rather in normative ones. To reduce costs, this could be a joint plan between the United States and the European Union. Finally, one has to consider whether the United States could encourage multinational corporations to win contracts for portions of the BRI since it would increase the governance and transparency of the process.31 What is important, however, is that some long-term well-crafted plan is brought about if the United States wants to retain its control over the global economic system.

30 John Hillman, “The Chinese Belt and Road Is Full of Holes,” CSIS Briefs, September 2018, p. 1. 31 “Embracing the BRI Ecosystem in 2018,” p. 2.

CHAPTER 4

Belt, Road and Ball: Football as a Chinese Soft Power and Public Diplomacy Tool Emanuel Leite Junior and Carlos Rodrigues

Introduction In September 2013, in a speech delivered at Nazarbayev University, Astana, Kazakhstan, Xi Jinping evoked the history of Silk Road. Recalling Zhang Qian’s travels to Central Asia “on missions of peace and friendship” (Xi, 2014, p. 315), Xi emphasized how those journeys helped to open “door to friendly contacts between China and Central Asian countries” (p. 315). Further on Xi extols the ancient Silk Road as the “exchanges and mutual learning” provided by the interactions among the Eastern and Western civilizations along the route contributed to “the progress of human civilization” (p. 315). The ancient Silk Road was as

E. Leite Junior (B) · C. Rodrigues University of Aveiro, Aveiro, Portugal e-mail: [email protected] C. Rodrigues e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_4

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an inspiration because it demonstrated that through mutuality and cooperative interaction, “countries of different races, beliefs and cultural backgrounds are fully able to share peace and development” (p. 316). This historical perspective presented by Xi had a rationale. The Chinese president used the ancient Silk Road as a basis for his analysis: the geopolitical scenario in 2013 demonstrated the right conditions to revitalize the old transnational route. For Xi, it was the ideal time to strengthen the “friendship and cooperation” (p. 316) between China and Eurasian countries. Therefore, Xi calls on the countries of the Eurasian region to have “an innovative approach and jointly build an economic belt along the Silk Road” (p. 317), thereby laying the foundations of what would initially be called “One Belt One Road”, now the “Belt and Road Initiative” (BRI). The Chinese leader’s political discourse, based on promoting the strengthening of “trust, friendship and cooperation, and promoting common development and prosperity” (p. 316), follows the Five Principles of Peaceful Coexistence.1 This is evident when Xi affirms China’s commitment not to interfere in either the internal affairs or the foreign policies of the countries (p. 316). There is no doubt that the BRI is currently the most ambitious strategy pursued by the Chinese government. But China is also looking at other scenarios in international geopolitics. Sport is one of the targeted fields. The Chinese intend to have one of the world’s largest national sports economies. To do this they have been implementing public policies aimed at developing their sports industry. In 2014, the Chinese State

1 The Five Principles of Peaceful Coexistence first appeared as an international agreement, that is, the Agreement between the Republic of India and the People’s Republic of China on Trade and Intercourse between Tibet Region of China and India, concluded between China and India in Beijing in April 1954 (Zhengqing & Xiaoqin, 2015, p. 70). It was Premier Zhou Enlai who first connected the idea of “peaceful coexistence” with the Chinese diplomacy. In a statement in support of the recommendation for peace submitted to the United Nations General Assembly by Soviet Union, he pointed out the principles of equality, mutual benefit and mutual respect for territorial sovereignty (p. 72). The Five Principles of Peaceful Coexistence are: mutual respect for each other’s territorial integrity and sovereignty; mutual non-aggression; mutual non-interference in each other’s internal affairs; equality and cooperation for mutual benefit; and peaceful co-existence. The Five Principles are considered “the most important diplomatic name card of China in the contemporary world stage, the five principles play a significant role in promoting the peaceful development of China and shaping its image as a responsible power” (p. 67).

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Council issued a document to boost China’s sports industry: “Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption” (国务院关于加快发展体育产业促进体育消费 的若干意见). This strategy is commonly deemed as the milestone marking the take-off of the Chinese sports industry (Liu, 2017). To meet that challenge, the Chinese government sees the development of football as the driving force behind this growth process. For this reason, “The Overall Reform Plan to Boost the Development of Football in China” (中国足球改革发展总体方案) was issued in 2015, a kind of preamble to the main document, from April 2016: “China’s medium and longterm football development plan (2016-2050)”—(中国足球中长期发展规 划 2016—2050年), thereafter “the Plan”. It is no novelty to affirm that the economic, political and social roles of sports are focus of a great deal of attention in the politics and policymaking realm (Korneeva & Ogurtsov, 2016). Elite sport has long been used both as an ideological tool and, as Gupta puts it, as an expedient to show its country to the world (Gupta, 2009a, p. 182). China, obviously, is not an exception. Sports, particularly since the nineteenth century, did not play second fiddle in the Chinese power structures (Hwang & Chang, 2008). Mao Zedong himself, about 30 years prior to the 1949 revolution, wrote an essay entitled “A Study of Physical Culture” (体育之研究), in which he praised physical education as necessary to counteract something he diagnosed as follows: “Our nation is wanting in strength. […]. The physical condition of the population deteriorates daily [….]. If our bodies are not strong, we will be afraid as soon as we see enemy soldiers, and then how can we attain our goals and make ourselves respected?” (Schram, 1989, p. 15). The attention paid to sports and physical education would permeate the post-revolution years under the motto “Keep fit, study well, work well”. As argued by Jarvie et al. (2008, p. 64), physical culture “stood for clean living, progress, good health and rationality and was regarded by the authorities as one of the most suitable and effective instruments for implementing new social policies as well as the relative degrees of social control implicit within many programmes”. Since the proclamation of the People’s Republic of China, the political use of sport has been recurrent. The 1950s were also marked by the first steps taken towards the setting up of an elite sports system in China (Hong, 2008). As we will see later, the politicization of sport has continued over the decades and remains a reality to this day.

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More than one hundred years after Mao’s first written concerns on the matter, the Chinese leadership personified in Xi Jinping is making efforts to materialize a whole new context for both elite sports and physical education, hoisting them to the core of the Chinese Dream as part of the so-called rejuvenation pursuit, something that has to do with modernization of the country and economic success (Peters, 2017, p. 1302). As we have mentioned before, football, the world most popular sport, could not be left out of the picture. Besides Xi’s personal enthusiasm for football—his “China football dream” (中國足球夢) was first expressed in 2009 (Tan et al., 2016, p. 8) and reiterated in 2011 with the revelation of his “three World Cup dreams”, participate in the World Cup, host the World Cup and to win the World Cup (Tan et al., 2016, p. 2), the Plan is not a policy aimed at satisfying the president’s personal dreams. There is the political and geopolitical aspect of the Plan. After all, elite sport can be used as a tool for promoting the country’s image—both in the pursuit of international acceptance (Allison & Monnington, 2002) as in the establishment of international relations through what Joseph Nye calls “soft power” (Nye, 2012). This chapter explores the role of sports, in particular football, in the developments associated with the BRI.

About the People-to-People Ties… The political, infrastructural, trade, economic and financial aspects seem to occupy central stage in the BRI overall international debate. One can argue that the attention paid to the cultural dimension, that is to say the people-to-people ties, is not so close as in the case of the other pillars of BRI. Nevertheless, this relative inattention does not match the relevance attributed by the Chinese political settings, both as a discursive and as a strategic asset. The Office of the Leading Group for Promoting the Belt and Road Initiative (推进“一带一路”建设工作领导小组办公室)2 reckons people-topeople bonds as “the cultural foundation for building the Belt and Road”, as well an ingredient needed to materialize “the common dream of all peoples to enjoy a peaceful and prosperous life” (China’s National Development and Reform Commission, 2019, p. 26). Xi Jinping (2014, pp. 318, 319), 2 The Office of the Leading Group for Promoting the Belt and Road Initiative operates under the National Development and Reform Commission and aims at providing BRI with guidance and coordination.

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in turn, considers people-to-people ties as “key to good relations between states ” and “to pursue productive cooperation” in all areas of the BRI. To cap it all, the Chinese leader claims for “more friendly exchanges between our peoples to enhance mutual understanding and traditional friendship, and build strong public sport and a solid social foundation for regional cooperation”. The expectation is that people-to-people ties can bring international public support to the BRI principles and implementation (China’s National Development and Reform Commission, 2015), outlining the desired “broad consensus on the Belt and Road Initiative” (ibid.). What are people-to-people bonds under the BRI framework? Liu and Dunford (2016, p. 13) offer a concise and clear answer: “People-to-people bonds means increasing support and capacity for BRIs through cultural and academic exchanges, student exchanges, media, tourism and medical cooperation, joint research, cooperation between nongovernmental organizations, etc.”. Mismatching the inattention in the public debate, as mentioned before, an approach to the implementation realm shows that, even vis-àvis the BRI-related multibillion infrastructure developments, the peopleto-people bonds do not play the second fiddle. This is well evidenced in progress reports issued by Chinese official sources (e.g. CNDRC, 2019). Cultural exchange draws on a wide range of activities, from art, music and film festivals to jointly established TV, radio and publishing programmes, as well as the shared heritage along the Silk Road (Winter, 2018). The same can be said about education and training. Besides the more and more active work carried out by Confucius Institutes in disseminating Chinese language and culture all over the world, the scholarship schemes set up by the Chinese government have allowed for a significant increase in the number of foreign people studying in China. In addition, China has signed 24 agreements with BRI participating countries concerning the mutual recognition of higher education degrees. The Silk Road Tourism Promotion Union, the Maritime Silk Road Tourism Promotion Alliance or the Tea Road International Tourism Alliance are BRI-driven organizational arrangements that serve as good examples of the cooperation mechanisms grounded in tourism. From visa exemption agreements to streamline application procedures, a number of initiatives have been developed under the light of the BRI people-to-people pillar, thus adding up the tourism quantitative potential inherent to the population magnitude. In the health-related fields, to the 56 agreements signed with several BRI countries and NGOs, one should add on Chinese-led cooperation in preventing and controlling diseases like, among others,

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AIDS, malaria, dengue and tuberculosis, as well as the presence of Chinese medical teams and the establishment of Chinese traditional medicine centres in several countries. Finally, the more than RMB 3 billion (ca. e 384 million) invested in emergency food assistance and relief and in the South-South Cooperation Fund, supporting health improving and poverty alleviation programmes in many countries. It is obvious that the varied dimensions of implementing the people-topeople pillar, as briefly reported above, have a feeding effect on the power of Chinese cultural diplomacy and soft power, or, at least, a counteracting effect on the risks of Chinese “soft disempowerment”. What is the role of sports, in particular of football, in this cultural foundation to build up the BRI?

The Plan According to FIFA, the historical origin of football lies in Ancient China and in the practice of cuju (蹴鞠), dating back to the times of the Han Dynasty (206 BC–220 AC). It is believed that it was during the Qing Dynasty, in the seventeenth century, that football stopped being practiced in China. Modern football, codified in England in 1863, reappears in China in 1879. Throughout the twentieth century, despite some attempts, China was unable to succeed in this sport (Leite Junior & Rodrigues, 2018). And the improvement of Chinese football competitive status will take a while. The professionalization of football in China has occurred only during the 1990s. The first professional championship was launched in 1994, and, for a brief period, it gained popularity (Hong & Zhouxiang, 2013). Despite being the first professional sport in China, Chinese football continues to lack competitiveness. Due to problems such as the successive corruption scandals and match-fixing, the credibility of the competition fades, causing sponsors and viewers to lose interest. After a few attempts of the Chinese authorities to fight football fraud, 2011 is commonly seen as the beginning of a new phase of professional football development in the country (Hong & Zhouxiang, 2013).

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Issued in April 2016, the “China’s medium and long-term football development plan (2016-2050)”—(中国足球中长期发展规划 2016– 2050年)—is the latest Chinese effort to try to improve and develop football in the country. The Plan represents a public policy strategy formulated and implemented by the Chinese government, under the competence of the State Council’s Office of the Inter-Ministerial Joint Conference on Football Reform and Development (足改部际联席会议办公室). This body brings together, among others, 11 Ministries, 4 State Council Commissions and 5 government agencies, as well as the Chinese Communist Party’s Propaganda Department and a range of bureaus, agencies and commissions at the provincial and local government levels. Currently, the Chinese men’s team is only 73rd in the FIFA World Men’s Rankings.3 There is, therefore, a long way to go, as acknowledged in the plan. Accordingly, to transform China into a future global football power, the original plan proposed three development stages, each one establishing goals to be fulfilled in 2020, 2030 and 2050, respectively (China’s National Development and Reform Commission, 2016): • By 2020: 20,000 specialized football schools, 70,000 football fields, 30–50 million primary and secondary school students practising the sport; • By 2030: 50,000 specialized football schools,4 the Chinese Men team being one of the best in Asia and the Women team established as “world-class”; • Until 2050: the Men team in the top-20 of the FIFA ranking established as a global football power. It is worth to mention that the overarching goal to establish China as a “world-class football power” by 2050 aligns with broader national objectives culminating with the 100th anniversary of the founding of the People’s Republic of China (PRC) in 2049.

3 FIFA World Rankings as of 14 June 2019. 4 In 2017, the People’s Daily (人民日报) reported that China’s sporting authorities had

altered the original goals of the football development plan. Instead of waiting until 2030 for 50,000 specialized football schools, the goal became to reach the mark by 2025 (People’s Daily, 2017).

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The scope of the Plan is broad, aiming at points such as the educational system (CNDRC, 2016, p. 6), increasing the physical education’s academic load, with emphasis on football, and encouraging the practice of football as a public health issue (aiming at the well-being physical and mental development of young people, as well as strengthening the physical conditioning of the masses). Here, we see the importance of implementing public policies that integrate such an ambitious plan with the promotion of education as a springboard of for emerging talents by promoting new cultural habits, such as the practice of football. The football development plan is well aware of this. For this reason, it aims to promote the strengthening of grass-roots football and community football, talent training, increasing the scale of youth participation in football, developing football schools to promote interest and cultivating fans (CNDRC, 2016, pp. 3, 4, 5). The Plan, however, also covers points such as the promotion of cultural and diplomatic exchange with other nations (as we will address later in this chapter). As well as aspire making football the driving force behind the development of the entire sports industry in the country, so that this will become a relevant sector in the national economy, helping the country to continue to grow and thrive, as mentioned before. The far-reaching nature of the Chinese plan is well illustrated by figures such as the stated aim to ensure that the national sports industry will generate USD 460 billion by 2020 (CNDRC, 2016) and USD 813 billion by 2025 (Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption). For comparative reference, it is estimated that the global sports industry traded around USD 1.3 trillion in 2017, USD 519.9 billion of which in the United States alone (Plunkett Research, 2018). Accordingly, the Chinese plan makes explicit the ambition to foster its national sports industry in ways that will allow China, in a five-year period, to draw near the current size of the US market.

Sport, Public Diplomacy and Soft Power Diplomacy is the politics at the state level. It’s “the application of intelligence and tact to the conduct of relations between the governments of independent state” (Satow, 1957, p. 1). According to Dubinsky, “the term public diplomacy was applied during the Cold War referring to the process of international organizations trying to achieve foreign policy goals by engaging with foreign publics” (Dubinsky, 2019, p. 1). The

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author adds that “new public diplomacy refers also to non-state actors” (p. 1) and explains that public diplomacy comprehends communications and interactions by governments, policymakers, organizations and individuals to influence foreign publics to achieve a more favourable image of the nation and ultimately achieve foreign policy goals (Dubinsky, 2019). Essentially, public diplomacy seeks to exercise influence by building positive and resilient affiliations, which other parties consider to be attractive and valuable (Brannagan & Giulianotti, 2018). Finally, we can say that sport diplomacy happens when international sport is consciously employed by governments as an instrument of diplomacy (Abdi et al., 2018). As we have mentioned in the introduction, since the proclamation of the PRC sports has been used as a political and diplomatic tool. It all started with the so-called sovietization of sport in the 1950s, fundamental in the establishment of contacts with the Soviet Union and Eastern European countries (Hong & Zhouxiang, 2012d); the Games of the New Emerging Forces (GANEFO)—through GANEFO China aimed at strengthening its leadership in the Third World as an alternative to the powers of the United States and Soviet Union (Hong & Zhouxiang, 2012e) and also promoted sport as a revolutionary diplomacy (Qingmin, 2013); the emblematic and historical case of the “ping-pong diplomacy”, which allowed Chinese rapprochement with the United States during a period of tension in Sino-Soviet relations (Hong & Zhouxiang, 2012f); the Olympic strategy which was implemented from the 1980s (Hong & Zhouxiang, 2012g) and deepened after the bad results in the Seoul Games (1988) with the implementation of the elite sport system, “juguo tizhi” (举国体制), which in English, literally, means “the whole country support for the elite sport system”, a political strategy that can be summarized as the quest for glory at the Olympic Games (Hong & Zhouxiang, 2012b, c). That glory was achieved in 2008, when Beijing hosted the Summer Olympic Games. After the failed bid in 1993 to host the 2000 Olympic Games, the Chinese capital city was chosen on its second attempt, in 2001, to host the 2008 edition. Hosting the Games was an important part of the whole Olympic strategy: “Beijing’s success was regarded as a milestone on the road of national revival” (Hong & Zhouxiang, 2012a, p. 153). China believes that through the 2008 Beijing Games it was able to show the world its development and that it has managed to position itself as a world power: economic and sports. “The image of a highly

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modern nation, efficient and increasingly prosperous” (Giulianotti, 2015, p. 290) was what the country tried to sell to the world, seeking not only the establishment of diplomatic and commercial relations, but also the development of tourism. According to Giulianotti (2015), mega-events, such as the Olympic Games and the World Cup, “can be considered one of the most powerful contemporary manifestations of globalization”. This is because, according to this sociologist, these mega-events have repercussions in the economic, social and political spheres. In economic terms, Giulianotti alludes to the billionaire figures involved in these tournaments and the possibility that the cities and countries hosting the events can be “sold”. Regarding the social question, the researcher recalls that these competitions are accompanied by billions of people across the planet. Finally, the political aspect, since “these events attract politicians from all over the world, particularly in the opening ceremonies” (Giulianotti, 2015, p. 288). And that brings us to a key concept to understand the Plan and how this public policy is connected to the BRI, as a diplomatic tool. We are talking about what Joseph Nye calls soft power (Nye, 2012). Following the author, “power is the ability to influence others to achieve the results they want, which can be done through coercion, payment or attraction” (Nye, 2012, p. 151). In contrast to hard power, which would be characterized by coercion (e.g. military force) or pay (e.g. economic force), there would be soft power. As Nye (2004, p. 5) explains: “A country can obtain the results it desires in international politics because other countries - admiring its values, emulating its example and aspiring to its level of prosperity - will want to follow it”. As Brannagan and Giulianotti put (2018), Nye coined the term “soft power” seeking “to respond to two interlinked shifts in relationships between states and international society. First, following advances in global communications, a growing range of actors had gained the capacity to collate, shape and distribute ever-expanding volumes of information to different audiences. Second, these diverse actors were transforming how political powers are acquired and exercised” (p. 1140). The states started to face the “paradox of plenty”. “A plenitude of information leads to a poverty of attention. Attention rather than information becomes the scarce resource, and those who can distinguish valuable signals from white noise gain power” (Nye, 2002, pp. 68, 69). With the difficulty of standing out in the midst of so much information, of so many actors, which generates the noise of communication, the states have the need to promote

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their legitimacy and attractiveness. It is in this context, then, that Nye presents the concept of “soft power”. Cultural achievements and sports success are ways to win the admiration of others. This can be done by adapting the state’s international agenda in the quest to shape the preference and behaviour of others in relation to the state (Brannagan & Giulianotti, 2018, p. 1141). That is why sports can be a very useful tool in the exercise of soft power (Brannagan & Giulianotti, 2015, 2018; Brannagan & Rookwood, 2016; Chari, 2015; Chen et al., 2012; Delgado, 2016; Grix & Lee, 2013; Korneeva & Ogurtsov, 2016; Krzyzaniak, 2016; Leite Junior & Rodrigues, 2017; Samuel-Azran et al., 2016). The concept of “soft power” was introduced in China in 1992 and has since generated a number of discussions and became a central concept in the political formulation in the Chinese Communist Party (Xu et al., 2018), having been adopted in the official language of the CCP in 2007, in the then President Hu Jintao’s speech at the party’s 17th National Congress. Cultural legacies and achievements besides sports success are ways to win the admiration of others. After all, culture is an important source of power and promoting a compelling culture is one of the main means to build an external national image (Nye, 2008, p. 95). In a speech at the 12th group study session of the Political Bureau of the 18th Central Committee, Xi Jinping stated that “the strengthening of our cultural soft power is decisive for China to reach the Two Centenary Goals and realize the Chinese Dream of rejuvenation of the Chinese nation” (Xi, 2014, p. 178). Freeman (2012) explains that soft power is a way for nations to build and manage their reputations and adds that this is a form of “soft public diplomacy”, which serves for states not only to become attractive to foreigners also for their own citizens. Brannagan and Giulianotti (2018) add that “soft power aligns more with strategies of ‘public diplomacy’, which also include creating and maintaining mutual understandings, long-lasting relationships and active cooperation” (p. 1141). It is by no mere chance that all the BRICS5 countries have hosted sports mega-events in the last years. Beijing, the Chinese capital, hosted the 2008 Summer Olympics; Delhi, the Indian capital, hosted the Commonwealth Games in 2010 and South Africa, in the same year, became the 5 Acronym of Brazil, Russia, India, China and South Africa, countries whose economic growth gained global recognition as cooperative links established among them grounded their (re)positioning in the geopolitical global settings.

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first ever African country to host the FIFA World Cup; Brazil, in a period of two years, organized the two largest world sporting events, the 2014 FIFA World Cup and the 2016 Summer Olympics (Rio de Janeiro); and Russia organized the 2014 Winter Olympics (Sochi) and more recently the 2018 FIFA World Cup. Furthermore, China will be again on the spotlight soon as organizers of the 2022 Winter Olympic Games. The Emirate of Qatar is another good example of a country that sought to exercise its soft power through sports. In 2008, it was issued Qatar National Vision 2030, a strategic plan for the country to change its image in the international scenario. It is in this broader strategy that we can find Qatar sports policies. Since December 2010, when Qatar was awarded the right to host the 2022 FIFA World Cup, the emirate has been in the spotlight of world football (Brannagan & Giulianotti, 2015, 2018; Brannagan & Rookwood, 2016; Dorsey, 2014, 2015; Reiche, 2014; Samuel-Azran et al., 2016). Krzyzaniak (2016) draws attention to Qatari soft power through football sponsorship, what he calls “nation branding”: in 2010 Qatar Foundation became the first commercial sponsorship of history on FC Barcelona shirt (a brand that was later replaced by Qatar Airways), and in 2011 Qatar Sports Investments bought the French team Paris SaintGermain. Qatar also explores Barcelona and PSG brands and its global stars, players like Messi, Neymar, Iniesta, Thiago Silva, among others, as poster boys of some of its advertising campaigns to promote tourism in the emirate. As far as public diplomacy is concerned, the Plan explicitly demonstrates its perception of football as an instrument of sport diplomacy. For example, the policy paper discusses the growth of the international exchanges, seeing the rise of football activities as “an important part of sports diplomacy” (CNDRC, 2016, p. 2). It goes further and draws attention to the need to strengthen the “international cooperation and exchanges of talent in the football industry” (CNDRC, 2016, p. 10), adding that the foreign exchange channels of football must be expanded, encouraging all bodies to host various forms of international football exchange activities and all kind of football experts to go abroad for study and training, and, finally, supporting the more outstanding experts to work in international organizations (CNDRC, 2016, p. 16). The Plan also refers to the importance of increasing “the level of domestic and foreign opening up and develop win-win cooperation” (CNDRC, 2016, p. 5). As we can observe, “cooperation” and “exchanges” are two keywords both in the Plan and in the Xi’s speech from 2013, showing how

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both initiatives play a fundamental role in the Chinese geopolitics and are consistent with the Five Principles of Peaceful Coexistence, that are “the most important diplomatic name card of China in the contemporary world stage” (Zhengqing & Xiaoqin, 2015, p. 67). To what extent has sport, in particular football, contributed to China’s BRI? This is what we will discuss in the next section of this chapter.

Football as a Connecting Element The Plan states that the Chinese government will lead the “reform and innovative development” and will be the responsible for fully displaying that “football has a leading role for China’s sports development and reform”. The document also highlights the role of non-governmental partners. Indeed, it foresees an active participation of the private sector, thus closely following the established in the “Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption”. According to the spirit of this novel strategy, the government limits its action to the guiding and supporting the development of the industry while fostering a structure that allows for setting forth a competitive market structure (Zhan, 2013). In that sense, it is important to remember that investments in football can provide the possibility of establishing trade and diplomatic relations. We must also consider that investing in sports at an international level brings the possibility of creating a state brand, helping to establish a national brand name (Gupta, 2009b, p. 1786). There is also the influence exerted by what Mills called the Power Elite. He argues that “the power elite are not solitary rulers. Advisers and consultants, spokesmen and opinion-makers are often the captains of their higher thought and decision” (Mills, 1956, p. 4). According to Mills, these include professional politicians, administrators and celebrities. Football business can be that political and economic tool, as a means through which to accumulate and exert power, to acquire legitimacy and credibility, and to exert influence over the governance of sport. That’s what happens, for example, in the Italian power elite, according to Doidge, between business, politics and football extends into football governance (Doidge, 2018, p. 118). As soon as the Plan was published, large Chinese corporations made significant investments in both domestic and overseas football and sports markets. Alibaba owns 50% stake in Guangzhou Evergrande, is also the main FIFA Club World Cup sponsor until 2023 and will sponsor the

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Olympic Games until 2028. Dalian Wanda Group bought Infront Sports & Media AG (one of the most respected sports marketing companies in the world and which has as one of its clients nothing less than FIFA) and also sponsors FIFA. They also hold 3% of the shares of Atletico Madrid (whose stadium has its naming rights Wanda Metropolitano Stadium) and own the Chinese Super League (CSL) club Dalian Yifang FC. But in the present section, we will look at some more specific deals and investments that we identified to be more connected to the BRI.

The English Connection In 2014, China signed a major oil and gas deal with Abu Dhabi, the capital city of the United Arab Emirates and also capital of the Emirate of Abu Dhabi, the largest of the UAE’s seven emirates. The UAE is a strategic partner to China, since the country is close to both overland and maritime Belt and Road routes. In October 2015, Xi Jinping visited the UK. The Chinese president has been to Manchester with the then British Prime Minister, David Cameron. During his stay in Manchester, Xi went to the Etihad Campus, the training centre of Manchester City, a club owned by City Football Group, which belongs to Abu Dhabi United Group. In that occasion, Xi took a selfie with the Argentinian striker Kun Aguero and Cameron. Two months later, on 1 December 2015, group of Chinese investors, headed by China Media Capital, acquired a 13% stake in the company that owns Manchester City football club for $400 million. On 17 December 2015, during the Crown Prince of Abu Dhabi, Shaikh Mohammad Bin Zayed, state visit to China, it was launched of a US$10 billion UAE-China joint strategic investment fund. Last February 2019, City Football Group bought Sichuan Jiuniu Football Club a football club based in Chengdu, Sichuan, China. The club currently plays in the China League Two, the third tier league of the country. Just days before that acquisition Abu Dhabi’s Etihad Airways announced a new fleet of Boeing 787’s to service its routes into Chengdu. Finally, on 26 June 2019, it was announced that Etihad Rail, the developer and operator of the UAE’s national railway, has awarded $1.2 billion of civil and rail engineering work to the China Railway Construction Corporation and Abu Dhabi-based infrastructure company Ghantoot Transport & General Contracting. The deal concerns to Packages B and C of the UAE’s national railway network. Package B runs for 216 km, and Package C runs for 94 km, and the two are part of the 605 km line from Ghuweifat

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on the western border with Saudi Arabia to the Port of Fujairah on the eastern border with Oman. Manchester City is not the only English club that has Chinese investments. As well as it is not just in the UAE that there are Chinese companies interested in railway construction. The four biggest clubs from the West Midlands in England—Aston Villa, Birmingham City (both from Birmingham), Wolverhampton Wanderers and West Bromwich Albion— belong to Chinese companies. And what is so special about that particular region of Britain? Phase 1 of the High Speed 2 (HS2), a planned high-speed railway in the UK, will create a new high-speed line between London and Birmingham by 2026. It just happens that according to the property schemes maps the railway will run through Aston Villa’s training ground, wiping out all the academy pitches and two first-team pitches. It is told that Tony Xia, who owns Aston Villa, might be interested in investing in the HS2 project. Xia is not alone, however. The conglomerate Fosun International Ltd, owner of Wolverhampton, is the first private company to own majority stakes than the government in a high-speed railway project.6 Fosun is reportedly interested in HS2 contracts.

The Ports Along the Way In March 2019, after a meeting of the Pakistani Senate Committee to Football Development, Chairman Senate Muhammad Sadiq Sanjrani said that promotion of football would be encouraged at national level. The Senator said that, to boost the development of Pakistani football, two football stadiums of international standard would be constructed in the cities of Quetta and Gwadar: with the assistance of the Chinese government. Since Mao Zedong’s era “China uses stadiums as diplomatic means to demonstrate its cultural, economic and socio-political engagement in less-developed nations” (Xue et al., 2019). According to Xue et al., the RPC built more than 100 stadiums in developing countries. This is called the “stadium diplomacy”. And in the case of the two announced stadiums in Pakistan, the choice of the two cities does not seem to be the result of chance. Quetta and Gwadar are located in the route of the China– Pakistan Economic Corridor and, moreover, integrate the sketch map of 6 Fosun Group will own a 51% stake in the Hangzhou-Shaoxing-Ningbo High-Speed Railway, which is to be built in Zhejiang Province. Four State-Owned Enterprises (SOEs), including China Railway Corporation, the one operating in the UAE.

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China–Pakistan railway. Gwadar, in particular, is even more important to the Chinese interest, because of its port. The Gwadar Port is a deep-sea port situated on the Arabian Sea at Gwadar in Balochistan province of Pakistan. The port features prominently in the China–Pakistan Economic Corridor plan and is considered to be a link between the ambitious BRI and Maritime Silk Road projects. Football also appears on the route of BRI’s maritime interests in the Mediterranean Sea. The Port of Barcelona, a world-class port, is in a strategic location, as well as being in a city that is also served by a good international airport. In November 2015, the Chinese company Rastar Managerial Group acquired 56% stake in RCD Espanyol, from Barcelona. Recalling Mills’ argument, football business, owning a local football club, can be a persuasive political and economic tool, serving as a good instrument to try to exert influence or to establish contacts.

Sports Tourism and BRI Football Tournaments The Football Plan is not the only Chinese public policy that has been published to leverage the growth of the country’s sports industry. In July 2017, the China National Tourism Administration and the General Administration of Sport of China issued the “Action plan for the development of sports tourism ‘Belt and Road’ (2017–2020)” (一带 一路” 体育 旅游 发展 行动 方案 2017–2020): a strategic document that aims to promote the acceleration of the development of sports tourism within China and along the BRI. The “Sports Tourism Plan” has five “Principles of action”. Three principles emphasize the need to promote sports tourism along the “Belt and Road Initiative” as a mechanism of peaceful cooperation among nations, Chinese openness and tolerance to partner countries, mutual learning and benefits, and multilevel and multiform exchange (China National Tourism Administration and General Administration of Sport of China, 2017, pp. 1, 2). Studies point to the political importance of tourism, including tourism as a means of both promoting and consolidating the vision it creates regarding the culture and values of a country (Hollinshead & Hou, 2012). Tourism is also seen as a force capable of influencing public policies and international relations (Xu et al., 2018).

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We are not going into details about the “Sports Tourism Plan” in this chapter.7 What is worth to mention to the matter of the present analysis is that China’s the integration of sports tourism, football and BRI has been happening through several football exhibitions and tournaments. • 2017, Shenyang: One Belt One Road Football Tournament—9 African countries, Nigeria, Equatorial Guinea, Cameroon, Zambia, Tanzania, Ethiopia, Somalia, Zimbabwe and Ghana. • 2017, Haikou: The “Belt and Road” Haikou Youth Football Tournament—8 teams from Croatia, Malaysia, Indonesia, Singapore and China. • December 2017, Mangshi: “Colorful Yunnan, Belt and Road” International Football Open—Laos, Vietnam, Thailand, Malaysia, Philippines, Cambodia, East Timor, Croatia and China. • 2017, Guangxi Zhuang: China-ASEAN International Youth Football Tournament—China, Taiwan, Australia, Russia, Vietnam, Indonesia and the People’s Republic of Korea. • January/February 2018, Shanghai: “Belt and Road” Culture and Soccer Winter Camp—sought to promote China through crosscultural interaction among children from BRI countries, including Serbia, Sri Lanka, Kenya and Panama. • 6 April 2018, Hainan: “Belt and Road” Cup (“一带一路” 杯)— teams from China, Azerbaijan, the Czech Republic and Hungary competed in friendly matches.

Conclusion BRI is undoubtedly an extremely grandiose and ambitious Chinese project, in particular from the president, Xi Jinping, responsible for launching this initiative in September 2013. It is an endeavour in which the Chinese seek deepen its process of opening up to the world, seeking to establish deals and trades across all continents. Building on its Five Principles of Peaceful Coexistence, China stands as a promoter of globalization, proposing to countries along the BRI—overland and maritime routes—a model of economic, political and cultural cooperation and exchange.

7 For further reading please check Emanuel Leite Junior and Rodrigues (2019).

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In this chapter, we analysed this initiative by crossing it with other Chinese public policies, which are also audacious. China intends to boost its sports industry in order to make this sector one of the largest markets on the planet. To do so, it mainly counts on the Football Plan, another document that shows the Chinese ambition to be back in the centre of the world. Without a football tradition, accustomed to defeat and humiliation in the grass fields, China wants to become, by 2050, one of the superpower of the most popular sport in the world. And so we proposed to demonstrate in this chapter how the Plan conforms or connects with BRI. What we noted in this chapter was that the “Chinese Dream” (中國 夢) seeks the “rejuvenation” of the nation, which means the modernization of the country and economic success. And the “Plan”, in fact, aims to make great efforts to make real “the dream of the rise of football, the dream of a powerful sports nation and the dream of rejuvenating the nation” (CNDRC, 2016, p. 3). But this “China Football Dream” (中國 足球 夢), expressed by President Xi Jinping, also fits into the country’s geopolitical strategies, as the “Plan” attests by referring to diplomatic relations and cultural exchanges. Something that is also expressed through the BRI discourse, as we have shown in this chapter. As we have seen in this chapter, football can be a “soft power” and therefore a public diplomacy tool. This potential comes from analysing the relationships of China and Chinese companies and investors from and/or through football all over the World. Through the “Football Plan” and also the “Sports Tourism BRI Plan”, China seeks not only to develop its sports industry, but also to establish diplomatic and trade relations, to promote exchange and exchange of knowledge, to bring the country closer to other nations, thus strengthening its economy and its leadership role in international geopolitics. The Plan advocates the establishment of the international exchanges, seeing the rise of football activities as an important part of sports diplomacy (CNDRC, 2016, p. 2), defending the “international cooperation and exchanges of talent in the football industry” (CNDRC, 2016, p. 10), adding that the foreign exchange channels of football must be expanded and encouraged. We selected in this chapter cases that demonstrate that the Plan has in fact fostered relationship between China and countries like England, Spain, UAE, Pakistan and several other countries through sports tourism football friendly tournaments and exhibitions.

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Finally, we understand that the contribution of this chapter lies in the fact that we analyse the BRI from the prism of the Chinese strategies for football and also for sports tourism from a different perspective (China’s geopolitical aspirations and these phenomena as soft power tool). Bearing in mind that this is not an exhausted theme, especially considering that the Football Plan has a final goal by 2050, we understand that we have been able to demonstrate, bringing some cases as examples, that football can not only open doors and serve as a link or instrument of power and influence, but also has already beeing contributed to the China’s BRI.

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CHAPTER 5

Understanding China’s “One Belt and One Road” Initiative: An “International Public Goods” Approach Li Xing and Zheng Xiaowen

Introduction Since the global financial crisis in 2008, the world economy is still in the process of gradual recovery. Along the past decade, and apart from global economic recession, there emerged a variety of serious global problems, such as protectionism, isolationism, violations of trade rules, financial instability, cybersecurity vulnerabilities, terrorism, and nuclear brinkmanship. At the same time, the world system’s core powers are retreating from their responsibilities as global political and economic leaders and are becoming more inward-looking driven by domestic nationalistic social

L. Xing (B) Aalborg University, Aalborg, Denmark e-mail: [email protected] Z. Xiaowen Beijing Normal University, Beijing, China e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_5

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forces. So far, the USA under Donald Trump with the slogan of “America first” is blaming others for its economic recession and is withdrawing from international agreements and obligations; the European Union is suffering from both the Brexit crisis and the refugee crisis; the Japanese economy continues to struggle. Emerging powers, such as Brazil, are struggling with various economic problems. Under these circumstances, it is a shared opinion that international public goods (hereafter IPGs) are undersupplied since the 2008 financial crisis. Contrary to the above pessimistic picture of international public goods deficit, China is, to the world great curiosity, undertaking it officially describes as the “One Belt One Road Initiative” (hereafter OBOR Initiative). It is the largest project of the century—building a network of railroads and shipping lanes linking itself with more than 60 countries across Asia, Africa, Europe, and Oceania. Such a gigantic project aims to create viable economic belts: (1) a land belt that includes neighboring countries surrounding China, especially those countries on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe; and (2) a maritime belt that links China’s port facilities with the African coast, pushing up through the Suez Canal into the Mediterranean. In a word, the OBOR’s utmost objective is no doubt to reposition the global economy with China as one of the dominant players in the coming new world order. China’s top leaders have, since 2012, officially claimed that China should take more responsibility in providing IPGs. “The Belt and Road Initiative has become the most popular public goods and the best platform for international cooperation with the brightest prospects in the world,” said Chinese Foreign Minister Wang Yi at a press conference for the fifth session of the 12th National People’s Congress in Beijing, March 8, 2017 (Xinhuanet 2017). To put it in concrete terms, “the great economic vision of the Belt and Road is to make use of China’s foreign exchange reserves - the world’s largest - and of China’s capability to promote neighboring countries’ infrastructure construction and development” (Lin 2015, pp. 16–17). In comparing with the existing IPGs structure which was historically shaped after the Second World War, China sees the OBOR Initiative as “a new model for the providing of international public goods” from both the perspectives of the size of the initiative, and the public funds of the initiative (nearly $300 billion) and as “a structural innovation of international cooperation, which follows the principle of jointly building the

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Belt and Road through consultation to meet the interests of all” (Han 2017). The Chinese official OBOR vision and plan were clearly spelt out in a central piece of documentation “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”1 in March 2015. The key message of this document to the outside world is “peace, development, cooperation and mutual benefit.” The OBOR project involves billions of Chinese-led investment programs covering a web of infrastructural projects, including roads, railways, telecommunication systems, energy pipelines, ports, etc. China sees OBOR as a great potential for economic gain and increased border security and peace, while positioning China’s western regions and the extended Eurasian region as its future center of economic gravity. The Debates and Research Question This chapter is a conceptual paper in an attempt for joining the global debates on China’s new OBOR Initiatives which has been received with both positive and controversial discussions and responses. Since the OBOR Initiative was unveiled in 2013, a huge and continuously growing body of literature has been focused, implicitly or explicitly, on the “real” motivation and rationale behind China’s giant and “benign” project. Most global responses are full of a mixture of multi-faceted attitudes and complex interpretation of possible actualities. The World Bank, globally seen as an international public goods institution, on the one hand, spells out an optimism that “the Belt and Road Initiative (BRI) is an ambitious effort to improve regional cooperation and connectivity on a transcontinental scale” and “the Belt and Road Initiative can transform the economic environment in which economies in the region operate”; while, on the other hand, it also holds a great of reservation that “there are significant economic and policy challenges, and the realization of the potential benefits of BRI is by no means automatic” and “for individual countries, it will be important to evaluate the possible effects of participating to

1 “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road,” issued by the People’s Republic of China’s National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council Authorization, March 2015. Available at http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.

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the BRI and the needed policies and institutional reforms” (World Bank Brief 2018, March 29). On the one hand, it is frequently advocated by Western media that the OBOR has, from the outset, been compared to the 1948 Marshall Plan rebuilding the post-war Europe. Such a comparison often appears in Western media headlines, such as “China’s Marshal Plan” (Bloombery 2016, August 7). It is identified as “China’s unique version of a modern Marshall Plan” (Yakobashvili 2013). On the contrary, Chinese official media seem to directly counter the comparisons to the Marshall Plan. Official titles, such as “China’s silk road proposals not Marshall Plan” (Xinhuanet 2015), and “Closer Look: So China’s Silk Road Fund Is Marshall Plan Redux? Not Really” (CaiXin 2014) and “One Belt, One Road: China’s 21st Century Marshall Plan?” (CaiXin 2017), and “Silk Road initiatives not China’s Marshall Plan: spokesman” (China Org.cn 2015), etc. On the other hand, the OBOR Initiative is seen as being driven by a number of political, economic and security-related rational considerations and logics similar to those upon which the Marshall Plan was initiated (Shen 2016). The Chinese government has made great and constant efforts to highlight the economic potential of OBOR, the Western world, including academia, media, and political circles, persists in viewing the initiative “more from a political and security perspective” (Ling 2015, p. 70) as a strategic measure of obtaining geopolitical dominance “along its geographic periphery” (Swaine 2015, p. 1). How to comprehend China’s essential objective underlining the OBOR Initiative? Besides the repeated domestic statement that the OBOR Initiative aims to reignite Chinese economic growth and reinvigorate underperforming provinces in the western part of the country as well as to deal with the country’s overcapacity problem, i.e., manufactured products and construction capacity, especially in the heavy industries; nevertheless, the OBOR is raised to, at least partly, a high level of challenge to the existing world order, i.e., an effort to “develop alternative and countervailing institutions and systems,” paralleling to the US-led liberal order (Heilmann et al. 2014, pp. 1–9). When we put the OBOR Initiative in this context, China has been defined as an emerging “structural power” with resources and capabilities to create alternative international public goods to the world system. Therefore, the OBOR, as a specific Chinese diplomatic effort and general effects of structural power, will “create a variety of new and important public goods-like resources” (Lairson

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2018, p. 41). Stated most simply, China builds a system of IPGs with its surplus of capital and capacity, and benefits from such system with the enhancement of its regional and global position (Wong 2016, pp. 455– 463), over against “American hegemony rooted in US structural power” (Lairson 2018, p. 41). As outlined from the above, the OBOR Initiative has been identified and associated with as at least the four images: (1) a Chinese “Marshall Plan” (Ferdinand 2016, p. 951), (2) a “grand strategy” toward “the US ‘pivot’ or ‘rebalancing’ to Asia” (Overholt 2015, p. 1), (3) “a new level of global economic leadership to compensate for the United States’ retreat” (Schortgen 2018, p. 19), and most positively (4) a supplement to the existing international institutions which will definitely make contributions to the IPGs (Pu 2016, p. 120). These discussions are based on the macroscopic perspectives, including leadership, hegemony, world order, etc. Taking a more pragmatic perspective, this chapter intends to provide a framework, from two specific observations, for understanding the potential role of the OBOR project: Firstly, it is to fill in the gap of IPGs undersupply across the OBOR region (Lin 2018, p. 33); secondly, it is China’s willingness and capacity to become an emerging IPGs provider.

The Conceptualization of International Public Goods (IPGs) Initiated in the field of economics, the concept of “public goods,” proposed by Paul A. Samuelson (1954, pp. 387–389), has been spread to other disciplines, including political science, sociology, and even natural science. There is little doubt that Olson (1966, pp. 266–279; 1971, pp. 866–874) first introduced the concept into the field of international relations and created an interdisciplinary term, i.e., “international public goods” (IPGs). He empirically examined the international organization NATO as an instrument to sustain common security among nations, though Olson (1965) did his notable research on the logic of collective action, which laid great emphasis on the provision of public goods, a little earlier. Generally speaking, there is a growing research interest in IPGs in the field of international relations (IR) and international political economy (IPE) with a special focus on the provision of IPGs, i.e., the undersupply of IPGs.

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Influenced by the anarchy of the international system, the most fundamental and vital issue within the context of IPGs, which has been mutually agreed upon and studied for years among different IR schools, is the provision or supply of IPGs. For this issue, the most influential contending forces, known as the mainstream theoretical paradigm of IPE, are the realist school represented by hegemonic stability theory and the liberal school represented by international regime theory. IPGs from the Realist Perspective In 1973, Charles P. Kindleberger first examined the Great Depression in the 1930s and pointed out the causality between hegemony and the stability of the international economic system, known as “hegemonic stability” theory (Kindleberger 1973). The basic idea of the hegemonic stability thesis is that the structural arrangement of the distribution of power among states is of vital importance for the stability and well-functioning of the international system. A “hegemonic arrangement” of distribution of power, understood as one dominant state (the USA) possessing the predominant position in the distribution of power, is most conducive to the stability and maintenance of an open and viable international system. The stability of the international system, according to the hegemonic stability theory, depends heavily on the provision of scarce and valuable international public goods (IPGs), including a stable monetary system, a free trade system, international security, and foreign aid, and so forth. The hegemonic country (countries) has the willingness and the capacity to provide these goods, regardless of the existence of “free riders” (Kindleberger 1973; Zhang 2005, p. 31). What deserves our attention is the fact that IPGs, such as an open international trading system and foreign aid, will never be voluntarily and freely supplied by any actor in the world system. However exceptionally, there can be a free universal IPG by “an enlightened hegemonic actor,” who possesses both the willingness and capacity to pay for the production and maintenance of IPGs in line with the ultimate goal of fulfilling its own national interests. The current US-dominated system can be seen as the result of “enlightened hegemon” (Conybeare 1984, p. 6). Taken together, hegemony should be regarded as the stabilizer of the international system. By using the research method from structural realism, hegemonic stability theory has been further remolded and developed by Robert Gilpin (1987) with the verification of the causal relationship

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between the stability of the international economic order, especially the financial part, and the unipolar international power structure. As a system-level approach, hegemonic stability theory has been criticized, by some scholars, due to its inefficiency and inapplicability when explaining the situation of “instability with a hegemon” during the 1990s. In the 1990s, the frequent regional financial crisis and the ineffective rescue of the IMF fully demonstrated that the existence of hegemonic countries did not automatically generate public goods. In order to fully understand the provision of IPGs, it is necessary to take the nationallevel factors, to be specific, the strategies of the hegemonic countries into account. In other words, the hegemonic stability theory has only solved the problem of the hegemon’s capacity in providing IPGs, ignoring another key variable, i.e., the hegemon’s willingness to provide IPGs (Li 2007, pp. 165; 185). From a more radical perspective, Snidal (1985, pp. 579–614) and Russett (1985, pp. 207–231) criticized the appropriateness of applying the economic concept of “public goods” to the anarchic international system. Fundamentally, as Snidal (ibid.) and Russett (ibid.) have claimed, IPGs should be essentially taken as “private goods,” which solely serve the hegemon’s own interest, to be specific, to maintain its hegemonic position. Therefore, as Zhao (2017, p. 712) argues, the realist perspective on IPGs driven by hegemonic stability theory was originated from and depended highly on the US policy after the Second World War, and it is insufficient to be applied on China’s OBOR Initiative. In addition, it is not a surprise that the realist perspective, which associates IPGs to “private goods”—serving the hegemon’s own national interest, identifies the OBOR Initiative as a threat to the existing hegemon and as a challenge to the existing structure of the world order. IPGs from the Neoliberal Perspective Seen from the neoliberal perspective, a global hegemon must possess the necessary economic and political power and is willing to pay collective transaction costs and build up international public goods, such as mechanisms that are able to facilitate global free trade, flows of capital, and provision of liquidity during crises (Kindleberger 1973, p. 292). It is worth noting that the above understanding is based on the premise that there is one and can only be one hegemon maintaining the security and functioning of the public goods in the international system. The existence of

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these public goods, in turn, generates global economic and political stability. This argument has become an important pivot for the late-comers to critically inherit his theoretical standpoints with introducing the concept of cooperation and expand them from narrowly economic sphere into international security and military field (Zhang 2005, p. 32). Robert O. Keohane, known as the representative of the liberal school, explored the issue of international cooperation in the era of hegemonic decline. As Keohane (1984, p. 46) put it: “The dominance of a single great power can contribute to order in world politics, in particular circumstances, but it is not a sufficient condition and there is little reason to believe that it is necessary.” According to Keohane (1982, p. 326), hegemonic stability theory is “necessarily incomplete,” due to the ignorance of the “fluctuation in demand for international regimes.” Taken the Uruguay Round as a successful example, Keohane (1984) argued that multilateral cooperation regime could play an important role in providing IPGs when the willingness or capacity of the hegemon has declined absolutely or relatively. Hence, a neoliberal focus on international public goods vis-a-vis the neorealist emphasis on structural constraints underpin two basic theoretical constituents of the idea of “hegemonic stability.” But, the question is when facing the rise of an emerging hegemon, whether hegemonic stability under one hegemon can be readily revised by accepting the role of “hegemonic cooperation” in the nexus of two hegemons. The neoliberal perspective, especially the “prospects for international cooperation” and “the capabilities of international institutions,” advocated mainly by Keohane has been viewed to be optimistic and irrational (Grieco 1988, p. 485). IPGs from the Institutional Perspective Besides the constant “seesaw battle” between the two main streams in the context of IPGs, the institutional perspective focusing on international law also explores some of the basic but significant problems. For instance, why do states/governments play a disappointing role in the protection of IPGs? How to overcome the conflicts and contradictions between “individual rationality” and “public reason”? How does international law and institutional framework behave in the production of IPGs? Generally speaking, international law, claimed by Krisch (2014, p. 4), appears as especially “ill-suited” to tackling IPGs challenges under the

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Westphalian international system. Similarly, Petersmann (2011, p. 23) has taken the inadequate “theories, rules, and institutions for overcoming the collective action problems” as the main cause of ineffective protection of IPGs. For this regard, a “multilevel constitutional framework” for both the rule-making process and the judicial protection of a certain set of principles, for instance the rule of law as well as constitutional rights, is highly required for the multilevel governance of IPGs (ibid.). Taken a more optimistic point of view, Shaffer (2012, p. 693) highlighted the role of international law, which facilitates on the one hand the “creation, maintenance, oversight, and constraint of centralized international institutions,” on the other hand the “monitoring and review of national institutions” regarding to the decision-making process of the production of IPGs. When the term “public goods” entered the field of IR, the discussion of this issue has correspondingly transformed into the confrontation between hegemonic stability theory and institutional stability theory (Cai and Yang 2012, pp. 108–109). To be specific, who/what virtually provide IPGs? Does the provision of IPGs mainly rely on the hegemonic powers with both willingness and capability or a stable international system? In recent decades, challenges as climate change, environmental degradation, and financial crises caused by globalization and deepening interdependence call for “globally coordinated efforts” and “global incentives to work collectively and cooperatively” (Ferroni and Mody 2002, p. 1). Since the absence and infeasibility of a world/global government, a large number of cross-border challenges could, to some extent, only be solved by the international community through the provision of IPGs with international spillover effects (Zhang and Li 2008, p. 196). In other words, international public goods (IPGs), including “the rules that apply across borders, the institutions that supervise and enforce these rules, and the benefits that accrue without distinctions between countries” (Ferroni and Mody 2002, p. 1), might be taken as one of the most significant and typical solutions responding to the above cross-border challenges (Table 5.1).

An IPGs Approach to China’s OBOR Initiative Why China’s OBOR Initiative should be regarded as IPGs? The three words—“public,” “good,” and “international”—will be examined and analyzed, respectively.

Hegemonic stability theory

International regime theory

Multilevel constitutionalism

Realism

Neoliberalism

Institutionalism

Source The authors’ own table

Representative theories

International legal mechanisms

Interest

Power

Perspective

Summaries of IPGs from different theory schools

Theory schools

Table 5.1

The stability of international system depends on the provision of IPGs by hegemons “Free riders” are pervasive and tolerant by hegemons Hegemonic powers are sensitive to the changes in the distribution of power (esp. the challenges from emerging powers) in the international system Hegemon has the interest in providing IPGs; global collective provision of IPGs is feasible (cooperation without hegemon) Hegemon contributes to the provision of IPGs rather than unilaterally supply Multilevel governance of IPGs requires a multilevel constitutional framework, stressing the role of international law and institutions International law facilitates firstly the creation, maintenance, oversight, and constraint of centralized international institutions, secondly the monitoring and review of national institutions regarding the production of IPGs

Main viewpoints

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Why Is OBOR Public? Generally speaking, the term “public goods” derives from the economic sphere with the emphasis on “non-excludable” (free-rider is inescapable) and “non-rival” (marginal cost is zero). To be specific, it refers to one “which all enjoy in common in the sense that each individual’s consumption of such a good leads to no subtraction from any other individual’s consumption of that good” (Samuelson 1954, p. 387). The notion also connotes that “Regional and international cooperation arrangements are public goods: arrangements that manage the negative and positive spillovers across borders” (Drysdale and Armstrong 2011, p. 208). The “public” role of OBOR is emphasized by the Chinese President Xi Jinping to such an extent that China is willing to provide opportunities and space for the development of the neighboring countries, and every country is welcomed to be a “free-rider” of China’s fast-growing economy (Xi 2014). It is understandable that, from the voice of top leader, China is willing to share its own “development dividend” and undertake greater international responsibilities. “Most economics would agree that maintaining a competitive economic environment is an important, albeit intangible, public good that benefits (almost) all, without exclusion” (Cooper 2011, p. 21). With great tolerance to “free-riders” and strong ambition to provide a stable but competitive economic environment, OBOR, advocating “peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit” (The State Council 2015), corresponds quite well with the “non-excludable” and “non-rival” characteristics. Why Is OBOR Public Goods? Without a normative judgment, “good,” in this context, refers to “benefits that provide utility or satisfy wants” or “the elimination of a ‘public bad’” (Morrissey et al. 2002, p. 35). There are at least three types of benefit, namely direct utility, risk reduction, and capacity enhancement (Morrissey et al. 2002, p. 37). The undersupply of IPGs, including backwards infrastructures and low economic development levels, in the Eurasian region has raised both awareness and concern. OBOR, as a new attempt of international development project, can in the short term create jobs and improve infrastructure and in the long run stimulate the vitality of the economy, and it

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“changes the development assistance by ‘blood transfusion’ from developed countries to the new development cooperation mode of ‘blood generation’” (Lin 2018, p. 33). As a priority area of OBOR, facilities connectivity focuses on “linking up unconnected road sections, removing transport bottlenecks, advancing road safety facilities and traffic management facilities and equipment, and improving road network connectivity” (The State Council 2015). Besides, OBOR strives to “improve investment and trade facilitation, and remove investment and trade barriers for the creation of a sound business environment within the region and in all related countries” (ibid.). Equally important, OBOR dedicates to “deepen financial cooperation, and make more efforts in building a currency stability system, investment and financing system and credit information system” (ibid.). Such infrastructure construction, trade facilitation, and financial integration projects coincide well with the above-mentioned “benefits,” with the function of direct utility, risk reduction, and capacity enhancement and, therefore, should be taken as “good.” Why Is OBOR International? When the qualifier “international” is added into the term “public goods,” the spatial spillover range should neither be local/community nor truly global level. Morrissey et al. (2002, p. 34) used the term “international” to indicate that “while the benefits extend well beyond national boundaries, they may not apply everywhere on the globe.” The Chinese official Action Plan has clearly imprinted OBOR with an international role and character: The Belt and Road Initiative is a systematic project, which should be jointly built through consultation to meet the interests of all, and efforts should be made to integrate the development strategies of the countries along the Belt and Road…. The Initiative is open for cooperation. It covers, but is not limited to, the area of the ancient Silk Road. It is open to all countries, and international and regional organizations for engagement, so that the results of the concerted efforts will benefit wider areas. (The State Council 2015; italic added)

OBOR, with its openness and inclusiveness, will definitely expand the benefits across national boundaries. As a Turkish scholar has argued, with

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the purpose of improving infrastructure, promoting mutual development, and enhancing win-win cooperation, OBOR has set up “a good example of a global public good offered by China to the rest of world” (Ya˘gcı 2018, p. 69). Based on the above analysis, OBOR should be regarded as international public goods. The functions of public goods could be divided into three categories which can be “inter-related” and “mutually reinforce each other”: (1) direct utility, (2) risk reduction, and (3) capacity enhancement (Morrissey et al. 2002, pp. 36–39). For example, it is understandable that the benefit of reducing the environmental deterioration of an ocean or other common property resources covers the above three aspects. To be specific, the improvement of the quality of natural resource provides direct utility and reduces the risk of natural disasters. More importantly, it generates externality benefits such as preserving biodiversity (capacity enhancement) (ibid.). Likewise, the benefit of OBOR’s infrastructure projects, including roads, railways, ports, canals, and pipelines, could firstly be directly utilized by OBOR countries, secondly reduce the risks such as large-scale outages, and thirdly enhance the production and logistics capacity.

Empirical Demonstrations Entering the twenty-first century, we are witnessing the increasing “public goods deficit” in many parts of the Eurasian region. First, the existing public goods, including IMF, World Bank, Asian Development Bank, and other international economic, financial, and trade organizations, have been “privatization” by big powers, especially the USA. Second, IPGs such as regional peace and stability have been severely damaged. In recent years, the USA and Europe have, on the one hand, instigated “Color Revolution” in Central Asia and, on the other hand, encouraged the “Arab Spring” in West Asia and North Africa. Therefore, the political situation in the Middle East and Central Asia is in jeopardy. Moreover, stimulated by the aggressive anti-terrorism strategy from the USA, the threats from terrorists have not decreased but expanded to a wider range of the world. To be specific, some extremist organizations such as the “Islamic State” have expanded rapidly, resulting in serious damage to peace and stability in the Middle East, South Asia, and Central Asia. Finally, the “fragmentation” problem in the supply of regional public goods along the OBOR

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region would ultimately lead to the “inefficient supply” situation (Xin 2016, pp. 27–28). Based on the above observation of the undersupply of IPGs, the implementation of OBOR strategy will, to a certain extent, alleviate the insufficient supply of international public goods and improve the international economic and trade environment. Through providing public goods along the OBOR region, China can, on the one hand, improve the current situation of the undersupply of public goods caused by the economic stagnation of the USA, Japan, and Europe; and on the other hand, form a China-centered network of cooperation systems (Huang 2015, p. 139). Laying great emphasis on connectivity, the visions of OBOR include but are not limited to transportation and information infrastructure, education, cultural communication, health care, financial aid, coordination of laws and regulations, security and stability, and environmental and resources protection. To put it another way, the public goods system framed by OBOR, according to Olson’s classification of IPGs, can be divided into a free and open trade and investment system, a stable monetary and financial system, a reliable security mechanism, and an effective international aid system (Yang and Li 2015, p. 65). It is argued that the preference of a state in providing IPGs is largely determined by its economic power, which also lays a foundation for its participation in international collective action (Huang 2015, p. 148). China, in comparison with other countries, gains more institutional advantage in the participation of international collective action and can therefore make more contributions to the provision of large-scale, costly IPGs (ibid.). OBOR Provides “Direct Utility” Since launched in 2013, China has established a series of cooperative mechanisms under the framework of OBOR (see Table 5.2). According to Oxford’s statistics and forecasts, infrastructure investment in the Asia-Pacific region was approximately $99.5 billion in 2015, $84.5 billion in the Middle East and $13.8 billion in Europe. By 2025, the infrastructure investment demand in the Asia-Pacific region will reach 171.5 billion US dollars, with an average annual growth rate of 7%, and the demand in the Middle East will reach 171.2 billion US dollars, an average annual growth rate of 10.3% (Chen et al. 2017, p. 185). Similarly, data from Asian Development Bank shows that the infrastructure

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Table 5.2 Governance mechanisms newly established under OBOR Domain

Mechanism

Founded time

Finance

Asian Infrastructure Investment Bank (AIIB) Silk Road Fund OBOR Free Trade Network Lancang-Mekong River Dialogue Cooperation Mechanism China Import Trade Fair OBOR Investment Dispute Resolution Mechanism OBOR Financing Guidelines “Green Silk Road” Initiative OBOR Green Development International Alliance Conception of Environmental Cooperation among SCO Member States OBOR Eco-environment Cooperation Plan Civil Organization Cooperation Network along the Silk Road Silk Road News Cooperation Alliance, Music Education Alliance Silk Road International Think Tank Network

December 2015

Trade

Investment

Eco-environment protection

Socio-culture

December 2014 May 2017 March 2016

November 2018 June 2018 May 2017 March 2015 May 2017 June 2018

May 2017 May 2017 May 2017

October 2015

Source Xie (2019), p. 56

investment demand in Asia in 2016–2030 will reach up to 26 trillion US dollars, with an average annual investment demand of 1.7 trillion US dollars (Lin et al. 2018, p. 184). From the perspective of constructing regional institutions, various financial investment means have been created under the OBOR scheme, such as AIIB, BRICS Development Bank, and Shanghai Cooperation Organization Development Bank, in order to provide IPGs. Such financial institutions on the one hand have paved the way for developing countries in the OBOR region to participate in the process of global governance, on the other hand, have largely filled the gaps where the existing dominated financial institutions, to be specific, the World Bank and Asian

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Development Bank, are inefficient in providing IPGs such as infrastructure (Table 5.3). A preliminary quantitative assessment carried out by Zhai (2018, pp. 84–92) shows that in 2030, the annual global welfare gains will reach US$1.6 trillion, over 90% of which is expected to be captured by OBOR countries, and global trade is expected to be boosted by 5% due to the OBOR investment. Table 5.3 Increased financial support from Beijing to OBOR Items

Amount

Silk Road Fund (additional injection) Overseas Fund Business in RMB for promotion of RMB usage China-Russia Regional Cooperation Development Investment Fund CDB to establish OBOR Multi-currency Special Lending Scheme for Infrastructure Development CDB to establish OBOR Multi-currency Special Lending Scheme for Industrial Cooperation CDB to establish OBOR Multi-currency Special Credit Lines for Overseas Financial Institutions EXIM to set up OBOR Multi-currency Special Lending Scheme EXIM to set up OBOR Multi-currency Special Lending Scheme for Infrastructure Development Increased assistance to developing countries along OBOR Emergency food aid to countries along OBOR Replenishment of the South-South Cooperation Assistance Fund

RMB 100 billion RMB 300 billion Initial capital of RMB 10 billion; total size RMB 100 billion RMB 100 billion equivalent

RMB 100 billion equivalent

RMB 50 billion equivalent

RMB 100 billion equivalent RMB 30 billion equivalent

At least RMB 60 billion 2017–2020 RMB 2 billion US $ 1 billion

Note CDB refers to China Development Bank. EXIM refers to the Export and Import Bank of China Source Chan (2017), p. 57

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OBOR Provides “Risk Reduction” “One of the original motivating forces for China’s Belt and Road Initiative is risk management: the aim being to use infrastructure to drive economic development, so improving political stability and creating a favorable impression of China in countries bordering China and beyond” (Cainey 2018). As part of OBOR, Chinese and Myanmar officials signed the memorandum of understandings regarding a new multi-billion-dollar ChinaMyanmar Economic Corridor (CMEC) in September 2018. This project includes an upgraded road and new high-speed rail line connecting Kunming, the capital of Yunnan Province in southwestern China, with the port of Kyaukpyu on the Rakhine seaboard. According to the latest report from International Crisis Group, such scheme could, in the long run, lead to “a reduction in illicit economies, as lucrative opportunities emerge in the formal economy, and as the enabling environment of conflict and insecurity comes to an end” (International Crisis Group 2019, p. 19). OBOR Provides Infrastructural “Capacity Enhancement” According to IMF Managing Director Christine Lagarde, “good infrastructure can help achieve more inclusive growth, attract more foreign direct investment, and create more jobs” (IMF 2018). For example, the Thailand-China high-speed railway could enhance trade capacity of Thailand which will further promote its integration into regional supply chains (ibid.) (Table 5.4). Over the past five years, the total trade volume between China and OBOR countries has exceeded $6 trillion. China’s investment in the OBOR countries has reached more than $80 billion and has created 240,000 jobs for the local people. More importantly, OBOR countries have received advanced technology and management experience from China which will firstly pave the way for the industrial upgrading process and secondly effectively improve their domestic mobilization capacity (Zhang 2019).

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Table 5.4 OBOR road and rail projects, completed, on-going, and planned OBOR projects

New Undivided Highways New Divided Highways Upgrade to Divided Highways Total Road Improvements New Conventional Railways New High Capacity Railways Upgrade to High Capacity Railways Total Rail Improvements Total

Km under construction or already built

Additional km planned, not built

km

%

km

5547

19

378

809

3

4723

16

11,079

Km total

%

km

%

3

5926

14

–

0

809

2

841

6

5564

13

1220

12,299

8649

30

4030

27

12,680

29

2835

10

3975

27

6809

16

6228

22

5768

38

11,997

27

17,712 28,791

13,774 100

14,993

31,486 100

43,785

100

Source Reed and Trubetskoy (2018)

Conclusion: IPGs for an Emerging Chinese World Order? Although this chapter conceptualizes the OBOR Initiative as a kind of IPGs from both the perspectives of theoretical discussion and empirical verification, arguing for its positive contribution to fill in the undersupply of IPGs across the Eurasian region and pointing out that participant countries develop at a faster pace and have received real benefits, it also recognizes the new brand that has been associated to the OBOR Initiative—“debt-trap diplomacy.” This new brand asserts that the OBOR Initiative is a form of increasing debt burden of recipient countries, or it is a purely geopolitical and geoeconomic tool to expand China’s influence. It should be recognized that China’s capital and trade expansion in developing countries of the Global South represents two sides of the same coin, with one side showing great opportunities in terms of infrastructure connectivity and political and economic room of maneuver and upward

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mobility, and another side exhibiting challenges in terms of debt burden and unequal trade relationship. The “debt-trap diplomacy” is closely associated with another emerging notion—“Chinese creditor imperialism”—which refers to the fact that Chinese global outward expansion in the Global South in general, and in South Asia in particular, is facilitated through such as the OBOR Initiative and is packed with financial credit. The concept implies that in order to finance and build the infrastructure which poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports (Chellaney 2017). It is reported that countries such as Sri Lanka and Tajikistan had to ceded control port or territory to China as a result of their incapability to fulfill their debt obligations. Western mainstream media are eager to grasp any data or case to verify their proposition that infrastructure investment under China’s OBOR Initiative is bringing debt burdens to developing countries involved (CNN 2018, March 5). Hostile western politician would take any opportunity to demonize the China’s economic relations with the Global South. Rex Tillerson, the then US secretary of state, identified China’s development strategy as “encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them long-term, self-sustainable growth” (Meer 2019). However, the authors regard the above debates and discussions on the possible negative impact of OBOR as being at the level of appearance, and this chapter attempts to go beyond the appearance and look into the essence of the issue that underline a higher level of debates and discussions. This level of analysis points to the conflict between the Chinadriven emerging world order and the US-led existing world order. Firstly, China’s integration in the global economy since the economic reform in the late 1970s and under the active interventionist role the state is moving the country up in the global supply chain and increasing its share in the possession of global wealth and resources. This has largely reduced the profit margin and resource access which used to be monopolized by the traditional core states. Beijing is seen as attempting to re-divide the already divided world. Secondly, the OBOR Initiative aims to project China as a responsible global “normative power” who is struggling to create a Eurasian “community of common destiny.” Chinese norms (policies and institutions) are being diffused via the various OBOR projects with the “causal” effect of the Chinese model of economic success penetrated through

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trade, investment, technical assistance, and infrastructural development. Beijing’s state-led development success—the Beijing Consensus—is ideologically unacceptable to the defined norms and values of the US-led liberal order. Even today, China is not recognized as a “market economy” by most of the existing core Western powers. China’s OBOR Initiative and the Beijing-led Asian Infrastructural Investment Bank (AIIB) are also interpreted as a double-track strategy— aiming to both join and modify the existing international institutions and set up the country’s own global financial institutions China’s rising position in the world system is changing the country from a passive rulefollower to a proactive rule-maker, leading to an emerging world order “with Chinese characteristics.” In other words, Beijing has two options today: It can “operate from within existing institutions to enhance its position through seeking the redistribution of decision-making authority, or by using its influence to obstruct and contain the progressive evolution of the liberal rules, practices, and norms of an institution in ways that threaten China’s interests” (Ikenberry and Lim 2017, p. 2). Therefore, at the functional level of analysis the China-US contradiction is about whether and to what extent Beijing’s One Belt One Road is seen as a form of IPGs, and what are the opportunities and challenges embedded in the Chinese IPGs. But at the structural level of scrutiny, Chinese IPGs are seen by the USA to support an emerging world order with “Chinese characteristics.” The “threat” of Chinese IPGs is that they are challenging the patterns of global relationships that generate gross inequalities in the existing world order and the tremendous privilege and power this global disparity of wealth and power has brought about for the core countries, especially the USA (Kennan 1976).2 It is expected that the international political economy of the world order will continuously be in a process of transition and transformation. The relationship between the China-driven emerging world order and the US-shaped existing order will continuously be in a state of waxing and waning or in a motion of flux and reflux. In the years ahead, the acceptance of the rise of China by the core powers of the existing world

2 George Kennan was the former Head of the US State Department Policy Planning Staff. His selective quotations are taken from the complete text of the section of Policy Planning Staff/23 (Kennan 1948). The complete paper was published in 1976 in Foreign Relations of the United States 1948, Vol. 1, No. 2.

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order will have to go through a considerable period of struggle, adjustment, and tension. The OBOR Initiative is just one issue, and there are also other China-US conflicts, such as the Huawei issue, and the trade war. It is expected that more problems will emerge in the near future. It is perhaps a situation of unsolvable conundrum between an emerging superpower and an existing superpower.

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Zhai, Fan. 2018. China’s Belt and Road Initiative: A Preliminary Quantitative Assessment. Journal of Asian Economics 55: 84–92. Zhang, Jianxin. 2005. Hegemony, Regionalism and Globalism: The pluralism of Supply of International Public Goods against the Background of Globalization. World Economics and Politics 8: 31–37. Zhang, Lulu. 2015. Silk Road Not Marshall Plan: Scholars. China.Org.cn. http://www.china.org.cn/world/2015-02/12/content_34805640.htm. Accessed 20 May 2019. Zhang, Wenchun. 2019. The “Belt and Road Initiative” Has Made Substantial Progress in Five Years. cssn. http://www.cssn.cn/jjx/jjx_qqjjzl/201902/ t20190203_4822829.html. Accessed 21 May 2019. Zhang, Yuyan, and Zenggang Li. 2008. International Political Economy. Shanghai: Shanghai Renmin Press. Zhao, Kejin. 2017. China’s Public Diplomacy for International Public Goods. Politics & Policy 45: 706–732.

CHAPTER 6

The Financing of the Belt and Road Initiative: Blessings and Curses Enrique Martínez-Galán

Introduction Nearly, five years have passed since the announcement of the Belt and Road Initiative (BRI), in 2013, by Chinese President Xi Jinping, an initiative estimated at around USD 1 trillion that claims to increase connectivity, trade and economic growth across Asia and beyond. As its strategic document mentions (National Development and Reform Commission 2015), the BRI ‘intends to strengthen hard infrastructure with new roads and railways, soft infrastructure with trade and transportation agreements,

Disclaimer: The views expressed in this text are those of the author and do not reflect the official policy or position of the Asian Development Bank. E. Martínez-Galán (B) CSG-Center for Research in Social Sciences and Management, ISEG-Lisbon School of Economics and Management, University of Lisbon, Lisbon, Portugal e-mail: [email protected] Asian Development Bank, Mandaluyong, Philippines © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_6

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and even cultural ties with university scholarships and other people-topeople exchanges’. It currently covers 137 countries (as of May 28, 2019) and over two-thirds of the world’s population. These five years have proved the Chinese political and economic commitment to the initiative. The BRI has become the cornerstone of President Xi’s foreign economic policy and one of the pillars underpinning his political appeal domestically. The initiative was included in the Communist Party’s constitution in 2017. It is difficult to think of any other recent global venture that has generated such a mixture of optimism and debate. An editorial of the Financial Times argued that the BRI ‘exports the worst aspects of the Chinese economy, while increasing the strains on its already stressed financial system’ (Financial Times 2017). In addition, most of the questions raised when the initiative was launched remain unanswered, namely: (i) its specific geographical scope; (ii) its financing sources and tools; (iii) the real objectives of the Chinese government; and (iv) the BRI’s impact, first, in the countries participating in the initiative; second, in non-participating countries and, finally, in China itself. This chapter is divided into eight sections. The second section presents the origin and discusses the specific geographical boundaries of the BRI. The third section assesses the objectives and goals of the initiative: i.e. the reasons for China to propose such an ambitious and far-reaching proposal. The fourth section presents the BRI’s financial envelope, namely its dimension, sources and tools. The fifth section presents those areas where the initiative could potentially have positive impacts (blessings), such as improving connectivity, economic growth and development within Asia and between Asia and other regions of the world. The sixth section focuses on those aspects were the BRI could potentially have negative impacts (curses), such as increasing indebtedness levels, non-existing environmental and social safeguards, or excessive political influence. This assessment is made first for China itself, second for the countries participating in the initiative and finally for the non-participating countries. This section also evaluates mitigating measures that could be applied to minimize the associated risks. The seventh section produces policy recommendations that should be followed to mitigate risks further. The final section sums up.

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The Boundaries of the Belt and Road Initiative In 2013, President Xi announced his vision of and proposal for a BRI in a phased manner. He proposed the launching of the Silk Road Economic Belt (the Belt: by land) on September 7, during an official visit to Kazakhstan. Later, he complemented the Belt with a proposal to create the twenty-first-century Maritime Silk Road (the Road: counter-intuitively, by sea) on October 3, during an official visit to Indonesia for a meeting with the Association of Southeast Asian Nations (ASEAN). The third plenary session of the eighteenth Central Committee of the Chinese Communist Party officially adopted President Xi’s vision as a national strategy on November 12, 2013, and several Chinese agencies started preparing for it in more detail. Finally, on March 25, 2015, the National Development and Reform Commission (NDRC), the Chinese planning agency that reports directly to the Chinese State Council, issued the ‘Vision and actions on jointly building the Silk Road Economic Belt and the twentyfirst century Maritime Silk Road’ (National Development and Reform Commission 2015). According to this document, the BRI is a systematic project aiming at integrating the development strategies of the countries along the routes; connecting Asia, Europe and Africa more closely; and promoting mutually beneficial cooperation. The areas of action of the initiative were ‘(i) policy coordination, (ii) facilities connectivity, (iii) unimpeded trade, (iv) financial integration, and (v) people-to-people exchange’ (Ministry of Finance 2017b). Although geographically the BRI aims at improving connections among Asia, Europe and Africa, no geographical delimitation was initially presented other than the historical reference to the trade routes, including the lucrative silk trade that has connected Europe and Asia since the Han dynasty. The first geographical presentation of the BRI was initially made in a map published by China’s state-owned Xinhua news agency on May 8, 2014 (Xinhua 2014). According to this map, the Silk Road Economic Belt would begin in Xi’an, continue through Gansu and Xinjiang provinces, cross Kazakhstan, Uzbekistan, Turkmenistan, Iran and Turkey, and from Istanbul head northwest through Bulgaria, Romania, the Czech Republic and Germany to the port of Rotterdam in the Netherlands. From Rotterdam, the planned route would continue southeast back to Venice, where it would meet the Maritime Silk Road. The latter would start in China in the harbour of Quanzhou in Fujian province, would include the harbours of Guangzhou, Beihai and Haikou before heading

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to Singapore and the Malacca Strait, Kolkata in India, and then through the Indian Ocean to Nairobi, Kenya. It would continue north through the Red Sea into the Mediterranean Sea, first to Athens and finally to Venice. The BRI now comprises six land routes (see Xinhua 2017a), namely (i) the China-Mongolia-Russia Economic Corridor (CMREC), proposed by President Xi in September 2014 during the first trilateral meeting of heads of State of those three countries, held in Dushanbe, Tajikistan, and honoured in a trilateral development plan signed in June 2016; (ii) the New Eurasian Land Bridge (NELB), linking the Pacific and the Atlantic oceans by rail (plus the associated highways and power transmission lines) and, by definition, linking China to Europe, from the Chinese coastal cities of Lianyungang and Rizhao to the ports of Rotterdam in the Netherlands and Antwerp in Belgium, crossing Kazakhstan, Russia, Belarus, Poland and Germany1 ; (iii) the China-Central Asia-West Asia Economic Corridor (CCWAEC), linking China to the Middle East, from Xinjiang to the Persian Gulf and the Mediterranean Sea, through countries including Kazakhstan, Kyrgyz Republic, Uzbekistan, Iran, Saudi Arabia and Turkey (closely resembling the ancient Silk Road); (iv) the China-Indochina Peninsula Economic Corridor (CIPEC), linking China to Southeast Asia, from the Pearl River Delta in China to both Hanoi and Singapore, crossing Vietnam, Lao People’s Democratic Republic (PDR), Cambodia, Thailand, Myanmar and Malaysia; (v) the China-Pakistan Economic Corridor (CPEC), proposed by Premier Li Keqiang in May 2013 during a visit to Pakistan, from Kashgar to the strategic port of Gwadar, where the land and the sea silk routes connect in the Indian Ocean2 ; and, finally, (vi) the Bangladesh-China-India-Myanmar Economic Corridor (BCIMEC), linking China to South Asia, from Kunming in the Chinese province of Yunnan to the Indian State of West Bengal, jointly presented by the Premiers of China and India during a visit of Premier Li Keqiang to India in May 2013 and formalized in a development plan signed by the governments

1 Xinhua (2017a) also mentions other transcontinental rail routes that have recently been inaugurated between China and Europe, namely between (i) Chongqing and Duisburg, in Germany; (ii) Chengu and Poland; and (iii) Yiwu and Madrid, in Spain. 2 The CPEC, estimated at a total of USD 60 billion, was described as the ‘fastest and most effective’ of all the BRI projects by the Chinese Ambassador to Islamabad (Voice of America News 2017).

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of the four countries in December 2013. The six economic corridors are shown in Fig. 6.1. In addition, the twenty-first-century Maritime Silk Road envisioned by President Xi, connecting several Chinese ports, first, to Europe and Africa through the South China Sea and the Indian Ocean, and, second, to Southeast Asia and Oceania through the Southeast Asian seas and the South Pacific Ocean, was delineated in a document named the ‘Vision for Maritime Cooperation under the BRI’ released on June 20, 2017, by both the NDRC and the State Oceanic Administration (SOA) (Xinhua 2017b). According to this document, the BRI comprises three sea routes, or blue economic passages, namely (i) the China-Indian OceanAfrica Mediterranean Sea Blue Economic Passage, linking the CIPEC, CPEC and the BCIMEC; (ii) the China-Oceania-South Pacific Blue Economic Passage; and (iii) the China-North Europe Blue Economic Passage

Fig. 6.1 The Belt and Road Initiative: six economic land corridors and three sea routes spanning Asia, Europe and Africa (Source Wang [2017])

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Fig. 6.2 The Belt and Road member countries (as of May 28, 2019) (Source Author, based on the official portal of the BRI, in https://eng.yidaiyilu.gov.cn/ info/iList.jsp?cat_id=10076&cur_page=1)

(also called the Northern Sea Route, or Silk Road on Ice), through the Arctic Ocean, initially proposed by Russia. The three passages can be seen in Fig. 6.1. All in all, the potential and aim of the BRI is virtually global, by covering 137 countries (as of May 28, 2019) in all continents, as illustrated in Fig. 6.2.3 In 2017, these countries represented 61.2% of the world’s population and 38.3% of the world’s gross domestic product (GDP)4 (World Bank 2018a). It is interesting to note that some of those 137 countries, such as Bolivia, Nigeria, Senegal and Uruguay, are actually located outside the economic corridors previously mentioned. Adding to this idea, the Chinese Minister of Foreign Affairs proposed to extend the BRI to South American, particularly in the Maritime Silk Road, during the second China-Community of Latin America and Caribbean States (CELAC) ministerial meeting held in Santiago de Chile on January 22, 2018 (CELAC-China Forum 2018). Moreover, President Xi proposed a 3 See the official BRI portal (https://eng.yidaiyilu.gov.cn/info/iList.jsp?cat_id=10076& cur_page=1) for a list of countries with Memorandums of Understanding (MoU) signed for collaboration with China under the BRI. 4 Measured in current US dollars.

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‘Silk Road in the air’ between Luxembourg and Henan province during an official visit of the Prime Minister of Luxembourg to Beijing on June 14, 2017 (see Zhang 2017). The latter adds to the ‘digital Silk Road’ (The Economist 2018) or the ‘Silk Road in the outer space’ (see Wall Street Journal 2016) mentioned in the media. In fact, the concept of BRI is an ambiguous one. There is no Secretariat or specific agency in charge of coordinating the initiative. The BRI merely states that any country or organization that wishes to be supportive is considered as being a part (National Development and Reform Commission 2015). It also makes the initiative less threatening and more inclusive. There is no official definition of what qualifies as a BRI project either. China has never provided the exact coordinates for the BRI economic corridors. There are Chinese-funded projects in countries not participating in the initiative that share many of the characteristics of the so-called BRI projects (see, for instance, the Doraleh port facilities built in Djibouti, run by the state-owned China Merchants Port Group, or the electrified rail line connecting that port to Addis Ababa, built jointly by China Railway Group and China Civil Engineering Construction Corporation, and providing Ethiopia with convenient5 sea access). While the BRI was officially inaugurated in 2013, projects starting years earlier are often counted. In fact, giving flexibility to the definition of the BRI seems a deliberate choice observed in the initiative’s foundational policy documents, official statements, maps and articles published by Chinese state media. One could consider the initiative a large umbrella giving geopolitical consistency, political visibility and strategic flavour to otherwise scattered or locally motivated projects.

The Objectives of the Belt and Road Initiative Chinese government thinking is normally associated with patience, strategy and long-term objectives. The objectives of the BRI need then to be placed in a long-term historical perspective. In October 2017, the two-five-year-mandate limit for Chinese Presidents was eliminated, giving President Xi the ability to continue ruling the country without time constrains. Xi also became the third Chinese leader

5 90% of Ethiopian trade went through Djibouti in 2016 according to Word Bank (2017).

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to have his political programme (thought, theory or philosophy in Beijing’s political jargon) inscribed in the Chinese Communist Party’s constitution, after Mao Zedong and Deng Xiaoping. In fact, President Xi’s thought represents a departure from Deng Xiaoping’s. Although President Xi’s ‘socialism with Chinese characteristics for a new era’ (2017) seems to affix just an additional characteristic, the new era, to Deng’s ‘socialism with Chinese characteristics’ (1978), the change in philosophy is more profound than that. The ‘new era’ component represents a critical step forward in assuming the country’s global ambitions as emerging superpower. While the project of Deng Xiaoping was inward-looking, focused on domestic economic development, President Xi does not want China to take a back seat in the world. The proposal for the BRI was one of the main pillars contributing to the formulation of this new thought. In fact, the nineteenth National Congress of the Chinese Communist Party not only added President Xi’s thought to the Party’s constitution, but it also made an additional amendment that read: ‘following the principle of achieving shared growth through discussion and collaboration, and pursuing the Belt and Road Initiative’. We argue that the BRI has five main goals, namely: (i) maintaining demand for Chinese goods and services, à la Keynes, particularly for stateowned construction firms, which are among the BRI’s strongest proponents and most active participants; (ii) increasing Chinese regional and bilateral influence with countries participating in the initiative; (iii) potentially supporting Chinese security and military objectives; (iv) promoting the internationalization of the renminbi; and, finally (v) geopolitical recognition of China as an emerging global superpower both by domestic and foreign public opinion. We will assess each one of these claims now in detail. First, the BRI takes the position of centrepiece of the Chinese economic foreign policy. BRI projects have the potential to promote the use of Chinese technologies and standards abroad, such as those for high-speed railways (see Xu 2018, for a comprehensive study about the potential for high-speed rail within the BRI), which could further lock in preferences for Chinese manufacturers. All in all, from this perspective, the BRI is not revolutionary. It just seeks to transfer to foreign markets China’s current domestic growth model, which, by relying both on

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state-owned enterprises (STOEs)6 and on state-owned banks (STOBs) that have evolved from government organizations into semi-corporate entities (such as the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China—which were in 2017 the world’s three largest banks by assets7 —and China Development Bank— the world’s largest development financial institution also by assets and China’s biggest overseas lender8 ), has led to overinvestment in industries and to underdeveloped services (see Dorrucci et al. 2013). In fact, a former European Union (EU) diplomat in China, cited by Hancock (2017), described the initiative as ‘a domestic policy with geostrategic consequences rather than a foreign policy’. Second, the BRI, by addressing infrastructure gaps, seeks to promote regional economic integration, to spur economic growth, and, additionally, to promote greater economic reliance on China. It particularly promotes Chinese political influence, both bilaterally and regionally, in countries participating in the initiative. It may give China geostrategic and political leverage in terms of foreign policy. The initiative might empower China to more readily shape the rules and norms that determine the economic relations in the BRI region. But, perhaps more importantly, it seeks to mitigate political risks for Chinese contractors and firms operating on the ground through high-level political dialogue. Deloitte (2018) argues that, according to its clients, political risk tops all others when it comes to the BRI countries. Managing the political risk of foreign investment by a firm becomes easier when a country has a good bilateral relationship with the recipient of that investment and, particularly, when the country of the investing firm plays a creditor role.

6 Zhang and Miller (2017) refer to 47 firms, such as State Grid, China Railway Group, China Energy Engineering or China Communications Construction Group (CCCG), out of a universe of 102 STOEs participating in around than 1,676 BRI projects. The authors also refer, as examples, that (i) CCCG alone had notched up USD 40 billion of contracts and built 10,320 km of road, 95 deep water ports, 10 airports, 152 bridges and 2,080 railways in Belt and Road countries, or (ii) the Industrial and Commercial Bank of China had participated in 212 BRI projects by providing USD 67.4 billion in total. 7 Johnston (2017). 8 China Development Bank (2018).

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Third, the infrastructure created under the BRI’s umbrella presents in some cases a significant potential to project Chinese military power. Security and military issues associated with the BRI projects have been highlighted by several academic reports. One example is given by Thorne and Spevack (2017), who refer one of the main vulnerabilities of Chinese supply routes by sea: nearly 80% of China’s imported oil passed through the Malacca Strait in 2016. Another example is given by the Doraleh port in Djibouti, which is located just five miles away from the only Chinese military base outside the country. A third example is provided by the Gwadar deep-water port in Pakistan, which might also play a relevant geostrategic role as gateway to the oil reserves of the Persian Gulf. As of now, the state-owned Chinese Overseas Port Holding Co. has expanded Gwadar Port and leased it from the Pakistani government until 2059. Reports in early 2018 indicated in fact that China has plans to build a naval base in Gwadar (Chan 2018), admitting that they manage to convince the Pakistani government to allow it. All in all, as suggested by Thorne and Spevack (2017), China might be looking at filling out a string of pearls, meaning a line of military postings along the Maritime Silk Road to solve its ‘Malacca Dilemma’, ensuring access to South Asian and Southeast trading routes. Fourth, although most of the BRI financing is currently made in US dollars, increasingly raising capital for BRI infrastructure projects by issuing renminbi-denominated bonds or by lending in renminbi will encourage its use in international financial centres as international payment currency. In fact, the BRI is increasingly mentioned as one of the enablers of the long-term internationalization of the renminbi9 (see Swift 2017). Southeast Asian (Malaysia, Thailand, and Vietnam) and Central Asian countries (Kazakhstan, Kyrgyz Republic, Tajikistan and Turkmenistan) show an increasing use of renminbi for credit transfer payments (Swift 2017). China is pushing Pakistan to allow the use of renminbi in the Gwadar free economic zone (Swift 2018). China’s State Council (2018) asserts that international cooperation under the BRI is a ‘key measure to support Chinese companies “going global”’. The internationalization

9 Together with the progress of China’s cross-border interbank payment system (CIPS); the deepening of Hong Kong as facilitator of renminbi’s internationalization; the progressive opening of financial markets to foreign investment after the 2007–08 crisis; and the increasing presence of FinTech online payment systems, such as Alipay and WeChat Pay.

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of the renminbi mitigates trade risks and costs such as (i) the inconvertibility of national currencies of BRI participant countries, where foreign businesses and investors are prohibited or confined in the international transfer of capital and profits; (ii) the fluctuation of exchange rates, whose consequences are enhanced by the facts, first, that payments to Chinese companies abroad are generally settled in local currencies and, second, that those payments occur for years, along the life cycle of the project; (iii) the need to hedge receivables, which is not available for most of the currencies of BRI participant countries; and (iv) the increasing stock of assets owned by Chinese firms abroad, which are not eligible as guarantee in Chinese mainland, thus hindering the capacity of Chinese firms to obtain financing domestically. Aiming at mitigating those risks, China’s State Council (2018) specifically proposes to increase the number of renminbi-denominated financial products available to borrowers within the BRI.10 We could take the recent case of Portugal, who became in June 2019 the first eurozone country to issue sovereign foreign-denominated debt in renminbi in China (amounting to yuan-equivalent USD 300 million), so-called panda bonds, only six months after Lisbon signed with Beijing the MoU in support of the BRI (Wise 2019). The Italian government announced in March 2019 his intention to issue yuan-denominated sovereign debt, in parallel to the signing by Rome of a similar MoU with Beijing (Bernabei 2019). Finally, regarding the geopolitical recognition of China as an emerging global superpower by foreign public opinion, we note that estimated global awareness of the BRI has tripled between 2014 and 2017, increasing from 6 to 18% in a survey of 22 countries (Guo 2018). Li (2018b) also shows that positive public opinion about the initiative increased from 16.5% in 2013 to 23.7% in 2017. Domestically, nearly 90% of surveyed media and netizens in China were positive about the prospects of the BRI (Li 2018b).

10 Together with: quickening the building of the CIPS; extending the renminbi foreign exchange swap to local credit system; creating a renminbi-transaction network in those key industrial parks overseas where Chinese firms are congregated; and, particularly related to project financing, encouraging Chinese financial institutions to issue renminbidenominated loans with preferential interest rates’.

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The Financing of the Belt and Road Initiative The Dimension The dimension of the BRI should be assessed both from demand and supply. In terms of demand, infrastructure needs in Asia are vast. The Asian Development Bank (ADB) estimates that developing Asia alone requires USD 26 trillion in financing of infrastructure investment between 2016 and 2030 to maintain its growth momentum, eradicate poverty, and respond to climate change (ADB 2017). This amount is equivalent to nearly USD 1.7 trillion annually. Nearly two-thirds of that amount are needed for energy and transport infrastructure. In addition, one should also bear in mind that this amount is estimated for the ADB’s definition of Developing Asia, meaning that countries such as Russia developed Asian countries, Middle Eastern countries and Turkey are not included in the figures. All in all, the financing needs are enormous, and the BRI can play a significant role in helping to meet them. In terms of supply, Chinese banks held more than USD 22.6 billion in deposits in 2016 (Statista 2018) and foreign exchange reserves in China exceeded USD 3.1 trillion in August 2018, nearly 9% of the world’s total (Trading Economics 2018). Liquidity is therefore rapidly available for the financing of BRI projects. The concept of the BRI is an ambiguous one, as previously mentioned, so the financial boundaries of the initiative are not easily estimated. Estimations of the BRI’s size vary between the USD 1 trillion committed by the Chinese in its first stage (Perlez and Huang 2017; Hillman 2018a) and the USD 8 trillion estimated in total investment if the full scope of projects in BRI participant countries materializes (Balding 2017; Moser 2017; Wo-lap 2016). Even in the most conservative case, the initiative would be seven times larger than the Marshall Plan of the United States (US), which amounted to USD 130 billion in current prices (The Economist 2016). The financing of the BRI is based on two main sources, namely: (i) the main financing, estimated around USD 900 billion; and (ii) the Silk Road Fund (SRF), estimated around USD 40 billion. By March 2016, the Bank of China had transferred USD 82 billion to three policy banks supporting BRI projects: USD 32 billion to the China Development Bank, USD 30 billion to the Export–Import Bank of China, and USD 20 billion to the Agricultural Bank of China. By the same time, the SRF had received the first capital instalment, which amounted to USD 10 billion.

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In May 2017, President Xi announced a further USD 124 billion for the BRI, including (i) USD 14.5 billion for the SRF, (ii) special lending schemes for the China Development Bank and the Export–Import Bank of China worth around USD 36 billion and USD 19 billion, respectively; and (iii) a request for STOBs to establish a BRI Fund worth USD 43 billion (Deloitte 2018). In addition, other financing enhancements and leveraging instruments have been also used as BRI financing tools. We will discuss them in detail in the next subsections. The Main Financing President Xi described the funding bottleneck in the region as ‘a prominent challenge’ to the BRI (cited by Zhang and Miller 2017) during the Belt and Road Forum for International Cooperation held in Beijing on May 14–15, 2017, which was attended by 30 heads of State and government of BRI countries and representatives of 100 other countries and 70 international organizations. BRI financing flows mainly from Chinese STOBs, which benefit from large economies of scale and from generous State subsidies, to Chinese STOEs. In fact, the BRI financing model fits perfectly into the conceptual framework of ‘financial statecraft’ following the definition of Armijo and Katada (2015) as ‘the intentional use, by national governments, of domestic or international monetary or financial capabilities for the purpose of achieving foreign policy goals, whether political, economic or financial’. According to this framework, the ultimate step in financial statecraft for an emerging power is to seek a systemic and offensive approach. In the systemic approach, the emerging power seeks a ‘greater voice in global financial and monetary governance’ through financial tools—the diversification of foreign capital sources, promotion of public banks, capital controls, multilateral banks—and monetary tools, such as reserve accumulation, regional monetary funds and promotion of multiple reserve currencies. In the offensive approach, the emerging power seeks also to ‘construct institutions of global governance, giving oneself ongoing hegemonic or disproportionate influence’ by resorting to financial means that ‘promote home financial markets as a source of global influence’ and monetary means that ‘promote one’s currency as a global reserve or transactions currency’.

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Regarding STOBs, Deloitte (2018) estimated that the big four stateowned commercial banks (Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China) were responsible for 51% of total BRI financing by December 2016 in terms of outstanding loans and equity investment. In addition, the China Development Bank and the Export–Import Bank of China accounted for 38% and 8%, respectively. In total, these six institutions provided 97% of the financing of the BRI. Financing by the SRF amounted to an additional 1%. These Chinese banks enjoy low borrowing costs, because their bonds are treated like virtual sovereign debt by the markets11 and they have access to direct lending from the People’s Bank of China. However, the attractiveness of the Chinese financing is surprising if we take into account that nearly three-quarters of their lending was offered on commercial, non-concessional terms, which is more expensive than the financing offered by Multilateral Development Banks (MDBs). Interest rates for sovereign long-term lending offered by Chinese STOBs range from 2–3% (soft loans) to 6–7%, with standard maturity of 20 years and standard grace period of between 2 and 5 years.12 These financing parameters are less attractive than those offered by MDBs, which ranged between zero and 1.5% in 2015 (see Faure et al. 2015). Borrowers commonly state that the attractiveness of the Chinese funding emerges from it having the ‘fewer strings attached’ and from the ‘higher risks taken’ comparative to other lenders. In addition, China seeks to offer the borrowing country a full turnkey solution for project finance in infrastructure investment, covering financing, insurance and implementation.

11 China’s sovereign credit rating is A+ according to Standard & Poor’s and Fitch and A1 according to Moody’s. 12 Let’s take the examples of the Jakarta-Bandung Railway, Indonesia’s first high-speed railway; the Lao PDR section of the Kunming-Singapore railway; and Sri Lanka’s Hambantota port. First, in Indonesia, the China Development Bank offered a 40-year concessionary loan, without asking for government debt guarantees, to finance 75% of the USD 5.3 billion railway. The loans carried a 10-year grace period. A 60% portion was denominated in US dollars carrying a 2% interest rate, and the remaining 40% calculated in Chinese yuan, carrying a 3.4% rate. Second, in Lao PDR, the Export–Import Bank of China offered a concessionary loan with an interest rate set slightly below 3%. Finally, in Sri Lanka, for phase I of the port, the Export–Import Bank of China offered an 11-year commercial loan to finance USD 306 million at 6.3% with a one-year grace period (see Sirimanna [2011] and Zhang and Miller [2017], for further details and examples).

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Finally, regarding STOEs, it is important to note that their size and capacity to implement projects match both the magnitude of the financing amounts made available by the STOBs and the magnitude of the needs of the BRI participating countries. Hillman (2018b) showed that the number of Chinese firms included in Fortune’s Global 500 list of the world’s largest companies by revenue increased from ten in 2000 (nine STOEs) to 120 firms as of July 2018 (81 STOEs). The trend was especially evident in the construction industry. In 2017, seven of the ten largest construction firms, by revenue, were Chinese. The Silk Road Fund After being announced by President Xi during the Dialogue on Strengthening Connectivity Partnerships held in November 8, 2014, that hosted seven other heads of State of BRI countries, the SRF was officially established in December 29, 2014. It pools together USD 40 billion (originally) and RMB 100 billion (around USD 15 billion equivalent, added in May 2017) in funding from (i) the State Administration of Foreign Exchanges (65%); (ii) the China Investment Corporation (15%); (iii) the Export–Import Bank of China (15%); and (iv) the China Development Bank (5%). The SRF offers medium- and long-term equity investment for BRI infrastructure financing. The dual currency funding of the SRF clearly promotes the internationalization of the renminbi. The SRF also strongly aims at leveraging co-financing for the BRI and welcomes participation from both Chinese and non-Chinese investors. A good example is the co-investment agreement with the European Investment Bank (EIB) under the China-EU Co-investment Fund signed on July 16, 2018, funded with EUR 250 million by each of the two parties (Silk Road Fund 2018). By the end of June 2017, the SRF had signed 16 contracts and committed to invest USD 6.8 billion, nearly 75% in equity investment (Wright 2017). Other Contributors The Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB, formerly known as BRICS Bank) are often described in the literature as institutions that will ‘support the efforts of governments of the countries along the Belt and Road and their companies and

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financial institutions with good credit rating’ (National Development and Reform Commission 2015). In the case of the AIIB, it differs from the other financing sources mentioned in this text by the fact that it is a multilateral financial institution (with 86 current and prospective shareholders by May 2018, according to AIIB 2018). In fact, AIIB’s top management reiterates in public interventions that the institution is not a tool of the BRI and that they are a truly multilateral institution with sound multilateral governance. It just happens that China owns 32% of the AIIB’s USD 100 billion authorized capital, in the same way that the United States have 30% of the capital of the Inter-American Development Bank (IADB). In both cases, China and the United States have de facto veto power in the most important decisions, those that need qualified majority to be approved. Moreover, the AIIB claims that it has world-leading policies for safeguards, transparency, anti-corruption measures, universal procurement and universal recruitment, among others. It has certainly put a great deal of effort into assessing the best practices of its peer institutions and in hiring experts in such policies. In any case, it is undeniable that the overarching mission of the AIIB, promoting the connectivity and the economic development of Asia, largely overlaps with the BRI, both strategically and geographically. The most interesting feature of the AIIB is that it leverages the financial credibility and reputations of developed nations (such as Canada, Germany, France and the United Kingdom) to contribute indirectly, in practical terms, to the BRI. The same rationale presented for the AIIB applies to the NDB, with the main differences: first, the number of shareholders is much smaller: five, namely Brazil, China, Russia, India and South Africa, which own equal amounts of shares of the Bank’s USD 100 billion authorized capital; and, second, it is in a less developed stage than the AIIB: the Bank had signed USD 1.6 billion in projects by the end of 2017 (nearly one-third of the level of signatures approved by the AIIB). In addition, 85% of NDB’s financing was approved by just three countries: China, India and Russia (New Development Bank 2018). Finally, in additional support to the BRI, Premier Li and the Prime Minister of Latvia agreed during the fifth meeting of heads of government of China and 15 Central and Eastern European countries (CEEC) inaugurated in November 5, 2016, the creation of a joint financial holding company: the Sino-CEEC Financial Holding Co Ltd. By channelling funding of Chinese STOBs, the company set up a China-CEEC Fund that

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is projected to reach USD 10 billion and attract nearly USD 50 billion in financing in projects that (i) seeks to increase connectivity and production capacity in the 16 CEEC, while (ii) purchasing Chinese equipment and goods (China-CEEC 2016). During the first phase of fundraising from the STOBs, the fund reached USD 3 billion (Global Capital 2017). It is expected to play a prominent role in supporting the BRI in Eastern Europe in the coming years.

The Blessings of the Belt and Road Initiative The BRI, by addressing infrastructure gaps, seeks to promote regional economic integration, to spur economic growth. The potential of the BRI to facilitate trade, accelerate growth, increase regional cooperation and integration within Asia and with the participating countries is sizeable. First, the World Bank points out three major opportunities (or blessings) of the BRI, namely (i) its tremendous size and scope; (ii) the large unexploited potential existing in the region; and (iii) its impact in improving connectivity (World Bank 2018b). The initiative seeks to use infrastructure to create more efficient trade links initially throughout Asia and ultimately with the world in a context of gradually slowing Chinese domestic annual GDP growth rates (from 10.6% in 2010 to 6.9% in 2017, according to World Bank 2018a). BRI countries markets accounted for 34% of China’s total exports in 2017, comparing favourably with the relative lower weight of exports to the United States (8%) (Fitch 2018). Trade volume between China and the BRI countries reached USD 1.1 trillion in 2017, 16% higher than the volume observed for 2016 (World Bank 2018a). New logistical linkages will be developed under the BRI, with particular benefits on transportation costs. The World Bank (2018b) estimates that it currently takes about 30 days to ship goods from China to Central Europe, with most goods being transported by sea, and that shipping goods by train can cut transit time in half. BRI’s potential impact in reducing time transportation is meaningful. Ruta et al. (2018) estimate that the average decrease in shipping time caused by the BRI ranges between 1.2 and 2.5% across country pairs in the world and that the BRI reduces aggregate trade costs between 1.1 and 2.2% for the world. As for shipping times, the gains in trade costs vary widely across pairs of countries, with East Asia and Pacific as well as South Asia being the regions with the largest average reductions. For the BRI economies, the change in trade costs will range between 1.5 and 2.8%. Djankov et al. (2006)

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also estimate that one-day delay in getting an item from the factory to the consumer reduces trade by one per cent. In a way, the initiative concentrates Chinese efforts to promote closer integration of Asia and Europe by removing mental and physical barriers between both continents. If successful, we might need to start thinking of Asia and Europe as one integrated region in the future, as proposed by Maçães (2018) under the term Eurasianism. Second, BRI projects seek to help China in addressing some of its overcapacity (capacity that could be used for production but is not), estimated in 2015 at around 30% of production in industries such as steel and cement. Based on central economic planning, China built up significant capacity in recent decades by expanding factories and hiring workers. However, lower-than-projected GDP growth caused a decrease in demand for construction and infrastructures, forcing firms in those sectors to downsize—the government announced in 2016 the need to cut nearly 1.8 million jobs, or 15% of the total labour force, in steel and coal sectors (Yao and Meng 2016). Premier Li recognized in fact that ‘overcapacity is a serious problem in certain industries, such as steel, coal, and cement’ (State Council 2016). In fact, China’s overcapacity challenges are so meaningful that Hillman (2018c) suggests that this is the reason why the Chinese STOEs do not discriminate between BRI and non-BRI locations, taking opportunities regardless of that distinction.

The Curses of the Belt and Road Initiative BRI critics often assume that China will reap the largest part of the initiative’s benefits. China’s role in BRI countries is already increasing. The Economist (2016) showed that, in 2015, China’s Foreign Direct Investment (FDI) in BRI countries rose twice as fast as the increase in its total FDI and that 44% of China’s new engineering projects were signed in BRI countries (52% in the first five months of 2016). In addition, the BRI presents risks and potentially negative impacts for the countries participating in the initiative (curses). Some of these could specifically impact China, namely (i) increasing indebtedness of China to finance the initiative; (ii) excessive political interference by China in the selection of projects, that could fail to ensure minimum commercial return and maximum bearable risk; and (iii) potential reputational losses that China will take in case the projects do not deliver properly during implementation.

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Some others have potentially pervasive effects in the beneficiary countries, namely (iv) increasing indebtedness of borrowing countries; and (v) permissive (or nonexistent) environmental, social, transparent and anticorruption standards for projects. Finally, some are potentially impacting non-participating countries, namely (vi) the lack of a level playing field for procurement for non-Chinese suppliers of public works, goods and services. The Curses for China Let’s start with the potentially negative impacts that the initiative can have in China. First, debt risk is usually the main concern that is mentioned by analysts. The backing of big-ticket BRI projects by Beijing could end up damaging the institutions providing the funding. We are mainly referring to official and quasi-official (state-owned) institutions, those directly lending for BRI projects, which could reach unsustainable levels of lending. Private institutions could be ultimately affected as well. First, private debt has climbed in recent years. As of December 2017, it was estimated at USD 36 trillion, nearly 266% of China’s GDP (Curran 2018). Second, the lack of transparency observed in the official statistics of domestic non-performing loans (NPLs) subtracts credibility to the Chinese financial system. While the official level of NPLs has been relatively stable in recent years at around 1.7% of total loans, Fitch, cited by Osborn (2017), estimates that the real ratio of NPLs to total loans could be as high as 20%, amounting to a total of USD 3 trillion. Increasing systematic refinancing, solvability and liquidity risks of the Chinese economy put significant pressure in the Chinese financial markets, which could negatively impact the Chinese real economy. In fact, Moody’s downgraded China’s credit ratings on May 23, 2017, for the first time in nearly 30 years, concerned with slowing growth and rising debt (Ruwitch and Chen 2017), highlighting systemic risks for the country with respect to further credit growth, particularly if directed for political non-commercial reasons into BRI projects. Anticipating this decision, both Export–Import Bank of China and China Development Bank had imposed country debt limits as well as controls to the concentration of loans (see Zhang and Miller 2017). In addition, government scrutiny of prospective deals has increased and managers of

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STOEs and STOBs are now held responsible for bad investments (including pay cuts, disciplinary action and judicial hearings), following a 2016 ruling by China’s State Council, as pointed by Thomas and Price (2016). Second, regarding the inclusion of non-economically viable but politically or militarily useful projects in the BRI, the Chinese government claims that STOEs make their investment decisions based on commercial and economic returns. However, some observers question that claim. The Governor of China’s Central Bank warned that ‘the reliance on cheap loans raises risks and problems, starting with moral hazard and unsustainability’ (Zhang and Miller 2017). The credit rating agency Fitch (cited by Wells and Weinland 2017) stated that ‘Chinese banks do not have a track record of allocating resources efficiently at home, especially in relation to infrastructure projects, so they are unlikely to have more success overseas’ and that, consequently, ‘the lack of commercial imperatives behind BRI projects means that it is highly uncertain whether future project returns will be sufficient to fully cover repayments to Chinese creditors (…)’. Indeed, Fitch (2018) indicated that ‘some China-backed infrastructure projects along the BRI were previously written off as financially unfeasible by traditional lenders or private investors’. On July 2018, the International Monetary Fund (IMF) also called for stepping up transparency and paying due attention to the debt sustainability of projects (see IMF 2018). Let’s take the examples of the Kara Balta oil refinery in the Kyrgyz Republic, reportedly running at only 6% of capacity as of 2017 (The Economist 2017), or the Qinzhou port in Southern China, projected to be a crucial trade hub for Southeast Asia, but still severely underused five years after completion (Blend 2017). One cannot forget that a significant number of BRI projects will be implemented (i) in countries with relatively low sovereign credit debt ratings (27 BRI countries are classified as ‘junk’ by the three main rating agencies and another 14, including Lao PDR, have no rating at all, as pointed out by Bloomberg 2017) and (ii) in countries with relative high levels of corruption (Lao PDR, Pakistan, Vietnam and Central Asian countries are highly ranked), according to the Corruption Perception Index (see Transparency International 2018). This also adds concerns about the capability of Chinese lenders to recover their investment. Among other initiatives proposed, Chinese firms, aiming at reducing the interest, exchange, credit and foreign exchange risks they bear in longterm financing, particularly in high-risk countries, will increasingly (i) partner with Western banks and financing companies; (ii) move towards

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a more balanced portfolio of funding, focused on equity financing and leveraging sources such as the SRF or large international private equity funds; and (iii) use local debt financing, when available, as projected by Deloitte (2018). China should also diversify the number of borrowers and decrease the size of projects. In addition, it is expected that China will increase its efforts to minimize the potential reputational losses associated with the projects that do not deliver properly during implementation. RWR Advisory Group, cited by Kynge (2018), found that 14% of 1674 BRI projects since 2013 had encountered problems, such as public opposition to projects, objections over labour policies, delays caused by land acquisition, financial irregularities and concerns about national security. The Chinese government claims that this percentage is relatively low and that it is mostly due to the lack of experience of the Chinese promoters in operating in sometimes challenging countries. The same government claims that these problems are expected to be further minimized in time, when a sufficient stock of relevant experience is built. In fact, Chinese government scrutiny of prospective deals has increased, and managers of STOEs and STOBs are now held responsible for bad investments (including pay cuts, disciplinary action and judicial hearings), following a 2016 ruling by China’s State Council, as pointed out by Thomas and Price (2016). In any case, having these concerns as well as debt-service cost considerations in mind, Myanmar, Nepal and Pakistan cancelled or side-lined three major hydroelectricity projects planned by Chinese companies amounting to USD 20 billion in total (Dasgupta and Pasricha 2017). In addition, newly elected Malaysian Prime Minister Mahathir Mohamad cancelled one railway and two gas pipelines under allegations of corruption and fiscal mismanagement (Berger 2018). The Curses for Participant Members Let’s turn now to the potentially negative effects of the BRI for participant members. First, for some countries with already significant levels of public debt, the financing required for BRI projects may expand debt to unsustainable levels. It is not clear that the increase in trade and the economic development originated by the initiative will generate and secure sufficient revenues to service the countries’ carrying costs of projects.

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At a macro-level, Hurley et al. (2018) concluded that eight countries are at particular risk of debt distress.13 The potentially negative impact in the sovereign borrowing country does not only come from its lower creditworthiness, which will impact negatively its financing costs and could eventually lead to a debt default, but also from the extreme concentration of the debt in only one creditor. Let’s take the example of the Kyrgyz Republic. If the USD 4.6 billion pipeline of BRI of projects materializes in the next five years, the public debt would increase from 65% of GDP in March 2017 to 105% in 2022. More importantly, 70% of that public debt would be to only one creditor: China, and particularly the Export– Import Bank of China. Still at a macro-level, the construction of the Lao PDR section of the Kunming–Singapore railway has an estimated cost of USD 6 billion, nearly 40% of the country’s GDP in 201614 (World Bank 2018b). Finally, Vanuatu, with only 270,000 inhabitants, has taken USD 270 million in Chinese loans in the past decade, worth 35% of its GDP (Parker and Chefitz 2018). At a project level, limited financing alternatives for many borrowing countries put them in an unfavourable position to negotiate good terms. A good example is the 2010 negotiation for the financing of phase I of the USD 8 billion Hambantota port in Sri Lanka, which concluded with a significantly high interest rate of 6.3% for a USD 306 million loan from the Export–Import Bank of China (see Sirimanna 2011). With nearly all its revenue going towards debt repayment, the Sri Lankan government had to consent to sell (for USD 1.12 billion) an 85% stake and a 99-year lease to the China Merchants Port Group (Panda 2017). But the terms associated with BRI projects are not only financial. Some important BRI projects, such as the 165 km-highway linking the Montenegrin port of Bar to Serbia (see Barkin and Vasovic 2018), require arising disputes to be settled in Chinese courts, a condition that clearly favours Chinese firms. One step further in this direction is the recent decision to establish two courts to handle disputes around BRI projects: one based in Xi’an for the

13 Namely, Djibouti; Kyrgyz Republic; Lao PDR; Maldives; Mongolia; Montenegro; Pakistan; and Tajikistan. 14 The Laotian government, in an attempt to control the impact of the project in its public finances, has limited their participation to around USD 700 million and financed the remaining amount through a public–private partnership. Nonetheless, USD 500 million of the Laotian contribution will be financed through a loan of the Export–Import Bank of China.

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overland ‘Belt’, and another one located in Shenzhen for the maritime ‘Road’ (see Hillman and Goodman 2018). They started operating in July 1, 2018. Nevertheless, when faced with the negative impact in some borrowing countries of BRI lending, the Chinese Ministry of Foreign Affairs denied that China had caused any debt crisis in those countries, stating that ‘The Belt and Road initiative follows the golden rule of shared benefits through consultation and contribution, and has delivered USD 2.2 billion tax revenue and more than 200,000 jobs for cooperation partners’ (Li 2018a). Second, regarding the risks associated with permissive or nonexistent minimum environmental, social, transparent and anti-corruption standards for projects, this could result in serious biodiversity loss, environmental degradation, forced displacement of population and the capture of disproportionate economic benefits by the country’s leading economic classes. This is particularly worrying in countries with relatively poor governance, as observed in many BRI participant countries. One mitigating measure would be the increasing participation of developed countries and of MDBs in the BRI. They could bring their longterm development experience to the initiative, with particular gains in environmental and social standards, transparency and anti-corruption measures, but also the diversification of financing sources and terms, the leveraging of additional financial resources and technology transfer. In the same vein, Deloitte (2018) projects that by 2030 at least half of BRI funding will be met by a combination of private capital, multilateral banks and foreign governments. However, so far, only 100 out of 941 BRI projects have involved the World Bank, the IMF or the ADB (Fitch 2018). The Curses for Non-participating Countries Regarding the lack of a level playing field for procurement for nonChinese suppliers of public works, goods and services, the numbers show that the BRI is mainly benefitting China’s STOEs and contractors. In fact, Hillman (2018b) found that Chinese projects are less open to local and international participation than those financed by MDBs. Within a sample of 2,200 transportation projects in Asia, approved from 2006 to 2017, the author found that 89% of all contractors participating in Chinese-funded projects were Chinese firms; 8% were local companies; and 3% were from third countries. In comparison, of the contractors participating in projects

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funded by the World Bank and the ADB, 29% were Chinese, 41% were local, and 30% were from third countries. These numbers do not take into consideration the participation of multinational corporations in supplying to and subcontracting from Chinese firms. In BRI projects, Chinese contractors, where state-owned or private, sometimes lack the technology, skills and experience. Deloitte (2018) refers that firms like Siemens, Honeywell, GE and ABB have also reaped significant benefits from BRI projects. Take ABB for example. The Swiss firm has been involved in dozens of engineering, procurement and construction partnership (EPC) deals undertaken by Chinese companies. In 2016 alone, ABB helped 400 Chinese firms to resolve inter-country differences in design and industrial standards, according to ABB (2017). Bradsher (2017) also refers to US firms benefitting from the BRI, namely (i) Caterpillar acknowledging BRI as a long-term opportunity and (ii) GE recording orders worth USD 2.3 billion in 2016 under BRI projects, up from just USD 400 million in 2014, while, in 2017, bidding for BRI business worth another USD 7 billion. This shows that the most likely way for a multinational company to access a BRI project is in fact by partnering with an STOE. In addition, within a trend of more cautious attitude of STOBs towards funding BRI projects, contractors will be increasingly forced to seek out other financing options, opening new opportunities to multinational corporations with expertise in raising funds for large infrastructure projects (from merger and acquisitions to build-operate-transfer contracts, public–private partnerships, EPCs, green finance, technology finance and asset securitization). In fact, Deloitte (2018) shows that more than half of Chinese STOEs admit that they must boost their ability to attract finance. Moreover, after BRI’s initial focus on infrastructure, the initiative will seek to broaden to other areas such as trade, manufacturing or tourism (see Ministry of Finance 2017b), where potential opportunities for nonChinese firms are higher. As the French President Emmanuel Macron put it in his recent visit to Beijing in January 2018, ‘The ancient Silk Roads were never only Chinese. The new roads cannot only go one way’ (Rose 2018). All in all, Deloitte (2018) asserts that the potentially negative effects associated with the BRI are less severe than many critics suggest, partly because they are underpinned by strong bilateral relationships, and partly because developed countries and MDBs are expected to become more involved. IMF (2018) also refers that the BRI success ‘would be enhanced

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by having an overarching framework, with better coordination and oversight, more open procurement and due attention to debt sustainability in partner countries’.

Some Policy Recommendations In previous sections, we argued that most of the risks identified are less severe than some critics defend and that, in addition, they are being mitigated. In conversations maintained with officials from the Chinese government, they acknowledged that the BRI is also a learning process for them. Although infrastructure financing abroad is not new for many Chinese agencies, it occurred in an ad hoc basis before. The BRI brings on board a significant change in magnitude and, consequently, much higher visibility, which leads to increased pressure both from the international community and the public opinion for the initiative to incorporate best international standards in areas such as transparency, environmental and social safeguards, procurement, anti-corruption and integrity, sustainability and quality of projects at exist, among others. The Chinese executing agencies, contractors and financiers did not have that pressure in the past, at least not in such an intensive manner. The way forward to diminish that pressure is involving third parties, ranging from the private sector to bilateral development partners, MDBs and non-governmental organizations, particularly with project implementation. This approach would allow China to incorporate decades of experience and international best practices. When adapted to the Chinese context, this knowledge will prove very useful for Chinese firms to compete abroad but also to incorporate those lessons learned in projects domestically. In our view, the involvement of third parties in the initiative could be strengthened by following these five avenues: (i) promoting closer collaboration with MDBs and other International Financial Institutions (IFIs) operating in the region; (ii) creating a formal agency acting as Secretariat in charge of coordinating the initiative; (iii) building closer ties with bilateral development partners, particularly with those active in Asia; (iv) creating a BRI facility providing end-to-end technical and financial support for project readiness and project preparation; and (v) China joining the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD).

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First, regarding the collaboration with MDBs and other IFIs, a first step was taken on May 14, 2017, when the Chinese Ministry of Finance and six MDBs15 signed the ‘MoU on collaboration on matters of common interest under the BRI’ (Ministry of Finance 2017a). In that document, the seven stakeholders committed to collaborate in: ‘(a) enhancing support to infrastructure and connectivity projects; (b) building stable, diversified, and sustainable development financing mechanisms; (c) strengthening coordination and capacity building; and (d) supporting the implementation of the United Nations 2030 agenda for Sustainable Development, the Achievement of the Sustainable Development Goals, and the Paris Agreement on Climate Change’. China should anchor the BRI in this MoU to build partnerships and internalize their knowledge. This would not be new for the Chinese government. Its Ministry of Finance deeply assessed all existing MDBs and sought to incorporate their best practices and standards when setting the AIIB (aspirationally autodescribed in its website as ‘a MDB for the twenty-first century’). Some examples to be followed could include replicating with other MDBs the co-investment agreement signed between the SRF and the EIB under the China-EU Co-investment Fund (Silk Road Fund 2018); or including the IMF in this group of MDBs, paying particular attention to the assessment of the implications of the initiative in the debt sustainability of its participants. Another document that sets the right path in this regard is the ‘Guiding principles on financing the development of the Belt and Road’ (Ministry of Finance 2017b) signed by the Finance Ministers of 27 countries, including China,16 during the Belt and Road Forum for International Cooperation held in Beijing on May 14–15, 2017. Those guiding principles include references to (i) opening up public service markets, referring to public procurement; (ii) developing public–private partnerships; (iii)

15 Namely ADB, AIIB, EIB, European Bank for Reconstruction and Development (EBRD), NDB and World Bank Group. 16 Argentina, Belarus, Cambodia, Chile, China, Czech Republic, Ethiopia, Fiji, Georgia, Greece, Hungry, Indonesia, Iran, Kenya, Lao PDR, Malaysia, Mongolia, Myanmar, Pakistan, Qatar, Russia, Serbia, Sudan, Switzerland, Thailand, Turkey and the United Kingdom.

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leveraging private sector financing, with particular reference to ‘commercial banks, pension funds, sovereign-wealth funds, and insurance, leasing and guarantees companies’17 ; (iv) the ‘need to strengthen social and environmental impact assessment and risk management of projects’; (v) to ‘take into account debt sustainability’ (as mentioned by IMF 2018); and (vi) coming back to the MDB topic, ‘encouraging MDBs to actively participate in the development of the BRI within their mandates (…) in strengthening coordination and collaboration to provide sustainable financing, institutional know-how, and consulting services to participant countries’.18 All these principles, if respected by the BRI, will critically mitigate the risks identified in this paper. Nevertheless, as in the case of the MoU with six MDBs mentioned above, those guiding principles need to be translated into practical initiatives now. The foundational terrain is set though. Second, the creation of an agency acting as Secretariat and being in charge of coordinating the initiative is of paramount importance. Ministry of Finance (2017b) mentions that ‘common platform(s) should be established to forge synergies between the development strategies and investment plans participant countries, map out strategies or plans for regional infrastructure development, formulate principles for identifying and prioritizing major projects, coordinate their supporting policies and financing arrangements, and share experiences on implementation (…) and establish effective information flows between the private sector and the financing institutions’. A BRI Secretariat would be instrumental in achieving those goals. It would also promote the consistency of the initiative, its transparency and, particularly, its smoother implementation, by incorporating lessons learned both by Chinese executing agencies and financiers in the field, as well as those lessons learned by other development partners. In fact, setting up such a Secretariat would be a factor of particular importance in promoting a closer coordination with MDBs and other development partners. Taking into account the size of the initiative, opening

17 Potential is vast, in that pension funds alone, which held USD 7.8 trillion in assets in 2016, are estimated to invest only about 1% of funds under management in infrastructure (ADB 2017). 18 Interestingly, the document also enumerates the priority sectors were financing should be channeled, namely: (a) infrastructure connectivity; (b) trade and investment; (c) industrial capacity cooperation; (d) energy and energy efficiency; (e) natural resources; and (f) small and medium enterprises.

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representation offices or nominating focal points would be an appropriate step to be considered by those institutions. Third, the coordination and the active participation of MDBs in the initiative cannot leave aside important development partners in the field, for the same purposes. OECD (2018) mentions that four countries represented in 2016 nearly 71% of bilateral Official Development Assistance in Asia, namely the United States (29%), Germany (17%), the United Kingdom (13%) and Japan (12%). The latter is particularly important when it comes to infrastructure financing in Asia (Alegado 2018) and the collaboration between agencies such as the Japanese International Cooperation Agency (JICA) or the Japanese Bank for International Cooperation (JBIC) assumes critical importance for the impact of the BRI but also of the Japanese Cooperation abroad (and of course for the beneficiary countries). Japan already missed the opportunity to influence the setting of the AIIB from inside, together with the United States. In our view, this should not happen again. Fourth, the BRI should dedicate a significant amount of resources to promote better design, readiness and preparation of projects before they are financed by the initiative. We see that the BRI foresees no financing allocated to this purpose, despite the fact that many developing countries lack the knowledge and capacity to design and implement bankable infrastructure projects (ADB 2017). In addition, an inadequate design of projects is one of the main factors causing delays and overruns during project implementation. We recommend that the formal agency acting as Secretariat of the initiative should host a facility that would allocate resources for project readiness and preparation and support the monitoring of project implementation through the life cycle. The agency should also promote the sharing of important lessons learned among projects, particularly in critical areas such as land acquisition. Finally, possibly as a corollary of the three factors above, China should consider, without fully sacrificing the specificity of their economic cooperation abroad, the possibility of applying to become the most recent member of the DAC of the OECD, and, by definition, of the organization. China currently cooperates with the DAC through the China-DAC study group set up in 2009 to share knowledge and exchange experiences on promoting growth and reducing poverty in developing countries in the form of symposia and roundtables.

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Conclusion The benefits of the BRI for China can be grouped into five areas: (i) increasing demand for Chinese goods and services; (ii) increasing regional and bilateral influence by China in participating countries; (iii) advancing security and military interests abroad; (iv) promoting the internationalization of the renminbi; and (v) national and global acknowledgement of China as a global superpower. Nevertheless, there is far from a consensus about whether the BRI is achieving its objectives. The BRI will clearly improve connectivity in the region, and consequently, trade and economic growth are expected to follow. Infrastructure financing will be further leveraged, and project funding sources will be diversified. However, some authors and political observers argue that the long-term costs could be greater than the benefits, particularly in certain specific countries and/or in certain locations associated with specific projects. These long-term costs are associated with some potentially negative effects of the BRI, and they could be divided into three main groups: (i) for China, its increasing indebtedness to finance the initiative and the role played by non-commercial factors in selecting projects for financing; (ii) for participating members, their increasing level of public indebtedness, the limited economic return of some of the BRI-funded projects, which allocate resources in an inefficient manner, and the permissive (or unexisting) environmental, social, transparent and anti-corruption standards in projects; and (iii) for non-participating countries, the lack of level playing field in procurement of public works, equipment and consulting services, which discriminates non-Chinese companies. We argue that most of the risks identified are less severe than some critics suggest that these risks are being mitigated, and that the inevitably increasing role that third parties are playing in the initiative (ranging from multilateral banks and bilateral funding agencies to private sector financiers) can be projected to mitigate the risks even further. We also point out some policy recommendations that could reinforce the mitigation of the identified risks, namely the following: (i) promoting closer collaboration with the MDBs and other International Financial Institutions operating in the region, building up on the initial step taken with the MoU on collaboration on matters of common interest under the BRI signed on May 14, 2017 between the Chinese Ministry of Finance and six MDBs, namely the ADB, AIIB, EBRD, EIB, NDB and the World

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Bank Group; (ii) building bilateral ties with the main bilateral development partners in the region, namely with the United States, Germany, United Kingdom and Japan; (iii) creating a formal Secretariat or Institute for the initiative, which would be in charge of promoting its consistency, transparency, assessment and, particularly, a smoother implementation, by incorporating lessons learned both by Chinese executing agencies and financiers and by other development partners; (iv) creating a BRI facility providing end-to-end technical and financial support for project readiness and project preparation; and (v) exploring the possibility of China becoming the most recent member of the DAC of the OECD. Avenues for further research include developing those risks identified and those policy recommendations suggested. What is the estimated impact of the BRI in promoting trade, particularly in a global context of trade tensions? What would be the governance and the most adequate institutional setting of the BRI Secretariat? What would it take for China to join the OECD’s DAC or the Paris Club? What would be the impact of the recent initiatives individually proposed by the United States (Pilling 2018) and by the EU (Elmer 2018) to counteract China by increasing supply of infrastructure financing in the developing world?

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CHAPTER 7

BRI—Sustainable, Inclusive Growth, and Financial Sources Fernanda Ilhéu

Introduction On 7 September 2013 when visiting the Nazarbayev University in Astana, President Xi Jinping announced an initiative called “One Belt One Road”. A month later—more precisely on 2 October the same year, when addressing the Indonesian Parliament—he announced the advent of the “New Maritime Silk Road of the 21st Century”. With these two announcements, what is now known as the Belt and Road Initiative and the 21st Maritime Silk Road (BRI) was created. With this initiative, the Chinese President envisaged China and neighbouring Central Asian and ASEAN countries working together in a process of cooperation to develop various corridors by land and by sea, linking China to Europe, and thus revitalise and reshape the ancient silk roads and turn them into new vectors of global trade and development.

F. Ilhéu (B) ISEG-Lisbon School of Economics & Management, Lisbon University, Lisbon, Portugal e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_7

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Initially, this initiative was understood to be being mainly located in Eurasia and was seen as a process of expansion and change of China’s economic model, which needed to be restructured in order to avoid a stagnation of its production levels and the onset of a ‘Middle-Income Trap’ threat or, in other words, to achieve real gross domestic product (GDP) growth rates of 7 and 6% per year—the new normal economic sustainability growth rates. BRI marked the internationalisation of the Chinese economic model of development of the last 40 years. China plans to revitalise the antique silk roads from China to Europe, which used to be great sources of trade and wealth in the past, and to create new drivers of trade growth, by cooperating in the investment of infrastructures and industrial platforms with China’s Eurasian neighbours, which may be income poor now, but rich in resources. Later on, in March 2015, the National Development and Reform Commission (NDRC) and the Ministry of Commerce of the PRC issued a document called “The Vision and Actions Plan to Jointly Built the Belt and Road and the 21st Maritime Silk Road”, which structured BRI and clarified it as being a Chinese initiative born in China, but which had turned to the world with the object of achieving a new global economic model with the capability to support a sustainable global economy in 2100. As written in this document, “The initiative will enable China to further expand and deepen its opening-up and to strengthen its mutually beneficial cooperation with countries in Asia, Europe and Africa and the rest of the world”. BRI is linked with two complimentary initiatives—“International Production Cooperation” and “Third-country Market Cooperation”. The first was launched on 16 May 2015, with the release of the ‘Guiding Opinions of the State Council on Promoting International Cooperation in Industrial Capacity and Equipment Manufacturing’, which aims to match Chinese industrial production with existing global demand, giving priority to China’s cooperation with emerging countries whose economic structures require considerable investment to trigger growth. The second initiative, the “Third-country Market Cooperation”, was first mentioned by Premier Li Keqiang in June-July 2015, when he attended the 17th China-EU leaders’ meeting and visited Belgium and France. The objective of this initiative is to combine China’s production capacity with developed countries’ advanced technology and equipment to achieve the joint development of markets in developing countries. BRI aims for global and regional cooperation and envisages cooperation for the implementation

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of large-scale regional projects. This is planned to be achieved by the creation of the necessary conditions for the development of the spirit of an international production cooperation, whereby the division of labour and the distribution of industrial global chains will be improved in conjunction, in order to benefit global sustainable development. During the Summer World Economic Forum in Davos in September 2015, Premier Li Keqiang referred in his speech to the fact that “China has created the initiative to build the Silk Road Economic Belt and the 21st Century Maritime Silk Road, and to promote global cooperation in production capacity. We believe these initiatives could help further open up our country and forge a more balanced and inclusive global industrial chain. This in turn could pool the comparative strengths of all countries and foster a global community of common interests and development for win-win, inclusive and common progress ”. According to China Outlook (2016, p. 26), “This would benefit: China, by facilitating the export of its production capacity and industrial products to the international market; Developed countries, by creating new sources of economic growth; Developing countries, by promoting their industrialization and economic development ”. Sharma and Kundu (2016) consider that BRI is a transnational connectivity model which seeks to revitalise the old silk roads and even create new ones. It will be implemented by those countries that want to join the initiative and which are willing to submit their development plans with the reward of gaining complimentary competitive advantages. At the 19th National Congress of China Communist Party in October 2017, the Belt and Road Initiative (BRI) was included in the Party’s Constitution. This proves the importance of this initiative for China and the long-term commitment of China to implement it. According to World Bank data, the 65 countries that had joined BRI by 2015 accounted for 62% of the world’s population and 30% of the world’s GDP, and they owned 75% of the world’s energy reserves. They were responsible for purchasing 50% of China’s iron and steel exports, 49% of its aluminium and 38% of its cement, while suppling 65% of China’s oil imports and 78% of its gas imports (OECD 2017). Six years after the announcement of BRI, 125 countries, including both developed and developing ones, together with 29 organisations have shown an interest in cooperating with China, leading to the signing of 173 cooperation agreements for the development of projects (BRI Portal 2019).

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Basically, the justification presented by NCRD for the creation of BRI by the Chinese government is centred on the complex and profound changes that have affected the world, the 2008 crisis being one of the most important events which continue to negatively impact the world economy and has been followed by a slow recovery in growth, as well as uneven global development, and many countries are now facing huge difficulties in their development process. The conclusions of the World Economic Forum Meeting 2016 state that “Rising income inequality is the cause of economic and social ills, ranging from low consumption to social and political unrest, and is damaging to our future economic well-being ”.

Visions of BRI as an Engine of Global Growth Cooperation on Economic Development António Guterres, the United Nations Secretary-General in its speech at the 2nd BRI Forum in April 2019 in Beijing, affirmed that “We see the B&RI as the most relevant project today in the world, in the context of South-South co-operation, which would contribute to fairer globalisation, and fairer globalisation is the best way to have a future of shared prosperity among the different nations of the world” and also “There is no peace without development and no development without peace”. China’s Vice-President Wang Qishan in his speech at the 8th World Peace Forum in July 2019 in Beijing also linked economic development with peace in the world by stating “development is the key to resolve all issues ”… “We should strengthen dialogue and cooperation on the economy, finance, technology, energy and other areas in order to take the world economy to a new level of openness and to strengthen joint security through shared interests ”. According to Wang Qishan, “China’s path of peaceful development is about developing China through promoting world peace while upholding world peace through China’s development ”. The interdependence between China’s and the world’s economic development explains the complementarity of the internal and external visions of BRI in China. Internally, BRI is seen as a new strategy to promote the development of the Chinese interior and western poorer provinces, such as Gansu, Xinjiang and Yunnan, among others and also to boost the opening-up and internationalisation of the eastern coast and south region provinces in order to upgrade and globalise their economy. A good example of this is the project for the creation of the Grand Bay Area, which links the various global development platforms of the nine

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cities of Guangdong Province with the Special Administrative Regions of Hong Kong and Macau to compete with the Tokyo Bay Area, the New York Bay Area and the San Francisco Bay Area. Externally, BRI is a vision of a new global development model based on the building-up of cooperation platforms aimed to proactively develop economic and cooperative partnerships between China and others countries in a bilateral or multilateral way to match the fast-developing needs of the countries involved, thus creating new windows of opportunities for all. This relation between China’s peaceful development by interconnecting with the world in peaceful development is also the vision of many economists, such as Angang (2015 p. 8). This author affirmed that the world can expect a higher integration of China in the global economy, because the more integrated is the Chinese economy with the world, the more it will act as a global stabiliser. BRI’s vision as being a major development opportunity can be explained by the increased trade and investment being generated by the sheer size of the physical and digital infrastructure projects being carried out and the synergies they create. The impact of BRI on global trade has been high. It is estimated that in 2018 alone, BRI added $170 billion to global trade, of which $50 billion were exports from China. The value of goods transacted with these countries and regions in the last six years exceeded US$ 6 trillion or about 27.4% of China’s total trade in that period. In 2018 alone, this figure was US$1.3 trillion, 16.4% more than in 2017. The impact on investment is also remarkable, for between 2014 and 2018, more than $410 billion of China’s investment was made in BRI countries, with foreign direct investment (FDI) alone amounting to US$90 billion. Between 2014 and 2017, loans totalling US$120 billion were made for projects in railways, highways and power stations, among others. The value of China’s construction project contracts for BRI exceeded US$400 billion during this period. China also signed industrial cooperation agreements with more than 40 countries in BRI, and the 82 Chinese state-owned enterprises (SOEs) in 24 BRI countries generated US$2.28 billion in taxes for local governments and created 300,000 jobs. By the end of 2018, 933 enterprises had been set up in China’s economic and trade cooperation zones, which have invested US$20.96 billion and employ 147,000 people. In China’s vision, the world needs a more integrated and globally controlled world economic model, to achieve a more dynamic and balanced growth, where China must assume global responsibilities. China wants to

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have a role in the decision-making of the rules of the relationship model for the world’s countries, especially regarding international organisations and regional integration policy. This wish of China is seen in the west by many analysts as being a tool of Chinese soft-power diplomacy to control others countries through its economy. However, Wang Qishan (2019) guaranteed that China stands for preserving multilateralism with the United Nations at the core, with respect to each country’s sovereignty independence and territorial integrity and abiding by international law. He assured that “No matter how developed China is, it will never seek hegemony — never seek expansion or a sphere of power”. Antonio Guterres (2019) recognised that we need global answers to global challenges, in both peace and development as well as the current multilateralism of China in international relations.

Rational of BRI Sustainable and Inclusive Growth Premises Since the Asian financial crisis of 1997, up until now, China has adopted infrastructure investments as an economic counter-cycle measure, and this panacea was also successfully utilised by China to face the negative effects of 2008 crisis, and it is in the spirit of the creation of BRI to impact the progress of developing countries, as well as to support world economic sustainable growth. This vision is consistent with multilateral development financial institutions recommendations to their member states to increase infrastructures projects to underpin economic growth. The improvement of infrastructures and connectivity is a base for the development of trade, investment and economic activity. A large amount of academic research work has been undertaken on the impact of the construction of infrastructures and trade and investment on economic growth. BRI takes these conclusions into consideration and advances new ways of progress, with the aim of reducing barriers and getting countries to work together with a new mindset which is based on knowledge, connectivity, trust and cooperation. When an investment is sound, infrastructure projects can have an important multiplier effect, as they create a temporary economic stimulus through the increase of demand in goods and services when the construction is underway, by reducing costs (if the investment is accompanied by efficiency-boosting policy reforms, transport costs in some BRI countries can fall by a quarter) and also by attracting investors who look

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for a cheaper production location or, for example, transport and logistics service operators (Brautigam 4 April 2019). Each country should plan its development in an integrated way, taking into consideration economic growth and human development; it should consider its natural and human resources, its geostrategic location, its political model and governance commitment to development and also its cultural context. Normally, these countries face constraints, such as lack of capital, lack of technology, lack of markets, lack of human skills and education, and bad and sometimes corrupt governance. Some also lack natural resources, and many possess such resources, but don’t process and value them, and we can observe that by themselves alone, they are unable to succeed in their development plans. The support supplied by developed Western countries, such as the USA and European countries to the development process of poor countries, has been carried out mostly through Official Development Assistance (ODA) since the Lomé Convention of 1975. OECD defined ODA as being government aid from one country to another to promote its economic development and welfare, which can be provided bilaterally from donor to recipient, and also through multilateral development agencies, such as the UN or the World Bank, and it involves not only financial grants and “soft” loans (25% should be granted), but also technical assistance. To be considered ODA, the financial fluxes should be channelled to the public sector and contribute to economic development. The EU is collectively the biggest ODA donor, providing e74.4 billion a year, as per 2018 figures to reduce poverty and support global development. As can be seen in Fig. 7.1, Africa is the continent that received more ODA finance from the EU and yet is a very poor continent, with 47% of its population living on US$1.90 per day or less, according to World Bank figures for 2016. Billions of dollars and euros have being applied in projects which can be seen as being positive for supporting these countries populations in health, education or natural catastrophes; however, this financial and technical support has been a complete failure in terms of economic development. As mentioned above, almost half of the Africa population lives in poverty and 256 million people are in risk of hunger and malnutrition, as can be seen in Table 7.1. However, Africa has enormous potential, according to the World Bank and the International Monetary Fund, as

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EU ODA Recipients Data per Continent € Billion 2007-2019 250 200 150 100 50 0

Fig. 7.1 EU AID 2007–2019 per continent (Source EU Aid Explorer [2019])

Table 7.1 People affected by grave food insecurity in 2019 (million people)

World Africa Asia Latin America and the Caribbean Oceania North America and Europe

2005

2010

2015

2016

2017

2018

% of the population

947.2 196.0 688.6 51.1

822.3 199.8 572.1 40.7

785.4 217.9 518.7 39.1

796.5 234.6 512.3 40.4

811.7 248.6 512.4 41.7

821.6 256.1 513.9 42.5

10.9 19.4 11.5 6.5

1.8 NR (Not recorded)

1.9 NR

2.3 NR

2.4 NR

2.5 NR

2.6 NR

6.1

Source FAO (2019)

Africa has 60% of the world’s arable land and currently most countries on this continent only achieve around 25% of their potential crop yield, giving great scope for improvement. Africa has 10% of the world’s population and yet is responsible for only 1% of the world trade.

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Half of the African population has no access to basic human needs, such as nutrition, clean water, shelter or electricity. 589 million subSaharan Africans live without electricity, and almost 40% of the people in the world without access to clean water live in Africa. The most critical issue facing Africa is to achieve industrialisation and economic transformation, which it could well succeed in doing after all the support received from the EU and other aid donors over the last 50 years. Africa has a growing young population, and it is expected that in 2025, around 1400 billion people will live in Africa alone, and one quarter of people under 25 years old will be Africans. Every year, 10 million young Africans will join the workforce, and if they fail to find a demand, there these young people will try to emigrate, most probably to Europe. The question of how to make these development projects sustainable is at the heart of the work carried out in recent decades by the UN. The UN Agenda 2030 aims to successfully achieve the establishment of Sustainable Development Objectives (SDO) that aim to eradicate poverty and achieve sustainable development globally and, at the same time, balance economic, social and environmental dimensions which should be implemented as a whole, rather than selectively, to avoid leaving no one behind, while seeking to reach the furthest first. Sustainable development is associated with the “Three Ps”: People, Planet and Prosperity, which cannot be separated and have to be developed in parallel. This concept is easy to accept, but difficult to implement. Understanding sustainable development at the local level is complex and requires institutional innovation; however, when it is taken to a global level, it can be seen that multiple actors will have to understand and cooperate, in order to establish new rules of global governance. Therefore, two more Ps were added lately by the UN to this Agenda: a P for Peace and a P for Partnership. China also practises ODA, which in its case consists of grants, loans with zero interest rates with large grace periods and flexible payment terms, and also technical assistance, scholarships for students, medical missions and human resource cooperation. For instance, ODA assistance to African countries from the 1950s up until 2006 reached a total of US$5.7 billion in 800 projects. The flow of Chinese ODA aid is beginning to be reinforced with Chinese investment after the visit of Zhao Ziyang to Africa in 1982, and, in the beginning, this investment was exclusively oriented by Chinese soft-power diplomacy to countries that were politically aligned with China. However, Chinese ODA became more oriented by economic reasons after China’s adhesion to the WTO, which explains

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why China needs huge quantities of raw materials and energy to feed its rapid economic growth. Over the recent years, the flow of ODA financial aid has been greatly complemented by investment fluxes, commercial credits and construction contracts. During the China-Africa Cooperation Forum (FOCAC) 2006, a summit which took place in Beijing in November of that year, with the presence of 44 African countries, US$3 billion soft loans were offered to those countries, together with US$2 billion in commercial credit lines and a US$5 billion development fund, in addition to African debt relief. China created the CADFUND in 2007—the first Chinese equity investment fund, which that focused investment in Africa and is financed by the China Development Bank, with the main objective of supporting Chinese companies’ investment in Africa, being the main platform for Chinese investment in this continent. With an initial capital of US$1 billion, this grew to US$10 billion after the Johannesburg Summit of 2015. Furthermore, at the FOCAC 2018 summit in Beijing, the Chinese government announced $60 billion of financial support to Africa, provided in the form of ODA, as well as investments and loans from financial institutions and companies. In addition, CADFUND offers to finance support advice in investment and in trade strategic decisions, as well as assistance during the negotiations. In conclusion, over recent years, for both economic and commercial reasons, China’s ODA has been delivered together with the government’s internationalisation policy, especially in rich strategic resources and energy countries that receive as well as much investment in infrastructures contracts with Chinese construction companies which are paid in the form of these resources, such as oil. One of these complimentary ODA investment programmes is called “Angola Mode”, see Fig. 7.2. Investment projects oriented to the exploration of resources appear as compensation for the payment of the construction of infrastructure projects. In this way, the African market for Chinese constructors is obtained by the Chinese government itself, which use these resources as a pre-negotiation condition for the concession of soft loans and grants, as well as the supply of the equipment and materials for construction, together with the conditions for the import of Chinese labour. In this way, those projects oriented to the exploration of resources are developed by the big Chinese SOEs, which are strongly supported by the Chinese government. These SOEs include companies, such as CNOOC—China National Offshore Oil Corporation; CNPC—China

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Fig. 7.2 Angola Mode (Source Author’s adaptation from Foster et al. [2009])

National Petroleum Corporation; and Sinopec—China Petroleum & Chemical Corporation. The service activities of other important SOEs complement the activities of these SOEs, for example being building infrastructure projects such as the China Overseas Engineering Corporation, the China Road and Bridge Corporation (CRBC), the China Railway Corporation, the Jiangsu International Corporation, the China Railway Construction Company, the China General Machinery and Equipment Import and Export Company (CMEC/CMIC), Sinohydro and the China Complete Plant Import and Export Corporation (COMPLANT). This last company is a good example of how the interaction between ODA programmes and economic and commercial activities works. This company started its activity as a governmental agency to implement the ODA programmes, but it progressively became involved in Chinese investment projects abroad, as well as profit-oriented trading. Nowadays, its business portfolio ranges from railway construction and water tanks, through to hotels, stadiums, cultural centres and investment in joint-ventures and sugar plantations. BRI is an on-going cooperation process of China with third world countries, and it creates a new vision for trade and investment relations, with the objective of common development and destiny. This new vision aims to find a way for countries to interconnect their development strategies which complement their competitive advantages, and it

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aims to establish economic development corridors—hubs of cooperation platforms with inland distribution logistics networks, infrastructures and industrial parks. China’s success in the global economy was initially due to its ability to integrate the Global Value Chains (GVCs) in its economy, which provided China with the required capital, technology and markets. Together with Chinese government policies and incentives, this produced the so-called Chinese economic miracle. Sun (2017) conclusions are that “Industrialisation is how China reshaped itself from a poor backward country into one of the largest economies in the world in less than three decades ”, because “Manufacturing, unlike agriculture and services, engages mass labour in highly productive ways to participate in the global economy”. The author also believes that “The Future of Africa depends on industrialisation”. Poor countries are normally countries whose main economic activity is agriculture or the exploitation of primary products. Some of these countries are rich in raw materials, which are exported in bulk by multinational companies without the incidence of any industrial transformation in the supplier countries. The question is how to pass from an agricultural economy to an industrial one. In a poor economy, the implementation of this type of process requires capital, technology and foreign markets. Only export-oriented FDI can unite these three resources. The Chinese vision of its model of economic development can be applied to the industrialisation of third world countries. An example is the FDI take-off model of Special Economic Zones (SEZs)—see Fig. 7.3. This model posits that if a country successfully implements the necessary legal and physical infrastructures to attract FDI to light exportoriented industry, then this country’s economic activity will progressively progress from agriculture to industry. To attract this investment, in the 1980s China created the SEZs of Shenzhen, Zhuhai, Xiamen, Shantou and Hainan and later in the 1990s China opened the Pudong’s SEZ in Shanghai. This SEZs model was inspired by the Ireland Free Trade Zone of Shannon, which was the first Free Trade Zone to be created in the world—in 1959. This model is still in expansion in China and has resulted in the creation of innumerous open cities, economic technological development areas, coastal development zones and Free Trade Zones. The FDI-led industrial take-off theory defends that FDI plays an important role in mobilising the industrialisation of developing countries. Indeed, it is a key source for doing so, enabling developing countries

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Agriculture

Export-led Growth

Light Industry

Market System

Infrastructure

Investment -driven

FDI FIEs

Industrialization Fig. 7.3 SEZ Economic Development Model (Source Hao and Ilhéu [2014])

to begin this process not at zero level, but by acquiring, together with investment, foreign investors’ technology, know-how and experience of industrialisation (Felker 2003; Ohno 2009; Davies 2011; Dentinho and Silva 2017; Yang and Zhang 2018). Lin (2011) explains the rapid growth of the Chinese economy by applying the advantage of the Economic Backwardness Theory effects of Gerschenkron (1962), saying that a country which is a latecomer to the development process can borrow technology, industry and institutions from advanced countries at low risk and costs, adding that “if that country knows how to tap the advantage of backwardness in technology, industry, and social and economic institutions, it can grow at an annual rate several times that of high-income countries for decades before closing its income gap with those countries ”. However for this to happen, countries must make themselves attractive to foreign investors, by building the necessary physical, legal, political and human infrastructures. The next question is how to attract FDI to a developing country. According to the Dunning Eclectic Paradigm (1980, 1988), companies which supply a particular market are chosen by the markets according to their ownership of specific advantages, and it is these companies which choose the production location of

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the products to be supplied to that particular market, according to the countries’ specific local advantages, which can be labour costs, resources, knowledge, infrastructures, trade facilities or tax incentives, which obliges countries to create their own specific local advantages. At the ground zero level of this process, developing countries need the assistance and support from developed countries to make themselves attractive to foreigner investors. This support can be financial support, the construction management of physical infrastructures, legal advice on fiscal incentives or international regulations on trade, the education system, the training of workers, skills development or economic and financial consultancy to choose the most appropriate projects for their development. Cooperation plans in the BRI context should be concentrated on largescale projects, implementing “Third-country Market Cooperation” and creating the conditions for the development of the China GVC Model of BRI, whereby, in the spirit of “International Production Cooperation”, the division of labour and the distribution of industrial chains should be improved by encouraging the entire industrial chain and related industries to develop in conjunction, as well as the establishment of R&D, production and marketing systems. BRI includes two realities in the world: the developed countries whose sustainable development requires huge investment in new technologies, namely AI, big data and cloud computing, among others, and the developing countries still struggling to achieve the investment to build up the required physical infrastructures for the start of their industrialisation process: an example of this huge gap is that in Africa, 650 million people still do not have electricity and in the developed world the target is electrical vehicles to everybody. Other important questions included the cost for implementing this new stage of connectivity and also how to achieve the construction of the fundamental infrastructures for this new global growth model. Some financial institutions talk about an investment requirement of around 4 trillion USD, while others cite 8 trillion in the long-run. According to the African Development Bank, the development of infrastructure projects in Africa requires US$130–170 billion a year. These infrastructure projects can be huge, such as the revitalisation of Bandar Megacity in Kuala Lumpur, which requires an investment of US$48.5 billion, or the Maputo-Katembe Bridge in Mozambique, which costs US$786 million and will equip that country with a 3-km-long

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bridge which will be the biggest in Africa and will contribute to the economic development of Mozambique. Other examples included the Cauchari Solar Power Station in Argentina, which will produce 300 MW of energy and will be the biggest solar farm in South America, with 85% of the finance for the US$ 400 million required investment being provided by the Import–Export Bank of China, with an interest rate of 3% per annum over 15 years or the water and sewage treatment plant in Kurunegala in the northwest of Sri Lanka, which was concluded in August 2018 and was built by the China Machinery Engineering Corporation, with an investment of US$40 million, to serve 70,000 people and 3500 institutions, including a hospital. The development project which will link Kampala to Lake Vitoria and the Dar es Salaam Port in Tanzania, with a total investment of US$620 million, will be carried out by a consortium involving the World Bank and Chinese and European banks, mainly German ones. This project involved diplomatic negotiations between China, Uganda and Tanzania to create new customs technologic facilities, the construction of hundreds of kilometres of railways crossing the two countries, the rehabilitation of interior ports and the seaport, as well as export processing zones, and it is also going to require private investment for those zones where exportoriented industries are going to be developed. Indeed, the process of obtaining private investment, especially by Chinese private investors in places where infrastructures and industrial parks are being made, is already underway. ODA and construction projects of China in Africa gave Chinese people knowledge and information about the African market, and some Chinese workers and government officials decided to stay in Africa after finishing their projects there to open their own business, as they saw interesting market opportunities in the place. Sometimes they also invite their friends to join them and jointly invested in some projects. An estimated 1 million Chinese citizens have emigrated to Africa over the last two decades to open private companies and develop activities ranging from industry to agriculture and services. According to Feng and Pilling (2019), some 10,000 Chinese companies operate in China. Jayaram et al. (2017) concluded that US$500 billion of African industrial output is handled by Chinese businesses, amounting to around 12% of total industrial output. Financing infrastructures and industrial projects for BRI adopts financing schemes which are different from the ODA, China FDI and Angola Mode model ones, not only due to the enormous amount of capital

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required, but also because they include projects which can only be paid on the long-term basis, and also short-term private and industrial and commercial finance has to be considered, together with the private equity of the investors. In a way, all kinds of financing are represented and complement each other. Shortly after the creation of BRI, China allocated a huge amount of resources to the initiative, initially it was supported by the New Silk Road Fund, with US$40 billion capital available to promote private investment in BRI, and, later on, more than US$14.5 billion were added to this fund. In 2015, the Asia Infrastructure Investment Bank (AIIB) was created, with 57 founder members (it now has 100, accounting for 78% of the world’s population and 63% of global GDP) and an initial capital of US$50 billion, which is expected to grow to US$100 billion. In addition, the China Development Bank, a Chinese state bank committed to providing financial support for BRI projects, declared at the beginning of its intention to invest US$900 billion and then announced a further $36.5 billion at a later stage. Between 2014 and 2018, more than US$410 billion of Chinese investment was made in countries that declare their intention to cooperate with China in the BRI context. US$90 billion alone was applied in FDI, and between 2014 and 2017, loans were made to a total value of US$120 billion to finance, among others, railway, highways, electric power station, and water and sewage plant projects. The value of construction projects carried out by China in BRI was greater than US$400 billion. China also signed industrial cooperation agreements with more than 40 BRI countries and 82 Chinese state enterprises established in 24 BRI countries generated US$2.28 billion in taxes for local governments and created 300,000 jobs. Up until the end of 2018, 933 companies have been created in economic and commercial zones implemented by China in those countries, which together invested US$20.96 billion and created 147 000 jobs. China is beginning to realise that the funding requirements of BRI exceed its capacity to finance the initiative, and it is now signing Memorandums of Understanding (MoUs) for cooperation in financing these projects with multilateral financial institutions, such as the World Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the Islamic Development Bank. The latter signed a MoU with AIIB to invest in Africa and the European Investment Fund and the Silk Road Fund signed a MoU

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to create the China-EU Co-Investment Fund to further develop synergies between BRI and the Investment Plan for Europe, the so-called Juncker Plan. Once operational, the China-EU Co-Investment Fund is expected to provide EUR 500 million to support equity investment. In her speech at the 2nd Belt and Road Forum held in Beijing in April 2019, the IMF President Christine Lagarde, affirmed that BRI has already entered the implementation phase of what she called “B&RI 2.0” and she highlighted its importance for the growth of opportunities for BRI projects under this initiative and she cited Senegal as an example, which has shown robust growth over the last four years of more than 6% per year. She also drew attention to the sustainability aspects that should be taken into consideration, namely the debt sustainability and green sustainability in terms of their environmental impact. Lagarde (2019) considered that infrastructure investments can lead to problematic growth if they are not well managed or if they are not really essential for the development of those projects which receive them, and, as a principle, such investments should only be made where they are needed and in cases when they are sustainable. Infrastructures projects which incorporate sustainability and digitalisation are very different from the majority of those seen around the world, even in most advanced countries. Consequently, the Chinese government considers sustainability to be a key factor in BRI. Dennis Pamlin, a Swedish entrepreneur who is a founder of 21st New Frontiers and who is an ex-director of UN Low Carbon Leader projects, published a report on Digital Sustainability in the China Daily European Weekly on 24 November 2017, p. 9, where he states “The Belt and Road Initiative is one of the most important initiatives on the planet right now. Not only because of its economic and geographical magnitude, but also because of its potential to create something new and much needed. The initiative has the potential to take a significant step toward a 21st-century sustainable network that connects all countries in a way that benefits everyone on more equal terms ”. He referred to Xi Jinping’s affirmation at the Belt and Road Forum for International Cooperation in Beijing in May 2017 that “B&RI calls for the use of a global sustainability filter in all strategic projects ” and concluded that this filter should support a sustainable global economy in 2100, and if BRI contributes to it, it will be “a physical and digital road to an ecological civilisation”.

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Indeed, at the Belt and Road Forum for International Cooperation in Beijing in May 2017, President Xi Jinping referred that to ensure sustainability, “we should pursue the new vision of green development (…) efforts should be made to strengthen cooperation in ecological and environmental protection and built a sound ecosystem so as to realise the goals set by the United Nations Agenda 2030 for Sustainable Development ”. When it came to digitalisation, he mentioned that “we should pursue innovationdriven development and intensify cooperation in frontier areas such as digital economy, artificial intelligence, nanotechnology and quantum computing, and advance the development of big data, cloud computing and smart cities, so as to turn them into a digital Silk Road of the 21st century”. In BRI, another sustainability vision is at the stake the economic and financial rationale, whereby the cost of infrastructure construction needs to achieve a sustainable global economy. Lagarde (2019) mentioned that the Chinese government has been learning from some projects which performed less well and caused major problems for investment-recipient countries, or losses for China, and that it is now committed to the economic and financial sustainability of BRI projects. Nowadays, new project analysis methodology has as its main principle the sustainability of the debt generate, together with an increasing transparency with regard to the process for tendering for construction and supplies and an improved risk analysis, as well as the sustainability of a project’s environmental impact, as mentioned above. Lagarde (2019) also referred that the spirit of cooperation, transparency and commitment to sustainability should be the common practice between China and its partner countries, international institutions and the private sector. She mentioned that the IMF has a cooperation agreement with the Chinese government to support staff training for this methodology and added that the China-IMF Capacity Development Center has already trained more than 140 staff from 45 different countries. The concerns expressed by Christine Lagarde at this Forum were also expressed by President Xi Jinping in his opening speech of the 2nd Belt and Road Forum, when he also introduced another concern—which is the successful implementation process of BRI projects with zero tolerance for corruption. He affirmed, “We need to pursue open, green and clean cooperation. The Belt and Road is not an exclusive club, but rather it aims to promote green development. We may launch green infrastructure projects, make green investments, and provide green financing to protect the Earth which we all call home. For in pursuing Belt and Road cooperation,

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everything should be done in a transparent way, and we should have zero tolerance for corruption”. In 2017, the Chinese government demonstrated its commitment to debt sustainability when mobilising funds to finance inclusive economic cooperation in BRI when, together with finance ministers from 28 countries, he endorsed the principles guiding BRI development projects finance, and he asked for the cooperation of governments, financial institutions and companies from BRI countries to ensure the long-run sustainability of the financial system. On 25 April 2019, the Chinese Government Minister of Finance issued the “Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative” policy. The procedures for debt sustainability analysis include the following steps: debt coverage; macroeconomic projections; realistic scenario; debt rating and repayment capacity; stress texts; risk signs; judgement on use; final risk rating; and a debt sustainability analysis report. At the AIIB Annual Conference of 2019, 1500 participants from the official delegations of member countries or prospective members and representatives of main world multilateral financial institutions discussed in the different panels their views and concerns regarding debt and climate sustainability for by BRI projects, as well as the modus operandi of project implementation. In general, they represented private companies, mainly financial ones, but also construction, consulting and digital companies, as well as IT services providers, universities and think tanks. These companies were also linked with the development of land, sea, air or digital connectivity projects geared towards common poverty reduction goals, following the recommendation that they should respect common interests for benefit and prosperity sharing. Many interventions at the conference mirrored these sustainability concerns of development goals, linking them to the need to strengthen connectivity and trust among peoples and to establish new knowledge and sharing platforms and a new world phase, with multilateral ambitions and governance. It seems that through BRI, China is progressively positioning itself in the same perspective paths, although it adopts different ways of accomplishing the SDO of UN Agenda 2030, which creates great expectations for the creation of opportunities for developing countries, and also the possibility to dynamise and create a more robust economy in developed countries, anchored on strong joint cooperation for the development of a new sustainable globalisation model.

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Conclusion BRI is a Chinese initiative born in China, but opened to the world with the objective of achieving a new global economic model with the capability to support a sustainable global ecological civilisation in 2100. BRI aims for global and regional cooperation and envisages cooperation for the implementation of large-scale regional projects, between China and third countries in a process known as “Third-country Market Cooperation”, and this is planned to be achieved together with the spirit of “International Production Cooperation”, whereby the division of labour and the distribution of industrial global chains will be improved in conjunction, in order to benefit global sustainable development. António Guterres, the United Nations Secretary-General, and China’s Vice-President Wang Qishan share the vision that BRI would contribute to a fairer globalisation, to the world economic development and with it to the world peace. The relation between China’s peaceful development interconnecting with the world peaceful development is a key issue in BRI since the world economic development and China’s economic development are interdepend, and this explains the complementarity of the internal and external visions of BRI in China. Internally, BRI is seen as a new strategy to promote the development of the Chinese interior and western poorer provinces and also to boost the opening-up and internationalisation of the eastern coast and south region provinces in order to upgrade and globalise their economy. Externally, BRI is a vision of a new global development model that aim to proactively develop economic and cooperative partnerships between China and others countries in a bilateral or multilateral way, to match the involved countries fast-developing needs. Six years after the announcement of BRI, 125 countries, including both developed and developing ones, together with 29 organisations have shown an interest in cooperating with China, leading to the signing of 173 cooperation agreements for the development of projects. The impact of BRI in these six years is very impressive both in world trade and investment and in cooperation agreements signed by China with third markets, mostly in Asia, Africa and South America. These agreements are basically concentrated in the construction of structural infrastructures and connectivity since their improvement is considered a base for the development of trade, investment and economic activity by having important multiplier effect, creating temporary economic stimulus through

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the increase of demand in goods and services when the construction is underway, by reducing costs of transport and also by attracting investors who look for cheaper production locations with efficient infrastructures support. BRI is a new approach to the traditional support given by China to developing countries. Since the 1960s, China practised ODA to those countries in a similar way but more competitive tools that the ODA offered by USA and EU, from 1975 onwards. This assistance focused on offering financial and technical support to health, education or natural catastrophes problems of those countries has been very positive; however, a complete failure in terms of economic development, the example of African situation is well detailed above. At the beginning of the millennium, China introduced a new approach to the resolution of economic and commercial problems complementing the ODA practices with Chinese investment infrastructures contracts made by Chinese construction companies to be paid in the form of natural and energetic resources. These investment contracts programmes are supported by Chinese funds and banks like the CADFUND and the China Development Bank, and are mostly done with rich resources countries, and is currently being called investments “Angola Mode”. BRI is a new step forward on the vision of cooperation between countries for the achieving the common goals of balanced economic development, and it foresees the interconnection of economic development strategies of China with third countries based on the complementarity of their competitive advantages. This model follows the economic theories, policies and practices pursue by China to integrate the GVCs in its economy, which provided China with the required capital, technology and markets for its development, through the attraction of foreign direct investors charmed to cooperate in the Chinese transition process from an agrarian to an industrial economy. The SEZ Economic Development Model explained above is the so-called Chinese economic miracle that China wants to replicate in developing countries, namely in Africa, to transform this continent in the “New Factory of the World” at same time is preparing Chinese economy to be ‘The New Office of the World’ and ‘The New Market of the World’. Financing infrastructures and industrial projects for BRI requires financing schemes which are different from the ODA, China FDI and Angola Mode model ones, due to its complexity and dimension.

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China created the AIIB and the Silk Road Fund and provided China Development Bank with specific funds to finance projects under the BRI and at same time negotiated MoUs with multilateral financial institutions, such as the World Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development or the Islamic Development Bank that sighed a MoU with AIIB to invest in Africa. Also the European Investment Fund and the Silk Road Fund agreed to create the China-EU Co-Investment Fund to further develop synergies between BRI and the Investment Plan for Europe, the so-called Juncker Plan, since BRI focused also the cooperation between China and European developed countries. Chinese government considers economic growth sustainability to be a key factor in BRI. Two key vectors are at scope: the financial sustainability and climate sustainability, and Chinese government is each time more close to the principles of UN SDO of the Agenda 2030. Chinese government recognised IMF concerns that infrastructure investments can lead to problematic growth if they are not well managed or if they are not really essential for the development of those projects which receive them. To prevent this threat, the Chinese Government Minister of Finance issued the guidelines for the concession of loans under BRI projects the “Debt Sustainability Framework for Participating Countries of the Belt and Road Initiative” policy. The procedures for debt sustainability analysis are very similar to the ones practised by the World Bank and include the following steps: debt coverage; macroeconomic projections; realistic scenario; debt rating and repayment capacity; stress texts; risk signs; judgement on use; final risk rating; and a debt sustainability analysis report. IMF and China signed an agreement to cooperate in the implementation of these criteria and for acting as a consulting office on the preparation of the projects. President Xi Jinping also announced during 2nd Belt and Road Forum its vision and intentions that BRI should pursue green and clean cooperation, launching green infrastructures projects, making green investments, providing green financing and promoting green development, and he also announced zero tolerance for corruption on these projects implementation.

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Lagarde, C. (2019). Speech at Belt and Road Forum Para International Cooperation, C:\Users\Utilizador\Documents\B&RI 2.0_Stronger Frameworks in the New Phase of Belt and Road.html. Li, Keqiang. (2015a). 17th China-EU Leaders Meeting, Brussels. http://trade. ec.europa.eu/doclib/press/index.cfm?id=1339. Li, Keqiang. (2015b). A New Blue Print for Global Growth, Summer World Forum, Dalian 10th http://news.xinhuanet.com/english/201509/11/c_ 134615607.htm09/11/c_134615607.htm. Lin, Y. J. (2011). Demystitying Chinese Economy. New York: Cambridge University Press. OECD. (2017). Economic Survey China. Ohno, K. (2009). “Avoiding the Middle-Income Trap: Renovating Industrial Policy Formulation in Vietnam”, ASEAN Economic Bulletin, 25–43. Pamlin, D. (2017). “Belt and Road Initiative’s ‘New Vision’”, China Daily European Weekly, 24 November, p. 9 http://europe.chinadaily.com.cn/epaper/ 2017-11/24/content_34926967.htm. Sharma, B. K., and Kundu N. D. (2016). China’s One Belt One Road Initiative, Challenges and Prospects. New Delhi: Vij Books India Pvt. Ltd. Sun, Irene (2017). “The Next Factory of the World, How Chinese Investment is Reshaping Africa”, Harvard Business Review Press. Wang, Qishan (2019). Upholding Peace and Cooperation and Building a Community with a Shared Future of Mankind, Speech at 8th World Peace Forum. http://www.xinhuanet.com/english/2019-07/08/c_138209779.htm. Xi, Jinping (2013a). “Promote People-to-People Friendship and Create a Better Future” at Kazakhstan’s. Xi, Jinping (2013b). Speech at the Indonesian Parliament. https://reconasiaproduction.s3.amazonaws.com/media/filer_public/88/fe/88fe8107-15d74b4c-8a590feb13c213e1/speech_by_chinese_president_xi_jinping_to_ indonesian_parliament.pdf. Xi, Jinping (2017a). Keynote Speech at the World Economic Forum, CGTN. https://america.cgtn.com/2017/01/17/full-text-of-xi-jinping-keynote-atthe-world-economic-forum. Xi, Jinping (2017b). Speech at the Belt and Road Forum for International Cooperation. http://www.xinhuanet.com/english/2017-05/14/c_ 136282982.htm. Yang, Y., & Zhang, Q. (2018). A Review of Direct Investment Between China and ASEAN Countries, 3rd International Symposium on Asian B&R Conference on International Business Cooperation (ISBCD 2018) (pp. 46–51). Atlantis Press.

CHAPTER 8

Environmental Considerations of the Belt and Road Initiative Richard Hardiman

Introduction In October 2013, Chinese President Xi Jinping introduced the twentyfirst-century Maritime Silk Road and the Silk Road Economic Belt as a ‘jointly built’ mega-project whilst calling for its acceleration to ‘connect Asian, European and African countries more closely and promote mutually beneficial cooperation to a new high level and in new forms’ where, in addition to infrastructure development, would also include the establishment of a free trade regime and the creation of new industrial parks (NDRC 2015). As the concept of the Belt and Road Initiative (BRI) developed, the Chinese government pronounced six main economic corridors crossing

R. Hardiman (B) NOVA School of Business and Economics, Carcavelos, Portugal e-mail: [email protected] Hebrew University of Jerusalem, Jerusalem, Israel © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_8

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Europe and Asia and, in addition, secondary corridors have been proposed together with maritime links, punctuated by ports and accompanying maritime and land transport networks. The BRI is undoubtedly the most ambitious project of the twenty-first century. As of March 2019, less than six years since BRI was launched, China has signed 173 cooperation agreements with 125 countries and 29 international organisations (China Daily, April 2019). Whilst the speed of development of the initiative has to be admired, there is serious concern as to the quality and depth of environmental vetting that has taken place prior to signature of these agreements and of the BRI economic corridors as a whole (Table 8.1). These corridors will provide a concentrate of infrastructure along economic zones comprising roads, railways, bridges, seaports, airports, dams, power stations, transmission lines, and oil and gas pipelines, accentuated by nodal points with the formation of new and expanded cities, towns and industries and an added demand for water, power, housing and urban infrastructure. Construction of these infrastructure projects will require iron, steel, cement, timber and other resources necessitating establishment of primary industries to produce these raw materials. These, in turn, will demand energy and hence construction of power stations and other energy sources. The construction of these facilities and the passage of the economic corridors will have both direct and indirect, positive and negative, impact upon the environment affecting greenhouse gas emissions, oceanic and continental flora, fauna and biodiversity, having local, regional and global environmental impact (Figs. 8.1 and 8.2). Some of these environmental concerns were addressed in a policy document issued by the Chinese government: Vision and Actions on Jointly Building the Silk Road Economic Belt and 21st-Century Maritime Silk Road (Ministry of Foreign Affairs, China 2015) in which it is stated ‘we should promote ecological progress in conducting investment and trade, increase cooperation in conserving eco-environment, protecting biodiversity, and tackling climate change, and join hands to make the Silk Road an environment-friendly one’. Since this statement, greening of the BRI has become a significant subtheme that seeks to propel China as a global leader in environmentally sustainable development. At the first Belt and Road Forum for International Cooperation, May 2017, President Xi Jinping said ‘we should pursue the new vision of green development and a way of life and work that is green, low-carbon, circular and sustainable. Efforts should be made to strengthen cooperation in ecological and environmental protection and

China-Mongolia-Russia Economic Corridor (CMREC)

Mongolia Russia

Belarus Czech Republic Kazakhstan Poland Russia Germany

Cambodia Laos Malaysia Myanmar Thailand Vietnam

Kyrgyzstan Tajikistan Turkey Turkmenistan Uzbekistan

China-Indochina Peninsula Economic Corridor (CIPEC)

Iran Kazakhstan

China-Central Asia-West Asia Economic Corridor (CCWAEC) Pakistan

China-Pakistan Economic Corridor (CPEC)

Countries included in the six main economic corridors of the BRI

New Eurasian Land Bridge (NELB)

Table 8.1

Myanmar

Bangladesh India

Bangladesh-China-IndiaMyanmar Economic Corridor (BCIMEC) 8 ENVIRONMENTAL CONSIDERATIONS …

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Miscellaneous, 12%

Coal, 12%

Manufacturing, 13% Hydro, 22% Ports and other, 8%

Other Energy Sources, 7%

Roads, 7% Rail infrastructure, 19%

Fig. 8.1 Types of BRI infrastructure projects (Source Greening the Belt and Road Initiative report, WWF-HSBC [2018, p. 8])

Fig. 8.2 BRI infrastructure heat map (Source Greening the Belt and Road Initiative report, WWF-HSBC [2018, p. 14])

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promote ecological civilization so as to realize the goals set by the 2030 Agenda for Sustainable Development’ (CCICED 2018, pp. 7–10). An official guideline on how to execute these BRI visions was released shortly before the first forum, entitled ‘Building the Belt and Road’ (Office of the Leading Group for the Belt and Road Initiative, China 2017), and indicates that China sees itself as having a moral obligation to share its ‘experience and practice in ecological civilization and green development’ with other growing economies and ‘that BRI projects will adhere to the laws and standards of the host countries regarding environmental protection’. However, many of the less advanced countries through which the BRI economic corridors will be passing do not have the experience or capacity to evaluate environmental impacts caused by infrastructures constructed under the BRI (Sims Gallagher and Qi 2018). More important, as will be seen from some of the case studies cited, the environmental and social impact of specific projects are financed by parties and are taken up by governments, both of which have a vested interest that projects go ahead and thereby implying an inherent bias in these evaluations. Due concern has arisen as to the environmental impact of the BRI and international organisations, some BRI countries and NGOs have proactively sought to engage with China on this matter. In response, President Xi Jinping launched an International Coalition for Green Development on the Belt and Road involving UN Environment and the Chinese Ministry of Ecology and Environment with the goal of improving the capacity of BRI countries on environment governance (Chaisse and Górski 2018, p. 608). The mandate of this platform is to exchange ideas, policies and practices and help steer infrastructure investments towards a more environmentally sustainable approach, thereby allowing BRI partner countries to exercise due diligence in evaluating social and environmental impacts of infrastructure projects. The mandate includes platforms for policy dialogue, communication, green technology exchange and knowledge and information. It is anticipated that there will be a series of thematic partnerships made up of coalition partners, concerning: • • • • • •

Biodiversity and ecosystem management, Green energy and energy efficiency, Green finance and investment, Improvement of environmental quality and green cities, South-South environmental cooperation and SDG capacity building, Green technology innovation and corporate social responsibility,

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• Environmental information sharing and big data, • Sustainable transportation, • Global climate governance and green transformation. This coalition, however, has no mechanism to ensure that its recommendations will be accepted by recipient countries of projects or that banks and companies undertaking the projects will be committed to these recommendations. Banks, construction companies and recipient nations of loans and infrastructure projects are independent of such recommendations and only pressure through corporate environmental and civil society groups can environmental sustainability be enhanced. In order to give some assurance that environmental and social principles will be adhered to in the financing of BRI projects, a series of green policies for its infrastructure development has been developed and promoted in the Chinese Belt and Road Portal: ‘Guidance on Promoting Green Belt and Road’ (Belt and Road Portal 2017). These are based upon the Chinese principle of an ‘ecological civilisation’ promoting environmental sustainability. Moreover, in December 2016, 19 global Chinese companies in energy, transportation, manufacturing and environment jointly launched an Initiative on Corporate Environmental Responsibility Fulfilment for Building the Green Belt and Road. These companies declared to observe environmental laws, reinforce environmental management and contribute to a Green Belt and Road in overseas investment and international production. However, there is no specific mention of Environmental Impact Assessments (EIAs) or Strategic Environmental Assessments (SEAs) or, more specifically, how the BRI will be committed to address environmental safeguards and ensure sustainability to prevent or mitigate new risks emerging from large infrastructure projects (Simonov 2016). The question therefore arises whether the BRI will be a macrocosm of China’s own infrastructure development that has taken place during its industrial revolution over the past thirty years resulting in disastrous environmental consequences, or it will be a result of ‘lessons learnt’ infusing new solutions and new technologies to old questions of environmental sustainability. Internally, China can deal with environmental issues in its own manner due to its de facto sovereignty; however, on the international arena this is less acceptable with environmental and social watchdogs increasingly vigilant regarding such projects.

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Energy projects have been central to the BRI since its inception and accounts for about 44% of BRI construction, followed by transport at 30% (Joy-Pérez and Scissors 2018, p. 2). Most of these energy projects will be focused along the economic corridors and particularly at nodal points where there will be increased infrastructure: towns, industries and market development. Whilst the requirement and demand for energy are an essential part of development, particularly of backward regions, coal power plants are inconsistent with the climate goals of the Paris Climate Agreement to which China is committed. In its seventh year, the BRI, or more specifically the Chinese government, finds itself under a heightened pressure to address emission implications of its energy projects. In 2018, over 40% of the BRI lending for the power sector was still in coal projects. Some recipient countries are beginning to voice concern over Chinese coal projects for their impact on the local environment as well as the potential of crowding out lower-carbon power generation alternatives in the future. In Kenya, the construction of a Chinese financed coal power plant was halted as per judicial order issued in September 2018 amid local environmental activists warning the environmental and public health effects of burning coal (Nakano 2019). In December 2018, Pakistan decided to suspend a 1300-megawatt coal project that had been planned under the auspices of the China-Pakistan Economic Corridor. The Pakistani government had determined that ‘surplus generation capacity had already been contracted and that more contracts would lead the country to a capacity trap’.

How Green Are the Banks? China, as the main protagonist of the BRI will undertake many of the projects through loans provided to recipient countries from Chinese government banks and private investment. Transparency, environmental and social safeguard policies and risk assessment of the banks are therefore essential. In accord with China’s State Council, it is estimated that by 2049, the BRI will have consumed investment to the sum of $8 trillion. So far, available data show that even the $1 trillion investment promise has yet to be achieved and it will probably take another 6–7 years to reach that milestone (Hillman 2018, p. 5). Regardless the actual amount, a large part of this sum will be met from government funding, national and multilateral and banks. A key to the environmental sustainability of the BRI will therefore be the policies set by these banks.

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The multilateral banks such as the Asian Development Bank and the World Bank have a long track record of placing environmental and social safeguards to ensure that any project funded by them has undergone rigorous vetting and that mitigation measures are put in place to minimalise environmental and social impact. To ensure commitment of other banks involved in the BRI, in April 2019, the Green Finance Committee of the China Society for Finance and Banking and the City of London Corporation’s Green Finance Initiative set seven Green Investment Principles (GIPs) to assert commitment of banks to improve management of environmental and social risks in BRI investments. A total of 27 financial institutions1 signed their commitment to these principles listed below and which include most of the large Chinese state-owned banks that finance the BRI (Lin 2019): 1. Embedding sustainability into corporate governance, 2. Understanding environmental, social and governance risks, 3. Disclosing environmental information, 4. Enhancing communication with stakeholders, 5. Utilising green financial instruments, 6. Adopting green supply chain management, 7. Building capacity through collective action. These principles form a good foundation for mainstreaming environment into BRI projects; however, reality on the ground presents a more complex situation and there is concern whether these guidelines can be met. They will require financing institutions to adhere to these guidelines and recipient nations, often in need of investment, may be willing to ignore environmental concerns in order to allow the project to go ahead. Moreover, enforcement mechanisms will be required to support these guidelines.

1 Agricultural Bank of China, Agricultural Development Bank of China, Al Hilal Bank, Astana International Exchange, Bank of China, Bank of East Asia, China Construction Bank, China Development Bank, China International Contractors Association, China International Capital Corporation, Crédit Agricole-CIB, DBS Bank, Deutsche Bank, Export–Import Bank of China, First Abu Dhabi Bank, Habib Bank of Pakistan, Hong Kong Exchanges and Clearing, Industrial and Commercial Bank of China, Industrial Bank, Khan Bank, Luxembourg Stock Exchange, Mizuho Bank, Natixis Bank, Silk Road Fund, Standard Chartered Bank, Trade and Development Bank of Mongolia and UBS Group.

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Green Bonds One of the key mechanisms to ensure the environmental sustainability of the BRI is through the issuance of green bonds and whereby investors are more willing to fund projects upon the guarantee that the environment, and in particular climate change, will not be impeded. Green bonds are a relatively new banking initiative of the European Investment Bank and the World Bank who are using the green bond market as a mechanism to fund climate change-related projects. It has gained increasing momentum creating a pool of bankable green infrastructure projects that are both environmentally and financially sustainable. It is seen as a part of an overall financing package from different sources, including concessional debt; private debt and equity; government grants and funds raised via capital markets. As of 2018, the market size was around $463 billion and where 58% of allocations were used to finance renewable energy and low-carbon transport (Climate Policy Initiative 2018, p. 2) (Fig. 8.3). Chinese banks have taken up this initiative in a large way, and by the end of Q3 2018, China became the second largest source for green bonds, a market totalling $61 billion. The Chinese banks are also in the process of buying up green bonds from European banks to support domestic and international BRI projects for offshore and onshore wind farms, solar and tidal energy systems, hydropower and low-carbon transportation (rail, tram, metro, bus rapid transit systems, electric vehicles) (Wilson Center, December 2018).

Fig. 8.3 Green bond issuance from BRI countries (by Q3 2018) (Source Green bonds in Climate Bonds Initiative)

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One of the main concerns regarding green bonds and green funding is that the criteria defining ‘green’ differ for Chinese funding sources and for international criteria. For example, China considers retrofitting a coal power plant as eligible for green funds; however, such guidelines are not in line with the expectations of international investors. Currently, green bond listing rules in stock markets are not sufficiently clear (TEG Report 2019, pp. 9–10). A critical next step for green bond issuance in BRI countries is clearer definitions with better standards to ensure that investors can be assured of the greenness of their investment. Greenness of Banks Investing in BRI It is difficult to accurately estimate the financial sources for BRI projects because of its broad expanse and that virtually, every project inside and outside China’s borders is incorporated under the BRI heading. However, using data to the end of 2018 indicates that 86% of investment for the BRI is financed by Chinese banks (Fig. 8.4). Of this 50% is from the four major Chinese state-owned commercial banks, 40% from Multi-lateral Development Banks, 6% Foreign Governments, 5%

Private Chinese Funds, 0.60% Foreign Private Funds, 1.60%

Chinese Corporates and Financial Institutions, 86%

Fig. 8.4 Funding BRI by source using 2016 data (Source ICSB, Standard Bank in partnership with Oxford Economics, April 2018)

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the China Development Bank and 8% from China’s Export and Import Bank (Exim). The remaining 2% is sourced from the Asian Infrastructure and Investment Bank (AIIB), the Silk Road Fund and the New Development Bank (Deloitte Insights 2018b, pp. 6 and 16). The Silk Road Fund, which has signed on to the Green Investment Principles, had made over 90% of its energy investments in fossil fuel projects between 2013 and 2016 Chinese financial institutions invested $5 billion in international coal projects (Nakano 2019). Yet, according to official Chinese estimates in 2017, 58% of Chinese companies operating in BRI countries have never published reports on social responsibility or sustainability (Hameiri and Jones 2018). One of the implications of this statement is that Chinesefunded projects fail to meet environmental and social international standards. Chinese banks and companies significantly lag behind their Western peers in terms of transparency and accountability. Whereas member states of the Organisation of Economic Cooperation and Development (OECD), to which China is not a member, have reporting obligations on the loans, guarantees and insurance to be provided by their export credit agencies or their aid agencies, China has no comparable reporting obligation. Furthermore, the export credit agencies of OECD member countries are bound by agreement to phase out financing of low efficiency, high emission coal-fired power generation technologies (OECD 2015), but China remains unconstrained. Cognisant of the reputational toll from high emission energy financing, the Chinese government highlighted a few initiatives that seem to emphasise its commitment to greening BRI during the 2019 Belt and Road Forum. Nakano (2019) is however cautious of the sincerity of these initiatives (Fig. 8.5). According to Gilbert et al. (2018), about 75% of the US$143 billion in loans from China’s major financing institutions went to fossil energy and transport projects, including US$10 billion for coal plants. Of these, almost all investments in the construction of fossil fuel power were by state-owned enterprises. This observation is complemented by Gallagher (Gallagher et al. 2018, pp. 313–321) who finds that between 2002 and 2018, China provided 20 countries with some $52 billion worth of loans for coal-fuelled power plants. Whilst Chinese financing and exports are not limited only to fossil energy projects, its energy outreach under the BRI has been carbon-intensive. As of 2016, Chinese companies are playing a significant role in the development, construction and financing of some 240 coal-fuelled power plants in 25 of the 65 countries under the BRI programme (Peng et al.

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China Exim Bank, 8%

Big four stateowned banks, 50%

China Development Bank, 40%

Miscellaneous, 2%

Fig. 8.5 Funding BRI by source using 2016 data (Source Financial Times, May 2017)

2017, p. 1). In contrast to most multilateral development banks that have pledged to desist from coal power financing, the Chinese state-owned banks have increased their investment (Chen et al. 2016). Kong and Gallagher (2019) conclude that Chinese banks, or more specifically the China Development Bank and the Export and Import Bank, are actively pursuing a government policy to finance and export coal-fuelled power plants in order to maintain momentum of the industry against the backdrop that China itself is going greener and closing down its own coal-fuelled power stations. Hence, whilst looking after China’s fundamental economic interests at home, it is increasing financing of coal-fuelled power plants overseas. This has profound implications regarding climate change and carbon emissions. Moreover, China offers to some recipient countries unconventional formulae for investments and loans, including low interest loans in exchange for rights to mine and exploit natural resources of the region. In Kazakhstan, long-term leases of land have been provided to Chinese businesses that will profit from opportunities that arise as a result of the economic corridor (Mariani 2013, p. 10) (Fig. 8.6).

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Fig. 8.6 Investments in energy in 56 BRI countries 2014–2017 (Source Gilbert et al. World Resources Institute 2018)

Worse, some of China’s investments into coal-fuelled power plants comprise decommissioned power plants considered too polluting for China’s environmental standards. According to the state-owned contractor Northwestern Third Electric Power Construction Co. Ltd, it has decommissioned two 300 MW units of the Changde Chuangyuan Power Plant in Hunan Province to be reassembled at the Sihanouk Special Economic Zone in Cambodia. As stated on its website, ‘The project is a practical measure to implement the national overcapacity policy and it is also a response to the national “Belt and Road” strategy. It will transform trash to treasure’ (Northwestern Power Company 2018). AIIB The newly created Asian Infrastructure Investment Bank (AIIB), whilst, until now, is not a major source of finance for the BRI, is ‘a new kid on the block’ as far as multilateral banking is concerned and is China’s first flagship bank created outside its own territory. AIIB began operations in 2016 and where China is the main founding member holding 300,000 votes amounting to 26.5% of the total. Its voting capacity gives China effective veto power to any policy decision or project approval, since, according to bank policy, all major decisions will require the support of at least 75% of the votes. It carries the motto ‘Lean, Clean and Green’ and is committed to meeting environmental and social standards

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and implementing the Paris Climate Agreement. The AIIB published an Environmental and Social Framework to ‘prioritise investments promoting greenhouse gas emission neutral and climate-resilient infrastructure including actions for reducing emissions, climate-proofing, and promotion of renewable energy’ (AIIB 2016, pp. 4–6). But behind this rhetoric, the AIIB’s investments are telling a very different story. A review of the bank’s current investment criteria indicates that it has not yet set the standards that were agreed upon in the Paris Climate Agreement (Hirsch et al. 2019, pp. 28–30). In its energy portfolio alone, 57% of finance has backed fossil fuels—more than double the amount invested in renewables (the rest is for energy investments where the fuel sources are not identified) (Geary 2019). The bank justifies this stand in its Report of 2019 indicating that the AIIB ‘avoids’ renewable energy projects giving preference to fossil fuelbased projects above renewable energy projects because they are nonbankable: ‘In countries where access to electricity is a concern—rather than clean energy specifically—a balance needs to be struck between economic and environmental benefits, with a focus on developing a road map toward clean energy, but because renewable energy is a newer sector, it has several challenges to overcome before becoming as “bankable” as conventional power projects’ (AIIB Report 2019, p. 14). The report adds that renewable energy projects are too small and are 3–4 times smaller than fossil fuel plants, attract small players with no clear international track record and therefore of higher risk and cannot meet the energy demand of clients. Therefore, the AIIB insists that in order to include renewable energy projects in its portfolio, it wishes to ‘develop interest from larger investors in Asian renewables. Multilateral organizations, developmental financial institutions and governments could therefore develop or support aggregation tools or platforms. For renewable energy to be the next “bankable” sector in the same way that power is currently perceived, governments and multilaterals must develop best practice risk allocation, documentation and processes that help to attract the private sector’ (AIIB Report 2019, p. 15). This is in contrast to a report by Bloomberg indicating that declining costs of renewable energy systems will gradually become competitive with coal-fuelled power plants (Mathis 2019). This not only emphasises that financing fossil-fuelled energy does not make economic sense, it also indicates that it will be a high-risk investment for any bank.

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A case in hand is the Bangladesh coal power station which is part of the Bangladesh-China-India-Myanmar (BCIM) corridor, whereby the AIIB has built up an $8 billion global lending portfolio of which so far—20% has gone into fossil fuels ($1.6 billion) against 8% for renewables ($660 million) (BIC Europe, July 2019, pp. 3 and 8). Similarly, the AIIB is funding the Bhola diesel and gas plant in Bangladesh which has been heavily criticised from an environmental perspective (Mehdi Hasan et al. 2018). In consideration of the fact that Bangladesh sits at the receiving end of Himalayan glacial melt resulting in floods and devastation as an indirect result of greenhouse gas emissions, use of fossil fuels in Bangladesh should be minimalised. In addition to direct lending, the AIIB also currently channels 15% of its total spending through indirect lending via financial intermediaries such as infrastructure and private equity funds or the IFC Emerging Asia Fund. It used this channel to fund the Summit Power Company in Bangladesh, whose energy portfolio is 100% fossil-fuelled. In considering AIIB’s overall direct and indirect investments of US$405 million for energy in Bangladesh, none have been for renewable energy projects (BIC Europe, December 2018). Whereas the World Bank and Asian Development Banks have clear social and environmental goals and objectives, the AIIB’s focus is primarily on infrastructural development and not on broader issues such as poverty reduction, gender equality and benefitting minority groups. Of course, the AIIB is a new bank and it is anticipated that increasing shareholding of several countries such as the UK 3.11%; France 3.44%; Germany 4.57%; and Australia 3.76% will pressure the AIIB to be more sensitive to environmental impacts and reach higher levels of social and environmental standards and practices on a par with those adopted by more established multilateral banks. This requires a review and amendment of its environmental and social safeguards and increased transparency. The elaboration of the Paris Climate Agreement signed jointly with other multilateral development banks provides a decisive window of opportunity to put things on track.

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Case Studies Box 1: Dushanbe-2 power plant, Tajikistan The Dushanbe-2 power plant is an important source of energy for the capital city of Tajikistan. The country suffered from a lack of electricity for many years and is therefore important for all residents especially during the cold winter months. The power plant current generates 4.2 million kWh/year and changes the quality of life of the population. Dushanbe-2 was constructed by the Chinese company Tebian Apparatus Stoc and is 80% funded by the Export–Import Bank of China. In return, the Chinese company gained access to two gold deposits in the area and the right to use these mines until the loan was repaid (Asia-Plus 2018). There was significant opposition to this project from various government agencies of Tajikistan at the outset and who presented the dangers posed by the construction of the power plant in the centre of Dushanbe city. However, with government and company assurances, the project was approved. Since the operation of the power plant, these concerns are coming to fruition. The power plant is built close to residential areas. It produces coal dust that plague children play areas causing toxic air pollution to both the local population and the neighbouring botanical garden, even though it is said to be fitted with high quality filters and scrubbers to ensure low emissions in the atmosphere (Kalybekova 2014; Public Environmental Organisation 2017, pp. 12–14). Various sources deny the presence of these filters and claim that air pollution still exists. Some sources indicate that the power plant was constructed using second hand equipment from decommissioned power plants in China, although this was denied by the construction company (Idrisova 2018).

BOX 2: Lamu power plant The Lamu coal power plant is part of Kenya’s plan to modernise its electricity supply system and shift away from costly diesel generators that were used ad hoc when power supply failed. The proposed power station, which is strongly supported by the Kenyan government, is a 1050 MW power station generating about 8.0 million MWh/year using a modern and efficient ultra-critical combustion system. The Lamu coal power plant would exceed all of Kenya’s existing emissions from fossil fuel plants with an annual output of approximately 8.8 million tons of carbon dioxide (Perspectives 2018, p. 5).

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Development rights were awarded to a consortium consisting of a Kenyan energy generating company, a private equity firm and Sichuan Electric Power Design and Consulting Company Ltd, a subsidiary of Power Construction Corporation of China. The power plant will be sufficient to power most of Kenya’s needs at a cost of $3 billion and to be operational in 2020. The need for electrical power supply in Kenya is undisputed. However, the environmental, social and economic aspects of the project and lack of considerations for alternative options for power, that was submitted by the project, have been severely criticised as having gross omissions, lacking quality and credibility (Mayoyo 2019). The Kenyan Supreme Court halted the project indicating that it did not adequately consult the public about the initiative and cited insufficient and unclear plans for handling and storing toxic coal ash (Obura 2019). Moreover, the project would be located on the coast of Kenya’s Indian Ocean, 20 km from Lamu Island and its historic Old Town, a UNESCO World Heritage Site. The power station’s emission and seawater cooling systems would therefore pose a significant risk to the region’s delicate marine environment and will harm its two most vital industries: fishing and tourism (Mayoyo 2019).

The overall issue played out in the above two case studies focuses on the fact that inadequate environmental and social impact assessments were carried out. Rather, it would appear that the projects were wantonly planned to go ahead regardless of environmental impact, public opinion or any mitigation measures and most important, alternative scenarios. This is contrary to China’s internal environmental laws and regulations and contrary to the statement of Mr. Xi Jinping that projects external to China would meet high environmental standards (Belt and Road Forum for International Cooperation 2017). In the case of the Lamu power plant, the approval of the project by Kenyan government is contrary to government policy to develop nonfossil fuel energy systems and president Uhuru Kenyatta’s plans to move the country to 100% green energy by 2020 (Daily Nation 2018). Further, the resulting in toxic pollution from coal and ash and carbon emissions would result in a significant health burden upon the country coupled with deaths and air and water pollution in an otherwise pristine environment. If one calculates the economic costs to both health and environment, the real cost of the power plant would be some 60% higher

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than the calculated cost. Hence, the forecasted price of $0.08/kWh would jump to $0.13/kWh and be compatible with a neighbouring the solar PV project operating at $0.12/kWh and the 310 MW Lake Turkana wind farm priced at $0.08/kWh (Nordman 2017). This supports the report by Mathis (2019) that declining renewable energy costs will become competitive with coal-fuelled power plants. In conclusion, the Lamu power plant will become a black elephant with the Kenyan government holding the debt and financial liability. This not only emphasises that a new coal power plant would not make economic sense, but that it will be a high-risk investment for any bank. A fundamental issue here is that in a normal scenario, the costs for any feasibility study considering environmental and social assessment are financed by the project itself and would therefore imply an inherent bias.

Biodiversity and Environment The six economic corridors pass through fragile environmental and ecological landscapes where biodiversity has, until now, been protected as a result of inaccessibility. Moreover, many of these corridors follow, or cross, migration routes of birds and wildlife alike. The opening up of these corridors by rail, road and through the passage of oil and gas pipelines will expose these ecosystems to considerable and additional pressures. In addition, increased accessibility to natural resources such as mineral deposits, water and forests will facilitate exploitation that was previously considered uneconomical. It will also give rise to increased poaching of the plant and animal species such as has been seen over the past decades in Africa and many of which have now become endangered and extinct. The BRI provides a dangerous scenario of opportunism and ecological impact that requires due cautiousness. Few studies have been conducted with regard to the impact of these economic corridors upon the ecology and biodiversity. This is partly because the precise transit route of the proposed corridors is as yet unknown. Hughes (2019) overlaid the anticipated road and rail routes of the economic corridors onto key biodiversity areas and protected areas and determined biodiversity hotspots for 4138 animal and 7371 plant species. She found that many of the endangered species live within 50 km of the forecasted or predicted route of these corridors and that up to 15% of key biodiversity areas were within 1 km of proposed railways, posing a significant risk. Further, she found that in all the proposed corridors,

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infrastructure, and especially mining, was clustered near to the proposed route. Thus, further construction and development of mines along the corridors can be expected. Without detailed information of the route and planned activities along the proposed economic corridors of the BRI, ecological impact cannot be determined and certainly need to be conducted. However, investigation of the ecological impact as a result of increased accessibility along other similar corridors can be indicative of the outcome of the BRI. Examples given here concern the logging in East Siberian forests. China manufactures 39% of global furniture (World Furniture Online 2017). Approximately 17% of its raw timber comes from the vast Siberian forests of oak, larch, birch and pine in Siberia covering 12 million km2 (larger than the Amazon). According to estimates made by the World Wide Fund (WWF), at least 30% of all Russian timber is of illegal origin (WWF 2007). Similarly, Smirnov et al. (2013) noted that at least half of the volume of Mongolian oak exported from the Russian Far East into Northern China was of illegal origin. Most of the illegal logging is a result of private business arrangements between companies and local partners or local governments and is difficult to control by virtue of the remoteness and vastness of the region. Of greater concern is that the illegal logging is facilitated by the Chinese government through the construction of railways and roads. In 2003, China invested US$38 million for railway expansion to Sui Fen He, a border town close to the Siberian forests, and which now has a transportation capacity of 10 million tons freight/year, equivalent to 400 train wagons Russian timber per day. Similarly, China invested US$50.3 million into the railroad system to Man Zhou Li, with a transportation capacity of 11 million tons/year. This, alongside low interest loans, subsidies and tax breaks for establishment of sawmills and furniture manufacturing industries, has facilitated the timber trade, bringing timber and furniture from the Siberian forests to the Chinese markets (Newell and Simeone 2014; EIA 2013, pp. 42–46; Russia Beyond the Headlines 2013). Even though, as far back as 2009 China introduced recommendations for Chinese companies operating abroad, with Guidelines for Sustainable Overseas Forest Resources Management (Government of the People’s Republic of China 2009) and, more recently, the Guidelines for Social Responsibility in Outbound Mining Operations (CCCMC 2018), there is little evidence that these have been followed. Whilst detailed inventories of these forests are

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unavailable, lay estimates for harvestable timber in these forests are set from between 5–20 years (New York Times, July 2019). This situation is repeated on the Chinese/Laos and China/Myanmar borders. Route 13 which is the main road running between the Chinese border and Vientiane is also the main exit route of illegal timber from Laos’ hardwood forests to China. Smirnov (2015) reported high volumes of illegal hardwoods crossing into China many times above allowed quotas. Similarly, in Myanmar the Environmental Investigation Agency documented continued and unabated smuggling of teak wood into China, albeit Myanmar proclaimed overland transport of timber illegal in 2014 (EIA 2019). The above scenario paints severe image of what can be expected if the BRI continues unabated, and it is clear that a systematic Strategic Environmental Assessment and Environmental Impact Assessments along the economic corridors are essential.

Conclusion The reflections in this paper do not paint a very positive outlook towards environmental aspects of the Belt and Road Initiative. The benefits of increased communication facilitated by the BRI cannot be denied and the market opportunities can lead to economic prosperity, reduction of unemployment, increase of industries and a shift away from poverty and stagnation particularly in areas that were previously remote and inaccessible. However, the environmental cost of BRI projects combined with the lack of transparency as afforded by the Chinese government, the banks and the companies carrying out these projects bring a certain concern as to global environmental sustainability and impact upon climate change mandates such as the Paris Climate Agreement. At a time when the world is facing the greatest challenge of the century regarding environment and climate change, the real question is whether the BRI will be a macrocosm of China’s own infrastructure development that has taken place over the past thirty years with disastrous environmental consequences, or it will be a result of ‘lessons learnt’ infusing new solutions and new technologies to ensure environmental sustainability. From the examples cited in this chapter, it would appear that the former would to be the case. However, the BRI has a great potential to become an example of global clean energy, environmental sustainability and protection of biodiversity and ecology. In order to do so, the banks, companies

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and the Chinese government have to be reigned in to comply with international norms on environmental protocols and standards. The complexity of this task is staggering considering the size of the initiative, the geopolitical intricacies, the sovereignty of recipient states and of China and the independence of banks and companies in their own decision-making. It is clear that protocols such as the Green Investment Principles are not respected, and although the International Coalition for Green Development established between UN Environment and Chinese Ministry of Ecology and Environment is a good initiative, it should be recognised that neither body has any authority whatsoever over decisionmaking in the BRI and, at best, can act as a think tank with policy recommendations to the Chinese government. There are many inherent weaknesses in the current approach to projects under the BRI. To date, there has been no Strategic Environmental Assessment conducted on the economic corridors. Moreover, the feasibility studies and the Environmental and Social Impact Assessment for individual projects are financed and carried out by interested parties. Recipient countries, banks and companies all have a vested interest that a specific project goes ahead and therefore independent assessment as to economic, social and environmental factors is subject to an inherent bias. An independent appraisal, particularly of environmental aspects of projects, is therefore essential. If the BRI is to develop in a manner that is ‘green’, it is necessary to establish an independent governing and decision-making organisation that has ‘teeth’ that may approve or otherwise projects included under the BRI. A format for such an organisation could be similar to that of the Water Framework Directive (WFD) of the European commission, involving both EU member states and non-member nations. The essence of the WFD is the sectioning of water bodies into river basins just as the BRI is sectioned into economic corridors. The key to its success is the establishment of independent, multi-faceted, multi-national expert working groups assigned to each economic corridor to provide recommendations to a board for approval of individual projects prior to being undertaken. A Strategic Environmental Assessment of each economic corridor should be considered mandatory before any project goes ahead. China has launched into the BRI at the pace of a hi-speed train signing 173 agreements within 5½ years and has left the world somewhat stunned as how to handle the situation. The EU has indicated ambivalence towards the initiative, less for reason of environmental and climate

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change issues and more for trade, economic and security concerns both within Europe and externally (Mohan 2018). The importance of mainstreaming environment and socio-economic consequences of the initiative into discussions is therefore essential. The overall assessment of the BRI discussed in this chapter is that it could an environmental disaster for the planet, sealing its fate forever. Unless environmental concerns of the BRI are implanted into national thought and G7/G20 agenda and concerted action is taken, then thoughts for a better future can be cancelled.

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Nakano, J., 2019, Greening or Greenwashing the Belt and Road Initiative? CSIS, May: https://www.csis.org/analysis/greening-or-greenwashing-beltand-road-initiative. NDRC (National Development and Reform Commission) of People’s Republic of China, 2015, Vision and Action on Jointly Built Silk Road Economic Belt and 21-st Century Maritime Silk Road. Accessed August 10, 2015: http:// en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html. New York Times, July 2019: https://www.nytimes.com/2019/07/25/world/ europe/russia-china-siberia-logging.html. Newell, J., and Simeone, J., 2014, Russia’s Forests in a Global Economy: How Consumption Drives Environmental Change, Eurasian Geography and Economics, volume 55, pp. 37–70: https://doi.org/10.1080/15387216. 2014.926254. Nordman, E., 2017, Why the Lamu Coal Plant Doesn’t Make Sense. Kenya Has Better Energy Options, May 31, the Conversation, Academic rigour, journalistic flair: https://theconversation.com/why-the-lamu-coal-plantdoesnt-make-sense-kenya-has-better-energy-options-78479. Northwestern Third Electric Power Construction Co. Ltd, 2018, http://www. nwpc3.ceec.net.cn/shownews.asp?Newsid=3371. Obura, D., 2019, Court Stops Construction of Kenya’s Coal Power Plant: Here’s Why, June 28, the Conversation: http://theconversation.com/court-stopsconstruction-of-kenyas-coal-power-plant-heres-why-119550. OECD, 2015, Statement from Participants to the Arrangement on Officially Supported Export Credits, November: https://www.oecd.org/newsroom/ statement-from-participants-to-the-arrangement-on-officially-supportedexport-credits.htm. Office of the Leading Group for the Belt and Road Initiative, 2017, Building the Belt and Road: Concept, Practice and China’s Contribution, May, ISBN 978-7-119-10810-0; © Foreign Languages Press Co. Ltd, Beijing, China, Published by Foreign Languages Press Co. Ltd 24 Baiwanzhuang Road, Beijing 100037, China Distributed by China International Book Trading Corporation 35 Chegongzhuang Xilu, Beijing 100044, China P.O. Box 399, Beijing, China Printed in the People’s Republic of China. Peng, R., Chang, L., and Liwen, Z., 2017, China’s Involvement in CoalFired Power Projects Along the Belt and Road, Geichina.org: http:// www.geichina.org/_upload/file/report/China’s_Involvement_in_Coalfired_ Power_Projects_OBOR_EN.pdf. Perspectives, 2018, The Impacts on the Community of the Proposed Coal Plant in Lamu: Who, If Anyone, Benefits from Burning Fossil Fuels? By DeCOALonize, Issue No. 31, p. 5: https://wedocs.unep.org/bitstream/handle/20.500. 11822/25363/Perspectives31_ImpactCoalPlantLamu_28032018_WEB.pdf? isAllowed=y&sequence=1.

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Public Environmental Organization ‘Little Earth’, 2017, Review of the Coal Sector in Republic of Tajikistan, pp. 12–14: https://bankwatch.org/wpcontent/uploads/2017/12/Tajikistan-coal.pdf. Russia Beyond the Headlines, 2013, Report: China Illegally Logs 80 Percent of Russian Hardwood, October 13. Accessed August 1, 2016: http://rbth.asia/ world/2013/10/13/report_china_illegally_logs_80_per_cent_of_russian_ hardwood_48933.htm. Simonov, E., 2016, Would Ecological Civilization Take the Silk Road? Rivers Without Boundaries, March 27. Retrieved January 31, 2017: http://www. transrivers.org/2016/1650/. Sims Gallagher, K. and Qi, Q., 2018, Policies Governing China’s Overseas Development Finance: Implications for Climate Change, The Center for International Environment & Resource Policy, Climate Policy Lab The Fletcher School Tufts University, Number 016. Sites.tufts.edu: https://sites. tufts.edu/cierp/files/2018/03/CPL_ChinaOverseasDev.pdf. Smirnov, D., 2015, Assessment of Scope of Illegal Logging in Laos and Associated Trans-Boundary Timber Trade, June 2015, WWF: https://wildleaks.org/wpcontent/uploads/2016/07/CarBi-assessment-of-scope2.pdf. Smirnov, Denis, Kabanets, Anatoly, Milakovsky, Brian, Lepeshkin, Evgeny, and Sychikov, Dmitry, 2013, Illegal Logging in the Russian Far East: Global Demand and Taiga Destruction, Moscow: WWF-Russia, April 16: https:// www.worldwildlife.org/publications/illegal-logging-in-the-russian-far-eastglobal-demand-and-taiga-destruction. TEG Report Proposal for an EU Green Bond Standard, 2019, pp. 9– 10: https://ec.europa.eu/info/sites/info/files/business_economy_euro/ banking_and_finance/documents/190618-sustainable-finance-teg-reportgreen-bond-standard_en.pdf. Tiezzi, S., 2015, China Celebrates Paris Climate Change Deal, The Diplomat: https://thediplomat.com/2015/12/china-celebrates-paris-climate-changedeal. Tracy, E. F., Shvarts, E., Simonov, E, and Babenko, M., 2017, China’s New Eurasian Ambitions: The Environmental Risks of the Silk Road Economic Belt, Eurasian Geography and Economics, volume 581, pp. 56–88. Wilson Center, New Security Beat, December 2018: https://www. newsecuritybeat.org/2018/12/bri-greenwash-green-bonds-pushing-climatefriendly-investment/. World Furniture Online, July 2017: https://www.worldfurnitureonline.com/ PDF/press-release/W0_July17_PR.pdf. WRI (World Resources Institute), 2018, Controlling CO2 Emissions in China’s Cement Industry, WRI, Washington, DC: https://www.wri.org/our-work/ top-outcome/controlling-co2-emissions-china%E2%80%99s-cement-industry.

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WWF, 2007, Russia’s Boreal Forests: https://www.google.com/search?q= Russia%E2%80%99s+Boreal+Forests&rlz=1C1SQJL_enIL799IL799&oq= Russia%E2%80%99s+Boreal+Forests&aqs=chrome..69i57j0l5.1508j1j8& sourceid=chrome&ie=UTF-8. WWF-HSBC, 2018, Greening the Belt and Road Initiative: https://www. sustainablefinance.hsbc.com/-/media/gbm/reports/sustainable-financing/ greening-the-belt-and-road-initiative.pdf.

CHAPTER 9

The Chinese Partnerships and “the Belt and Road” Initiative: A Synergetic Affiliation Yichao Li and Mário Barbosa Vicente

Introduction Nothing, not even mountains and oceans, can separate people with shared goals and vision. (志合者, 不以山海为远。 )

China was not the first to propose the concept of partnerships, and it is not only China that is committed to building partnerships. Beginning in the 1990s, different countries began to establish their own partnerships. In January 1992, the United States and Japan issued the Tokyo Declaration on the US-Japan Global Partnership, and the two governments

Y. Li (B) · M. B. Vicente City University of Macau, Macau, People’s Republic of China e-mail: [email protected]

© The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_9

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resolved to join in a global partnership.1 In January 1994, the United States and Russia signed the Moscow Declaration and announced that the relationship between the two countries had entered a new stage of mature strategic partnership.2 In 1997, India and Russia announced the establishment of a strategic partnership and the Declaration on Strategic Partnership was signed in October 2000.3 Therefore, it can be said that the establishment of partnerships is a new trend in the reconfiguration of international relations after the end of the Cold War. However, there are some differences between how China and the West understand partnerships. David Shambaugh (2000, pp. 97–115) stated that “A true strategic partnership should be characterized by an essential similarity of world-view, strategic interests, political systems, and institutionalized intelligence-sharing and military relations.” In the words of Sean Kay (2000, pp. 15–24), “A strategic partnership can be understood as a tool used by a powerful state, or states, to maximize political, economic, and military dominance in the international system.” From these definitions, partnership is understood in terms of an alliance and there must be some similarities between the countries that have established partnerships. Influenced by thinking on Chinese traditional culture, when China establishes state relations with other countries, “relationality” has a certain guiding significance (Qin 2009, p. 69). The partnerships proposed by China are more intimate, advocating equality, mutual benefit, and mutual respect. China pursues a non-aligned foreign policy. On 1 September 1982, Deng Xiaoping pointed out in the opening speech of the 12th National Congress of CPC: “We are unswervingly implementing the policy of ‘open to the outside world’ and actively expanding foreign exchanges on the basis of equality and mutual benefit.”4 This policy provided a solid theoretical foundation for the “Go global” strategy. On 24 December 1997, when meeting with representatives of the National Foreign Investment Conference, Jiang Zemin pointed out: “‘Bring in’ and ‘Go global’ strategies are two aspects of our close and mutual promotion of the basic national

1 The Tokyo Declaration on the US-Japan Global Partnership. (1992). US Depart-

ment of State Dispatch, 3 (20 January 1992), pp. 44–45. Retrieved on 16 August 2019, from https://heinonline.org/HOL/Page?handle=hein.journals/dsptch5&div=51& g_sent=1&casa_token=&collection=journals. 2 Clinton, W. J. (14 January 1994). The Public Papers of the Presidents of the United States, p. 74. Retrieved on 16 August 2019, from https://quod.lib.umich.edu/p/ ppotpus/4733149.1994.001?rgn=main;view=fulltext. 3 Nadkarni, V. (2010). Strategic Partnerships in Asia: Balancing Without Alliances, Taylor & Francis e-Library, pp. 87–89. 4 Selected Works of Deng Xiaoping (Vol. 3). (1993). People’s Publishing House, p. 3.

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policy of ‘opening to the outside world’. They are indispensable.”5 Later, under the leadership of a new generation led by President Hu Jintao, China accelerated the pace of implementing the Go global strategy. When dealing with relations with other countries, China chooses “companionship.” At the 22nd APEC Economic Leaders’ Meeting on 11 November 2014, President Xi Jinping pointed out that “partnership means pitching in for common goals and big initiatives.”6 After two weeks on 29 November 2014, President Xi Jinping pointed out in the Central Foreign Affairs Working Conference that “we should make friends and form a global partnership network on the premise of adhering to the principle of non-alignment.”7 A month later on 24 December 2014, at the opening ceremony of the International Situation and China Diplomacy Seminar, Foreign Minister Wang Yi said that the core of Chinese partnership is a new path of companionship without alliance, which is characterized by equality, peace, and inclusiveness.8 Su Changhe summed up the difference between companionship and alignments follows: “Allied alliances are the old international relations thinking of ‘finding the enemy’, and companionship is the new international relationship thinking of ‘making friends’.”9 Men Honghua (2015, pp. 68–69) defines partnership as: “An independent international cooperation relationship between countries based on common interests and through joint actions to achieve common goals.” So the partnership that China advocates is neither a military alliance nor a hostile relationship. It is more about emphasizing mutual respect, mutual benefit, and harmonious development, which together produces a winwin situation. As China’s national top-level cooperation initiative, the Belt and Road Initiative (BRI) has received responses from many countries since it was

5 Retrieved on 24 August 2019, from http://history.mofcom.gov.cn/?datum=实施引进 来和走出去相结合的开放战略. 6 Retrieved on 16 August 2019, from https://www.fmprc.gov.cn/web/gjhdq_676201/ gjhdqzz_681964/lhg_682278/zyjh_682288/t1209597.shtml. 7 Retrieved on 16 August 2019, from http://www.xinhuanet.com//politics/2014-11/ 29/c_1113457723.htm. 8 Retrieved on 16 August 2019, from https://www.fmprc.gov.cn/web/wjbzhd/ t1222370.shtml. 9 Retrieved on 16 August 2019, from http://www.gov.cn/xinwen/2014-12/23/ content_2795587.htm.

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launched in 2013. Under the BRI framework, different countries continue to expand cooperation areas and fields and to try out and explore new modes of cooperation to enrich, develop, and improve the BRI. But its original intention and principle are unchanged. The BRI is an open and inclusive regional cooperation initiative that is not exclusive. It is a platform for pragmatic cooperation, with equal and peaceful characteristics, rather than China’s geopolitical tool. It is a joint development initiative that involves extensive consultation, joint efforts, shared and mutual benefits, not China’s unilateral foreign aid program. It interfaces and complements existing mechanisms; it does not act as a substitute. It is a bridge to promote cultural exchanges, not a trigger for civilized conflicts.10 From the connotations of BRI, it is not difficult to find that this initiative is characterized by openness, tolerance, civilization, harmony, equality, and pragmatism. These characteristics are similar to China’s goals to develop its own partnerships with other countries. The development of BRI is mainly based on policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds. The Chinese partnerships can also play an important role in the following aspects: (1) political coordination; (2) economic cooperation; (3) mutual support in security; and (4) cultural mutual understanding (Men and Liu 2015, pp. 71–72). Security interests are paramount to any country. Through the establishment of partnerships, states can strengthen high-level communication and coordination in relation to bilateral relations, jointly safeguard mutual common interests, and create a good political environment. In turn, this can strengthen economic cooperation, promote bilateral trade and investment cooperation, and enhance the flows pertaining to energy, information and finance, and so on. Along with the continuous expansion of bilateral cooperation, enhancing cultural exchanges and mutual recognition, partner states will have a positive impact on bilateral relations. The characteristics and functions of BRI and Chinese partnerships are closely related, mutually reinforcing the development of close relationships. This chapter first discusses the establishment and development of Chinese partnerships and the cooperation between other countries with China in the relevant areas of the BRI. It then analyzes the establishment and development of Chinese partnerships before and after the implementation of BRI projects, how the situation has changed especially after the 10 Retrieved on 16 August 2019, from http://theory.people.com.cn/n1/2018/0226/ c40531-29834263.html.

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BRI was put forward, and it looks at the interactions and contributions arising from Chinese partnerships and the BRI.

Building and Developing Chinese Partnerships In 1993, the strategic partnership between China and Brazil was the starting point for China to establish partnerships with other countries. According to the authors’ research and statistics obtained from the relevant public documents on the official Chinese Ministry of Foreign Affairs Website, as of 31 July 2019, China has established different kinds of partnerships with one hundred and two countries in the world.11 These cover a wide range of areas and are spread across six continents and most countries around China. In the last twenty years of development, China has constantly upgraded or deepened its own partnerships (see Table 9.1). Information on the establishment of partnerships is obtained from the official Chinese Ministry of Foreign Affairs Website, joint statements, and joint communiques issued by the countries concerned, including public expressions in the media about the intention to develop the partnership. According to Table 9.1, the establishment, upgrading, or deepening of Chinese partnerships mainly occurred when: (1) there was a change of government or an exchange of visits between the heads of state; (2) diplomatic relations were established between China and the country in question, such as on a particular anniversary; and (3) international multilateral meetings were held. Since entering the twenty-first century, the development of friendly relations between China and the rest of the world has entered a new stage of maturity, with a view to long-term stability, cooperation more than conflict (Yu et al. 1998, p. 345). After 2000, China’s process of building partnerships has gradually accelerated. In 2014, within the short two-year period after the 18th National Congress of CPC, President Xi Jinping and Premier Li Keqiang made seventeen foreign visits and traveled to more than fifty countries on five continents. In

11 All partnerships listed in this article are limited to countries. But China also has partnerships with many international organizations such as ASEAN (1997), EU (1998), Arab League (2004), AU (2006), and CELAC (2014).

2007 2008 2009 2010

2006

2005

Brazil Russia

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Pakistan, Philippines France Britain, South Korea, Japan, Turkmenistan Egypt Turkey, South Africa, Laos Venezuela, Ukraine Kyrgyzstan Mongolia, Mexico, Ethiopia Italy, Germany, Poland, Romania, Chile, Hungary, Argentina, Algeria, Malaysia Spain, Portugal, Croatia, Canada, India, Jamaica, Kazakhstan, Sri Lanka, Nigeria, Bangladesh, Indonesia, Uzbekistan Cambodia, Greece, Bulgaria, Afghanistan, Fiji, New Zealand Tajikistan Saudi Arabia, Peru, Denmark, Vietnam Serbia, Nepal Angola

Partnerships

Year

1 4 2 1

6

12

1 1 0 2 1 4 1 3 2 1 3 9

No.

Kyrgyzstan, Turkmenistan, Philippines South Korea, Japan, India Brazil, Laos, Spain South Africa, Cambodia, Germany, Turkey, India, Uzbekistan, Bangladesh, Russia, France, Italy, Greece, Ukraine, Afghanistan

India, Laos, South Africa, Egypt, Algeria

Pakistan, Philippines

South Korea, Pakistan France, England, South Africa

Russia

Russia

Deepened/upgraded partnerships

3 3 3 13

5

2

0 0 0 1 0 0 0 0 1 0 2 3

No.

Table 9.1 List of countries that have established partnerships and countries with deepened or upgraded partnerships with China

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Myanmar

Thailand, UAE, Ireland

Republic of Congo, Tanzania, Belarus, Australia, Brunei, Kenya

Belgium, Maldives, Netherlands, Timor-Leste, Qatar, Papua New Guinea, Tonga, Vanuatu

Sudan, Jordan, Singapore, Iraq, Costa Rica, Ecuador, Equatorial Guinea, Liberia Iran, Czech Republic, Switzerland, Mozambique, Uruguay, Senegal, Morocco, Guinea, Gabon, Sierra Leone Israel, Finland, Djibouti, Madagascar, São Tomé e Príncipe Austria, Bolivia, Kuwait, Namibia, Oman, Zimbabwe Uganda

2011

2012

2013

2014

2015

1 102

6

5

10

8

8

6

3

1

No. Poland, Kazakhstan, Mongolia, Turkmenistan, Indonesia, Germany, Ukraine Uzbekistan, Afghanistan, Brazil, Chile, Russia, Germany Sri Lanka, Peru, Indonesia, Mexico, South Korea, India, Pakistan, Kazakhstan, Tajikistan, Uzbekistan, Kyrgyzstan, Turkmenistan, Vietnam, Thailand, Malaysia, Afghanistan, Russia, Greece, Romania, Ukraine, Serbia Algeria, Bulgaria, Germany, Argentina, Venezuela, Fiji, Mongolia, Australia, Egypt, Brazil, South Korea, India, Tajikistan, Kyrgyzstan, Turkmenistan, Myanmar, Greece, Afghanistan, Russia, France, Hungary, New Zealand Britain, India, Pakistan, Kazakhstan, Indonesia, Mongolia, Russia, Belarus, Malaysia Poland, Uzbekistan, Chile, Peru, Saudi Arabia, Serbia, Ecuador, Bangladesh, Belarus, Greece, Egypt, Republic of Congo, Cambodia, Afghanistan Uzbekistan, Hungary, Russia, Tajikistan, Laos, Ethiopia Kyrgyzstan, UAE, Pakistan, Spain, Portugal, Papua New Guinea, Brunei, Philippines, France Italy, Tajikistan, Kyrgyzstan, UAE, Russia, Bulgaria

Deepened/upgraded partnerships

6

9

6

14

9

22

21

6

7

No.

Source Authors’ compilation of information obtained from the Website of the Ministry of Foreign Affairs of China. Updated to 31 July 2019 https:// www.fmprc.gov.cn/web/

2019 Total

2018

2017

2016

Partnerships

Year

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25 20 15 10 5 0

Countries that have established partnerships with China

Countries that have upgraded/deepened partnerships with China

Fig. 9.1 Growth in the number of countries that have established, upgraded, or deepened partnerships with China (1993–July 2019) (Source By the authors)

total, they met with nearly five hundred foreign heads of state and government.12 Therefore, 2014 was also the most fruitful year for China’s diplomatic achievements. During this year, China officially established partnerships with eight countries and upgraded or deepened its partnerships with twenty-two countries (see Fig. 9.1). So far, China has established different kinds of partnerships with other countries. The words China uses to define its partnerships with other countries are different, and these words express diverse concepts, for example, “strategic,” “comprehensive,” “all-round,” “friendly,” and “innovative.” From an official point of view, China does not distinguish between the levels of these partnerships. However, from the perspective of how these partnerships are named, there are differences in the closeness of the relationships. Generally speaking, the level of a strategic partnership is higher than that of a partnership that is not described as strategic. Different countries have different understandings of the term “strategic” and the emphasis it lays on partnerships. Carlos argues that in Brazil’s foreign policy, “Strategic partnerships are priority political and economic

12 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/ce/cgvienna/chn/ zgbd/t1223840.htm.

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relations, reciprocally compensating, established on the basis of an accumulation of bilateral relations of a universal nature” (Carlos 2010, pp. 115– 131). Giovanni’s (2010) view on the meaning of strategic partnerships is that “Partnerships do not become strategic by virtue of defining them as such … Strategic partnerships are those that both parties regard as essential to achieve their basic goals.” On 6 May 2004, Wen Jiabao, the then Prime Minister of the State Council of China, visited the EU headquarters in Brussels and attended the China-EU Investment and Trade Forum. At the forum, he delivered a speech entitled “Vigorously Promoting Comprehensive Strategic Partnership between China and the European Union.” In his speech, he clearly pointed out the meaning of strategic: “The cooperation between two sides should be long-term and stable. It transcends the differences in ideology and social system and is not subjected to the impacts of individual events that occur from time to time.”13 For China, or any country, to establish a long-term and stable relationship, it is very important to respect each other’s national interests, especially the core interests (national sovereignty and territorial integrity). This is a key factor that determines whether China upgrades or deepens partnerships with other countries (Sun and Ding 2017, p. 57). Medeiros (2009, p. 82) concludes that “For China, a partnership is strategic for two reasons: firstly, it is comprehensive, including all aspects of bilateral relations (e.g., economic, cultural, political, and security); and secondly, both countries agree to make a long-term commitment to bilateral relations, in which bilateral problems are evaluated in that context and, importantly, occasional tensions do not derail them.” As for the other words used to describe Chinese partnerships, of course, they have their own specific meaning. The more adjectives used in superposition, the more specific and special the partnership is. Take the words all-round and comprehensive as an example. The biggest difference between these two words is the difference in the dimensions of the description. Simply put, all-round is 3D, and comprehensive is 2D. At present, among all the partnerships established by China, only three countries (Germany, Belgium, and Singapore) have used the term all-round to describe their partnerships. Compared with the traditional economic, political, cultural, and security fields included in the word comprehensive, an all-round partnership its own particularity. On 28 March 2014, China 13 Retrieved on 17 August 2019, from http://www.chinamission.be/eng/zt/t101949.

htm.

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and Germany established an all-round strategic partnership. Among the features of such a partnership, the regular government consultation mechanism agreed upon by the two countries in 2010 plays a core coordination role. On 9 July 2018, the Chinese and German governments conducted the fifth round of consultations and issued a joint statement. The statement pointed out that the many consensuses reached by the two countries highlight the six characteristics of all-round strategic partnership: leading, openness, innovative, contemporary, strategic, and friendly.14 On 31 March 2014, China and Belgium established an all-round partnership of friendship and cooperation. China fully affirms the location advantage of Brussels as the operational headquarters of the EU and Belgium as the “heart” of the European economy.15 In November 2015, China and Singapore established an all-round cooperative partnership progressing with the times. Singapore has formed many economic and trade cooperation mechanisms and carried out cooperation projects with Chinese local governments. In regional and international communication and cooperation, Singapore became a country coordinator for ASEAN relations with China in 2015.16 At the same time, with the development and progress of the times, some buzzwords that have emerged in recent years have been used to describe partnerships, words such as innovative and new-type. In March 2017, China and Israel established an innovative comprehensive partnership and decided to continue to carry out innovative cooperation under the China-Israel Joint Commission on Innovation and Cooperation.17 In April 2017, China and Finland established a future-oriented new-type cooperative partnership to further deepen cooperation in a wide range of areas, including a circular economy, sustainable energy development and utilization, and green ecological smart city construction.18 These are all changes reflecting the progress of the times. 14 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1576464.shtml. 15 Retrieved on 17 August 2019, from http://www.gov.cn/xinwen/2014-04/01/ content_2651259.htm. 16 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1613229.shtml. 17 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1447466.shtml. 18 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1451490.shtml.

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Table 9.2 summarizes different types of partnerships that countries have established with China. Among the types of partnerships, the number of comprehensive strategic partnerships is the largest. Here, we explain the partnerships between China and the United States, Russia and India separately. Sino-US relations are one of the most important bilateral relations in the world today. The relationship between China and the United States can be said to impact the entire world. In 1997, China and the United States issued a joint statement announcing joint efforts to establish a constructive strategic partnership.19 In 2011, the two countries issued another joint statement in Washington, reaffirming their commitment to building a positive, cooperative, and comprehensive Sino-US relationship in the twenty-first century.20 Since 2012, the establishment of a new model of Sino-US relations has remained a clear strategic goal in Chinese diplomatic strategies. While the construction of the partnership between China and the United States is ongoing, their partnership is not included in the table compiled here. The partnership established between China and Russia is a comprehensive strategic partnership of coordination for a new era. This was proposed in the latest joint statement issued during President Xi Jinping’s state visit to Russia in June 2019. The partnership between China and Russia is also the only coordination partnership among all partnerships. In fact, the reference to coordination was put forward as early as 1996 when the two countries jointly issued a statement.21 In 2013, President Xi Jinping said in a speech delivered at the Moscow Institute of International Relations: “Sino-Russian relations are the most important set of bilateral relations in the world, and they are the best group of major country relations. A high-level and strong Sino-Russian relationship is not only in the interests of both China and Russia, but also an important guarantee

19 Retrieved on 17 August 2019, from http://www.people.com.cn/GB/shizheng/ 252/7429/7439/20020209/667272.html. 20 Retrieved on 17 August 2019, from https://www.bbc.com/zhongwen/trad/china/ 2011/01/110120_uschina. 21 Retrieved on 17 August 2019, from http://www.cctv.com/special/903/6/70501. html.

Comprehensive strategic and cooperative relationship (全面战略合 作关系) Strategic reciprocal relationship (战略互惠关系) Closer development partnership (更加紧密的发展伙伴关系) Strategic cooperative partnership (战略合作伙伴关系) Reciprocal strategic partnership (互惠战略伙伴关系)

Global comprehensive strategic partnership in the twenty-first century (面向21世纪全球全面战略伙伴关系) All-round strategic partnership (全方位战略伙伴关系) Comprehensive strategic partnership (全面战略伙伴关系)

Russia

Comprehensive strategic partnership of coordination for a new era (新时代全面战略协作伙伴关系) All-weather strategic partnership of cooperation (全天候战略合作 伙伴关系) Comprehensive strategic cooperative partnership (全面战略合作伙 伴关系)

Japan India South Korea, Brunei, Sri Lanka, Bangladesh, Afghanistan Ireland

Germany South Africa, Algeria, Egypt, Mongolia, Malaysia, UAE, Saudi Arabia, Iran, Kyrgyzstan, Tajikistan, Uzbekistan, Indonesia, Kazakhstan, Greece, Poland, Serbia, Hungary, Portugal, Belarus, Italy, Spain, Denmark, France, New Zealand, Papua New Guinea, Australia, Chile, Peru, Ecuador, Venezuela, Brazil, Argentina, Mexico Philippines

Mozambique, Namibia, Ethiopia, Republic of Congo, Senegal, Sierra Leone, Guinea, Zimbabwe, Myanmar, Cambodia, Vietnam, Laos, Thailand Britain

Pakistan

Countries

List of countries that have established partnerships with China (according to partnership types)

Types of partnerships

Table 9.2

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Jamaica

Note a In the English Version of Joint Statement between the People’s Republic of China and The Democratic Republic of Timor-Leste issued on 14 April 2014, the partnership was named comprehensive partnership of Good-Neighbourly Friendship, Mutual Trust, and Mutual Benefit Source Authors’ compilation of information obtained from the Website of the Ministry of Foreign Affairs of China. Updated to 31 July 2019, https://www.fmprc.gov.cn/web/

Innovative comprehensive partnership (创新全面伙伴关系) Future-oriented new-type cooperative partnership (面向未来的新 型合作伙伴关系) Friendly partnership (友好伙伴关系)

Kenya, Tanzania, Uganda, Gabon, Madagascar, Liberia, Equatorial Guinea, Nepal, Timor-Leste,a Croatia, Netherlands, São Tomé e Príncipe Israel Finland

Maldives, Romania

Singapore

Switzerland Austria Angola, Nigeria, Sudan, Djibouti, Morocco, Kuwait, Iraq, Qatar, Oman, Jordan, Turkmenistan, Czech Republic, Bulgaria, Ukraine, Uruguay, Bolivia, Costa Rica, Canada, Fiji, Vanuatu, Tonga Turkey Belgium

Innovative strategic partnership (创新战略伙伴关系) Friendly strategic partnership (友好战略伙伴关系) Strategic partnership (战略伙伴关系)

Strategic cooperative relationship (战略合作关系) All-round partnership of friendship and cooperation (全方位友好 合作伙伴关系) All-round cooperative partnership progressing with the times (与 时俱进的全方位合作伙伴关系) Comprehensive friendly partnership of cooperation (全面友好合作 伙伴关系) Comprehensive cooperative partnership (全面合作伙伴关系)

Countries

Types of partnerships

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for maintaining international strategic balance and world peace and stability.”22 Over the years, the close high-level exchanges of visits between China and Russia have highlighted the depth and characteristics of the development of bilateral relations. In 2013 and 2014, Russia was the first country President Xi Jinping visited at the beginning of the New Year. Making Russia the priority of China’s diplomacy shows what China considers to be its best partner in foreign affairs.23 The Chinese and Russian heads of state maintain an average of five meetings a year. They jointly plan and maintain the desired direction of bilateral relations, continue to deepen the cooperation between the two countries, and work to improve the global governance system. The partnership between China and Russia is an illustrative example of partnerships between big powers. The two sides both have consensus and differences. Both countries have a solid foundation of mutual trust and the ability to deal with problems rationally. They do not have to use consensus to cover up their differences, nor do they affect consensus through differences. The biggest advancement in this partnership is that both parties can continue to expand their mutual understanding while recognizing and effectively managing differences (Fu 2016, p. 6). The development of the partnership between China and India is also very unusual. In 2005, the two countries issued a joint statement announcing the establishment of a strategic cooperative partnership for peace and prosperity.24 In the 2013 Joint Statement on the Future Development Vision of China-India Strategic Cooperative Partnership, the two countries reaffirmed their determination to promote the development of a strategic cooperative partnership of peace and prosperity between the two countries.25 In 2014, the two countries issued the Joint Statement

22 Retrieved on 17 August 2019, from http://www.gov.cn/ldhd/2013-03/24/ content_2360829.htm. 23 Feng, S. L. (2014). Zhong e keneng wei daguoguanxi tigong xindefanshi (China and Russia May Provide a New Paradigm for Big Power Relations). People’s Tribune. Retrieved on 16 August 2019, from http://theory.people.com.cn/n/2014/0311/ c112851-24601252.html. 24 Retrieved on 17 August 2019, from http://www.gov.cn/gongbao/content/2005/ content_64191.htm. 25 Retrieved on 17 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1092254.shtml.

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on Building a Closer Partnership for Development. Because of the territorial dispute between China and India, the term “strategic” is missing from the description of the partnership from the 2014 Joint Statement and can easily be seen as a sign of a lower level of partnership. However, the original text of this statement clearly stated: “The two sides recognize that the respective development processes of the two countries have promoted each other and decided to achieve complementary advantages and build a closer development partnership. The leaders of the two countries agreed that this closer development partnership should be the core content of the strategic cooperative partnership between the two countries.”26 Our understanding is that there are differences in the process of developing a strategic cooperative partnership between these two countries. The construction of a “closer development partnership” is the development goal that the two sides should pay attention to at this stage, to better maintain and enhance the connotation of strategic cooperative partnership. In summary, from the perspective of the establishment and development of Chinese partnerships, the following points can be drawn. On the one hand, the partnerships established by China aim for a win-win situation resulting in equality and mutual benefit, mutual respect, and seeking common ground while preserving differences. China pursues a nonaligned foreign policy. Compared with alliances, partnerships offer more flexibility for partner countries committed to the relationship. Therefore, the establishment of partnerships is especially valuable for the countries involved. On the other hand, there are also some areas for improvement in the establishment of Chinese partnerships. Each partnership is equal. China hopes to differentiate the level of partnership building by giving different names to different partnerships. However, due to different conceptions in the Chinese language itself, there is no clear standard in the naming of these partnerships. Because the official names of partnerships do not give an accurate indication or explanation, the criteria on which to upgrade or deepen partnerships are not only difficult to define but also conceptually confusing. Different scholars have different understandings of Chinese partnerships. As Jia Qingguo pointed out, “The partnership arrangement is more similar to a vision, indicating that the two countries are committed to becoming partners. However, in actual implementation, 26 Retrieved on 17 August 2019, from http://www3.fmprc.gov.cn/web/ziliao_ 674904/zt_674979/ywzt_675099/2014zt_675101/xcf_675183/zxxx_675185/ t1193043.shtml.

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this will cause problems because the other country is often unclear about what needs to be done to improve bilateral relations.”27 Some scholars believe that partnerships are more of an expression of attitude and that the name of the partnership is inconsistent with the development itself.

Implementation of the Belt and Road Initiative The launch of the BRI in 2013 has aroused widespread concern in the international community, and the evaluation of this initiative by various countries has also been mixed. For China, this is a top-level cooperation initiative officially written into the party constitution during the 19th National Congress of CPC (24 October 2017).28 Since the implementation of the BRI six years ago, it has achieved rich results and has obtained support and recognition from more and more countries. At the end of the 2nd Belt and Road Forum for International Cooperation in 2019, countries reached a broad consensus on high-quality joint construction of BRI. By the end of July 2019, one hundred and thirty-two countries and thirty international organizations had signed one hundred and ninety-four cooperation documents related to the BRI with China (see Table 9.3). Most of the one hundred and ninety-four cooperation documents listed in the official Website of the Belt and Road Initiative are in the form of a memorandum of understanding between two parties. There are also a number of cooperation agreements, “planning BRI” construction documents, and joint statements on the establishment of partnerships among them. In fact, of the one hundred and thirty-two countries that have signed BRI cooperation documents with China, a considerable number of countries have also established partnerships with China. According to the information that we collected, there are eighty-one countries in total (see Table 9.4). Based on the analysis of Table 9.4, the following findings can be drawn. A large number of countries have signed BRI cooperation documents with China and established a partnership with China. All these countries are covering most of the types of partnerships, with the largest number of 27 Retrieved on 18 August 2019, from http://m.cankaoxiaoxi.com/china/20131104/ 296155.shtml. 28 Retrieved on 24 August 2019, from http://cpc.people.com.cn/19th/n1/2017/ 1024/c414305-29606637.html.

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Table 9.3 List of countries that signed cooperation documents related to the BRI with China Africa (40)

Asia (38)

Europe (26)

Oceania (9)

Sudan South Africa Senegal

Ghana Zambia Mozambique

Nigeria Chad Republic of Congo Zimbabwe Algeria Tanzania Burundi Cape Verde

Sierra Leone Cote d’Ivoire Somalia Cameroon South Sudan

Gabon Namibia Mauritania Angola Djibouti

Seychelles Guinea South Korea Mongolia Singapore Timor-Leste Malaysia Myanmar Cambodia Vietnam Laos Brunei Russia Austria Greece Poland Serbia

Ethiopia Kenya Pakistan Sri Lanka Bangladesh Nepal Maldives UAE Kuwait Turkey Qatar Oman Slovakia Albania Croatia Luxembourg Montenegro

Moldova Hungary Portugal Romania Latvia

Czech Republic Bulgaria New Zealand Vanuatu

Estonia Lithuania Niue Fiji

Ukraine Belarus Cook Islands Samoa

Uganda Gambia Lebanon Saudi Arabia Bahrain Iran Iraq Afghanistan Azerbaijan Georgia Armenia

Togo Rwanda Morocco Madagascar Tunisia Libya Egypt Equatorial Guinea Liberia Mali Kyrgyzstan Tajikistan Uzbekistan Thailand Indonesia Philippines Yemen Cyprus Kazakhstan Slovenia Malta Italy The Republic of North Macedonia Bosnia and Herzegovina Tonga Papua New Guinea

Micronesia (Federated States of)

(continued)

countries establishing comprehensive strategic partnerships. Asian countries have developed the most partnerships and signed the most BRI cooperation documents.

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Table 9.3 (continued) South America (8) North America (11)

Total Number

Chile Guyana Costa Rica

Uruguay Venezuela Dominica

Ecuador Peru Barbados

Panama

Grenada

Cuba

El Salvador

Jamaica

The Dominican Republic

Bolivia Suriname Antigua and Barbuda Trinidad and Tobago

132

Note These documents include cooperation agreements, memorandums of understanding, “planning BRI” construction documents, “joint declarations,” or statements of support for the initiative Source https://www.yidaiyilu.gov.cn/xwzx/roll/77298.htm. Updated to 31 July 2019

As discussed earlier, the comprehensive strategic cooperative partnership can be regarded as a higher level of partnership. Before 2013 (when the BRI was announced), China had only established or upgraded to a comprehensive strategic cooperative partnership with five countries: Vietnam (2008), Laos (2009), Cambodia (2010), Myanmar (2011), and Thailand (2012). There were no other partnerships with other countries established at this level. These five countries are China’s neighbors and have close relations with China. This type of partnership is also in line with China’s long-standing foreign policy that “The periphery is the first.”29 However, at present, some African countries have emerged in comprehensive strategic cooperative partnerships: Mozambique (2016), Republic of the Congo (2016), Senegal (2016), Sierra Leone (2016), Guinea (2016), Ethiopia (2017), Zimbabwe (2018), and Namibia (2018), and the time taken to establish or upgrade to this level of partnership is relatively recent compared to the neighboring countries mentioned. All of these countries have signed cooperation documents with China on BRI. Africa has the highest concentration of developing countries, and China has always adhered to its policy of diplomacy in Africa: “true (真), real (实), friendly (亲), and sincere (诚).” China also attaches great importance to the development of relations with African countries. On the other

29 Selected Works of Hu Jintao (Vol. 2). (2016). People’s Publishing House, p. 91.

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Table 9.4 List of countries that have established partnerships with China and signed cooperation documents related to the BRI (N = 81) Types of partnerships

Africa

Comprehensive strategic partnership of coordination for a new era All-weather strategic partnership of cooperation Comprehensive strategic cooperative partnership

Europe

Oceania South America

North America

Russia

Pakistan

Mozambique Namibia Ethiopia Senegal Sierra Leone Guinea Zimbabwe Republic of Congo Comprehensive South Africa strategic Algeria partnership Egypt

Comprehensive strategic and cooperative relationship Strategic cooperative partnership

Friendly strategic partnership Strategic partnership

Asia

Myanmar Cambodia Vietnam Laos Thailand

Mongolia Malaysia UAE Saudi Arabia Iran Kyrgyzstan Tajikistan Uzbekistan Indonesia Kazakhstan Philippines

Greece Poland Serbia Hungary Portugal Belarus Italy

New Zealand Papua New Guinea

Chile Peru Ecuador Venezuela

South Korea Brunei Sri Lanka Bangladesh Afghanistan Austria

Angola Nigeria Sudan Djibouti Morocco

Kuwait Iraq Qatar Oman

Uruguay Bulgaria Fiji Ukraine Vanuatu Bolivia Tonga Czech Republic

Costa Rica

(continued)

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Table 9.4 (continued) Types of partnerships

Africa

Strategic cooperative relationship All-round cooperative partnership progressing with the times Comprehensive friendly partnership of cooperation Comprehensive Kenya cooperative Tanzania partnership Uganda Gabon Madagascar Liberia Equatorial Guinea São Tomé e Príncipe Friendly partnership

Asia

Europe

Oceania South America

North America

Turkey

Singapore

Maldives

Romania

Nepal Croatia Timor-Lestea

Jamaica

Note a In the English Version of Joint Statement between the People’s Republic of China and The Democratic Republic of Timor-Leste issued on 14 April 2014, the partnership was named comprehensive partnership of Good-Neighbourly Friendship, Mutual Trust, and Mutual Benefit Source Compiled from Tables 9.1, 9.2, and 9.3

hand, out of these eight countries, three of them are in the top ten richest countries in natural resources in Africa: Namibia is 2nd, Mozambique 6th, and Guinea 7th.30 Lastly, following President Xi Jinping’s visit to Oceania, China paid attention to the development of relations with small countries. In 2014, President Xi Jinping visited Fiji which is the first time that a Chinese President has paid a state visit to the Pacific Island countries. He also held meetings with other Pacific Island leaders who established diplomatic 30 Retrieved on 25 September 2019, from https://www.legit.ng/1146046-richestafrican-countries-terms-natural-resources.html.

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relations with China to establish strategic partnerships, such as Papua New Guinea, Tonga, and Vanuatu. In 2018, China also upgraded its partnership with Papua New Guinea to a comprehensive strategic partnership. These countries have also signed BRI cooperation documents with China. The establishment of partnerships between China and these South Pacific island countries can be said to be a model for establishing diplomatic relations between big and small countries.

How Chinese Partnerships and BRI Contribute to One Another? In fact, after BRI was put forward in 2013, the pace of development of Chinese partnerships with other countries to establish or upgrade quickened. Based on joint statements, joint news, and joint communiques of the partnerships established or upgraded by China after 2013, there is a corresponding link between Chinese partnerships and the BRI. Three categories of countries can be distinguished: The first category is countries that have established partnerships with China and signed BRI cooperation documents with China. As mentioned above, according to our research on the declaration documents published on the Website of the Ministry of Foreign Affairs, there are eighty-one such countries. Of the joint statements issued by the eighty-one countries on partnerships, only twenty-six countries’ declarations did not cover the BRI. Among these twenty-six countries, the most recent declarations for some countries date from 2013 or before.31 In the joint declaration documents on establishing or upgrading the partnerships between China and the country concerned, links to the BRI were mostly expressed as follows: “support BRI,” “actively or continue to participate in BRI,” and “strengthen or jointly build BRI.” The declarations of some countries fully affirmed the joint successes they achieved since the beginning of the BRI. And some declarations also clearly pointed out that it is necessary

31 The most recent dates that these 26 countries established or upgraded their partnerships with China are as follows: Nigeria (2005), Jamaica (2005), South Africa (2010), Angola (2010), Turkey (2010), Kenya (2013), Tanzania (2013), Thailand (2013), Romania (2013), Ukraine (2013), Algeria (2014), Korea (2014), Fiji (2014), New Zealand (2014), Venezuela (2014), Sudan (2015), Equatorial Guinea (2015), Liberia (2015), Costa Rica (2015), Republic of Congo (2016), Senegal (2016), Sierra Leone (2016), Guinea (2016), Gabon (2016), Peru (2016), and Bolivia (2018).

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to strengthen the docking of their own national strategy onto the BRI. In 2018, the joint statement issued by China and Singapore clearly stated that “The cooperation of BRI is the new focus of China-Singapore relations. The two sides will continue to strengthen cooperation in BRI framework for interconnection cooperation, financial support cooperation, tripartite cooperation, and new key areas of law and justice.”32 The second category is countries that have established partnerships with China but have not yet signed formal BRI cooperation documents. In these countries, after 2013, in a joint statement with China on establishing or upgrading partnerships, some countries have also mentioned the BRI, which is usually expressed in terms such as: “appreciate the BRI,” “willing to participate in the BRI,” “interest in the development of the BRI,” and “wish to explore specific cooperation projects.” In 2018, China and Argentina issued a joint statement clearly stating “Both sides agreed that the BRI will inject momentum into China-Argentina cooperation. And that the China-Argentina comprehensive strategic partnership can be extended to BRI.”33 The third category is countries that have, thus far, signed BRI cooperation documents with China but have not formally established partnerships with it. These countries are mostly small countries located far from China. Compared with other major countries and countries adjacent to China, there is a lack of suitable opportunities, the frequency of meetings between leaders is low, and the process of cooperation between countries is slow. As a result, the development of partnerships has taken a long time, and no formal partnership has been established until now. Take the Republic of North Macedonia (renamed in 2019) in Europe as an example. It issued a joint statement with China on strengthening and promoting friendly relations and cooperation in 2002.34 Five years later, in 2007, the two countries issued another joint statement, but in the statement, they only affirmed that “Further deepening the friendly relations and mutually beneficial cooperation between the two countries is in line with the common aspirations and fundamental interests for people of both 32 Retrieved on 18 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1613229.shtml. 33 Retrieved on 18 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1618164.shtml. 34 Retrieved on 18 August 2019, from http://www.gov.cn/gongbao/content/2002/ content_61520.htm.

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countries.”35 Subsequently, the two countries have not yet jointly issued any statement on the establishment of partnership. As a result, there is no formal partnership between China and the Republic of North Macedonia. So, the development of partnership is still in progress. However, in 2015, a memorandum of understanding was signed between China’s Ministry of Commerce and North Macedonia’s Ministry of Economic Affairs on promoting the construction of the Silk Road Economic Belt under the framework of the China-Macedonia Economic and Trade Mixed Commission.36 It is expected that after more in-depth and pragmatic cooperation between the two countries, the relationship between them will be closer and deeper, reaching the level at which formal partnerships can be established. In general, since the implementation of the BRI, the initiative has become one of the special links connecting the countries concerned. Since 2013, whenever China developed partnerships, most of the areas of cooperation explored have come under the framework of the BRI. We take the Portuguese-speaking countries (PSC) as an example to discuss the development of Chinese partnerships and the cooperation under the BRI (see Table 9.5). From Table 9.5, it can be seen that among the nine PSC, five countries have established partnerships with China and also signed cooperation documents related to the BRI. But Brazil, Cape Verde, Guinea-Bissau, and São Tomé e Príncipe have not yet completed these two steps. Brazil is the first among the PSC to establish a partnership with China (a strategic partnership), a partnership which spans more than twenty years. China and Brazil have cooperated in many fields, and in the course of time, the depth and breadth of cooperation continue to increase. Although the two countries have not signed formal cooperation documents related to the BRI, many areas of cooperation are in line with the core concepts of the BRI. Guinea-Bissau is one of the least developed countries in the world. Due to the lack of political stability, it is difficult to make a headway in the establishment of partnership and cooperation in the context of the BRI. During the 2018 Beijing Summit of the Forum on China-Africa 35 Retrieved on 18 August 2019, from http://aalco-beijing.mfa.gov.cn/web/ziliao_ 674904/1179_674909/t387405.shtml. 36 Retrieved on 18 August 2019, from https://www.yidaiyilu.gov.cn/xwzx/bwdt/ 76972.htm.

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Table 9.5 The situation in Portuguese-speaking countries (PSC) for establishing partnerships with China and signing cooperation documents related to the BRI PSC

PSC that established partnerships with China

PSC that signed BRI cooperation documents with China

Portugal

Comprehensive strategic partnership Comprehensive strategic partnership Comprehensive cooperative partnership Strategic partnership

Signed

Brazil Timor-Leste Angola Cape Verde Equatorial Guinea Guinea-Bissau Mozambique São Tomé e Príncipe

Comprehensive cooperative partnership Comprehensive strategic cooperative partnership Comprehensive cooperative partnership

Signed Signed Signed Signed

Signed

Source Compiled from Tables 9.1, 9.2, and 9.3

Cooperation, China signed a memorandum of understanding on the BRI with Cape Verde. Although it has not yet established a formal partnership with China, it is in the process of developing one. In official reports state: “China and Cape Verde are committed to building strategic cooperative partnerships.”37 China resumed diplomatic relations with São Tomé e Príncipe in 2016. In the official report of the two heads of state meeting in 2017: “China is willing to work with Sao Tome and Principe to jointly push forward friendly and mutually beneficial cooperation in various fields between both countries and the establishment of a comprehensive cooperative partnership featuring equality, mutual trust, and win-win cooperation.”38 This decision was fully reaffirmed when the foreign ministers of the two

37 Retrieved on 20 August 2019, from http://cv.mofcom.gov.cn/article/zxhz/ 201706/20170602597262.shtml. 38 Retrieved on 15 September 2019, from https://www.fmprc.gov.cn/mfa_eng/ wjb_663304/zzjg_663340/fzs_663828/gjlb_663832/3069_664164/3071_664168/ t1454467.shtml.

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countries met the following year.39 Therefore, it can be considered that the two countries established a comprehensive cooperative partnership in 2017. São Tomé e Príncipe has not yet signed cooperation documents related to the BRI, but since the two countries have not resumed diplomatic relations for a long time, it is believed that it will take some time to continue to deepen cooperation in various fields. Looking at the joint statements concerning the establishment of partnerships, the analysis of the three categories and the study case of the PSC, it can be seen that the establishment of partnerships is a dynamic development process which takes time. Combined with the implementation and development of the current BRI, it can be said that there is a positive link between the Chinese partnerships and the BRI. They promote and contribute to each other. From the perspective of the promotion of the Chinese partnerships under the BRI: 1. The partnership network established by China has laid a solid foundation for the implementation of the BRI. At present, the countries that have established partnerships with China have become part of a huge network, covering most of the countries involved in BRI cooperation with China. And by continuously upgrading and deepening partnerships with these countries, this massive network is becoming more and more solid and reliable. Only when both sides are able to reach a basic consensus can both parties establish a partnership. Through the previous analysis, we know that the partnerships established by China also have a hierarchy. We note that among the countries that participate in the BRI, most of the partnerships established by the countries include the word “strategic.” Therefore, the basic consensus that these countries and China can reach is even more profound. Some scholars pointed out that “Fundamentally speaking, the effect of China’s relationship governance with BRI directly determines the success or failure of BRI ” (Yang 2015, p. 16). The governance of state relations between China and these countries is based on partnerships, which undoubtedly illustrates the importance

39 Retrieved on 15 September 2019, from https://www.fmprc.gov.cn/mfa_eng/ wjb_663304/zzjg_663340/fzs_663828/gjlb_663832/3069_664164/3071_664168/ t1526784.shtml.

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of the construction of Chinese partnerships in the context of the BRI. From what we can see, the BRI has received positive responses from more and more countries, especially those countries that have established partnerships with China. On the other hand, the types of partnerships covered are very diverse among these countries. This also means that there are many differences between these countries and China in the emphases, areas, and mechanisms of cooperation. “For the integration of BRI, it is also a problem. In a short period of time, these countries are more inclined to contact with China individually in the context of BRI ” (Chu and Gao 2015, p. 96). 2. Chinese partnerships can promote the formation of the BRI development model and norms. BRI is a bold attempt by China to reconfigure the existing model and order of international cooperation. China’s stance has shifted from a relatively passive position instead of a positive position. At the same time, China is also trying to shape a norm that is beneficial to itself as well as influencing the international community. There are some voices of doubt and criticism around the world in response to this new move by China. However, as mentioned previously, as an initiative that includes the connotations of peace, partnership, and openness, it is fundamental for the BRI to achieve mutual cooperation and win-win outcomes. How can we better accept the initiative that upholds this development concept? This is the meaning of building partnerships. The Modern Chinese Dictionary gives the following definition of “partner”: people who participate in certain organizations or engage in certain activities. Webster’s Dictionary defines “partnership” as “a relationship formed by two or more people working together to accomplish a certain task under a common principle.” Therefore, only when a country is already a partner, can a partnership reach a certain consensus and accept the common principles. Then the development model of the BRI can be more easily accepted by other countries. Take the United States’ and Russia’s views on the BRI as an example. The US attitude toward the BRI is that the negative impact is greater than the positive impact. On the one hand, they affirm that global large-scale investment in infrastructure and interconnection are necessary, and that the Chinese government has played a role in redirecting global attention to this issue, which is commendable. On the other hand, the project under the framework of the BRI is often

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prone to corruption, and there is a serious lack of economic sustainability, regulatory transparency, and effective management. Due to these shortcomings, project construction may threaten sovereignty, export sub-standard norms and practices, and raise concerns over the initiative’s geostrategic implications.40 Russia is generally positive about the BRI and sees it as an opportunity full of controllable risks. “Russians also realize that the BRI is a political project geared to bolster the stature of President Xi Jinping. They are willing to play along, conscious that the Putin-Xi relationship is the key element of the Russo-Chinese partnership.”41 3. Chinese partnerships can better implement and guarantee the smooth progress of the projects in context of the BRI. Guanxi 42 is a special concept in the traditional culture of China. The practice of guanxi is very important, in business, officialdom, and life in general. Similarly, in the process of implementing the BRI, on the basis of a good partnership between the two countries, project cooperation will be smoother. Conversely, if we want to promote project cooperation between the two countries, it would not work if we do not establish, maintain, and operate the relationship between the two countries. Since the BRI was made known, there have been some examples of the suspension of cooperation projects due to differences in relations between the two countries. For instance, China’s investment project in the port city of Colombo was suspended in 2015. It was however restarted one year later. Part of the reason for the suspension was related to the presidential election in Sri Lanka.43

40 Feng, Y. J., Gabuev, A., Haenle, P., Ma, B., and Trenin, D. (8 April 2019). The Belt and Road Initiative: Views from Washington, Moscow, and Beijing. Retrieved on 19 August 2019, from https://carnegietsinghua.org/2019/04/08/belt-and-road-initiativeviews-from-washington-moscow-and-beijing-pub-78774. 41 Ibid., 41. 42 To quote Bucknall 1999, “guanxi”: To get around this, people develop a network

of contacts and personal relationships for whom they do favours and from whom they ask favours in return, see Kevin Barry Bucknall, Chinese Business Etiquette and Culture, Boson Books, 1999, p. 15. 43 Retrieved on 19 August 2019, from http://www.xinhuanet.com/world/2016-03/ 12/c_128794781.htm.

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From the perspective of the promotion of BRI in Chinese partnerships: 1. The BRI can enrich the content of Chinese partnerships. Since the beginning of the twenty-first century, Chinese partnerships with other countries have experienced much development and produced very good results. When developing partnerships with other countries in the future, we can make corresponding adjustments to the establishment or upgrading of partnerships in accordance with the needs of the development of the BRI. At the same time, based on the analysis of the original joint statement on the establishment of partnership, the development of the BRI can also be one of the reasons for promoting or strengthening the development of partnerships. To a certain extent, the initiative has enriched the connotation of Chinese partnerships. In addition, the current Chinese partnerships have not yet fully covered all the countries involved in the BRI. Promoting cooperation between countries under the framework of the BRI can also pave the way for the establishment of Chinese partnerships. Participating countries in the BRI can deepen their understanding of the concept of cooperation and win-win that China advocates as well as increase their understanding of China. At the right time, the establishment of partnerships naturally becomes a matter of course. In the end, it will also be beneficial for China to improve its own partnership network. 2. Make the establishment of partnerships more stable through the integration of the BRI and other national strategies. BRI is based on an open cooperation agreement and welcomes all like-minded countries to join. All parties are also welcome to actively contribute ideas and suggestions. Therefore, since the BRI was put forward, many countries have nurtured the hope to combine their own development strategies with BRI in the process of their participation. This is a good way to ensure the stable development of partnerships between countries. China and Kazakhstan established a comprehensive strategic partnership in 2011. In 2014, Kazakh President Nursultan Nazarbayev stated that the new economic policy of the “Bright Road” was highly compatible with the goal of BRI and the Chinese government fully affirmed it. The two sides are willing to promote the docking of “the Silk Road Economic Belt” onto the “Bright Road” on the

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basis of equality and mutual benefit and to achieve common development and prosperity. The two countries signed the memorandum of understanding on Jointly Promoting the Construction of the Silk Road Economic Belt.44 In 2015, the two countries issued a joint declaration on the new stage of comprehensive strategic partnership. The two sides emphasized that “China’s ‘Silk Road Economic Belt’ and Kazakhstan’s ‘Bright Road’ complement each other. It is conducive to deepening the comprehensive cooperation between the two countries.”45 In 2016, the two sides signed a cooperative plan for the construction of the Silk Road Economic Belt and the Bright Road to further refine and guarantee cooperation.46 In 2018, in the joint statement jointly issued by the two countries, the fruitful results of the BRI were fully affirmed.47 Hence, strengthening the docking of the BRI onto the strategies of partnering countries, which plays a certain role in promoting the stability of the partnership. From the information we gathered, a total of twelve countries promoted their national strategy and BRI docking (see Table 9.6). 3. BRI can be said to be a common denominator in many of Chinese partnerships, and the concepts of cooperation and win-win are implemented at the operational level. According to the five cooperation priorities proposed in BRI, in terms of policy coordination, through high-level visits, regular meetings, and other mechanisms, countries reach consensus and ensure the steady implementation of policies. In terms of facilities connectivity, unimpeded trade, and financial integration, with the guarantee of policies, through the flow of funds, the development of trade is promoted, and a large amount of infrastructure is invested. In terms of people-to-people bonds, promoting cultural communication and strengthening cultural exchanges are measures that can be taken in the areas of tourism and education. In the end, participating partner countries 44 Retrieved on 19 August 2019, from https://www.yidaiyilu.gov.cn/zchj/xzcjd/7651.

htm. 45 Retrieved on 19 August 2019, from https://www.fmprc.gov.cn/web/ziliao_ 674904/1179_674909/t1292568.shtml. 46 Retrieved on 19 August 2019, from https://www.yidaiyilu.gov.cn/zchj/xzcjd/7651.

htm. 47 Retrieved on 19 August 2019, from https://www.fmprc.gov.cn/web/zyxw/ t1566964.shtml.

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Table 9.6 List of countries that practice strategic docking of the BRI onto their national policies Country

Strategic docking

Mongolia Vietnam Cambodia Laos

“Steppe Road” Program & BRI “Two Corridors, One Economic Belt” & BRI “Rectangular Strategy” & BRI The strategy to transform Laos from a landlocked to a land-linked country & BRI Vision of Global Maritime Fulcrum & BRI 2035 National Vision & BRI National Development Strategy for 2018–2040 & BRI National Development Strategy before 2030 & BRI “Bright Road” & BRI The Eurasian Economic Union & BRI Sustainable development plan & BRI “Open to the East” Policy & BRI

Indonesia Kuwait Kyrgyzstan Tajikistan Kazakhstan Russia Poland Hungary

Source Authors’ compilation of information obtained from the Website of the Ministry of Foreign Affairs of China. Updated to 31 July 2019 https://www.fmprc.gov.cn/web/

will reap real benefits such as the growth of employment rate, the improvement of infrastructure level, economic development, and cultural exchanges. These benefits can bring confidence to the continued deep and long-term development of partnerships between countries, enhance mutual understanding and support, and consolidate and deepen the level of bilateral partnership. All in all, there is a positive connection between Chinese partnerships and the BRI, which produces a virtuous circle. The establishment of Chinese partnerships can guarantee the implementation of the BRI, and the BRI can improve the strength of Chinese partnerships.

Conclusion Back to the question that we originally set out to explore, what kind of connection do Chinese partnerships have with the BRI? We contend that they have a synergetic affiliation. In 2017, President Xi Jinping’s speech in Geneva about building a community with a shared future for mankind pointed out that: “China’s determination to build a partnership will not change … China has taken

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the lead in establishing partnerships as the guiding principle for interstate relations … China will further connect the ‘friends circle’ all over the world.”48 The establishment of Chinese partnerships plays an important role in enhancing China’s international image, enhancing the country’s influence, and developing the country’s interests. Since the current international system cannot fully meet the growing development needs of many members of the international community, the proposal and operation of the BRI have become a tool for China to improve the global governance system and accelerate international development. For China, this is a good time to promote win-win cooperation, improve Chinese partnerships with other countries, and provide more opportunities for other countries. China will continue to promote and implement the BRI and work with other countries to promote highquality development and the realization of the BRI. Whether China is committed to building a global partnership network or the implementation of BRI, the BRI is a bold and ambitious plan. The Chinese government has also tried to make some adaptations and adjustments to the problems that have arisen in the development of the BRI in recent years. The government has made many efforts to improve the transparency of the initiative and ensure the openness and reciprocity of the project to enhance mutual trust among participants.49 Despite the partnerships established in China, the hierarchical classification of partnerships is difficult to differentiate because of differences in Chinese conceptions and the Chinese language itself. But no matter what kind of partnership, each partnership is equal, and China should carefully manage and maintain this partnership. It is necessary not only to pay attention to development and cooperation in tangible fields such as politics, economy, and energy, but also to the intangible exchanges of education, culture, and ideas. That is the people-to-people bonds embodied in the BRI. “Either in good times or bad, either on a smooth road or a thorny path, China will uphold the spirit of partnership, keep in mind what brought us together, and march forward without hesitation. For we all believe that our people deserve a better world, and Belt and Road cooperation will make

48 Retrieved on 19 August 2019, from http://www.xinhuanet.com/world/2017-01/ 19/c_1120340081.htm. 49 Ibid., 41.

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the world a better place.”50 The development of China has benefited the international community. China has also contributed to global development. China’s determination to promote common development will not change. At the same time, China needs like-minded partners to realize this concept. Through mutual contribution arising from Chinese partnerships and the BRI, this vision can be realized.

Bibliography Belt and Road Forum. (27 April 2019). Toast by H.E. Xi Jinping President of the People’s Republic of China at the Welcoming Banquet of The Second Belt and Road Forum for International Cooperation. Retrieved on 15 September 2019, from http://www.beltandroadforum.org/english/n100/2019/0429/ c22-1400.html. Carlos, L. A. (2010). Brazil’s Strategic Partnerships: An Assessment of the Lula Era (2003–2010). Revista Brasileira de Political International, No. 53 (Special Edition), pp. 115–131. Chu, Y., and Gao, Y. (2015). China’s Belt and Road Initiatives: Three Questions to Be Answered. International Economic Review, No. 2, p. 96. Clinton, W. J. (14 January 1994). The Public Papers of the Presidents of the United States, p. 74. Retrieved on 16 August 2019, from https://quod.lib.umich. edu/p/ppotpus/4733149.1994.001?rgn=main;view=fulltext. Feng, S. L. (2014). Zhong e keneng wei daguoguanxi tigong xindefanshi (China and Russia May Provide a New Paradigm for Big Power Relations). People’s Tribune. Retrieved on 16 August 2019, from http://theory.people.com.cn/ n/2014/0311/c112851-24601252.html. Feng, Y. J., Gabuev, A., Haenle, P., Ma, B., and Trenin, D. (8 April 2019). The Belt and Road Initiative: Views from Washington, Moscow, and Beijing. Retrieved on 19 August 2019, from https://carnegietsinghua.org/2019/ 04/08/belt-and-road-initiative-views-from-washington-moscow-and-beijingpub-78774. Fu, Y. (2016). Zhong e guanxi: shi mengyou haishi huoban? (Sino-Russian Relations: Is It an Ally or a Partner?). Contemporary International Relations, No. 4, p. 6. Giovanni, G. (2010). Making EU Strategic Partnership Effective. Working Paper, No. 105, December.

50 Belt and Road Forum. (27 April 2019). Toast by H.E. Xi Jinping President of the People’s Republic of China at the Welcoming Banquet of the Second Belt and Road Forum for International Cooperation. Retrieved on 15 September 2019, from http:// www.beltandroadforum.org/english/n100/2019/0429/c22-1400.html.

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Kay, S. (2000). What Is a Strategic Partnership? Problems of Post-Communism, 47:3, pp. 15–24. Medeiros, Evan S. (2009). China’s International Behavior: Activism, Opportunism, and Diversification. RAND Corporation, p. 82. Men, H. H., and Liu, X. Y. (2015). Partnership Strategy of China: Progress, Evaluation and Prospects. World Economics and Politics, No. 2, pp. 68–72. Nadkarni, V. (2010). Strategic Partnerships in Asia: Balancing Without Alliances. Taylor & Francis e-Library, pp. 87–89. Qin, Y. Q. (2009). Relationality and Processual Construction: Bringing Chinese Ideas into International Relations Theory. Social Sciences in China, No. 3, p. 69. Selected Works of Deng Xiaoping (Vol. 3). (1993). People’s Publishing House, p. 3. Selected Works of Hu Jintao (Vol. 2). (2016). People’s Publishing House, p. 91. Shambaugh, D. (2000). Sino-American Strategic Relations: From Partners to Competitors. Survival, 42:1, pp. 97–115. Sun, X. F., and Ding, L. (2017). Explaining the Upgrading of China’s Partnership: Pivot Partners, Broker Partners and Beyond. World Economics and Politics, No. 2, p. 57. The Tokyo Declaration on the US-Japan Global Partnership. (1992). US Department of State Dispatch, 3 (20 January 1992), pp. 44–45. Retrieved on 16 August 2019, from https://heinonline.org/HOL/Page?handle=hein. journals/dsptch5&div=51&g_sent=1&casa_token=&collection=journals. Yang, S. L. (2015). The Management of China’s Relations with Its Neighbours and Its Challenges Under the Initiative of One Belt One Road. South Asian Studies, No. 2, p. 16. Yu, Z. L., et al. (1998). Studies on Great-Powers’ Strategies: U.S., Russia, Japan, European Union, and China in the Future World. Central Compilation & Translation Press, p. 345.

PART II

The Belt and Road Initiative and the European Union

CHAPTER 10

The Belt and Road Initiative: A New Platform in EU-China Cooperation? Carmen Amado Mendes and Lorenzo Gagliano

Introduction “Silk Road Economic Belt and the 21st-Century Maritime Silk Road Initiative”: this is the full name of the Beijing initiative, more commonly referred to as the “Belt and Road Initiative” (BRI), which replaced the original version “One Belt, One Road Initiative” (OBOR) “一带一路”, whose “uniqueness” conveyed in the name itself contrasted with the rhetoric of inclusiveness and flexibility with which the project was presented. In September 2013, Chinese President Xi Jinping proposed a “Silk Road Economic Belt” (SREB) and, one month later, announced the “21st-Century Maritime Silk Road”, referring to the vestiges of the ancient Silk Road dating back to the Han dynasty (206 BC–220 AD), the privileged route for commercial trades between East and West. These two

C. A. Mendes (B) University of Coimbra, Coimbra, Portugal e-mail: [email protected] L. Gagliano Mediterranean Institute for International Studies, Palermo, Italy © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_10

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main branches encompass a number of corridors, six of which are currently in some stage of planning or construction: the China-MongoliaRussia corridor; the New Eurasian Land Bridge; the China-Central Asia-Western Asia Corridor; the China-Pakistan Corridor; the Indochina Peninsula Corridor; and the Bangladesh-China-India-Myanmar Corridor. The Maritime Silk Road connects China’s east coast to ports in Sri Lanka, Pakistan, across the Indian Ocean, through the Red Sea to Greece’s Piraeus, ending in Venice. The overland economic belt connects Venice to Duisburg in Germany, across Moscow, through Central Asia and Western China to finish in Xian, the ancient capital where the historic Silk Road was beginning. For several reasons, the Chinese government treats the SREB and the Maritime Silk Road differently. The implications of the BRI analysed in this chapter focus on the SREB. At the regulatory level, one of the most striking aspects of the BRI is that, unlike other initiatives of regional integration and cooperation that are based on international treaties characterized by well-defined rules, it is regulated on a political basis. Apparently, it is a way to maintain the intention of a flexible, unconditional, open and inclusive cooperation. The National Commission for Reforms and Development, together with the Ministry of Foreign Affairs and the Ministry of Commerce of the People’s Republic of China (PRC) in March 2015, defined five main areas of cooperation1 : intergovernmental political cooperation, infrastructure, trade, financial integration and exchanges of people. Following an inclusive approach, the BRI is implemented within three different levels: in China itself, in developing countries and in developed ones. First, China wants to overcome domestic overcapacity in many industrial sectors through the expansion of foreign markets in order to support its economic development and growth, in the transition from an investment-led model to a consumption-based economy. Beijing also needs to improve the security of trade routes, especially for energy products, while focusing on reinforcing its role as a leader in global governance. Second, the BRI targets developing countries, especially those in Central Asia, which have a great deal of market potential for economic growth but lack infrastructure and funds to implement this. And finally, it has an impact in developed countries, namely in Europe, which have largely enjoyed a surge in trade 1 National Commission for Reforms and Development Ministry of Foreign Affairs and the Ministry of Commerce of the PRC. 2015. “Visions and Action Plan on the Framework Underpinning OBOR”, Beijing.

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volumes with China but are slowed down by economic policies anchored in economic restrictions and institutional barriers. The most ambitious project of the current Chinese leadership led by Xi Jinping attracted considerable attention from the international community since the beginning and won a positive response from the countries involved. The fact that a large number of nations will benefit from this opportunity for growth offers China greater influence in the neighbourhood, also in political terms. Terrestrial corridors, seaways and landings are certainly destined to transform the international panorama and the balance of power, especially in the Asian region. The “boundless” territorial extension of the project causes concerns in other countries, especially those that are not included. The question is if the Belt and Road Initiative is a Chinese strategic tool or geopolitical lever to compete with the Western-led order. This chapter focuses on the European Union (EU), analysing how it can maximize the advantages and minimize the disadvantages of the BRI, and considers if this initiative offers an opportunity to unify interests or positions of European member states and to open up the Chinese system. Europe represents the end point of the Belt and Road Initiative, not only from a traditional imaginative point of view, retracing the historical silk route told by Marco Polo, but also from an economic viewpoint, anchored in today’s commercial performances.

China and the Western-led World Order The idea of a “Chinese dream” of “a moderately prosperous society”2 has been reinforced several times by Xi Jinping during official speeches, to be reached by 2020 through an increase in GDP per capita even with a slowdown in growth—a normal feature of post-industrial economies—and China becoming a provider rather than as recipient of investments.3 Aiming to achieve the “rejuvenation of the Chinese nation”, bringing it back to the centre of the world, the President announced the New Silk Road. 2 Xi Jinping’s speech delivered at the 19th National Congress of the Communist Party of China, October 18, 2017. 3 China’s outbound direct investment (ODI) exceeded inbound foreign direct invest-

ment (FDI) for the first time in 2015. In 2015, Chinese outbound direct investment was 145.67 billion dollars, which was 10.07 billion dollars more than the paid-in foreign investment. Source PRC Ministry of Commerce Website, Regular Press Conference held in August 31, 2017. http://english.mofcom.gov.cn/article/newsrelease/press/201709/ 20170902641629.shtml. Accessed June 3, 2019.

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This project highlights the official will to change the international cooperation system, through a multilevel (bilateral, multilateral and trilateral) and multi-programmatic (integration with other regional, international and national development initiatives) cooperation, more open to the needs of developing countries according to the principles of South-South Cooperation (SSC): resources, technology and know-how are exchanged between developing countries on the basis of mutual benefit (win-win cooperation). This approach moves away from the Western concept of, almost exclusively, one-way welfare aid, from North to South. According to the Office of the Leading Group for the Belt and Road Initiative (OLGBRI): “The initiative is a Chinese program whose goal is to maintain an open world economic system, and achieve diversified, independent, balanced, and sustainable development, and also a Chinese proposal intended to advance regional cooperation, strengthen communications between civilizations, and safeguard world peace and stability”.4 It launches a strong complaint: “the global economic governance system fails to adapt to objective changes, and institutional reform makes slow progress”. In the current system, indeed, the developed economies have now entered a post-industrial phase, but many underdeveloped countries are developing and strongly demand a role that matches their high ambitions of growth. In this view, the interests of China, as the “major developing country”, coincide and are interconnected with those of other countries in the world. Having experienced the risks linked to an exaggeratedly high interconnection with Western countries, once the 2008 financial crisis had occurred, China settled a cooperation agenda with non-Western countries. The BRI is part of that agenda, a project which is open to the participation of all interested parties in various capacities, including national and supranational institutions or private bodies. This highlights that Beijing is well aware that it does not yet have the capacity, on its own, to carry out a project of such dimensions. China’s new devotion to multilateralism and globalization occurs in a period in which the United States (US), traditionally the primary promoter of a globalized world organized on the basis of multilateral institutions, shows willingness to abandon the leadership in global governance to pursue its national interests. On the one hand, the United States’ 45th President, inspired by the philosophy of “America first!”, imposes tariffs 4 OLGBRI. 2017. “Building the Belt and Road: Concept, Practice and China’s Contribution”, Foreign Languages Press, Beijing.

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on the trade of goods, continually delegitimizes the United Nations, withdraws from free trade agreements such as the Paris Climate Agreement and the Trans-Pacific Partnership (TPP) and even threatens the possibility of leaving the North Atlantic Treaty Organization (NATO). On the other hand, during the opening speech at the 2017 World Economic Forum in Davos, President Xi Jinping defended China’s acquired capacity to lead the global economy, supporting free trade market. The document of the OLGBRI states that “China, as the largest developing country and the world’s second largest economy, shoulders its wider responsibilities in promoting international economic governance toward a fair, just and rational system”.5 This new and highly pragmatic approach to foreign policy is characterized by principles such as capitalism with Chinese characteristics, a win-win approach and South-South Cooperation. This allows Beijing to synthesize various needs in a project capable, at least in theory, of bringing benefits at a global level, considerably increasing the centrality of China as an indispensable player in global governance. The BRI involves regional blocs, including the European Union, and has the support of national, international, bilateral and multilateral financial institutions, many of which were conceived as being directly related to the purposes of the BRI. This is the case of the Asian Infrastructure Investment Bank (AIIB), which works as complementary to the traditional institutions created by the Bretton Woods Agreements, as the World Bank. Moreover, the attempts to make the Renminbi (RMB) increasingly internationalized, at least in Asia, and the massive influx of Chinese financial capital into developed economies, also contribute to an increasing political and economic presence in the decision-making arenas. China aims to reform the system from the inside towards a “healthy” globalization,6 without putting itself or its institutions forward as a radical alternative to the traditional one and thus avoiding direct confrontation. Hence, the BRI may have a significant impact on economic growth, not only in those

5 Ibid. 6 Hence, in line with the concept of the new pragmatism advanced by G. W. Kołodko,

a transformation of globalization is desirable. It can be achieved by following a path of higher integration, openness, inclusiveness, to the thrive of more positive effects and to build a better global governance system. Source Kołodko. 2001. “Globalization and Transformation: Illusions and Reality”, TIGER Working Paper Series No. 1. Warsaw, Poland.

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countries crossed by the New Silk Road, but also at the global level: the thrive of more positive effects and to build a better global governance system. The Belt and Road Initiative, if it holds the promise of its objectives, could represent a model towards the road of a new globalization, as the five main areas of cooperation of the BRI fully correspond to the connectivity principles of globalization identified by International the Monetary Fund (IMF): trade and transactions, capital and investments, migration and movement of people, and the dissemination of knowledge.7 However, there are many challenges to be addressed by Beijing, not only in the international political landscape, but also within its own borders. Indeed, it would be naive not to consider that China, despite the huge economic and international leaps and bounds, remains a developing country with many internal social problems, with only one-seventh of GDP per capita of the United States, a capacity to project its military force much lower than that of Washington. Moreover, the public world opinion recognizes its extraordinary performance at the economic level but not its leadership ability to replace the United States as a global hegemonic power. Nevertheless, it is not surprising that Washington has taken measures since the Obama administration to contain the Chinese economic expansionism, up to the present trade war supported by the Trump administration.

The BRI in Sino-European Relations Diplomatic ties between the PRC and the European Community were established in 1975 and suffered the negative effects of the Tiananmen massacre with the establishment of sanctions and an arms embargo on China, which is still in force today. Political relations evolved in the 1990s, including at a high institutional level, with the establishment of the EUChina annual summit. In 2001, the two players considered themselves strategic partners and established a comprehensive strategic partnership in 2003, developing more than 60 mechanisms of consultation and dialogue covering issues such as politics, economics, trade, environment, military, technology and science. On the European Union side, numerous policy papers have been published since 1995, which paved the way for even greater economic cooperation. The EU became China’s first 7 International Monetary Fund. 2000. “Globalization: Threats or Opportunity”, IMF Publications.

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trading partner, while China is the second EU trading partner after the United States, and the most recent EU-China 2020 Strategic Agenda for Cooperation emphasizes bilateral investment.8 As the Chinese interest in Europe expanded geographically and substantially, new trends in investment and trade emerged, highly differentiated across Europe and across sectors, despite the existence of some common patterns. China’s increasingly important role as a global economic player and its attempt to reform its economy to achieve a “new normality”,9 in which economic growth is increasingly based on technology and services, make dialogue and continued cooperation with Beijing a top priority for the EU. Nevertheless, the positive evolution of political and economic relations has been combined with diplomatic frictions on several occasions, namely regarding the European maintenance of the arms embargo and political support of freedom movements in Hong Kong and Tibet. From the economic perspective, the European companies, obliged to render too much of their technology and know-how accessible to their counterparts, face formal and informal barriers in the entry to the Chinese market and the competitive advantage of its companies, which benefit from favourable conditions and incentives provided by the government. The asymmetry of bilateral trade and investment flows, the lack of transparency and poor protection and enforcement of intellectual property rights remain serious issues for both parties’ representatives to resolve.10 The bilateral document signed at the end of the 20th EU-China summit, in June 2018, states the commitment to multilateralism, cooperation on climate change, promotion of international trade and the enhancement of Eurasian connectivity under the umbrella of the Belt

8 This information has been gathered from the European Commission policies, information and services website. http://ec.europa.eu/trade/policy/countries-and-regions/ countries/china/. Accessed June 3, 2019. 9 During the 2014 Asia-Pacific Economic Cooperation (APEC) CEO Summit in Beijing held on November 9, 2014, Chinese President Xi Jinping first used the phrase as “new normal stage of Chinese economy”. Subsequent to this, China’s 13th Five-Year Plan (2016–2020) incorporates the “new normal” in economic development in order to build a moderately prosperous society in all respects by 2020. The most important features of China’s “new normal” are: slower but more sustainable economic growth, marketoriented reforms, services-driven economy and opening up through connectivity. 10 Hanemann. 2018. Rhodium Group and M. Huotari, Mercator Institute for China Studies, “Eu-China Fdi: Working Towards Reciprocity in Investment Relations”, No. 3. May 2018.

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and Road Initiative. According to the European Parliament resolution made on 12 September 2018 on EU-China relations, the EU looks to the Belt and Road Initiative with great interest but at the same time with great attention, reflecting different moods of enthusiasm and scepticism. The New Silk Road could in fact represent an excellent opportunity of development for many European countries but, at the same time, it may create overlaps with Brussels’ planned (infrastructural) policies including the Trans-European Transport Network (TEN-T).11 In September 2015, the European Commission and the Chinese government signed a Memorandum of Understanding (MoU) on the EU-China Connectivity Platform to enhance synergies between China’s BRI and EU’s connectivity initiatives such as the TEN-T. Given the limited progress made in Europe in terms of BRI projects started and completed (especially in comparison with the Asian region), it is difficult to predict exactly the impact of the Beijing Initiative in Europe. Beijing seems to be developing a sort of double parallel negotiation strategy, one with the European institutions and the other with those countries that it considers strategic. This is the case of Eastern European and Mediterranean countries, for example Greece, Hungary, Serbia and Poland, that signed political agreements with Beijing in 2015– 2016. These privileged relations allow China to diversify access gates to continental Europe without being too dependent on politically and economically stronger countries in Europe, such as Germany, Belgium and the Netherlands, where the most important ports for goods traffic are located.12 This is demonstrated by the platform for outward investment called “16+1 mechanism”, an exclusive informal forum between 16 countries of Eastern Europe and China, which has already raised a number

11 The Trans-European Transport Network (TEN-T) is a European Commission policy directed towards the implementation and development of a Europe-wide network of roads, railway lines, inland waterways, maritime shipping routes, ports, airports and rail-road terminals. 12 According to Theo Notteboom, Co-director at the Center for Eurasian Maritime

and Inland Logistics established at the Shanghai Maritime University, the ports of Rotterdam (NL), Antwerp (BE) and Hamburg (DE) were the best-performing commercial ports in 2018. Notteboom. 2019. “PortGraphic: Top 15 Container Ports in Europe in 2018”, PortEconomics. https://www.porteconomics.eu/2019/03/02/ portgraphic-top15-container-ports-in-europe-in-2018/. Accessed June 12, 2019.

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of concerns among the EU institutions.13 Southern European countries perceive Chinese investment as an opportunity to revive some sectors of their economies that have been severely undermined after the 2008 debt economic crisis: Italy, Greece, Malta, Poland and Portugal have already signed a Memorandum of Understanding on the BRI with Beijing. The Port of Piraeus, in Greece, the so-called southern gate of Europe, is one of the most surprising and positive experiences of investment in infrastructure promoted by China in Europe.14 Even in Germany, the city of Duisburg, which had experienced a very slow growth in the past few years due to the financial crisis of 2008, stimulated by the arrival of the China Railway Express (CRE), in 2017 recorded a growth of over 30%; more than 6000 jobs in logistics have been created for the city, resulting in the terminal that grew faster in Germany in that year.15 With its main commercial partners in Europe, the UK, France and Germany, China built privileged economic and commercial relations on a bilateral basis.16 These individual initiatives of member states slow down or obstruct the EU’s intention to reach agreements that are beneficial to all member states. The “divide and rule” logic adopted by Beijing, which can be seen in the different economic conditions at market entry imposed on

13 Grieger, Claros. 2018. “China, the 16+1 Format and the EU”, European Parliamentary Research Service. 14 The China Ocean Shipping (Group) Company (COSCO), a Chinese state-owned shipping and logistics services supplier company, has based a great cargo hub tacking over the management of the Piraeus Port (Greece) in 2016. According to the World Shipping Council (WSC), before the Company came into the Piraeus, the port was listed 93rd in the world ranking of cargo tonnage, and by 2016, it has climbed to the 41st. World Shipping Council. 2019. “Top 50 World Container Ports”. http://www.worldshipping.org/aboutthe-industry/global-trade/top-50-world-container-ports. Accessed June 12, 2019. 15 According to Johannes Pflug, responsible for China affairs in the Duisburg municipality. Source Yang, Sheng. 2018. “Spotlight: China-Europe Railway Network Sparks New Vitality in Germany’s Biggest Inland Port”, Xinhua News Agency, March 29. http:// www.xinhuanet.com/english/2018-03/29/c_137072853.htm. 16 After the United States, China is the second largest non-European German partner

(fifth in absolute terms) for exports and the largest for imports. Also for France after the United States, China is the second non-European partner (seventh in absolute terms) for exports and the first non-European for imports. On the other hand, Germany and France are the largest European China’s partners. Source The Observatory of Economic Complexity (OEC).

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the different countries interested in investing in China, promotes competition between European countries interested in attracting Chinese investment and plays a role in the Belt and Road Initiative. This underlines the difficulties Brussels faces in resolving the lack of cohesion and solidarity among member states, and their consequent mistrust of the formal and informal mechanisms that govern the decision-making processes of the European institutions. The lack of a clearly defined response plan to the BRI weakens the bargaining power of many EU countries and companies. It would therefore be worthwhile to promote a single European diplomatic action while reducing the role of individual member states, in order to prevent China’s main commercial partners in Europe from gaining access to privileged channels at the expense of other states. In order to avoid, or at least mitigate, the negative effects of the lack of unity within the EU, the European institutions should adopt some key actions towards China. From an economic and political point of view, it will certainly be difficult to expect China to respect European standards in crucial areas, such as media and telecommunications, as they represent the backbone that supports the maintenance of the power of the Chinese Communist Party.17 To leverage the BRI to bring Beijing to a substantial opening in those strategic sectors for the New Silk Road, such as construction, transport and finance, the European institutions should focus on these economic areas during negotiations in order to speed up the implementation of reforms to open up the Chinese internal market, threatened with the domestic risks it would face if formal and informal barriers to market entry were to continue to be maintained. The EU should also make a bilateral EU-China investment agreement a priority. Improving international cooperation between the two actors would ensure clear rules, and their economic and political weight could be a guarantee of compliance with the norms. Until diplomacy succeeds, action must be taken within Europe’s borders, establishing which industrial sectors should be protected and keep a European leadership position, giving a detailed mandate to the Commission to negotiate investment agreements with China, based on reciprocal rules of market access. In case of resistance, the EU should act by gathering around itself other countries interested in accelerating the process of opening up the Chinese domestic market, namely other developing countries. Moreover, the role of China

17 Castells. 2009. “Communication Power”, Oxford University Press, Oxford.

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in international organizations should not be underestimated. For example, incentives for its effective integration within OECD countries should be created, putting Beijing on the path towards international rule of law.

Conclusion The Silk Road Economic Belt and the 21st-Century Maritime Silk Road Initiative focus on increasing connectivity in Asia, Europe and Africa, through land and sea. This new Chinese proposal for international cooperation to improve multilateralism and tackle global issues is not an aid plan. It is a rather pragmatic ongoing process without specific planning behind it, which develops on the basis of commercial interests. Theoretically, the Belt and Road Initiative is not designed to challenge China’s geopolitical competitors, but this can be a consequence. This chapter analysed the impact of this initiative in Sino-European relations, while acting as a catalyst for deeper Eurasian trans-continental economic integration and greater regional security. In some strategic sectors such as rail transport, seaports, public structures and financial investments, the growing expansion of Chinese shareholders is evident. Sometimes, the growing economic influence on certain countries can translate into an increasing capacity to influence the whole region politically. This has already put the EU’s authority as a rule-setting power at serious risk. Six years after the launch of the BRI, the economic impact of concrete projects in Europe remains fairly limited when compared to the progress achieved in Central Asia. Engaging in solid cooperation with Europe is a key element for the BRI’s own success. However, being the ultimate destination of the vast network of land routes and sea lanes starting from various Chinese provinces, Europe should leverage its importance for the BRI, pushing Beijing to take a softer position on key issues related to its strategic economic interests. This includes a greater (and credible) Chinese opening up reform process. A greater involvement of a major trading partner, it has not only economic purposes, but also represents a guarantee for the peaceful implementation of the BRI. Europe itself, having obtained the necessary guarantees, should move away from the demonization of this project and embrace this proposal in order to maximize its benefits, which would be not only economic, but also political, since it is the very purpose of the European Union to promote multilateralism, cooperation between states not only within its borders.

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Many international observers are concerned about the Chinese strategies towards Europe, which seem to be oriented towards the principle of “divide and rule”. However, this chapter wants to overturn, in a provocative way, the terms of this statement: it is not China who divides member states to obtain more advantageous conditions of entry into Europe; it is the European divide that facilitates the entry of China, in terms of financial capital and political influence. A strategy of greater cohesion among member states would allow a coordinated and unambiguous European response, limiting the Chinese bargaining power and resulting in a political victory for the EU within its borders as well. In this way, BRI projects in Europe would not be a Chinese proposal, but rather its integration into the European Union development project. Therefore, this new platform for cooperation can arguably contribute to revitalize a more proactive and bilateral relationship. In order to maximize advantages and minimize disadvantages, the European Union should act simultaneously through two levels. Firstly, the EU must bridge the gap between member states by implementing a common strategy unifying national interests. Despite increasing globalization and interconnection of people and territories, nations keep the primacy over supranational institutions. Relations that China develops with governments of key member states, mainly resulting of bilateral agreements, weaken the European institutions and the overall feeling of cohesion within the EU. The EU should seek a “one Europe” policy towards China. For example, more effective communication is needed about the TEN-T project, as well as the attempts to improve access conditions to the Chinese market for European companies and protect strategic European sectors, in order to promote the EU as the protector of common interests. The recent discussion on the creation of a screening mechanism for Chinese investment in Europe is certainly a step forward and risks failure if, at the same time, Brussels is unable to provide credible structured plans to fill the gap between the divergent European Union member states, in terms of economic and political interests. Secondly, the EU should act multilaterally, not so much by providing alternatives to Chinese projects and funding systems, but rather by seeking integration between BRI and TEN-T and cooperation through multilateral frameworks like the EU-China Connectivity Platform, as well as through cofinancing models involving Chinese institutions such as the AIIB and the EIB and EBRD. In terms of trade asymmetries between Europe and

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China, which translate into an impressive and long-term trade deficit,18 a screening mechanism to magnify foreign investment in Europe, such as the one being worked on by the European Commission, is a tool to be welcomed, but is still not enough. Issues related to Sino-European economic and commercial asymmetry, as well as a lack of an EU strategy and cohesion among its member states, can lead to a consistent slowdown in the economic performance at a global level and in the development of the BRI itself. Beijing is aware that a slowdown in economic globalization would be very risky for China, whose economic policy agenda envisions greater integration into foreign markets. Therefore, the BRI can arguably be a strong incentive pushing China to fulfil its international commitments to open up its economy in the framework of the announced reforms.

Bibliography Allison, 2017. “Destined for War: Can America and China Escape Thucydides’s Trap?”, Houghton Mifflin Harcourt. Andrews-Speed, Dannreuther. 2011. “China, Oil and Global Politics”, Routledge. Barbieri, Miranda. 2018. “One Belt One Road: Understanding China’s Activism in Contemporary World. Does the Flap of a Butterfly’s Wings in China Set Off a Tornado in Europe (UK Included)?”, The Cardozo Electronic Law Bulletin Essay. Bartley, Clarke, Latimer, Kerswell, Mclinden. 2018. “Trade Facilitation Challenges and Reform Priorities for Maximizing the Impact of the Belt and Road Initiative” (English). MTI Discussion Paper; No. 4. Washington, DC: World Bank Group. Bluhm, Dreher, Fuchs, Parks, Strange, Tierney. 2018. Connective Financing: Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries. AidData Working Paper #64. Williamsburg, VA: AidData at William & Mary.

18 In 2008, the EU had a trade deficit with China of e171 billion. There was a deficit throughout the period between 2008 and 2018, reaching e185 billion in 2018. During this time, EU exports to China were highest in 2018 (e210 billion) and lowest in 2008 (e78 billion). EU imports from China were highest in 2018 (e395 billion) and lowest in 2009 (e215 billion). Source Eurostat (online data code: ext_IT_Maineu). 2019. “Imports, Exports and Balance for Trade in Goods Between the EU-28 and China, 2008– 2018”. Data from 2018. https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ EDN-20190409-1. Accessed June 24, 2019.

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Castells. 2009. “Communication Power”, Oxford University Press. Chen. 2017. “Three Domestic Challenges of China’s One Belt, One Road Initiative”, Global Risk Insights (GRI). Chen, Lin. 2018. “Foreign Investment Across the Belt and Road Patterns, Determinants and Effects”, Policy Research Working Paper 8607. World Bank Group. Cushman, Wakefield. 2018. “Chinese Capital Flows”. De Soyres, Raphael. 2018. “The Growth and Welfare Effects of the Belt and Road Initiative on East Asia Pacific Countries” (English). MTI Practice Note; No. 4. Washington, DC: World Bank Group. De Soyres, Raphael, Mulabdic, Alen, Murray, Siobhan, Rocha Gaffurri, Nadia, Ruta. 2018. “How Much Will the Belt and Road Initiative Reduce Trade Costs?” (English). Policy Research Working Paper; No. WPS 8614. Washington, DC: World Bank Group. Erede, 2017. “OBOR: soft law come alternativa cinese ai trattati internazionali”, ISPI “OBOR WATCH – Geo-economia delle Nuove Vie della Seta”. Eurostat (online data code: ext_IT_Maineu). 2019. “Imports, Exports and Balance for Trade in Goods Between the EU-28 and China, 2008–2018”. Data from 2018. https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ EDN-20190409-1. Gleave, 2018. “Research for TRAN Committee: The New Silk Route—Opportunities and Challenges for EU Transport”, European Parliament, Policy Department for Structural and Cohesion Policies, Brussels. Grieger, Claros. 2018. “China, the 16+1 Format and the EU”, European Parliamentary Research Service. Hanemann, Rhodium Group, Huotari. 2018. “Eu-China Fdi: Working Towards Reciprocity in Investment Relations”, Mercator Institute for China Studies, No. 3. Hu. 2018. “The Belt and Road Initiative and the Transformation of Globalization”, Kwartalnik Nauk O Przedsi˛ebiorstwie, 1, pp. 30–37. International Monetary Fund (2000). “Globalization: Threats or Opportunity”, IMF Publications, 12 April 2000. Jacobowski, Poplawski, Kaczmarski. 2018. “The Silk Railroad. The EU-China Rail Connections: Background, Actors, Interests”, OSW Centre for Eastern Studies. Jia, Wong. 2017. “Belt & Road: Opportunity & Risk the Prospects and Perils of Building China’s New Silk Road”, Baker McKenzie & Silk Road Associates. Kołodko. 2001 “Globalization and Transformation: Illusions and Reality”, TIGER Working Paper Series No. 1. Warsaw, Poland. Kołodko. 2014. “The New Pragmatism, or Economics and Policy for the Future”, Acta Oeconomica, 64(2), pp. 139–160.

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Lequn, Jian. 2017. “Contemporary China’s Politics”, China Intercontinental Press. Liu, Shi, Laurenceson. 2018. “China & World Economy”, Institute of World Economics and Politics, Chinese Academy of Social Sciences. Wiley, Vol. 26, No. 4. National Commission for Reforms and Development Ministry of Foreign Affairs and the Ministry of Commerce of the PRC. 2015. “Visions and Action Plan on the Framework Underpinning OBOR”, Beijing. Notteboom. 2019. “PortGraphic: Top 15 Container Ports in Europe in 2018”, PortEconomics. https://www.porteconomics.eu/2019/03/02/portgraphictop15-container-ports-in-europe-in-2018/. OLGBRI. 2017. “Building the Belt and Road: Concept, Practice and China’s Contribution”, Foreign Languages Press. Richet, Ruet, Wang. 2017. “New Belts and Roads: Redrawing EU-China Relations”, In “China’s Belt and Road: A Game Changer?”, Edizioni Epoké— ISPI, pp. 97–120. Rühlig, Jerdén, Van der Putten, Seaman, Otero-Iglesias, Ekman. 2018. “Political Values in Europe-China Relations”, A Report by the European Think-tank Network on China (ETNC). Sheng. 2018. “Risks of China’s ‘One Belt, One Road’ Initiative”, Centre for Banking & Finance Law, Faculty of Law, National University of Singapore, Report Number CBFL-Rep-1802. SWIFT. 2018. “RMB Internationalisation: Where We Are and What We Can Expect in 2018”, RMB Tracker. Tunningley, Eva, Trickett, Lin. 2018. “China’s Belt & Road Initiative: Risk Insights, Trade Route Limits Energy (In)security Regional Tensions”, Global Risk Insights (GRI). Van der Putten, Seaman, Huotari, Ekman, Otero-Iglesias. 2016. “Europe and China’s New Silk Roads”, Report by the European Think-Tank Network on China (ETNC). Van Leijen. 2018. “Duisburg-China Traffic Quadrupled Since Regular Silk Road Train”, RailFreight.com, Online Magazine for Rail Freight Professionals. Verlare, Van der Putten. 2015. “‘One Belt, One Road’ an Opportunity for the EU’s Security Strategy”, Clingendael Policy Brief. World Bank. 2018. “Global Economic Prospects, June 2018: The Turning of the Tide?”, Washington, DC: World Bank. World Shipping Council (WSC). 2019. “Top 50 World Container Ports”. http://www.worldshipping.org/about-the-industry/global-trade/top-50world-container-ports. Yang, Sheng. 2018. “Spotlight: China-Europe Railway Network Sparks New Vitality in Germany’s Biggest Inland Port”, Xinhua News Agency, March 29. Zhang. 2017. “Contemporary China’s Diplomacy”, China Intercontinental Press.

CHAPTER 11

Maritime Cooperation in the European Union-China Relations and the 21st Century Maritime Silk Road: What is at Stake? Lívia Brasil Carmo Grault and Laura C. Ferreira-Pereira

Introduction Relations between the EU and China in the twenty-first century have featured as one of the most relevant, albeit challenging examples of bilateral cooperation on the international stage. More recently, China’s Belt and Road Initiative (BRI) and its considerable geopolitical and economic weight have brought with it renewed impetus to this rapport, which has been largely managed by a rather institutionalized strategic partnership (SP) that comprises a wide range of issues. Despite the prominence of trade issues in this developing partnership, security aspects have been gaining increased importance. In this regard, even though maritime security has been an issue less explored at the

L. B. C. Grault University of Minho, Braga, Portugal L. C. Ferreira-Pereira (B) CICP-University of Minho, Braga, Portugal e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_11

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bilateral level, it has emerged as an increasingly relevant topic in the security policy agendas of the EU and China. Against the backdrop of the 21st Century Maritime Silk Road Initiative (MSRI) which constitutes the maritime component of BRI, China has invested heavily in modernizing its naval assets as part of national endeavors to ensure international connectivity. On the other hand, the EU has gradually developed its maritime security actorness since the launching of CSDP anti-piracy operation EUNAVFOR Atalanta in 2008, which has counted on Chinese contributions, and it has also attempted to advance the so-called maritime multilateralism, in the framework of the implementation of its Global Strategy for Foreign and Security Policy (EUGS) (European External Action Service 2016, 43). The advent of the BRI, and particularly the MSRI, opens up a new range of challenges and opportunities for cooperation between the two actors in the domain of maritime security. Yet, the trajectory of this bilateral relationship has shown that cooperation has not unleashed its full potential yet due to power competition as well as prevailing differences between the two actors when it comes to their nature, identity, values and worldviews. Considering the recent emergence of EU and China as maritime security actors, this chapter aims at examining the evolution of maritime security cooperation between the two actors while giving particular emphasis to the implications of the MSRI to this bilateral cooperation, inside and outside the existing SP. Such examination will cover the period between 2003 and 2019. This choice transcends aspects exclusively related to the security maritime domain to take into consideration the trajectory of the EU-China relations as a whole. The year of 2003 is considered a milestone since it marks the establishment of the EU-China SP which was preceded by the production of the papers “A Maturing Partnership— Shared Interests and Challenges in EU-China Relations” and “China’s EU Policy Paper” by the European Commission and Chinese authorities, respectively. It also marked the approval of the European Security Strategy (ESS), the EU’s first strategic document, under the aegis of which the organization has consolidated its role as an international security actor. The analysis will be stretched until 2019 which saw noteworthy developments springing from the EU-China Summit, namely a new Joint Statement issued in April (European External Action Service 2019). Additionally, this year was eventful for China politically bearing in mind the unprecedented outbreak of pro-democracy protests in Hong Kong,

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which started in June, and the presentation of the paper on defense entitled “China’s National Defense in the New Era” (2019 White Paper), in July. In terms of the theoretical approach, this study draws upon practice theory and two of Pierre Bourdieu’s “thinking tools”, notably “habitus” and “field”,1 which are applied to the analysis of international practices. It also relies on the concepts of “background knowledge” and “strategic interaction” that can foster a “community of security practice” (Mérand and Pouliot 2008; Adler and Pouliot 2011; Bueger 2013; Bueger and Gadinger 2015). The chapter begins with a brief contextualization of EU-China SP in order to underline the increasing cooperative dynamics existing between these actors. It then proceeds with an analysis of the evolution of maritime security cooperation between the EU and China, before and after the launching of the MSRI. The final section attempts to discuss those specific cooperative experiences and its prospects in light of the abovementioned practice theory-related concepts, in order to demonstrate that the advent of MSRI has expanded the room for the EU-China maritime security cooperation to grow. The chapter concludes that in spite of a prevailing competitive and mistrustful environment characterizing EUChinese maritime cooperation, the amount of opportunities for mutual practical interaction which exist against the backdrop of the MSRI, at the politico-diplomatic level and below, paves the way for increasing cooperation and the formation of a community of security practice.

1 As Anna Leander explains, Bourdieu refers to his own concepts as “thinking tools” which are “open”, in the sense that he wished to develop concepts and mechanisms that should gain meaning in the context of a concrete issue or problem (2011, 308). Pierre Bourdieu has given very limited attention to the subject of the international (Mérand and Pouliot 2008). Such reality, however, paved the way for relevant literature aiming at discussing means to apply his work to IR, such as the one put forward by Emanuel Adler, Anna Leander, Fréderic Mérand and Vincent Pouliot, among others. See chapter’s references for more details. Here, we apply the concept of “habitus” mainly as understood by Adler and Pouliot when laying down the foundations of their understanding over international practices (Adler and Pouliot 2011), as well as Mérand (2012) and Bueger and Gadinger (2015).

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The EU-China Strategic Partnership: A Contextualization Since it was established in 2003, the EU-China SP has developed into a rather comprehensive framework. While comprising “an annual summit, regular ministerial meetings, and over 60 sectoral dialogues” (European External Action Service 2019, 1), the SP has become the main platform of or channel through which this bilateral relationship has deepened ties between the parties. In October 2003, the “Joint Press Statement on the Sixth China-EU Summit” recognized the expansion of the SP in both depth and scope. At the time, partners described the partnership as one exhibiting “increasing maturity” and “growing strategic nature” (European Council 2003). Shortly before, both parties had issued policy papers on each other. On the EU’s side, the paper “A Maturing Partnership—Shared Interests and Challenges in EU-China Relations” (European Commission 2003) stressed the need to strengthen the political dialogue, including cooperation in security, human rights and global governance, as well as helping China to conduct internal reforms and ultimately adopt democracy, rule of law and free market. On the other hand, the “China’s EU Policy Paper” emphasized the Five Principles of Peaceful Coexistence, as well as the differences in “historical background, cultural heritage, political system and economic development level” (PRC 2003, sec. 2, par. 2), which should lead to a mutually respectful rapport. Security cooperation was mentioned briefly under the last and very short topic entitled “The Military Aspect”, while the perspective of multilateralism was limited to the trade sphere. Ten years later, the partners issued the “EU-China 2020 Strategic Agenda for Cooperation” (European External Action Service 2013). Different from the 2003 policy papers, this document has sought to incorporate a “full-fledged strategic level” to the partnership (Montesano 2019, 141). It has acknowledged the strong interdependence between the two actors (European External Action Service 2013, 2) and ascribed security a prominent position as mirrored in longer considerations on the matter. Against the backdrop of a 10-year period, during which multilateralism had become a pillar of global governance, the partners have described themselves as “important actors in a multipolar world” (ibid., 3). Finally,

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cooperation on maritime issues has featured for the first time as a dominant topic, in relation to sustainable development, to which one paragraph is exclusively dedicated (ibid., 13). More recently, the EU and China have issued a new “EU-China Summit Joint Statement”, that is more focused on prioritizing “day-to-day” issues (Smith 2016, 89) and on settling commitments between the partners so as to generate a real engagement in the international arena (European Council 2019). For instance, among international issues mentioned in the document are Venezuela, Ukraine (Minsk Agreements) and Myanmar (European Council 2019, 7). There are also references to initiatives related to the increasing importance of China and the BRI, such as EU-Asia Connectivity Platform (2019, 6). Finally, it lays down the intention to adopt a new strategic agenda beyond the year 2020 (European Council 2019, 1). All this denotes the progress that has been made regarding the bilateral dialogue cultivated in the framework of the SP. The EU-China SP has gathered together two actors that are recognized by some observers as “unlike partners” (Michalski and Pan 2017, 611) given the existence of fundamental cultural and ideological differences that conditions diverging worldview(s). Such differences have fostered conceptual gaps, resulting from “different conceptualizations of the same concept by different actors” (Pan 2012, 2). Among these conceptual gaps, stand out those concerning the meaning of “strategic partnership”, as well as the understanding of “multilateralism”. Regarding the meaning of “strategic partnership”, while the EU sees it as a short-term tool, in order to obtain immediate results, China regards it as a longterm quest (Stumbaum and Xiong 2012, 163–164). As for multilateralism, the EU conceives it as a core Western-dominant world norm; yet China approaches multilateralism as means to attain a more multipolar world (Zhang 2012). Those conceptual gaps have created additional difficulties in China’s socialization experience at international level and caused its perception as a challenger to the liberal order (Michalski and Pan 2017, 613; Maher 2016, 971), both inside and outside the BRICS. Linked to this, Gustaaf Geeraerts asserts that “the BRICs opposition to the liberal order poses a particular challenge to the EU’s understanding of multilateralism as an organizational concept for world governance and the norms associated with it” (2019, 147). This is not a surprise, given that over the last few

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years the so-called Beijing Consensus has questioned the established liberal order that is aligned with the Washington Consensus—designed by the United States and seconded by the EU. The premise of the Washington Consensus relies on the assumption that the Western developed countries define what should be considered good governance on the basis of free-market capitalism guidelines. Also, it stipulates that the aid to developing countries is conditioned to the implementation of policies prescribed by the Western donors (Leandro 2018, 75–76). Conversely, the Beijing Consensus entails a wider flexibility while being a soft power instrument, based on pragmatism, the principle of non-interference and the belief in partnerships to the detriment of alliances (ibidem). Along these lines, the EU-China SP has been frequently examined through the perspective of a socialization process conceived to accommodate an actor of a sheer political and economic weight in the international order due to the cultural and ideological differences (Paul 2016; Maher 2016; Smith 2016; Michalski and Pan 2017; Cottey 2019). Bearing in mind the trajectory of the EU-China SP and the more recent experiences undergone by the two actors in their foreign and security policies, considerations on existing conceptual gaps and diverging worldviews represent only part of a broader picture. The EU is currently striving to consolidate its role as a security actor in the international arena, while facing multiple internal and external challenges such as the growing populism, the migration crisis, the uncertainty resulting from the Brexit process and the Trump administration’s erratic foreign policy. On the other hand, China faces a trade war with the United States, while dealing with a “structural economic slowdown” and trying to manage the downsides of having an export-dependent economy (Geeraerts 2019, 154). Moreover, China deals with serious domestic problems. Among the most pressing are shortage of natural resources (Duarte 2017) and the storm of protests in Hong Kong that has emerged as a new challenge to China.2 Against such challenging backgrounds for both parties, the SP seems to constitute a stable platform in which the EU and China may be able not only to sustain converging stances and approaches, but also to discover new paths of convergence. As already mentioned, trade issues have 2 Initially sparked by an extradition bill that would enable residents from Hong Kong to face trial in mainland China, this storm of pro-democracy protests has culminated in the local deepest political crisis in years.

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been at the center stage of the SP. According to data made available by the European Commission, “China is the EU’s biggest source of imports and its second-biggest export market. China and Europe trade on average over e1 billion a day”.3 Nevertheless, given that both actors aim at improving their role as international security actors for the sake of enhancing their status and prestige, maritime security cooperation—that has not yet developed its full potential—emerges as a relevant field since it can contribute for increasing mutual familiarity and understanding. Incidentally, much has been written about the economic and trade dimensions underlying the SP, and very little about security issues that should not be neglected (Kirchner et al. 2016) for at least two major reasons. Firstly, the absence of fundamental disputes regarding security issues between the EU and China, something which creates a window of opportunity for deploying joint efforts (Li 2016, 15; Dorussen et al. 2018, 289). Secondly, the growing interdependence between the two partners in the economic and trade areas, which has the potential to foster closer relations in other fields like security as a result of a spillover effect (Dorussen et al. 2018, 289).

EU and China in Maritime Security Cooperation: Evolution and Seminal Experiences As a field of study, maritime security cooperation provides substantive insights when it comes to analyze whether actors are able to work together over and above identity and political divergences, as in the case of the EU and China. This is so because, as Bueger observes, “maritime security is widely understood as a transnational task” and calls for “a shared responsibility and requires a new vision of collective security” (2015, 163). In order to understand the relevance of the MSRI in the EU-China maritime security cooperation, we will first outline the evolution of both the EU and China as maritime security actors during the last decade, look at how the bilateral cooperation has unfolded, and then proceed to discuss the impact of MSRI upon the EU-China maritime cooperation. The EU and China have been asserting themselves as important maritime actors, with anti-piracy operations being the main framework in

3 See http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/. Accessed: 26 August 2019.

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which both actors have developed their maritime security approaches and profiles. Even so, recent official documents rarely mention direct cooperation between the EU and China in the realm of maritime security. China’s participation in the international coalition to tackle anti-piracy issues off the Coast of Somalia in 2009 is worth noting since it was a case without precedent in recent history (Lanteigne 2013, 291). In 2008, when the situation in Somalia worsened and the piracy activity soared, China supported the UN Security Council Resolution 1851, which legitimized actions that followed suit. This decision was of exceptional nature considering China’s traditional profile as an international security actor and its deep-rooted defense of the principle of non-interference (Christiansen et al. 2016, 243–244). In fact, China’s defense of noninterference has been at times compromised in the name of economic interests and its willingness to boost its participation in the international fora. An illustrative example of this is precisely China’s actorness in Africa and its contribution to counter-piracy-related activities (Gottwald and Duggan 2012, 42–43). For its engagement in the aforementioned coalition, China took into account the fact that the government of Somalia consented to the operation. But the decision was largely taken by virtue of the perceived dimension of the threat and the high risk of deterioration of the security environment highly detrimental for Chinese interests. This is so considering the importance of the Gulf of Aden as a sea lane of communication (SLoC) to many Chinese ships which transport market goods to and from China (Lanteigne 2013, 295–296). At the same time, when deploying vessels in the Horn of Africa, China seized a timely opportunity to employ in an out-of-area operation its People’s Liberation Army Navy (PLAN), which had been—and still is—undergoing a modernization process. Thus, counter-piracy operations also provided PLAN with valuable experience and training (ibid., 297). It is important to highlight that China used its participation in international efforts to tackle piracy to improve its status as global security actor. It acted according to all the rules from the 1982 United Nations Convention on the Law of the Seas (UNCLOS) and protected non-Chinese ships under attack. Also, by taking part in this operation, the country has gained a timely pretext to justify its necessity of enhancing national military assets, which had been attracting external suspicion (e.g., the EU and United States). Overall, China seized this opportunity to promote its international image of a responsible power (Lanteigne 2013; Lin-Greenberg 2010, 220–221). Eventually, this has paid off since it was against this backdrop that, in

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December 2010, China was asked to cooperate with the EU Operation Atalanta, by means of protecting naval units that carried cargo for the World Food Programme (Lanteigne 2013, 301). Despite, by then, the cooperative dynamics was somewhat timid, this particular experience was notably valued in the Chinese eyes. The defense paper issued in 2019 entitled “China’s National Defense in the New Era” (2019 White Paper), a long and detailed document addressing China’s account of international security and actions intended to tackle it, confirms it in the following terms: Exchanges and cooperation in all areas are making sound progress. Targeting a China-Europe partnership for peace, growth, reform and civilization, China conducts security policy dialogues, joint counter-piracy exercises and personnel training with the EU. (PRC 2019, sec. 4, par. 9)

Likewise, in the “EU-China Summit Joint Statement” issued in the same year, the partners affirm that: …the EU and China agree to reinforce cooperation and high-level exchanges on peace, security and defence, including on maritime security and counter-piracy, support for African solutions to African problems to maintain the peace and security in Africa, and information exchange on crisis management and UN peacekeeping operations. (European Council 2019, 7)

Over the last decade, China has been attempting to enhance its status as an international security actor. Howorth highlights that there is little question that the 2015 China’s Military Strategy (2015 White Paper) has committed the country to “a global military role” (2016, 156). This document underlines the need for “pragmatic military cooperation”, to deepen cooperative maritime security (PRC 2015b, sec. 6, par. 3) and asserts that: Faithfully fulfilling China’s international obligations, the country’s armed forces will continue to carry out escort missions in the Gulf of Aden and other sea areas as required, enhance exchanges and cooperation with naval task forces of other countries, and jointly secure international SLOCs. (PRC 2015b, sec. 6, par. 4)

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In light of BRI’s ambition to restore the prosperous ancient times of the Chinese Silk Road, this role in maritime security has been recognized as a reminder of “the Ming Dynasty-era exploratory voyages in the Indian Ocean” (Lanteigne 2013, 291). While China has been developing its maritime security role based on its own values, founded in its millenary culture (Economides 2018, 39), the EU has been promoting a Western value-based foreign and security policy, which came to include a maritime dimension. The first major sign of this was the Commission’s “Green Paper Towards a Future Maritime Policy for the Union: A European Vision for the Oceans and Seas” published in 2006. The document was a move toward the design of an overarching maritime policy able to encompass all diffuse sea-related policies. Indeed, the aim was to put together an integrated maritime policy and to forge a European maritime identity (European Commission 2006). To this end, this first document launched a consultation process to stakeholders, which lasted a year and originated in 2007 an action plan, entitled “An Integrated Maritime Policy for the European Union”. The latter emphasized not only the economic importance of the seas, but also sustainability and the need for cooperation with third states. Nevertheless, both documents addressed maritime security issues only marginally, in the form of references to surveillance activities intended to tackle piracy, trafficking of human beings, smuggling and illegal immigration (European Commission 2006, 26, 2007, 5). Yet, since then, the importance of maritime issues in the EU agenda has grown. The EUGS and its extensive focus on various dimensions of security have reinforced the EU partners’ expectations for the organization’s action as a “global security provider” (European External Action Service 2016, 3). While elaborating on global governance, the strategic document has put forward the concept of “maritime multilateralism” and underscored the EU’s intention to “act as an agenda-shaper, a connector, coordinator and facilitator within a networked web of players” (2016, 43). It is worth noting the importance that the EUGS gives to Asia, in line with the “Asian turn” (Ferreira-Pereira and Vieira 2017, 415) when affirming that European prosperity is dependent on Asia’s security and stressing the relevance of connectivity and maritime capacity building in the region (European External Action Service 2016, 38–39). Besides the evolution that was made between 2006 and 2016 at the declaratory level, one should stress other major ventures which,

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in the meantime, have promoted the EU’s maritime policy and actorness. Among these ventures, stand out the European Union Naval Force (EUNAVFOR), also known as Operation Atalanta launched in 2008 in the Gulf of Aden and the EUNAVFOR MED Operation Sophia launched in 2015, in the Mediterranean. Another major development was the issuing of the European Maritime Security Strategy (EUMSS), in 2014 that has laid down the main principles, objectives and interests of the organization regarding maritime issues (European Council 2014a). Generally speaking, it has emphasized the importance of multilateralism, as well as rules and principles, pleading for abidance by the United Nations Convention on the Law of the Sea (UNCLOS). Interestingly, the document has acknowledged that “cooperation at sea between all actors involved has a positive spill-over in other policy areas” (European Council 2014a, 9). Even though this statement was originally directed at member states, the same reasoning can be applied to the EU’s strategic partners, notably China. Concerning Operation Atalanta, as some have pointed out, it was not a peace operation. The operation had the goal to protect World Food Programme units which transported food to Somalia. At the same time, it aimed at protecting maritime trade routes from pirates (Riddervold 2011, 386, 396). Moreover, this operation presented itself as a timely opportunity to expand the EU’s foreign and security policies competences, while exploring maritime security as a form of power projection (Germond 2011, 567, 574). In a broader reading, the launching of Atalanta has been grounded on the EU’s pursuit of geopolitical goals and on its claims of being a reference in tackling piracy threats (Germond and Smith 2009, 589). The EU’s experience as a maritime security actor has been reinforced by 2015 Operation Sophia, whose original purpose was to tackle the refugee crisis in the Mediterranean Sea. Like in the case of Atalanta, the objectives of this operation have been questioned. According to some observers, despite being firstly launched as a search and rescue operation, it evolved to be less concerned about human rights, than about “preventing migrants from coming to Europe” (Riddervold 2018, 168). This has reflected tensions between normative standards (i.e., promotion of human rights and rule of law) and member states’ material interests concerning migration issues (Riddervold 2018, 171; Cusumano 2019, 118). After outlining the general aspects related to the European and Chinese original cooperative rapport in the domain of maritime security and

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ensuing seminal experiences, at this point of the study, attention should be given to the examination of their stances and strategies in light of the advent of MSRI. In 2017, China has published its “Vision for Maritime Cooperation Under the Belt and Road Initiative” (i.e., 2017 BRI White Paper), which followed up a previous publication entitled “Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road” issued in 2015 (i.e., 2015 BRI White Paper). In these documents, China upholds its usual discourse of “winwin cooperation” in the sense of joining efforts to ensure the well-being of the world community. Both documents have underlined the general aspects of BRI, namely the need for coordinating policies and building consensus in order to improve connectivity; and also the ambitious objective of improving living conditions at domestic level within the countries envisaged by the initiative (PRC 2015a, 2017). As mirrored by its title, the 2017 BRI White Paper has focused specifically on the maritime component of the BRI and the development of the blue economy; while calling for “pragmatic cooperation” (PRC 2017, sec. 3, par. 1). This document has set out five cooperation priorities, as follows: green development; ocean-based prosperity; maritime security; innovative growth; and collaborative governance. The “green development” priority addresses marine environment protection along with measures to tackle carbon emissions and climate change. The “ocean-based prosperity” involves fostering good practices of management regarding marine resources, including technical support, stimulating industry cooperation and tourism as well as improving connectivity. “Maritime security”, on its turn, is regarded as a core matter in order to safeguard the blue economy evolution and comprises “maritime public services, marine management, maritime search and rescue, marine disaster prevention and mitigation and maritime law enforcement” (ibid., sec. 4.3, par. 1). The document has stressed that China would honor its obligations as an international actor regarding the fight against crimes at sea by cooperating both in bilateral and multilateral levels (ibid., sec. 4.3, par. 2). The “innovative growth” entails the sharing of technological and scientific knowhow as well as information and media cooperation on all matters regarding the sea. Lastly, “collaborative governance” relates to the framing of multilateral institutions to harbor the intended initiatives on maritime cooperation; and to the importance of trust-building through multilateral and bilateral cooperation.

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The BRI in general, and MSRI in particular, constitutes a developing venture, given that “flagship projects are in diverse states of progress” (Duchâtel and Duplaix 2018, 11) and “China is learning and adapting as the Road project evolves” (Ghiasy et al. 2018, 3). Massive investment in hard infrastructure such as seaports—for civil and military uses— power grids, pipelines and railways has been planned, and it is deemed to be combined with soft infrastructure in the form of trade deals and creation of multilateral fora with the purpose of benefiting developing countries in Asia and Africa (Blanchard and Flint 2017, 226–227; Duarte 2017, 34). In order to provide funding to ensure the materialization of all those projects, China has created the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund (SRF), among other funding frameworks (Blanchard and Flint 2017, 228). According to Blanchard (2017, 251), one can identify soft and hard narratives connected to the MSRI. Indeed, when examining the MSRI one can identify these narratives translated concretely into a softer and a harder agenda. What can be referred to as the softer agenda has been structured around the official discourses and documents previously outlined (i.e., 2017 BRI White Paper and 2015 BRI White Paper). By means of the MSRI, China envisages the achievement of multiple goals, among which stand out the provision of an alternative able “to challenge and corrode ‘Western-centrism’ and balance it with a China-led economic order” (Ghiasy et al. 2018, 9), as well as the promotion of the Beijing Consensus. At the same time, one cannot escape to the fact that China also regards MSRI as a project by means of which the country intends to promote its own material interests beyond its borders (Duchâtel and Duplaix 2018, 28). In this regard, a harder agenda can be related to a realist outlook of EU-China cooperation in the framework of MSRI. China’s action(s) tend to be inspired in its own history, when it allegedly reigned as one of the world’s largest naval powers during the fifteenth century. The country is aware that a strong maritime influence is a fundamental aspect for projecting world power (Ghiasy et al. 2018, 4). Hence the growing Chinese investments in the modernization of its naval force (Duchâtel and Duplaix 2018, 27). It should be also noted that the MSRI has been designed to “sustain and boost China’s growth” (Blanchard and Flint 2017, 229) by providing outlets for Chinese products surplus, improving trade relations with Western countries and developing Chinese provinces and cities like Xinjiang (ibidem). Stability and the welfare of the people are among China’s core interests; thus, ensuring food and energy security is of paramount

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importance. Besides this, the MSRI has also the objective of amplifying China’s logistic possibilities and resilience due to the country’s dependence on maritime chokepoints, such as Malacca Strait and Panama Canal to receive a high percentage of its food and oil imports. The fact that both of these chokepoints are under US Navy surveillance posed a significant challenge to China (Ghiasy et al. 2018, 7). Overall, the MSRI is closely linked to China necessity of securing resources, connectivity and market access, which are critical for sustaining economic growth as well as political and social stability. China’s investment in improving PLAN capabilities and assertiveness regarding the Chinese claims over South and East China Sea (SCS) disputed waters has increased uncertainty, even pushing member states of the Association of Southeast Asian Nations (ASEAN)4 to get closer to the West (Duarte 2017, 259; Cottey 2019, 11–12). In effect, SCS is a pivotal matter in Chinese maritime security agenda given its major economic and geostrategic importance. This area is a valuable source of resources, as well as an essential sea lane for transporting goods. Not unsurprisingly, in 2016, China rejected a decision adopted by the International Court of Arbitration based on the UNCLOS, which was linked to territorial disputes with the Philippines. Other similar disputes have involved Malaysia, Vietnam and Brunei (Ghiasy et al. 2018, 19–20). Related to this, China has resorted to the MSRI as a platform for enhancing its economic and political clout, and building a trustworthy environment. Given the importance of the SCS, ASEAN member states have played an important part in such a strategy (ibid., 8–9). Consequently, ASEAN has received wide attention on the 2017 BRI White Paper (PRC 2017) and, more recently, on the 2019 White Paper (PRC 2019). As a result of this, initiatives designed to foster cooperation with ASEAN and ASEAN member states have flourished.5 That being said, a purely realpolitik reading of the BRI

4 ASEAN is a concert of Southeast Asia nations, which currently reunites ten member states: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Source: ASEAN Web site. https://asean.org/ asean/about-asean/overview/. Accessed 24 August 2019. 5 The most illustrative examples are the following: China-ASEAN Cooperation Framework, the China-ASEAN Marine Cooperation Center, and the East Asian Ocean Cooperation Platform, not to mention MOUs and joint statements for ocean cooperation with Thailand, Malaysia and Cambodia (PRC 2017). Besides this, China and ASEAN conducted a joint maritime exercise in October 2018, the first ever held, are advancing with

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scope and purpose(s) has been consistently denied by China (Blanchard and Flint 2017, 234). In the framework of EU-China relations, the SCS has been a point of friction, precisely because it involves a matter of rule of law and the EU has traditionally aligned itself with the United States on this matter (Cottey 2019). In effect, “official activities reveal that while Asia-Pacific maritime security issues have not traditionally penetrated far into EU policies, the SCS is one of the few exceptions” (Ghiasy et al. 2018, 36). Like the EUMSS, the latest revision of the action plan adopted by the Council in June 2018 does not make any mention to the initiative, nor to any cooperation with China—apart from a vague reference to “relevant partner countries”. Instead, it stresses the need for cooperation with ASEAN and NATO for a maritime rules-based order (European Council 2018, 3). The EU has not, to date, issued a specific document on the BRI, neither more particularly on the MSRI. It has rather been working on the development of the “EU Strategy on Connecting Europe and Asia” and the “EU Trans-European Transport Networks”, in order to increase synergies between BRI and a future similar EU strategy.6 Incidentally, China has welcomed the European strategy (European Council 2019, 6; Brattberg and Soula 2018, par. 14). This is so since the emphasis has been pragmatically placed upon connectivity for the sake of optimal connection flows in view of security concerns that are considered paramount. On its joint communication “Connecting Europe And Asia - Building Blocks For An EU Strategy”, the EU underlines the following correlation between connectivity and security:

the negotiations of a Code of Conduct (COC) and have in 2012 implemented a Declaration on the Conduct of Parties in the South China Sea (DOC) (PRC 2019). The DOC is available at https://asean.org/?static_post=declaration-on-the-conduct-of-parties-in-thesouth-china-sea-2. Accessed 24 August 2019. 6 The clear intention of the EU establishing an initiative of its own that would mirror BRI is implicit in the following excerpt: “Bilateral cooperation with individual countries should be adapted to their specific situation. For instance, with China, the EU should strengthen the existing cooperation on the respective infrastructure and development cooperation initiatives, promote the implementation of the principles of market access and a level playing field, as well as rely on international standards within initiatives on connectivity” (European Commission 2018, 7; emphasis added).

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(…) Access to trade routes remains dependent on an adequate political and security environment and is subject to addressing challenges, such as transnational organized crime and any kind of illicit smuggling and trafficking, cybersecurity and attacks on transport and energy security. These challenges cannot be addressed solely through the internal or external policies of countries or entities (…). (European Commission 2018, 4)

By advancing its own strategy based on its core values, the EU wants to be able to promote connectivity in “the European way”, i.e., ensuring “procurement rules”, “social and individual rights” and “free and fair competition” (European Commission 2018, 2). This can be read as a direct message to China that the EU is forging an alternative to Chinese BRI-related initiatives and projects. In fact, it can be seen as a European response to BRI, in the sense that it gives the EU the opportunity to distance itself from China in aspects in which they disagree (Brattberg and Soula 2018, par. 14). In this context, the bottom line is that BRI, including the MSRI, has brought with it the prospect of further competition to the EU-China relations, despite Chinese efforts to deny and mitigate it continuously.

EU-China Cooperation in Light of 21st Century Maritime Silk Road: Challenges and Opportunities As referred earlier, this study draws upon practice theory and two of Pierre Bourdieu’s “thinking tools”, namely “habitus” and “field” that are applied to the examination of international practices within the EU-China rapport in the realm of maritime security cooperation. For the sake of this study, the habitus corresponds to the set of dispositions that guide the agents’ practice and may vary according to their respective position on the field. They are historically incorporated and, thus, not intentional. In so being, the habitus can be seen as natural logics of action (Mérand and Pouliot 2008, 612–613). When applied to international practices, the habitus is closely related to the concept of background knowledge, i.e., “dominant interpretive backdrop that sets the terms of interaction” (Adler and Pouliot 2011, 17). Just as the habitus, the background knowledge is unintentional and yet it can change and evolve through interaction. It materializes through practices, i.e., “socially meaningful patterns of action which, in being performed more or less competently, simultaneously embody, act out, and

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possibly reify background knowledge and discourse in and on the material world” (ibid., 4). Nevertheless, practices are not static. In other words, “the habitus is the origin of the practices that reproduce or change the existing structures of the field. These practices again shape the experiences of actors, form their habitus, and stabilize power structures in the field” (Bueger and Gadinger 2015, 455). Hence, practices can be transformed through an agent-structure joint movement insofar as the world is formed by countless “assemblages of communities and their practices that interact, overlap, and evolve” (Adler and Pouliot, 27). Amidst them, are different communities of security practices, such as the one formed by maritime security actors that interact with each other. Finally, it is also pivotal to have in mind that practices are relational. Even though Bourdieu’s approach originally considers the concept of “habitus” as being more related to power and domination, than to the possibility of actual change (Bueger and Gadinger 2015, 455), here we adopt Mérand’s conceptualization as an actor’s “position and trajectory in a social field” (Mérand 2012, 139), by focusing on the habitus’ utility as the origins of practices. In this context, as a result of continued strategic interaction over time, the actors will eventually “cross-habitus”, meaning that they will be able to achieve a “deep understanding of each other’s position” (ibid., 144). Such strategic interaction that allows for cross-habitus will then generate new practices, i.e., will enable transformation (Adler and Pouliot 2011, 26). In this way, as Mérand puts it, “practices are generated by the schemes of perception and action that social agents have internalized by rubbing off shoulders with each other in a social field over a long period” (2012, 139), in other words, “a context in which learning is likely to result in the construction of common practices” (Geeraerts 2019, 156). From these practices, in the long run, a community of security practice will have room and base to emerge. In this regard, “from the perspective of practice, what is important in terms of processes of (security) community-building is not that they first create a common identity, but whether actors learn to do something in a new way” (Bremberg 2015, 677). In other words, a community of security practice will always precede a common identity, if this is ever reached, as it is not a pre-condition for the assemblage of the community. Rather, what is needed is a mere “compatibility of values and mutual responsiveness” (ibid., 676). Against this theoretical background, after having outlined and examined in the previous section the EU’s and Chinese stances and strategies in

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light of the advent of MSRI, it is possible to assess the challenges and the possibilities for maritime security cooperation between the two actors in light of practices. Firstly, it should be stressed that when it comes to maritime security against the backdrop of MSRI, cooperation apart from practices is hard to achieve. At the political level, cooperation is limited insofar as each partner has its own strategy regarding EU-Asia connectivity. This occurs because the relationship in the realm of maritime cooperation is marked by reciprocal mistrust, as well as conflicts deriving from diverging background knowledge. In fact, from the EU’s perspective, there is a clear “reluctance to accept Chinese terms of engagement on BRI projects” (Duchâtel and Duplaix 2018, 7), the MSRI included. Therefore, prevailing mistrust stands out as the first major challenge to the enhancement of EU-China cooperation. The EU’s mistrust vis-à-vis China has two mains reasons. Firstly, there is a sheer impression that BRI is in fact about power projection, notwithstanding Chinese attempt to promote a benign narrative about its role in the world (Duchâtel and Duplaix 2018, 7). Secondly, there is the tangible experience of internal divisions within the EU caused by the BRI (ibidem). Examples include the accession of some member states to the AIIB without any prior coordination at the EU level (Fallon 2015, 146); and also the China and Central and Eastern European Countries cooperation framework (CEEC 16+1),7 that has raised criticism that “China was instrumentalizing the EU only when and where it sees fit” (Makocki 2016, 69). Those episodes have inspired the fear that China was adopting an approach to divide and conquer within the EU (Dempsey 2019; Cottey 2019); and this has further contributed to fostering mistrust in the relationship. Moreover, these illustrative episodes have made the EU realize the need for a coordinated and unified approach toward BRI, something that has now being addressed on the basis of the EU Strategy on Connecting Europe and Asia (Brattberg and Soula 2018). This leads to the second challenge that links to the different ways in which both EU and China have engaged in BRI as well as in the EU Strategy on Connecting Europe and Asia, for that matter. The EU

7 The framework involves cooperation in a wide array of areas between China and those countries, between EU member states and neighboring countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia). Source: CEEC Web site. http://www.china-ceec.org/eng/. Accessed 24 August 2019.

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has been developing its own strategy not only because of the realization that it needed a unified approach, but also because of disagreements with China over practices and norms, which are grounded in diverging background knowledge/habitus. This has been an important reason for China engaging with member states separately, to the detriment of cooperating directly with the EU. China has initially perceived a bilateral approach with the EU as being problematic given its infrastructure financing operations that entail “state guarantees from the borrowing country and requires the direct award of a financed project to the Chinese companies, without an open and competitive tender” (Makocki 2016, 68). On the other hand, when it comes to financing rules, the EU upholds diverging practices, founded in diverging norms such as sustainability and transparency (Brattberg and Soula 2018, par. 9). However, China might eventually come to terms with the need to coordinate with the EU in those operations, even if as an interested party. For example, on the recent EU-China Joint Statement, there is a commitment to rules and principles, as well as the acknowledgment of the need to “comply with established international norms and standards, as well as the law of the countries benefiting from the projects, while taking into account their policies and individual situations” (European Council 2019, 6). Along these lines, the EU-China maritime security cooperation resulting from MSRI is not likely to develop its full potential between at the highest political-diplomatic level. However, the situation might change if we draw our attention to the level of practice. The potential to build a security community exists if drawing on the practice theory, once we place emphasis upon practical cooperation such as information sharing, training exercises, expertise transfer and other types of practical interaction (Bueger 2013, 307). In spite of the challenges above mentioned, the MSRI has widened the prospects for a common security agenda encompassing “economic avenues since the two are often wed” (Ghiasy et al. 2018, 46; Dorussen et al. 2018). Therefore, the MSRI has originated new opportunities for cooperation, which in future might well transcend maritime security stricto sensu. If the EU bets on a more practical approach, in line with the goal of promoting “maritime multilateralism”, it is likely to be able to expand its participation in the development of MSRI (Ghiasy et al. 2018, 46), especially through synergies with its own strategy. To this end, multiple areas present valid avenues of cooperation in multiple sectors, something that has to be harnessed by the two partners in

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order to overturn criticism regarding the effectiveness of the existing SP (Hong 2018, 22). Among these sectors, the establishment of Special Economic Zones and joint ventures for working on infrastructure projects, development and sustainability (Ghiasy et al. 2018, 36 and 48) is a case on point. To this should be added anti-piracy initiatives, in which the EU and China have already cooperated, as previously discussed. Equally important, cooperation is also more likely where competition between the two actors is less prominent as in the cases of the Mediterranean as well as the Indian and Atlantic Oceans (Duchâtel and Duplaix 2011, 37). According to Bueger, the emergence of a given security community depends upon three major aspects: “(1) the intensity with which actors engage and communicate with one another, (2) the degree to which actors securitize together and develop a common repertoire, and (3) the degree to which they engage in a common enterprise” (Bueger 2013, 299). From this, it follows that when considering the extent of the MSRI and the degree in which it will require the EU and China to jointly engage on several projects, the potential for such emergence of a security community does exist—even if the EU chooses to design its own strategy. Although we see two diverging habitus—with the EU putting forward the background of liberal order while seconding the Washington Consensus and China promoting the Beijing Consensus—each habitus will produce its own practices and undergo mutual pressures of change. Moreover, those differences between EU and China are not so important in the field of practice because, as previously mentioned, identity does not have to be common, only compatible, something that can be optimized through cross-habitus. Considering day-to-day practices between the EU and China, gaps linked to identity issues and diverging worldviews are not likely to cause incompatibility and hinder mutual interaction. Along these lines, if both EU and China take full advantage of opportunities created by the multiplication of contacts and exchanges as a result of increasing growing cooperation, “commonalities between the EU and China inevitably expand” (Hong 2018, 22).

Conclusion In this chapter, we have attempted to outline and appraise the evolution of the EU-China maritime security cooperation against the backdrop of the MSRI, taken here as an integral part of the BRI. Since 2003, the EU

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and China have developed a SP, through which growing interdependence and socialization between the two actors has been gradually taking place. China’s recent leap to the position of a leading economic power, with the perspective of becoming a military world in the upcoming decades has raised suspicion within the EU. Such suspicion should be seen in light of the EU’s transatlantic connections and concerns regarding Chinese investments across Europe and also claims regarding the South China Sea that could impact important sea lanes of communication essential to the EU’s trade relations. Mismatches regarding background knowledge, encompassing the value-system, have contributed to intensify competition and mistrust in the field of maritime security—one in which each actor has invested significantly in recent years. However, as this study has attempted to demonstrate, the development of MSRI has brought with it opportunities of further cooperation tantamount to the challenges. Such opportunities derive from the growing interaction required by the implementation of every project and negotiation, making it necessary for actors to interact not only on the highest politico-diplomatic level, but also at the level of strategic interaction through practices. Based on the concepts of cross-habitus and community of security practice, we have argued that the unfolding of the MSRI may be able to provide a wide field for cooperation, which over time may foster conditions for a transformation in patterns of practice. Consequently, over time competition in some instances may decline in favor of a more regular cooperative dynamics. Although the existing gap between the EU and China over worldviews will not go away any time soon, and the liberal values will prevail as the dominant norm system, the cross-habitus between the two actors has the potential to promote an increase of cooperation in the field of maritime security. Among practices, there is no need to share an identity, but only compatibility for cooperation to advance further. Both the positive evolution and record of the EU-China SP have given evidence of such compatibility that may allow the incremental bridging of the gaps which ultimately benefit the security cooperative dynamics.

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Mérand, Frédéric, and Vincent Pouliot. 2008. Le Monde De Pierre Bourdieu: Éléments Pour Une Théorie Sociale Des Relations Internationales. Canadian Journal of Political Science 41 (3): 603–625. Michalski, Anna, and Zhongqi Pan. 2017. Unlikely Partners? China, the European Union and the Forging of a Strategic Partnership. Singapore: Palgrave Macmillan. Montesano, Francesco Saverio. 2019. EU-China Security Relations: Discourse vs Practice and the Role of EU Member States. The International Spectator 54 (2): 139–158. Pan, Zhongqi. 2012. Introduction: Exploring the Conceptual Gaps in ChinaEU Relations. In Conceptual Gaps in China-EU Relations: Global Governance, Human Rights and Strategic Partnerships, ed. Zhongqi Pan, 1–15. London: Palgrave Macmillan. Paul, T. V. 2016. The Accommodation of Rising Powers in World Politics. In Accommodating Rising Powers: Past, Present, and Future, ed. T. V. Paul, 3–32. Cambridge: Cambridge University Press. People’s Republic of China (PRC). 2003. China’s EU Policy Paper. Beijing, 13 October. https://www.fmprc.gov.cn/mfa_eng/topics_665678/ ceupp_665916/t27708.shtml. Accessed 8 September 2019. People’s Republic of China (PRC). 2015a. Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. National Development and Reform Commission. Beijing, 28 March. http://en.ndrc. gov.cn/newsrelease/201503/t20150330_669367.html. Accessed 20 August 2019. People’s Republic of China (PRC). 2015b. “China’s Military Strategy” Information Office of the State Council. Beijing, 27 May. http://english.www.gov. cn/archive/white_paper/2015/05/27/content_281475115610833.htm. Accessed 10 October 2019. People’s Republic of China. (PRC). 2017. Full Text: Vision for Maritime Cooperation Under the Belt and Road Initiative. The State Council. Beijing, 20 June. http://english.www.gov.cn/archive/publications/2017/06/ 20/content_281475691873460.htm. Accessed 20 August 2019. People’s Republic of China (PRC). 2019. “China’s National Defense in the New Era” The State Council. Beijing, 24 July. http://www.xinhuanet.com/ english/2019-07/24/c_138253389.htm. Accessed 20 August 2019. Riddervold, Marianne. 2011. Finally Flexing Its Muscles? Atalanta—The European Union’s Naval Military Operation Against Piracy. European Security 20 (3): 385–404. Riddervold, Marianne. 2018. A Humanitarian Mission in Line with Human Rights? Assessing Sophia, the EU’s Naval Response to the Migration Crisis. European Security 27 (2): 158–174.

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Smith, Michael. 2016. EU Diplomacy and the EU-China Strategic Relationship: Framing, Negotiation and Management. Special Issue ‘The Strategic Partnerships of the European Union: Conceptual Insights, Cases and Lessons’. Cambridge Review of International Affairs 29 (1): 78–98. Stumbaum, May-Britt U., and Wei Xiong. 2012. Conceptual Differences of Strategic Partnership. In Conceptual Gaps in China-EU Relations: Global Governance, Human Rights and Strategic Partnerships, ed. Zhongqi Pan, 156– 169. London: Palgrave Macmillan. Zhang, Xiaoming; 2012. Multipolarity and Multilateralism in International Norms: The Chinese and European Perspectives. In Conceptual Gaps in China-EU Relations: Global Governance, Human Rights and Strategic Partnerships, ed. Zhongqi Pan, 173–186. London: Palgrave Macmillan.

CHAPTER 12

EU Legal Obstacles to the Belt and Road Initiative: Towards a China-EU Framework on the Belt and Road Initiative Sten Idris Verhoeven

Introduction The Belt and Road Initiative aims to connect China with the rest of Asia and Europe, thereby creating a Eurasian continent. Since the EU is the terminal point of both the overland and maritime routes of the Belt and Road Initiative and China’s largest trade partner, the EU is an essential partner for the success of the Initiative. Nonetheless, the EU has not yet adopted any common position on the Belt and Road Initiative. Whereas southern and eastern Member States are generally enthusiastic, northern and western Member States are more hesitant. China for its part focuses on the 17+1 Framework, which includes EU Member States and other European States, but has barely comprehensively engaged with the EU. However, such engagement is needed, due to significant legal obstacles that may arise when the Belt and Road Initiative is implemented within

S. I. Verhoeven (B) University of Macau, Macau SAR, China e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_12

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the EU legal order. Although China may prefer to engage with individual EU Member States, due to the pooling of sovereignty at the EU level, EU Member States do no longer have sole decision-making powers in the areas of the internal market, international investment, public procurement, etc. The contribution looks into the potential legal obstacles posed by EU law to the successful implementation of the Belt and Road Initiative. The first major obstacle lies in the division of competences between the EU and its Member States. The EU is a supranational, autonomous legal order, with its own competences that cannot be set aside by international commitments of the Member States,1 and primacy over the legal system of the Member States.2 Although most of the competences are shared, the EU has exclusive competences over many areas covered by the Belt and Road Initiative, in particular with regard to the trade and investment dimensions of the Belt and Road Initiative. Moreover, other areas of the Belt and Road Initiative, although shared, have indirectly become exclusive due to the action of the EU. In addition, Member States must sincerely cooperate with the EU, when exercising shared or their own competences.3 The contribution will also address whether the existing bilateral investment agreements between the Member States and China can still be relied upon after the EU obtained exclusive competence for external action in the field of direct investment.

1 ECJ, Joined cases C-402/05 P and C-415/05 P, Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council of the European Union and Commission of the European Communities [EU:C:2008:461], paras. 282–285; ECJ, C-284/16, Slowakische Republic v. Achmea [EU:C:2018:158], para. 32; ECJ, Opinion 1/17, Comprehensive Economic and Trade Agreement Between Canada, of the One Part, and the EU and Its Member States, of the Other Part [EU:C:2019:341], paras. 107 and 109–110. 2 ECJ, Case 6/64, Flaminio Costa v. ENEL [EU:C:1964:66]; ECJ, C-399/11, Stefano Melloni v. Ministerio Fiscal [EU:C:2013:107], para. 59. Primacy of EU law requires Member States to set aside national law that conflicts with EU law that has direct effect; if EU law does not have direct effect, Member States must as far as possible interpret national law in line with EU law: ECJ, C-573/17, Criminal Proceedings Against Daniel Adam Popławski [EU:C:2019:530], paras. 53–68. 3 Article 4(3) TEU.

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Besides these obstacles flowing from the division of competences, the EU has recently adopted a mechanism for screening of foreign investments in sensitive sectors,4 a mechanism with direct bearing on Chinese investment in the EU in the context of the Belt and Road Initiative. Finally, when China provides for financial support to EU Member States for infrastructure projects related to the Belt and Road Initiative, EU procurement law may introduce obstacles, as is evidenced by the EU Commission’s investigation into the Budapest-Belgrade Railway for potential violation of EU public procurement rules.5

The Belt and Road Initiative and the EU China launched its ambitious Belt and Road Initiative in 2013,6 partially in response to worsening international relations with its neighbours, Japan, Vietnam and the Philippines, and the United States’ pivot to Asia.7 Consequently, China reoriented its foreign policy, which primarily focused on its relation with the United States under the policy of “a new type of great power relations”, to its western neighbourhood.8 Additionally,

4 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, O.J. 21 March 2019, L79I/1. 5 M. Ferchen, “Hungaria-Serbia Railway Case Study and International Comparisons”, in M. Ferchen et al. (eds.), Assessing China’s Influence in Europe Through Investments in Technology and Infrastructure, Four Cases, Leiden Asia Center, 2018, 6, available at: https://www.clingendael.org/sites/default/files/2019-01/Report_Assessing_ China_Influence-in-Europe.pdf. 6 During a visit to Kazakhstan, on 7 September 2013, President Xi proposed that China and Central Asia cooperate to build a Silk Road economic belt; on 3 October 2013, in Indonesia President Xi introduced the 21st Century Maritime Silk Road as a new maritime silk road connecting China with the members of ASEAN, South Asian countries, Africa and Europe: D. Mitrovi´c, “The Belt and Road: China’s Ambitious Initiative”, 59 China International Studies 2016, 76. 7 European Parliamentary Research Service, “One Belt One Road (OBOR), China’s Regional Integration Initiative”, July 2016, 2, available at: http://www.europarl.europa. eu/RegData/etudes/BRIE/2016/586608/EPRS_BRI(2016)586608_EN.pdf. 8 Ibid.; see also European Council of Foreign Relation, “Explaining China’s Foreign Policy Reset”, April 2015, available at: https://www.ecfr.eu/page/-/ChinaAnalysisEng_ Special_issue_1503_Final_v3_(2).pdf; Y. Sun, “March West: China’s Response to the U.S. Rebalancing”, Brookings, 31 January 2013, available at: https://www.brookings.edu/ blog/up-front/2013/01/31/march-west-chinas-response-to-the-u-s-rebalancing/.

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the Belt and Road Initiative is the result of domestic concerns, in particular the “two centenary goals”, referring to the 100th anniversary of the Chinese Communist Party and the 100th anniversary of the People’s Republic of China respectively: turning China into a “moderately prosperous society” by 2021 and turning China into “a prosperous, strong, democratic, culturally advanced, harmonious and modern socialist country” by 2049, which in turn would lead to the realization of the “dream of a great rejuvenation of the Chinese Nation”.9 Other stated goals include supporting Chinese exports of products and equipment; controlling logistics chains to support Chinese trade with Europe; encouraging economic convergence and more balanced development across China; providing a mechanism for increasing the use of the Renminbi as a means of international payment; and creating alternative overland energy routes to supply oil and gas from Central Asia, Southeast Asia, and Pakistan.10 However, no official or generally accepted definition of the Belt and Road Initiative exists, since it was loosely defined when launched in 2013.11 According to Van der Putten et al., it is a “broad conceptual framework for policies contributing to greater economic integration within Asia, between Asia and Europe, and between Asia and Africa”.12 It involves more than 70 states along the Belt and Road Initiative and the members of the Asian Infrastructure Investment Bank, which includes

9 R. Aoyama, “‘One Belt, One Road’: China’s New Global Strategy”, 5 Journal of

Contemporary China Studies 2016, 3–4. 10 S. D. Gleave, “Research for TRAN Committee: The New Silk Route—Opportunities and Challenges for EU Transport”, European Parliament, Policy Department for Structural and Cohesion Policies, Brussels, 2018, 15 and 28–29, available at: http://www.europarl.europa.eu/RegData/etudes/STUD/2018/585907/IPOL_ STU(2018)585907_EN.pdf; D. Mitrovi´c, “The Belt and Road: China’s Ambitious Initiative”, 59 China International Studies 2016, 77–79. 11 Ibid., 23. 12 F.-P. Van der Putten, J. Seaman, M. Huotari, A. Ekman, & M. Otero-Iglesias (eds.),

Europe and China’s New Silk Roads, European Think-tank Network on China, December 2016, 3, available at: https://www.clingendael.org/sites/default/files/pdfs/Europe_and_ Chinas_New_Silk_Roads_0.pdf.

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20 Member States of the EU.13 In any event, the Belt and Road Initiative comprises six major land corridors and one maritime corridor.14 The New Eurasian Land Bridge Economic Corridor is based on a railway line that connects western China with Rotterdam through Kazakhstan, Russia, Belarus and Poland. Furthermore, the Maritime Corridor connects the major ports within the South China Sea and the Mediterranean Sea, across the Bay of Bengal, the East African coast, and the Suez Canal. Consequently, the EU is one of the destinations of the Belt and Road Initiative. In order to realize the European part of the Belt and Road, China has opted to either directly invest in European infrastructure, such as acquiring a controlling stake in the Piraeus Port Authority, or to provide loans to finance infrastructure projects associated with the Belt and Road Initiative.15 Due to the importance of Europe for the Belt and Road Initiative, one could have expected that China would directly interact with the EU. A large amount of European States are Member States of the EU. Nonetheless, initially, the opposite has happened: China has opted to interact with EU Member States in the now 17+1 Framework, including 12 EU Member States: Bulgaria, Croatia, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia, with the EU Commission and the European Investment Bank as observers. China equally attaches great importance to the Mediterranean region, in particular Malta, Cyprus, Italy, Spain and Portugal. Member States typically have concluded legally non-binding16 Memoranda of 13 At the time of writing, 31 October 2019, the EU Member States are: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Spain, Sweden, The UK: https://www.aiib.org/en/about-aiib/governance/members-of-bank/index.html. 14 National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, 28 March 2015, available at: http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html. 15 F.-P. Van der Putten, J. Seaman, M. Huotari, A. Ekman, & M. Otero-Iglesias (eds.), Europe and China’s New Silk Roads, European Think-tank Network on China, December 2016, 4, available at: https://www.clingendael.org/sites/default/files/pdfs/Europe_and_ Chinas_New_Silk_Roads_0.pdf. 16 M. N. Shaw, International Law, Cambridge, Cambridge University Press, 2014, 656–657. For instance, the Italian-Chinese Memorandum of Understanding specifically stipulates that it does not create legally binding rights and obligations: Paragraph VI Memorandum of Understanding between the Government of the Italian Republic and the

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Understanding with China, covering transport-related issues, infrastructure development, cooperation over customs procedures, financial cooperation, industry development, trade and the exchange of people. Not surprisingly, the EU has been concerned that the Belt and Road Initiative may undermine the EU’s common position in its relation with China, a concern that is substantiated by the dissenting positions within the EU by some Member States on the South China Sea arbitral award, human rights in China, China’s market economy status, the EU level screening mechanism, and of course the Belt and Road Initiative itself.17 Furthermore, the EU has its own plans to develop transportation infrastructure in the EU Member States, the Trans-European Transport Networks (TENT),18 which may overlap with the Belt and Road projects, in particular the North Sea-Baltic TEN-T Core Network Corridor. In 2017, it was decided that the Trans-European Transportation Networks would equally include the Eastern Partnership countries,19 potentially creating conflicts with future Belt and Road projects. In addition, there is the concern whether the projects related to the Belt and Road Initiative are economically viable, truly create a win-win situation and do not overburden countries with debt.20 In this regard, there Government of the People’s Republic of China on Cooperation within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative, available at: http://www.governo.it/sites/governo.it/files/Memorandum_Italia-Cina_EN.pdf. 17 European Parliament, “China, the 16+1 Cooperation Format and the EU”, 2017, 3, available at: http://www.europarl.europa.eu/RegData/etudes/BRIE/2018/625173/ EPRS_BRI(2018)625173_EN.pdf. 18 Regulation (EU) No. 1315/2013 of the European Parliament and of the Council of 11 December 2013 on Union guidelines for the development of the trans-European transport network and repealing Decision No. 661/2010/EU, O.J. 20 December 2013, L348/1. 19 See Commission Delegated Regulation (EU) 2019/254 of 9 November 2018 on the

adaptation of Annex III to Regulation (EU) No. 1315/2013 of the European Parliament and of the Council on Union guidelines for the development of the trans-European transport network, O.J. 14 February 2019, L43/1. 20 G. van Pinxteren, “China’s Belt and Road Initiative: Nice for China, Not for Europe”, 2017, 2–3, available at: https://www.clingendael.org/sites/default/files/201707/Opinie_One_Belt_China_GvP_CAF.pdf; M. Okano-Heijmans & T. Kamo, “Engaging but Not Endorsing China’s Belt and Road Initiative”, 2019, 2, available at: https:// www.clingendael.org/sites/default/files/2019-05/PB_China_Belt_and_Road_Initiative_ May_2019.pdf?fbclid=IwAR1RFGcH8QsGdFCFcmcR_iDYa38RC6jJ_aCmIEOhfGGKsils93sQN9UN74; M. Ferchen, “Hungaria-Serbia Railway Case Study and International Comparisons”, in M. Ferchen et al. (eds.), Assessing China’s Influence in Europe Through

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is some dissatisfaction that the ambitious goals of the previous 16+1 Summits are rarely leading to concrete results.21 It has equally been noted that trains arriving in the EU are often more loaded with goods than those leaving the EU22 ; moreover, it is questionable that transport of goods between China and the EU by rail is an economically viable alternative to transport by air and sea.23 Furthermore, questions have been raised concerning the economic viability of some of the projects associated with the Belt and Road Initiative.24 Nonetheless, the Belt and Road Initiative has a significant potential for increase in trade and economic growth, for both China and the EU.25 In 2013, China did not consider the EU as relevant for the Belt and Road, which focused on its western periphery.26 In the period from 2013 to 2014, the EU’s initial stance was therefore to await the development of Investments in Technology and Infrastructure, Four Cases, Leiden Asia Center, 2018, 5–8, available at: https://www.clingendael.org/sites/default/files/2019-01/Report_Assessing_ China_Influence-in-Europe.pdf; more specifically: World Bank, Belt and Road Economics: Opportunities and Risks of Transport Corridors, Washington, DC, World Bank, 2019, 39–42. 21 D. Pavli´cevi´c, “China in Central and Eastern Europe: 4 Myths”, The Diplomat, 16 June 2016, available at: https://thediplomat.com/2016/06/china-in-central-andeasterneurope-4-myths. 22 See, for instance, Spain: M. Esteban & M Otero-Iglesias, “Spain: Looking for Opportunities in OBOR”, in F.-P. Van der Putten, J. Seaman, M. Huotari, A. Ekman, & M. Otero-Iglesias (eds.), Europe and China’s New Silk Roads, European Think-tank Network on China, December 2016, 56–57, available at: https://www.clingendael.org/sites/ default/files/pdfs/Europe_and_Chinas_New_Silk_Roads_0.pdf. 23 S. D. Gleave, “Research for TRAN Committee: The New Silk Route—Opportunities and Challenges for EU Transport”, European Parliament, Policy Department for Structural and Cohesion Policies, Brussels, 2018, 56–58, available at: http://www.europarl. europa.eu/RegData/etudes/STUD/2018/585907/IPOL_STU(2018)585907_EN.pdf. 24 Ibid., 68. 25 H. Lu, C. Rohr, M. Hafner, & A. Knack, China Belt and Road Initiative, Measuring

the Impact of Improving Transport Connectivity on International Trade in the Region—A Proof-of-Concept Study, Rand, 2018, available at: https://www.rand.org/content/dam/ rand/pubs/research_reports/RR2600/RR2625/RAND_RR2625.pdf; A. Garcia Herrero & J. Xu, China’s Belt and Road Initiative: Can Europe Expect Trade Gains?, Bruegel, 2016, available at: https://bruegel.org/wp-content/uploads/2016/09/WP-05-2016.pdf. See also World Bank, Belt and Road Economics: Opportunities and Risks of Transport Corridors, Washington, DC, World Bank, 2019, 43–64. 26 J. Zheng, “Does Europe Matter? The Role of Europe in Chinese Narratives of ‘One Belt, One Road’ and ‘New Type of Great Power Relations’”, 55(5) Journal of Common Market Studies 2017, 1170.

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the Belt and Road Initiative and its impact on the EU, although the EU stressed that the Belt and Road Initiative must be in line with EU standards and the transnational networks.27 Since 2015, the EU took a more active approach towards the Belt and Road Initiative as it responded with a proposal for the Connectivity Platform for EU-China Cooperation, a proposal which was accepted by China.28 In addition, the EU-China CoInvestment Fund was signed between the European Investment Bank and the Silk Road Fund.29 The EU and China have discussed the coordination of projects in Central and Eastern Europe, transparency and possible cooperation in the Connectivity Platform, albeit with limited success.30 However, more recently, the EU has become more assertive with regard to the Belt and Road Initiative, without losing interest in connectivity in Eurasia. In April 2018, 27 of the 28 national EU ambassadors to China, with the exception of Hungary, criticized the project as being designed to hamper free trade and put Chinese companies at an advantage.31 Furthermore, the EU launched its own programme for connectivity between Europe and Asia in the European way, namely sustainable, comprehensive and international rule-based connectivity.32 In this context, on 27

27 Z. Liu, “Europe’s Protectionist Position on the Belt and Road and Its Influence”,

72 China International Studies 2018, 146. 28 F.-P. Van der Putten, J. Seaman, M. Huotari, A. Ekman, & M. Otero-Iglesias (eds.), Europe and China’s New Silk Roads, European Think-tank Network on China, December 2016, 5, available at: https://www.clingendael.org/sites/default/files/pdfs/Europe_and_ Chinas_New_Silk_Roads_0.pdf. 29 https://www.eif.org/what_we_do/equity/news/2017/eib_silk_road_fund_initiative.

htm. 30 M. Okano-Heijmans & T. Kamo, “Engaging but Not Endorsing China’s Belt and Road Initiative”, 2019, 2, available at: https://www.clingendael.org/sites/ default/files/2019-05/PB_China_Belt_and_Road_Initiative_May_2019.pdf?fbclid= IwAR1RFGcH8QsGdFCFcmcR_iDYa38RC6jJ_aCmIEOhfGGKsi-ls93sQN9UN74. 31 Handelsblatt, “EU Ambassadors Band Together Against Silk Road”, available at: https://www.handelsblatt.com/today/politics/china-first-eu-ambassadors-bandtogether-against-silk-road/23581860.html. 32 European Commission and High Representative of the Union for Foreign Affairs and Security Policy, “Joint Communication to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, Connecting Europe and Asia—Building Blocks for an EU Strategy”, 19 September 2018, 2–3, available at: https://eeas.europa.eu/sites/eeas/files/joint_communication_-_connecting_ europe_and_asia_-_building_blocks_for_an_eu_strategy_2018-09-19.pdf.

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September 2019, the EU and Japan signed the Partnership on Sustainable Connectivity and Quality Infrastructure.33 In addition, the EU has classified China not only as a strategic partner, but equally as “a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance”.34 Nonetheless, the EU and China remain engaged, with both since 2013 negotiating a EU-China Comprehensive Investment Agreement, which they hope to complete in 2020; the agreement would substantially improve market access, eliminate discriminatory requirements and practices affecting foreign investors, establish a balanced investment protection framework and include provisions on investment and sustainable development.35 Equally, the EU remains willing to engage with China on the Belt and Road Initiative by finding “meaningful synergies” with the EU’s connectivity strategy for Asia, as long as the projects of the Belt and Road Initiative respect market rules, transparency, open procurement and establish a level playing field and fair competition.36

The Competence of the EU with Regard to the Belt and Road Initiative Despite the growing interaction between China and the EU on the Belt and Road Initiative, China has primarily opted to operationalize the Belt

33 Available at: https://eeas.europa.eu/headquarters/headquarters-homepage/68018/ partnership-sustainable-connectivity-and-quality-infrastructure-between-european-unionand_en. 34 European Commission and High Representative of the Union for Foreign Affairs and Security Policy, “Joint Communication to the European Parliament, the European Council and the Council, EU-China—A Strategic Outlook”, 12 March 2019, 1, available at: https://ec.europa.eu/commission/sites/beta-political/files/communicationeu-china-a-strategic-outlook.pdf. 35 Joint Statement of the 21st EU-China Summit, 10 April 2019, para. 4, available at: https://eeas.europa.eu/delegations/china_en/60836/Joint%20statement%20of% 20the%2021st%20EU-China%20summit. 36 Vice-President of the European Commission Maroš Šefˇcoviˇc, “Connecting Europe and Asia: Seeking Synergies with China and the Belt and Road”, 25 April 2019, available at: https://eeas.europa.eu/delegations/china/61412/connecting-europe-andasia-seeking-synergies-china%E2%80%99s-belt-and-road_en?fbclid=IwAR23aj_yzA85A_ SVXclTe3z1BBYpL3QHMtmClL5r-xEwaHezieZCGl9fmEU.

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and Road Projects through interacting with the Member States of the EU, through the conclusion of Memoranda of Understanding, which include political cooperation, trade and investment, transport and infrastructure, people-to-people exchange, etc. Although these memoranda are not legally binding, they may lead to the adoption of legislation or other measures in the EU Member States. However, EU Member States can only implement the Memoranda of Understanding if they have the competence under EU law to do so. Hence, the specification in the SinoItalian Memorandum of Understanding that the memorandum has to be interpreted, for Italy, in line with its obligations arising from its membership of the EU.37 Whether the EU Member States have the competence depends on the allocation of competence under the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU).38 The Competence of the EU with Regard to the Trade Dimension of the Belt and Road Initiative The EU has only the competences that the treaties have conferred upon it.39 This principle is further elaborated in Article 2 TFEU, which makes a distinction between exclusive and shared competences: in case of exclusive competences only the EU may legislate and adopt legally binding acts, whereas for shared competences the EU and the Member States both have competence over the area. Relevant for the Belt and Road is that the EU has exclusive competence over the common commercial policy,40 a policy that was significantly expanded by the Treaty of Lisbon in 2009, to include direct investment. In turn, Article 206 TFEU describes the sphere of the common commercial policy as including tariff rates, the conclusion

37 Paragraph VI Memorandum of Understanding between the Government of the Italian Republic and the Government of the People’s Republic of China on Cooperation within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative, available at: http://www.governo.it/sites/governo.it/files/ Memorandum_Italia-Cina_EN.pdf. 38 Consolidated Version of the Treaty on European Union, O.J. 26 October 2012, C326/1; Consolidated Version of the Treaty of the Functioning of the European Union, O.J. 26 October 2012, C326/47. 39 Article 5(2) TEU. 40 Article 3(1)(e) TFEU.

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of tariff and trade agreements relating to trade in goods and services, the commercial aspects of intellectual property, and foreign direct investment. However, besides obvious economic dimensions, the EU trade policy is embedded in the larger goals of the EU’s external action and reinforces the EU’s foreign and security policy.41 Consequently, the EU’s trade policy is not confined to reduction of tariffs and liberalization of trade, but also promotes sustainable development, labour rights, human rights, the environment, and good government, including procurement and competition.42 Hence, the recent free trade agreements are a vehicle for the EU to export its values and to ensure that its trade partners act consistently with European values and standards.43 In the light of the extensive scope of contemporary free trade agreements concluded by the EU, the question of the extent of the exclusive competence comes to the fore. In this regard, the European Court of Justice (ECJ) has extensively interpreted the exclusive competence of common commercial policy. The common commercial policy relates to trade with third States.44 However, an agreement that has merely incidental implications for trade with third States will not fall within the scope of the common commercial policy; the agreement must essentially intend “to promote, facilitate or govern such trade and has direct and immediate effects on it”.45 This includes trade liberalization in goods and services, 41 Article 21(2)–(3) TEU; Article 205 TFEU; Article 207(1) TFEU. 42 European Commission, “Communication from the Commission to the Council, the

European Parliament, the European Social and Economic Committee and the Committee of the Regions, Trade, Growth and World Affairs: Trade Policy as a Core Component of the EU’s 2020 Strategy”, 2010, 15, available at: https://eur-lex.europa.eu/legal-content/ EN/TXT/PDF/?uri=CELEX:52010DC0612&from=en. 43 S. Gstöhl & D. Hanf, “The EU’s Post-Lisbon Free Trade Agreements: Commercial Interests in a Changing Constitutional Context”, 20(6) European Law Journal 2014, 736; A. Dimopoulos, “The Effects of the Lisbon Treaty on the Principles and Objectives of the Common Commercial Policy”, 15(2) European Foreign Affairs Review 2010, 161. 44 ECJ, C-414/11, Daiichi Sankyo and Sanofi-Aventis Deutschland [EU:C:2013:520], para. 50; ECJ, C-137/12, Commission v. Council [EU:C:2013:675], para. 56; ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], para. 35. 45 ECJ, C-414/11, Daiichi Sankyo and Sanofi-Aventis Deutschland [EU:C:2013:520], para. 51; ECJ, C-137/12, Commission v. Council [EU:C:2013:675], para. 57; ECJ, Opinion 3/15, Marrakesh Treaty on Access to Published Works [EU:C:2017:114], para. 61; ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], para. 36.

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with services referring to all four modes of service under WTO law,46 market access of goods and services, customs duties and customs facilitation, non-tariff barriers to trade and investment, commercial aspects of intellectual property rights, government procurement, commitments regarding free and undistorted competition, including State aid, and admission and protection of direct investment.47 A direct investment is defined as “investments of any kind made by natural or legal persons which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity. Acquisition of a holding in an undertaking constituted as a company limited by shares is a direct investment where the shares held by the shareholder enable him to participate effectively in the management of that company or in its control”.48 Indirect investments and investor-State dispute mechanisms, on the other hand, do not belong to the exclusive competence of the EU, but are shared between the EU and the Member States.49 In addition, the ECJ has specified that because the common commercial policy has to be carried out in line with the objectives of the EU’s external action, the objective of sustainable development forms an integral part of the common commercial policy.50 However, the objective of sustainable development may not lead to harmonization of rules between the EU and the party to the agreement. Rather, commitments to sustainable development in trade agreements are limited to commitments that make liberalization of international trade conditional on compliance with international obligations concerning social protection of workers and environmental protection.51

46 ECJ, Opinion 1/08, Agreements Modifying the Schedules of Specific Commitments Under the GATS [EU:C:2009:739], paras. 4 and 118–119. 47 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376]. 48 ECJ, C-446/04, Test Claimants in the FII Group Litigation, [EU:C:2006:774], paras. 181–182; ECJ, C-326/07, Commission v. Italy [EU:C:2009:193], para. 35; ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], para. 80. 49 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], paras. 225–244 and 285–293. 50 Ibid., paras. 142–148. 51 Ibid., para. 166.

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From this overview of the EU’s competence of the common commercial policy, significant dimensions of the Belt and Road Initiative, whose purpose is to, inter alia, facilitate trade by simplifying customs clearance systems and quarantine processes, improving market access and eliminating trade barriers, simplifying foreign investment procedures, etc.,52 will be covered by the EU’s exclusive competence of the common commercial policy. Furthermore, since connectivity in general has a direct impact on trade,53 other parts of the Belt and Road may as well fall within the scope of the common commercial policy, for instance, minimum labour standards, harmonization of standards related to trade, and sustainability requirements.54 Whether a measure will facilitate trade and direct and immediate impact trade depends on the objective of the measure, which can be derived from the terms of the measure.55 In any event, Chinese investments in the EU that amount to direct investments and market access of Chinese companies into the EU, including Chinese construction companies and Chinese financial institutions offering loans to support Belt and Road projects, fall squarely within the EU’s competence. The Competence of the EU in the Area of Transport Article 207(5) TFEU introduces a significant exception to the exclusive competence of common commercial policy, namely the international trade in transport services, which remains part of the common transport policy, a shared competence between the EU and the Member States.56

52 State Council of the People’s Republic of China, “Action Plan on the Belt and Road Initiative”, 2015, available at: http://english.www.gov.cn/archive/publications/2015/ 03/30/content_281475080249035.htm; G. Grieger, “European Parliament Research Service Briefing, One Belt, One Road (OBOR): China’s Regional Integration Initiative”, 2016, 4, available at: http://www.europarl.europa.eu/RegData/etudes/BRIE/ 2016/586608/EPRS_BRI(2016)586608_EN.pdf. 53 Supra, note 25. 54 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the

Republic of Singapore [EU:C:2017:376], paras. 157 and ff. More specifically, if an area falls within the scope of the WTO, this is a strong indication that the area concerned has a direct and immediate effect on trade: ECJ, C-414/11, Daiichi Sankyo and Sanofi-Aventis Deutschland [EU:C:2013:520], paras. 52 and ff. 55 ECJ, Opinion 3/15, Marrakesh [EU:C:2017:114], paras. 62 and ff.

Treaty

on

56 Article 207(5) TFEU juncto Article 4(2)(g) TFEU.

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Transport services are services involving a physical act of moving persons or goods from one place to another by a means of transport and services that are inherently linked to this.57 Transport services may cover road transport, rail transport, maritime and inland waterways transport, and air transport. Transport services do not include maintenance and repair of means of transport, the selling and marketing of transport services and the reservation of those services since those services are part of the common commercial policy.58 Consequently, the construction of transport infrastructure projects, such as railroads, airport and port terminals does not fall within the ambit of transport services and remains part of the common commercial policy. Nonetheless, the Belt and Road Initiative necessarily involves transportation services over land and sea. Would China be able to conclude agreements with the Member States with regard to transport services, which do not fall within the scope of the common commercial policy? The answer is largely in the negative. It is not because the EU and the Member States have a shared competence that this competence cannot become exclusive through the gradual exercise of this shared competence by the EU. Once the EU has exercised its competence, the Member States are pre-empted to exercise that competence.59 Hence, a shared competence may well become over time exclusive, a supervening exclusivity,60 when the EU has completely or almost completely exhausted its legislative competence.61 It is important to note that the pre-emption of the power of the Member States does not only cover existing EU law, but

57 ECJ, C-168/14, Grupo Itevelesa and Others [EU:C:2015:685], paras. 45–46. 58 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the

Republic of Singapore [EU:C:2017:376], paras. 62–68. 59 Article 2(2) TFEU; ECJ, Case 22/70, Commission v. Council [EU:C:1971:32], para.

31. 60 ECJ, Opinion 2/91, Convention Nº 170 of the International Labour Organization Concerning Safety in the use of Chemicals at Work [EU:C:1993:106], para. 9. See also ECJ, Opinion 1/94, Competence of the Community to Conclude International Agreements Concerning Services and the Protection of Intellectual Property [EU:C:1994:384], paras. 72–105. 61 M. Chamon, “Implied Exclusive Powers in the ECJ Post-Lisbon Jurisprudence: The Continued Development of the ERTA Doctrine”, 55 Common Market Law Review 2018, 1105.

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the law’s “future development, insofar as that is foreseeable at the time of that analysis” as well.62 This raises the question which actor has the power to conclude agreements related to shared competences. Article 3(2) TFEU, introduced by the Treaty of Lisbon, specifies that the EU has exclusive competence to conclude an international agreement when “its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope”. An agreement concluded by the Member States will affect common rules from the moment its application affects the effectiveness and the full application of EU law.63 The specific rules of the international agreement do not need to conflict with secondary EU law per se. In case of an area almost completely covered by EU law, for instance, when the EU lays down uniform rules, if it cannot be excluded that the application of the international agreement will hinder the realization of the objectives of secondary EU law, only the EU has exclusive competence.64 Moreover, if the area is not almost completely covered by EU law, Member States will not alone be able to conclude agreements if those agreements partially affect EU law.65 In essence, when the agreement is “capable of undermining the uniform and consistent application of the EU rules and the proper functioning of the system which they establish”,66 the EU will have exclusive competence. In particular, an international agreement will have a risk of 62 ECJ, Opinion 1/03, Competence of the Community to Conclude the New Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters [EU:C:2006:81], para. 126. 63 Ibid., para. 128; ECJ, C-467/98, Commission v. Denmark (“Open Skies ”) [EU:C:2002:625], paras. 85–92. 64 ECJ, Opinion 2/91, Convention Nº 170 of the International Labour Organization Concerning Safety in the Use of Chemicals at Work [EU:C:1993:106], paras. 25–26. 65 M. Chamon, “Implied Exclusive Powers in the ECJ Post-Lisbon Jurisprudence: The Continued Development of the ERTA Doctrine”, 55 Common Market Law Review 2018, 1120–1121. 66 ECJ, Opinion 1/13, Convention on the Civil Aspects of International Child Abduction [EU:C:2014:2303], para. 74. Similarly, see ECJ, C-114/12, Commission v. Council (Protection of Neighbouring Rights of Broadcasting Organisations) [EU:C:2014:2151], para. 74; ECJ, C-66/13, Green Network SpA v. Autorità per l’energia elettrica e il gas [EU:C:2014:2399], para. 33; ECJ, Opinion 3/15, Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled [EU:C:2017:114], para. 108.

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affecting EU law when there is an overlap between the two, taking into account their foreseeable future development and the nature and content of the rules and provisions, and when EU law lays down uniform rules.67 Furthermore, even if EU law allows the Member States some competence and discretion in an area, this competence may not be used in such a way as to undermine the objectives of EU law.68 From this overview of the scope of Article 3(2) TFEU, it is clear that a supervening exclusive competence of the EU is likely to be found once the EU has adopted extensive secondary legislation in a specific area. Once an area has extensive EU regulation, the Member States no longer can adopt any international agreement, since the mere risk of affecting EU law is sufficient to bestow the EU with exclusive competence. As the Court found in Opinion 2/15, due to the extensive EU secondary law on road and rail transportation, despite Article 207(5) TFEU, the EU has exclusive competence.69 However, there was a disagreement between the Court and Advocate General Sharpston concerning maritime transport. Advocate General Sharpston found that there was an overlap between Regulation No. 4055/86 and the EU-Singapore Free Trade Agreement. She equally found that although the Regulation was only concerned with cross-border EU maritime transport and not with maritime transport between the EU and third countries, this in itself is not sufficient to reject the exclusive competence of the EU, since international agreements may very well affect common rules governing intra-EU situations. Nonetheless, since Regulation No. 4055/86 does not cover all aspects of transport services, such as for instance the right of establishment, the Advocate General did not find that the area of maritime transport is largely covered by common rules of EU law.70 Conversely, the Court disagreed with the Advocate General since the main concern of the EU-Singapore Free Trade Agreement was the cross-boundary maritime services, so that

67 ECJ, Opinion 1/13, Convention on the Civil Aspects of International Child Abduction [EU:C:2014:2303], para. 108. 68 ECJ, Opinion 3/15, Marrakesh Treaty to Facilitate Access to Published Works for

Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled [EU:C:2017:114], para. 124. 69 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], paras. 195–212. 70 Opinion Advocate General Sharpston, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2016:992], paras. 239–241.

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therefore there was an almost complete overlap between EU law and the free trade agreement and a risk that the common rules would be affected. The Court regarded the other aspects of maritime transport services as not sufficiently significant as to include them in its analysis of the area covered by common rules.71 Hence, the Court is willing to “compartmentalize” an area of EU law in order to more easily find an overlap with the commitments in an international agreement, so that the EU is more likely to have exclusive competence. Nonetheless, it has to be stressed that in order for Article 3(2) TFEU to apply, there must be a large overlap between the international agreement and secondary EU law. Hence, the wider the area, the less likely there will be a significant overlap. If the international agreement covers maritime transport services that go beyond cross-border maritime transport, Article 3(2) TFEU will not apply and the EU will not have exclusive competence. However, this does not entail that Member States will alone be able to conclude agreements if those agreements partially affect EU law.72 Due to the above-mentioned pre-emption doctrine, once the EU has acted in a shared competence, it pre-empts the power of the Member States to act. As a result, both the EU and the Member States will have to jointly together negotiate the international agreement and conclude a mixed agreement.73 It is only when the international agreement does not cover any area regulated by EU law that the Member States may act by themselves.74 Nonetheless, when acting together with the EU or by themselves, the Member States must in furtherance of the principle of sincere cooperation, not undermine the objectives and effectiveness of EU law.75 Even in areas over which a Member State has retained 71 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], paras. 175–195. 72 M. Chamon, “Implied Exclusive Powers in the ECJ Post-Lisbon Jurisprudence: The Continued Development of the ERTA Doctrine”, 55 Common Market Law Review 2018, 1120–1121. 73 See, e.g., ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], paras. 240–243. 74 ECJ, C-370/12, Thomas Pringle v. Government of Ireland and Others [EU:C:2012:756], paras. 68–69; C. Hillion, “Mixity and Coherence in EU External Relations: The Significance of the Duty of Cooperation”, CLEER Working Papers 2009/2, 21. 75 Article 4(3) TEU; ECJ, Case 22/70, Commission v. Council [EU:C:1971:32], paras. 17–22; ECJ, Opinion 1/03, Competence of the Community to Conclude the New Lugano

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full competence and the EU has no competence, the principle of sincere cooperation, as a general principle of EU law, remains applicable.76 With regard to external relations, the principle implies that Member States have to, at all times, act in the interest of the EU and that the Member States are prevented to undermine the external action of the EU.77 In this respect, it aims to ensure the objective of the unity of the external action of the EU.78 Consequently, the principle does not only prevent Member States to conclude international agreements undermining EU law or the autonomy of the EU institutions, but equally bars them from negotiating such agreements.79 Furthermore, once the EU has decided to open negotiations on an international agreement, Member States have at the very least a duty of close cooperation with the EU in order to facilitate the success of the negotiations and the external representation of the EU.80 A Member State may equally not undermine a common strategy of the EU, regardless whether that strategy is adopted in a binding act.81 With regard to the Belt and Road Initiative, the focus of the Initiative is on rail and maritime cross-border transportation. In the light of the EU’s Opinion 2/15, this implies that for rail transportation (and transportation by road), the EU has exclusive competence, in the light of the wide scope of EU law, to conclude any international agreement with China on these areas. Furthermore, cross-border maritime transport is equally an exclusive competence on the basis of Article 3(2) TFEU, but when

Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters [EU:C:2006:81], para. 119; ECJ, C-55/00, Elide Gottardo v. Istituto nazionale della previdenza sociale (INPS) [EU:C:2002:16], para. 32. 76 ECJ, C-266/03, Commission v. Luxembourg [EU:C:2005:341], para. 58; ECJ, C433/03, Commission v. Germany [EU:C:2005:462], para. 64; ECJ, C-124/95, The Queen, ex parte Centro-Com Srl v. HM Treasury and Bank of England [EU:C:1997:8], paras. 25 and 27. 77 ECJ, C-266/03, Commission v. Luxembourg [EU:C:2005:341], para. 60. 78 E. Neframi, “The Duty of Loyalty: Rethinking Its Scope Through It Application in

the Field of EU External Relations”, 47 Common Market Law Review 2010, 352–353. 79 ECJ, Opinion 1/76, Draft Agreement Establishing a European Laying-Up Fund for Inland Waterway Vessels [EU:C:1977:63], paras. 10–12. 80 ECJ, C-266/03, Commission v. Luxembourg [EU:C:2005:341], para. 60; ECJ, C433/03, Commission v. Germany [EU:C:2005:462], para. 66. 81 ECJ, C-246/07, Commission v. Sweden [EU:C:2010:203], paras. 103–104.

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the international agreement would cover more than cross-border maritime transport, both the EU and the Member States will jointly have to conclude any international agreement with China on the Belt and Road Initiative. The Member States will only be able to individually or collectively conclude agreements on the Belt and Road if those agreements do not cover areas regulated by EU law. However, at this point in time, the EU is equally negotiating an ambitious investment agreement with China, which it hopes to conclude in 2020,82 and which will have an impact on trade and connectivity between China and the EU. In addition, China and the EU interact through the Connectivity Platform for EU-China Cooperation. Consequently, because of the duty of sincere cooperation, the Member States will have to coordinate any potential interaction with China with the action of the EU and may not endanger the negotiations on the EU-China investment agreement. Equally, their interaction with China in the context of the Belt and Road Initiative must support the EU’s position on this Initiative. As a result, even if the Member States have a limited competence to conclude international agreements, these agreements can only support the position of the EU on the Belt and Road Initiative and have to remain in line with the objectives of the EU.

Member State Competence over Belt and Road Initiative Projects on the Basis of Investment Agreements between the Member States and China As the foregoing parts have demonstrated, concerning many aspects of the Belt and Road Initiative, the EU has important competences in its external action. Nonetheless, with regard to direct investment, the EU’s competence to conclude international agreements was only introduced with the Treaty of Lisbon, in 2009. From that moment on, the EU replaced the Member States in their competence to negotiate and conclude investment agreements. New agreements concluded between the EU and third States will replace the old Member State bilateral or multilateral investment agreements.83 However, the conclusion of such new 82 European Commission, Directorate-General for Trade, “Report of the 23rd Round of Negotiations for the EU-China Investment Agreement”, 25 September 2019, available at: https://trade.ec.europa.eu/doclib/docs/2019/september/tradoc_158373.pdf. 83 ECJ, Joined Cases 21/72 to 24/72, International Fruit Company NV and Others v. Produktschap voor Groenten en Fruit [EU:C:1972:115], paras. 10–18.

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international agreements is a lengthy process. Since direct investment by Chinese companies is one means to achieve the European limb of the Belt and Road Initiative, could such investments be subsumed under the investment agreements between the Member States and China? To answer this question, two situations need to be distinguished. The first situation concerns an investment agreement between a Member State and China concluded before that Member State joined the EU. This situation is regulated by Article 351 TFEU, which is intended to permit the Member States to respect the rights that third States derive in accordance with international law from the earlier agreements.84 Pursuant to Article 351 TFEU Member States may continue to apply the earlier agreements, even if these agreements would conflict with secondary and primary EU law, with the exception of the principles that constitute the foundation of the EU legal order.85 Article 351 TFEU requires that the performance of the obligations in the earlier agreement can still be demanded by the non-Member States.86 If an international agreement allows, but does not require, a Member State to adopt a measure contrary to EU law, the Member State must refrain from adopting the measure.87 Furthermore, Member States have a duty to, as far as possible, eliminate the inconsistencies between the earlier agreements and EU law, for instance if all else fails, by denunciation of the agreement.88 In the context of investment, a Member State cannot be required to cancel an investment covered by

84 ECJ, Case 812/79, Attorney General v. Juan C. Burgoa [EU:C:1980:231], para. 8; ECJ, C-84/98, Commission v. Portugal [EU:C:2000:359], para. 53; ECJ, C-205/06, Commission v. Austria [EU:C:2009:118], para. 33; ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], para. 254. 85 ECJ, C-402/05 P and C-415/05 P, Kadi and Al Barakaat Foundation v. Council of the European Union and Commission of the European Communities [EU:C:2008:461], paras. 301–304. 86 ECJ, C-158/91, Criminal Proceedings Against Jean-Claude Levy [EU:C:1993:332],

para. 13. 87 ECJ, C-124/95, The Queen, ex parte Centro-Com Srl v. HM Treasury and Bank of England [EU:C:1997:8], para. 60; ECJ, C-324/93, The Queen v. Secretary of State for Home Department, ex parte Evans Medical Ltd and Macfarlan Smith Ltd [EU:C:1995:84], para. 32. 88 ECJ, C-62/98, Commission v. Portugal [EU:C:2000:358], paras. 46–49.

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an earlier international agreement, if this would amount to an unlawful expropriation for which the Member State must pay compensation.89 Concerning the Belt and Road Initiative, Article 351 TFEU is very relevant for the Member States in Central and Eastern Europe. Hungary, for instance, concluded a BIT with China in 1991, which entered into force in 1993,90 before Hungary acceded to the EU in 2004. In such case, these Member States may continue to rely on the earlier agreements to permit Chinese investments in the Member States for the Belt and Road Initiative. The second situation concerns bilateral investment agreements concluded between accession to the EU and the conferral of exclusive competence to the EU in the field of direct investment on 1 December 2009, the entry into force of the Lisbon Treaty. EU law has introduced Regulation (EU) No. 1219/2012 under which those agreements may remain in force; the same regulation allows such agreements (and those falling within the scope of Article 351 TFEU) to be amended or a new agreement on direct investment to be concluded as long as an agreement between the EU and a third State does not exist.91 Concerning the existing investment agreements concluded before 1 December 2009, Member States have a duty to report the agreements to the Commission, which may assess the notified investment agreements by evaluating whether their provisions constitute a serious obstacle to the negotiation or conclusion by the EU of bilateral investment agreements with third countries.92 If such a serious obstacle is indeed present, the Commission and the Member State will enter into consultations and have to try identifying the appropriate actions to remove the obstacles. In the end, the Commission may indicate the appropriate measures a Member State may need to take to remove the obstacles.93

89 ECJ, C-264/09, Commission v. Slovak Republic [EU:C:2011:580], paras. 47–52. 90 UNCTAD, “International Investment Agreements Navigator”, available at: https://

investmentpolicy.unctad.org/international-investment-agreements/countries/94/hungary? type=bits. 91 Regulation No. 1219/2012 of the European Parliament and of the Council of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, O.J. 20 December 2012, L351/40. 92 Articles 2 and 5 Regulation No. 1219/2012. 93 Article 6 Regulation No. 1219/2012.

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Concerning bilateral investment agreements signed between 1 December 2009 and 9 January 2013, which the Member State intends to maintain in force or permit to enter into force by 8 February 2013 and the opening of negotiations to amend existing bilateral investment agreements or conclude new ones, Regulation No. 1219/12 provides for a duty to notify the Commission in advance. The Commission must subsequently decide to authorize the Member State to take these actions. The Commission can refuse if these actions would conflict with EU competences; the actions would be superfluous, because the Commission has decided to submit a recommendation to open negotiations with the third country; the actions would be inconsistent with the EU’s principles and objectives for external action; or the actions would constitute a serious obstacle to the negotiation or conclusion of bilateral investment agreements with third countries by the EU.94 If the Commission authorizes the opening of negotiation, it must be kept informed of the progress and results of the negotiations and may request to participate in the negotiations.95 If a Member State intends to sign the negotiated bilateral investment agreement, it must notify the Commission and provide it with the text of the agreement.96 Concerning bilateral investment agreements signed between 1 December 2009 and 9 January 2013, if the Commission finds that the bilateral investment agreement concerned satisfies the above-mentioned requirements, it must authorize the maintenance or entry into force of the agreement. Unless such authorization is granted, the Member State may not take any further steps towards the conclusion of the agreement.97 As a result, EU law on the one hand aims to respect investment agreements that were concluded before the Member State either joined the EU or before the EU received the exclusive competence on the matter. On the other hand, EU law aims to bring these agreements in line with its own law. Either the Member States have to do all that is possible to remove the inconsistencies between the investment agreements concluded before they have joined the EU; or if they want to negotiate, amend or conclude investment agreements with third countries they will

94 Article 9 Regulation No. 1219/2012. 95 Article 10 Regulation No. 1219/2012. 96 Article 11 Regulation No. 1219/2012. 97 Article 12 Regulation No. 1219/2012.

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need to seek an authorization of the Commission, which may refuse if inter alia this would undermine its own negotiations. With regard to the Belt and Road Initiative, this implies that Chinese investments under this Initiative remain in principle protected by the existing bilateral investment treaties between the Member States and China. However, if the Member States intend to adjust these bilateral investment agreements or conclude new ones to address the new challenges of the Belt and Road Initiative, the Commission may refuse to authorize such actions. Since the EU and China are in an advanced stage in negotiating an investment agreement, it is unlikely that Member States will receive such authorization because such actions could create serious obstacles to the negotiation or conclusion of this bilateral investment agreement.

The New Mechanism on Investment Screening: A Hindrance to the Belt and Road Initiative? One means of China to realize the Belt and Road Initiative is through direct investment, as evidenced by the investment in the Greek port of Piraeus through the state-owned enterprise COSCO.98 As established before, in the absence of a comprehensive investment agreement between the EU and China, these investments will be protected by the bilateral investment agreements between China and the EU Member States. However, the increase in Chinese investments by state-owned enterprises has raised concerns on the implications thereof for national security, since Chinese investments are often made with Chinese national interests in mind, for instance China’s Manufacturing 2025 Strategy and the Belt and

98 On the Chinese investment in Piraeus, see F.-P. Van der Putten et al., “The Motives Behind COSCO’s Investment in the Port of Piraeus”, in M. Ferchen et al. (eds.), Assessing China’s Influence in Europe Through Investments in Technology and Infrastructure, Four Cases, Leiden Asia Center, 2018, 14 and ff., available at: https://www.clingendael.org/ sites/default/files/2019-01/Report_Assessing_China_Influence-in-Europe.pdf.

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Road Initiative.99 Certain Member States had already introduced mechanisms to review foreign investments, although such mechanisms differ in scope.100 Under EU law, the screening of investments by Member States coming from third States is considered to fall within the freedom of movement of capital and payment, laid down in Article 63 TFEU.101 This provision prohibits any restriction on the movement of capital between Member States and between Member States and third countries. The ECJ has broadly interpreted Article 63 TFEU as including “investments of any kind made by natural or legal persons which serve to establish or maintain lasting and direct links between the persons providing the capital and the company to which that capital is made available in order to carry out an economic activity”.102 Member States may only restrict the freedom of movement of capital in specific situations provided for by EU law, including on grounds of public policy or public security, but these measures may not constitute an arbitrary discrimination or a disguised restriction on the free movement of capital and payments.103 Although Member States have the discretion to determine which measures they should adopt to protect public security and public policy, the ECJ has the competence to review the national measures and interprets the restriction to the freedom of movement of capital restrictively; only a genuine and sufficiently serious threat to a fundamental interest of society will justify a national measure on the basis of public policy and public security. In any event, derogations on the basis of public security and policy must not be misapplied

99 J. de Kok, “Towards a European Framework for Foreign Investment Reviews”, 44(1) European Law Review 2019, 25 and 35–38. 100 European Commission, “Staff Working Document on the Movement of Capital and the Freedom of Payments”, SWD(2019) 94 final, 53–54, available at: https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_ and_finance/documents/2019-capital-market-monitoring-analysis_en.pdf. 101 Recital (4) Regulation (EU) 2019/452 of the European Parliament and of the

Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union; J. de Kok, “Towards a European Framework for Foreign Investment Reviews”, 44(1) European Law Review 2019, 30–31. 102 ECJ, C-212/09, Commission v. Portugal [EU:C:2011:717], para. 47; ECJ, C182/08, Glaxo Wellcome v. Finanzamt München II [EU:C:2009:559], para. 40. 103 Articles 65(1)(b) and 65(3) TFEU. See also Article 346 TFEU.

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to serve purely economic ends.104 Furthermore, measures on public policy and public security grounds are only justified if they are necessary for the protection of the interests and only insofar as less restrictive measures cannot achieve the same level of protection.105 In addition, the ECJ has accepted more generally that Member States may restrict this freedom in the absence of EU harmonization in case of overriding reasons in the general interest, provided these measures are appropriate and necessary to achieve their objective.106 EU law therefore recognizes that Member States have the competence to screen investments they consider dangerous to their security (and public policy). However, with the expansion of the exclusive competence of the common commercial policy to direct investment, the EU has the sole competence to negotiate under which conditions foreign direct investment in the EU can be allowed or restricted. Thus, although pursuant to Article 4(2) TEU Member States remain solely competent over their national security, there is a need to coordinate the Member States’ screening mechanisms with the EU,107 which led to the adoption of a screening framework in Regulation (EU) No. 2019/452. The Regulation applies to foreign direct investment, i.e. “an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity in a Member State, including investments which enable effective participation in the management or control of a company carrying out an economic activity”. In addition, a foreign investor is defined as “a natural person of a third country or an

104 ECJ, C-54/99, Association Eglise de scientologie de Paris et Scientology International Reserves Trust contre Premier ministre [EU:C:2000:124], para. 17. 105 Ibid., para. 18. 106 Case C-112/05, Commission v. Germany [EU:C:2007:623], paras, 72–73. 107 Recitals (3)–(7) Regulation (EU) 2019/452 of the European Parliament and of the

Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.

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undertaking of a third country, intending to make or having made a foreign direct investment”.108 The Regulation therefore does not apply to intra-EU investments. The Regulation introduces a framework to report on foreign direct investment between the Member States and the Member States and the EU, but it does not oblige the Member States to adopt any review mechanism. However, the Regulation establishes a duty to notify the Commission and other Member States when a Member State is screening foreign direct investments in its territory. This notification may include a list of Member States whose security or public order is deemed likely to be affected. Furthermore, Member States may comment upon other Member States when they screen investments, which are likely to affect their security or public order and send those comments to the Commission, which notifies the other Member States of these comments.109 If the foreign direct investment planned or completed in another Member State is not undergoing screening, other Member States and the Commission may inform that Member State of the danger of that investment for that State’s security or public order.110 Besides an exchange of information between the Member States, the Regulation also provides that the Commission may issue an opinion to Member States undertaking an investment screening if the foreign direct investment is likely to affect security or public order in more than one Member State. However, the Commission must issue such opinion where justified, after at least one-third of Member States consider that a foreign direct investment is likely to affect their security or public order and notify the Member States thereof.111 The Commission may equally provide an opinion addressed to a Member State that is not screening a planned or 108 Article 2(1)–(2) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 109 Article 6(1)–(2) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 110 Article 7(1) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 111 Article 6(3) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.

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completed investment when that investment is likely to affect security or public order in more than one Member State.112 The Regulation specifies on which grounds foreign direct investment will likely affect security or public order. This will be the case when the foreign direct investment may have an effect on critical infrastructure, including energy, transport, water, communications, …; critical technologies and dual-use items, such as artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies; supply of critical inputs, including energy or raw materials and food security; access to sensitive information; and the freedom and pluralism of the media. In addition, the Member States and the Commission may also take into account whether the foreign investor is directly or indirectly controlled by a government, including though ownership structure and funding; whether the foreign investor has previously been involved in activities affecting security or public order; or whether there is a serious risk that the foreign investor engages in illegal or criminal activities.113 Besides foreign direct investments that affect the security and public order of the Member States, the Regulation provides that the Commission may issue an opinion to a Member State where the foreign direct investment is planned or has been completed if that foreign direct investment is likely to affect projects or programmes of EU interest on grounds of security or public order. These concern projects and programmes which contribute significantly to the EU’s economic growth, jobs and competitiveness, involve substantial EU funding, or are established by EU law regarding critical infrastructure, critical technologies or critical inputs.114 The opinion is equally sent to all other Member States. The Member State must take into account the Commission’s opinion and provide an

112 Article 7(2) Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 113 Article 4 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 114 Recital 19 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union.

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explanation to the Commission if its opinion is not followed.115 Projects or programmes of EU interest are listed in an annex to the Regulation and include the Trans-European Networks for Transport. Regulation (EU) 2019/452 will be relevant to investments under the Belt and Road Initiative. Not only is direct investment from China and by Chinese investors covered by the Regulation, the projects of the Belt and Road Initiative fall within the ground of critical infrastructure, which is one of the bases to assess whether foreign direct investment will likely affect security or public order. Furthermore, direct investments by stateowned enterprises, such as COSCO’s investment in Piraeus, will be particularly in the cross-hairs of the Member States and the Commission. In addition, since projects under the Belt and Road Initiative may overlap with the Trans-European Transport Networks, the EU may intervene to protect the projects under that framework. On the other hand, the Regulation’s grounds to screen an investment are not as extensive as other jurisdictions, notably the United States and China.116 In addition, the Regulation does not require a Member State to introduce a screening mechanism, nor does it permit the EU or other Member States to block foreign direct investment in another Member State, even if it concerns investments in projects and programmes of EU interest. Nonetheless, the Regulation has, for the first time, given the Commission an important role in foreign investment screening and it cannot be excluded that the political pressure from the Commission and Member States will impact the screening of foreign direct investments under the framework of the Belt and Road Initiative.

Obstacles to the Belt and Road Initiative under EU Procurement Law Besides advancing the Belt and Road Initiative through investment in existing infrastructure, another means is to construct new infrastructure through providing Chinese backed loans. A clear example is the aforementioned Budapest-Belgrade Railway, one of the signature projects of the 115 Article 8 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union. 116 J. de Kok, “Towards a European Framework for Foreign Investment Reviews”, 44(1) European Law Review 2019, 43–44.

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Initiative in Europe, which was agreed upon in December 2014 in the Interdepartmental Memorandum of Understanding on Hungary-Serbia Railway Cooperation Projects.117 The Export-Import Bank of China would loan over US$3 billion in low-interest financing to build the railroad and Chinese firms are also awarded the majority of the construction contracts. This is not unusual: according to the World Bank, the big four state-owned commercial banks provide about half of a total of $292bn of funding for Belt and Road Initiative projects. In addition, the China Development Bank, the Export-Import Bank of China and the Silk Road Fund have provided much of the rest. Funding by these entities involves both explicit and implicit preferences for Chinese suppliers.118 Although the railroad project was jointly agreed in the Memorandum of Understanding, the projects consist of two separate bilateral loan and construction packages between, on the one hand, China and Hungary and, on the other hand, China and Serbia. However, the Hungarian limb of the project came under investigation by the Commission for potential violation of EU procurement law.119 Consequently, Hungary opened a public tender for the railroad to abide by EU procurement law.120 In the end,

117 Ministry of Foreign Affairs of the People’s Republic of China, “Five Year Outcome

List of Cooperation Between China and Central and Eastern-European Countries”, 28 November 2017 (32), available at: https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/ 2649_665393/t1514538.shtml. 118 T. Ghossein et al., “Public Procurement in the Belt and Road Initiative”, MTI Discussion Paper, No. 10, December 2018, 5–6, available at: http://documents.worldbank.org/curated/en/ 143241544213097139/pdf/132786-MTI-Discussion-Paper-10-Final.pdf?fbclid= IwAR3ou_7eEcaG4rsDmlwlKyjqRpHxAFJq34YKdop75GUMSfE3kGgKHOFZkLg. 119 M. Ferchen, “Hungaria-Serbia Railway Case Study and International Com-

parisons”, in M. Ferchen et al. (eds.), Assessing China’s Influence in Europe Through Investments in Technology and Infrastructure, Four Cases, Leiden Asia Center, 2018, 4–5, available at: https://www.clingendael.org/sites/default/files/ 2019-01/Report_Assessing_China_Influence-in-Europe.pdf; Delegation of the EU to China, “Reply by the EU Delegation to China on Recent Media Reports Related to the Belgrade-Budapest Railway Project”, 28 February 2017, available at: https://eeas.europa.eu/delegations/china/21594/reply-eu-delegation-chinarecent-media-reports-related-belgrade-budapest-railway-project_en. 120 J. Suokas, “Hungary Opens Public Tender for Landmark Chinese Rail Project”, Global Times, 27 November 2017, available at: https://gbtimes.com/hungary-openspublic-tender-for-landmark-chinese-rail-project.

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the project was awarded to a Hungarian-Chinese CRE consortium, comprised of RM International Zrt., China Tiejiuju Engineering & Construction Kft., and China Railway Electrification Engineering Group Kft.121 EU law gives the EU the exclusive competence to conclude international agreements to determine the arrangements under which the economic operators of each Party may participate in procurement procedures organized by the other Party’s public authorities, as part of the common commercial policy (with the exception for transportation services).122 In this regard, the EU has ratified the WTO Agreement on Government Procurement, which guarantees national treatment and nondiscrimination for the suppliers of parties to the agreement with respect to procurement of goods, services and construction services covered in each party’s schedule.123 China is not a party to the agreement, however (but Hong Kong is).124 The EU can equally opt to include public procurement arrangements in bilateral or multilateral free trade agreements, but has not concluded such agreement with China. As a result, there is no mutual obligation between the EU and China to open public works to each other economic actors,125 although nothing would prevent the EU and China to unilaterally allow each other’s economic operators to participate in public tenders. In any event, since public procurement involving third countries is part of exclusive competence of the common commercial policy, Member States are not allowed to award contracts directly to third countries and their economic actors.126

121 Reuters, “Hungary PM Orban’s Ally to Co-build Chinese Railway for $2.1 Billion”, 12 June 2019, available at: https://www.reuters.com/article/us-hungary-china-railwaysopus-global-idUSKCN1TD1JG. 122 ECJ, Opinion 2/15, Free Trade Agreement Between the European Union and the Republic of Singapore [EU:C:2017:376], paras. 76–77. 123 Article IV Agreement on Government Procurement (Revised), available at: https:// www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.htm. 124 Available at: https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm. 125 European Commission, “Guidance on the Participation of Third Country Bidders

and Goods in the EU Procurement Market”, C(2019) 5494 final, 24 July 2019, 5– 6, available at: https://ec.europa.eu/growth/content/new-guidance-participation-thirdcountry-bidders-eu-procurement-market_en. 126 Ibid., 8.

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Substantively, EU procurement law is currently regulated by three Directives.127 According to these Directives, Member States and their bodies, the contracting authorities,128 must provide for a public tender for goods, services and concessions over a specific value.129 The core obligations of the contracting parties are to treat economic operators equally and without discrimination and to act in a transparent and proportionate manner.130 Consequently, when a Member State intends to start a public work that exceeds the stipulated values in the Directives, they must provide all economic actors the possibility to participate. This implies that when a Member State intends to construct a part of the Belt and Road Initiative exceeding the values of the Directives it must provide for a public procurement open to all potentially interested economic actors. However, since most Belt and Road projects are largely financed by loans from Chinese state-owned banks, the conditions of the loan may require that the contract is allocated to a Chinese company. Therefore, can such public works be excluded from the scope of the Directives? Article 9 Directive 2014/24 and Article 20 Directive 2014/25 provide for two exceptions to the material scope of the Directives. The first exception is when the Member State is obliged to award the public contract in accordance with procurement procedures established by a legal instrument creating international law obligations between a Member State and one or more third countries covering works, supplies or services intended for the joint implementation or exploitation of a project by the signatories, or established by an international organization. At first glance, this may apply to the Belt and Road Initiative which is a joined project

127 Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, O.J. 28 March 2014, L94/1; Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, O.J. 28 March 2014, L94/65; Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, O.J. 28 March 2014, L94/243. 128 Article 6 Directive 2014/23/EU; Article 2(1) Directive 2014/24/EU; Article 3 Directive 2014/25/EU. 129 Article 8 Directive 2014/23/EU; Article 4 Directive 2014/24/EU; Article 15 Directive 2014/25/EU. 130 Article 3 Directive 2014/23/EU; Article 18 Directive 2014/24/EU; Article 36 Directive 2014/25/EU.

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between China and inter alia certain EU Member States. However, the ECJ has held that exceptions to the general duty to provide for public procurement must be interpreted narrowly.131 In this regard, the exception addresses situations in which Member States needed to follow different procurement rules to award a public contract due to an international agreement or because of the procurement rules of an international organization.132 Since projects under the Belt and Road Initiative are regulated in non-binding Memoranda of Understanding, they do not create international law obligations and therefore will not fall under this exception. Moreover, the cooperation between China and Central and Eastern European Countries (the 17+1 Framework) is not an international organization under EU law. The term “international organization” refers to organizations of which only States and other international organizations are parties133 ; the ECJ has identified traditional international organizations, created through international treaties, such as the United Nations and the WTO, as international organizations.134 Although it has a Secretariat and national coordinators, the cooperation between China and Central and Eastern European Countries is a Chinese-led initiative and its Secretariat a Chinese institution under the Ministry of Foreign Affairs of China. The second exception stipulates that the Directives do not apply to public contracts which the contracting authority awards or organizes in accordance with procurement rules provided by an international organization or international financing institution, where the public contracts are fully financed by the international organization or institution. Although

131 ECJ, C-408/16, Compania Na¸tional˘ a de Administrare a Infrastructurii Rutiere SA v. Ministerul Fondurilor Europene — Direct, ia General˘a Managementul Fondurilor Externe [EU:C:2017:940], para. 45. 132 Ibid., para. 46; European Commission, “Guidance on the Participation of Third Country Bidders and Goods in the EU Procurement Market”, C(2019) 5494 final, 24 July 2019, 8. 133 B. Heuninckx, “Applicable Law to the Procurement of International Organisations in the European Union”, 4 Public Procurement Law Review 2011, 113. 134 ECJ, Joined cases C-402/05 P and C-415/05 P, Yassin Abdullah Kadi and Al

Barakaat International Foundation v. Council of the European Union and Commission of the European Communities [EU:C:2008:461], para. 292; ECJ, C-91/05, Commission v. Council, para. 65; ECJ, Opinion 1/94, Competence of the Community to Conclude International Agreements Concerning Services and the Protection of Intellectual Property [EU:C:1994:384], para. 21.

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this will cover international financial institutions such as the World Bank, the European Investment Bank and the Asian Infrastructure Investment Bank, Chinese banks, state-owned or not, are not international entities. As a result, for projects of the Belt and Road Initiative the EU Directives on public procurement will apply. Even if this would not be the case, EU law requires that for public procurement not covered by the Directives the Member States must comply fully with the TEU and TFEU, especially with the principles of transparency, equal treatment and nondiscrimination.135 Hence, directly awarding the contract would not be consistent with these principles.136

Conclusion The chapter demonstrates that the EU, instead of the Member States, has the competence to engage China over significant aspects of the Belt and Road Initiative, in particular trade. In areas where both the EU and the Member States have competence, the competence of the latter may be excluded due to extensive action of the EU in that area. Furthermore, even if the EU has a shared competence with the Member States, the latter must at all times remain loyal to the EU and put the interests of the EU at the forefront. Although this chapter focused primarily on the shared competence of transport, the principle of sincere cooperation applies to all fields of EU law, including when the EU has no competence over a certain domain. In addition, the EU has developed a mechanism to screen investments of Chinese economic actors in the EU, including those made under the Belt and Road Initiative. In addition, EU procurement law is in principle applicable to projects of the Belt and Road Initiative, which prevents the direct allocation of public works to Chinese economic actors. Although China initially interacted with the EU Member States, the discussion in this chapter indicates that the EU is an important actor as well, and with regard to the trade dimension of the Belt and Road Initiative, the only partner. Hence, the need for a shift in focus, from 135 ECJ, C-59/00, Bent Mousten Vestergaard v. Spøttrup Boligselskab [EU:C:2001:654], para. 20; C-324/98, Telaustria Verlags GmbH and Telefonadress GmbH v. Telekom Austria AG [EU:C:2000:669], paras. 60–62. 136 European Commission, “Guidance on the Participation of Third Country Bidders and Goods in the EU Procurement Market”, C(2019) 5494 final, 24 July 2019, 8.

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the Member States to the EU. China has come to recognize this and is more closely interacting with the EU via the Connectivity Platform for EU-China Cooperation. In addition, it has declared that its interaction with the EU Member States complements its interaction with the EU, fully respecting relevant EU law.137 Nonetheless, this may imply that the flexible and China led-approach under the Belt and Road Initiative may have to be (partially) abandoned. The EU has insisted that the Belt and Road Initiative must respect market rules, transparency, open procurement and fair competition, which the EU has to defend since its external action must respect the core values of the EU treaties. Whether China is ready to abandon (partially) its approach in order to enter into more rigid commitments with the EU remains to be seen, but it will in one way or another have to take into consideration EU law in order to successfully realize the Belt and Road Initiative in Europe.

137 Xinhua, “Full Text of the Dubrovnik Guidelines for Cooperation Between China and the Central and Eastern European Countries”, 13 April 2019, available at: http:// www.xinhuanet.com/english/2019-04/13/c_137973910.htm.

PART III

The Belt and Road Initiative and Latin America, North Atlantic, Central Europe and Central Asia

CHAPTER 13

Latin America and the Caribbean Bring the Western Hemisphere into the Belt and Road Gretchen Small

Introduction Latin America and the Caribbean (LAC) is the most recent region of the world to be incorporated into the Belt and Road Initiative (BRI). In the first few years after China’s President Xi Jinping proposed the BRI in September 2013, far-sighted policymakers in this region watched the initiative take shape and viewed it as an increasingly important factor in Eurasian affairs. Although the BRI’s potential to shift the balance of global power away from the unipolar system grabbed the attention of the region, it was seen as being “over in Asia.” Only an exceptional few foresaw that the BRI could come to have a determining impact on their nations and the lives of their people. That has changed. As of June 1, 2019, 19 of the region’s 33 countries have signed agreements to participate in this great global project.

G. Small (B) Schiller Institute, Leesburg, VA, USA e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_13

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The “Big Four” missing from that number—Argentina, Brazil, Colombia, and Mexico—are actively weighing joining. More quietly, several of the Central American and Caribbean countries which still have diplomatic ties with Taiwan are studying whether to establish relations instead with the People’s Republic of China (PRC), in order to participate in the BRI. That, in turn, could tip the balance of the fight inside Paraguay, the only country in South America which still has ties with Taiwan, over whether to do the same. This chapter will address how and in what way the BRI has become a political and economic force in Latin America and the Caribbean, and its prospects going forward. The BRI is being welcomed across the region, not as a foreign project, but as a vehicle through which those nations can realize their own dream of integrated development. Two proposed great projects, in particular, will be examined below, to illustrate the interplay of history and current forces shaping the direction of this unique endeavor in the Latin American and Caribbean region. Proposals for extending the Eurasian corridors of the BRI into North, Central and South America by land, through a tunnel or bridge crossing the Bering Strait, will also be reviewed. The cases of Brazil and Mexico will then be addressed as two critical bottlenecks in this process. For well-known reasons of geography and history, however, any discussion of the prospects for Latin America and the Caribbean is inseparably entwined with the great strategic question of whether the United States can be won over to participate in the Belt and Road Initiative, and the new paradigm of international relations which it embodies. From President Xi Jinping on down, China has repeatedly extended an invitation to the United States to join the BRI. In 2015, leading Chinese scholar Yuan Peng specifically proposed in a Washington, DC presentation, that joint US and Chinese investment in developing the LAC nations would be an excellent “win-win-win” basis for developing the needed new model of great power relations.1 Such cooperation is antithetical to the deep-rooted commitment of the US Wall Street-centered Establishment to a unipolar world in which the United States, through its “Special Relationship” with the UK, dictates the terms of the world order. That modern-day form of the “Teddy 1 Author’s notes on presentation by Dr. Yuan Peng, Vice President, China Institutes for Contemporary International Relations (CICIR), 24 March 2015, Woodrow Wilson Center forum on “China’s Foreign Policy in a New Era of Sino-Latin American Relations.”

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Roosevelt” faction in US history—a term used here to broadly encompass the oligarchical current extending back to the Tory stay-behinds whom Benjamin Franklin warned against—still views Latin America and the Caribbean as its “backyard,” subject to the dictates of Wall Street, and without right to its sovereignty or economic development. Since the United States’ founding as a republic, however, an opposing current, adhering to the “American System of Economics” developed by its first Treasury Secretary, Alexander Hamilton, has fiercely rejected that view. This current, associated with such figures as John Quincy Adams, Henry Carey, Abraham Lincoln, James G. Blaine, William McKinley, Franklin Delano Roosevelt, John F. Kennedy, and Lyndon LaRouche, views the Latin America and Caribbean nations as sovereign allies in a common battle for peaceful economic progress in the Western Hemisphere. While its tenets are little taught today, that legacy remains a power to be tapped throughout the Americas, as the old world order disintegrates.

Crossing All Regions and Ideological Divides The countries which have signed BRI agreements extend over three subregions: eight in South America (Bolivia, Chile, Ecuador, Guyana, Peru, Surinam, Uruguay, and Venezuela); eight in the Caribbean Sea (Antigua and Barbuda, Barbados, Dominica, The Dominican Republic, Grenada, Cuba, Jamaica, and Trinidad and Tobago); three in Central America (Costa Rica, El Salvador, and Panama). These nations also span the highly charged ideological divide between the so-called neoliberal democratic regimes and the so-called populist or socialist regimes, a long-standing division which has been exacerbated since 2015 to the point that regional economic integration has been paralyzed. Participation in the BRI raises the possibility of a return to the policy of working out differences and conflicts within the framework of regional unity which had once dominated. Three regional institutions are also active in the BRI. The region’s two development banks, the Inter-American Development Bank (IADB) and the CAF-Development Bank of Latin America, joined China’s Ministry of Finance and five other multilateral development finance institutions from around the world in founding a Multilateral Cooperation

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Center for Development Finance in March 2019 “to work on the promotion of infrastructure and connectivity development within the framework of the Belt and Road Initiative” (CAF 2019). Likewise, the U.N. Economic Commission on Latin America and the Caribbean (ECLAC), which advises on economic policy in the region, is an enthusiastic supporter of the BRI.

“If China Can, Why Can’t We?” It is a testimony to what we may call “the New Silk Road Spirit” at work in the region, that the Belt and Road is continuing to gain adherents, despite intensifying pressure from the US Departments of State and Commerce, the National Security Council, U.S. Southern Command, representatives of old Rockefeller-linked business interests, the National Endowment for Democracy networks, et al., which have labeled China and the BRI a “strategic threat” to democracy, freedom, and the United States. Threats are being delivered, privately and publicly, that these countries better think twice about working with China and the Belt and Road, or diplomatic, intelligence, security and economic ties to the United States could be endangered. The inability of the BRI’s unipolar opponents to acknowledge the power of the intangible, but fundamental human aspiration for a better future may prove to be their Achilles heel. The BRI has sparked a wave of optimism in the region, and optimism has often proved its power to change history. In this region, where millions of men, women, and children live and beg on the streets, or risk their lives to reach the United States which no longer welcomes them, the Belt and Road’s biggest calling card is China’s success at eradicating poverty at home, and that it has accomplished this by transforming its once-underdeveloped economy into one of the greatest scientific and technological powerhouses on the planet. According to the World Bank, as of 2015, 130 million people, or one in five of the 648 million people then-living in Latin America and the Caribbean, lived in chronic poverty. Adding in the “transient poor” (those temporarily driven into poverty), the World Bank estimated the number of poor at over 160 million, or one in four of its people (Vakis et al. 2015, pp. 12–19). Furthermore, while China moves forward toward its goal of eliminating all poverty by the end of 2020, the number of poor in the LAC

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region is rising. ECLAC estimates that at the end of 2017, 184 million (30.2% of the population) lived in poverty, of whom 62 million lived in extreme poverty (10.2% of the population, the highest percentage since 2008) (ECLAC 2019, pp. 75–84). That difference has not gone unnoticed. Mexican Congressman Gerardo Fernández Noroña, initially no fan of the BRI, repeated with awe to his constituents back home every day during his trip to China as a member of the Mexican delegation to the second Belt and Road Forum in April 2019: “There are no people living in the street here! There are no children begging!” (Fernández Noroña 2019).

Boarding the Belt and Road Development Train Trade relations between China and the region have been growing at astonishing rates, increasing from $17 billion in 2002 to almost $306 billion in 2018. Similarly, Chinese state banks provided more financing over 2005–2018 than the World Bank and the IADB combined, as traditional capital flows to the region fell dramatically after the 2008–2009 global financial crisis. Chinese foreign direct investment reached over $200 billion by 2017 (CRS 2019). In 2014, China began shifting its economic relations in the region from primarily bilateral relations with individual nations, to creating a framework for a more ambitious agenda of cooperation on great crossregional projects capable of transforming the economic potential of the region as a whole, culminating in the LAC nations joining the BRI directly. That shift began at the July 14, 2014 summit of President Xi Jinping and 11 Heads of State from the Community of Latin American and Caribbean States (CELAC). That China-CELAC summit was held in Brazil’s capital, Brasilia, one day after the historic summit of the BRICS (Brazil, Russia, India, China, and South Africa) where the decision was taken to found the New Development Bank. The China-CELAC summit established an ongoing institutional framework for a new “comprehensive partnership of equality, mutual benefit, and common development,” called the China-CELAC Forum. While the BRI was not mentioned in the final declaration, its goals were echoed. Signatories “place high importance on the role of infrastructure in ensuring smooth logistic flows, facilitating trade and driving economic growth. We emphasize the importance of building and upgrading infrastructures such as railways, roads, ports,

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airports and telecommunication … to improve the connectivity within Latin American and Caribbean countries and between those and China,” they stated.2 On November 2016, China issued a “Policy Paper on Latin America and the Caribbean,” which outlined an ambitious agenda for joint development with the region, assisting these nations not only with infrastructure and long-overdue twentieth-century industries, but also with what they need to leapfrog to such frontiers of human knowledge in the twenty-first century as space and nuclear power. “Cooperation will be extended to downstream and supporting industries such as smelting, processing, logistics trade and equipment manufacturing, so as to improve added value of products…. which will cover the whole industrial chain, so that the two sides can complement each other, increase local employment, upgrade the level of industrialization and promote local economic and social development,” the Policy Paper stated. China will actively explore the expansion of its cooperation with Latin American and Caribbean countries in high-tech fields such as information industry, civil aviation, civil nuclear energy and new energy, to build more joint laboratories, R&D centers and high-tech parks, support innovative enterprises and research institutions on both sides to carry out exchanges and cooperation, and promote joint research and development…. China will pay full attention to the role of space technology as a driving force for the scientific, technological and industrial development of Latin American and Caribbean countries, and promote sustainable development in science and technology and the economic fields. (State Council of the People’s Republic of China 2016)

The contrast could not be greater with recent decades of Western assistance limited to new debt issued to repay old loans, at ever-higher interest rates and tied to International Monetary Fund conditionalities of austerity, public disinvestment and no big infrastructure projects. The official invitation for Latin America and the Caribbean to join the BRI came at the first Belt and Road Forum on International Cooperation in May, 2017, extended by President Xi personally. Argentine President Mauricio Macri and Chilean President Michelle Bachelet were there,

2 Declaración Conjunta de la Cumbre de Brasilia de Líderes de China y de Países de América Latina y Caribe, 17 July 2014. http://www.itamaraty.gov.br/images/ed_ integracao/docs_CELAC/DECLCHALC.2014ESP.pdf. Accessed 1 June 2019.

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along with Foreign Ministers, ambassadors, and leaders of the IADB and ECLAC. The second China-CELAC Foreign Ministers Forum, held on January 22, 2018 in Santiago, Chile, became the decisive turning point for BRI participation. Chinese Foreign Minister Wang Yi came to the meeting with the message that Latin America and the Caribbean are “indispensable participants in the Belt and Road’s international cooperation” (Wang Yi 2018). President Xi’s message to the meeting, read by Wang, recalled the 250 years of ships (the “Manila galleons”) which “blazed the transPacific Maritime Silk Road between China and the LAC countries,” as the precedent for drafting a “new blueprint for our joint effort under the Belt and Road Initiative … that will better connect the richly-endowed lands of China and Latin America.” The “Special Declaration on the Belt and Road Initiative” issued at the end of the meeting stated that “the Ministers of Foreign Affairs of CELAC welcomed, with interest, the presentation of the Chinese Foreign Minister on the Belt and Road initiative for deepening cooperation among Latin American and Caribbean Countries and China…”.3 All 33 CELAC member states were present, those that recognized the PRC and those which still recognized Taiwan. The latter included the then-pro Tempore President of CELAC, El Salvador. Within the next eighteen months, 19 nations signed MOU’s with China to participate in the Belt and Road, including the Dominican Republic and El Salvador, which as Panama had done earlier, broke relations with Taiwan and established relations with the PRC in order to join the BRI.

South America’s “Two Ocean” Railroad The most momentous proposal on the table under the Belt and Road umbrella is the construction of a bioceanic railway corridor connecting the Atlantic and Pacific Oceans through the heart of South America. It will drastically cut shipping times and costs from Brazil, Argentina, and Uruguay to Eurasian powerhouses like China, India, and Russia; allow for intermodal cargo and passenger linkages to be constructed with 3 Declaración especial de Santiago de la II reunión ministerial del Foro CELAC-China sobre la Iniciativa de la Franja y la Ruta, 22 January 2018. http://www.itamaraty.gov.br/ images/2ForoCelacChina/Declaracin-Especial-II-Foro-CELAC-China-VF-22-01-2018. pdf. Accessed 19 June 2019.

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South America’s three great river systems: the Orinoco in the north, the Amazon in the center, and the Paraná/Río de la Plata in the south; and open up two vast areas in South America’s interior to intense, high-technology agricultural production—the Brazilian Cerrado and the Colombian-Venezuelan Plains—which could allow the continent to nearly triple its current levels of food production in about a decade. Such a transcontinental railroad—and there is no reason for there to be only one—will at long last open up the vast, uncharted interior of the South American continent to human development. Beyond the trackmiles built; tons of cargo transported; jobs created; or trade with Asia multiplied, it is the leaps in science, technology and consequent productivity of labor generated as a result of taking on this task which will lay the foundation for further development. This idea was not invented by China, but is deeply rooted in South American history. Plans for a transcontinental rail system were underway as far back as the 1860s in Peru. The construction of the first transcontinental railway in the world in the United States, initiated by President Abraham Lincoln during the Civil War and completed in 1869, had excited imaginations around the world. Under the Presidencies of José Balta (1868–1872) and Manuel Pardo (1872–1876), US railroad entrepreneur Henry Meiggs and a network of American and European scientists and engineers were invited to head up the project to build the continent’s first national railroad system designed to develop the national economy as a whole. Until that time, what little rail existed in the region solely served the old colonial model of running “from the mine to the port.” This railroad plan aimed to industrialize Peru and educate its people. Meiggs’s Peruvian team developed the technologies which permitted railways to cross the Andes mountain range, and drew up plans to connect them with the waterways and rail of Brazil and Argentina (Vásquez 2012, pp. 82–151). In the 1890s, a proposal for a unified rail system connecting and crisscrossing the continents of North and South America was drawn up by the InterContinental Railway Commission. The ICRC was initiated by American System advocate and then-US Secretary of State James Blaine, with the active support of Mexican diplomat Matías Romero, who had been President Benito Juárez’s ambassador to Lincoln’s government three decades before. Representatives from 10 Latin American countries and the United States participated. Under its aegis, US Army engineers and other civilian personnel, and Latin American experts and governmental

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authorities, mapped out 5456 miles of new rail lines that were to connect with thousands of miles already in operation in North and South America. The completed proposal—an eight-volume report with 123 illustrations and 311 maps and profiles—was presented to President William McKinley in 1898 (ICRC 1898). In 1901, McKinley was assassinated while he was giving a speech advocating construction of that intercontinental railroad at the 1901 Pan-American Exposition in Buffalo, New York. Such a great project approach was revived in 1986, with the release of the Schiller Institute’s book, Ibero-American Integration: How to Create 100 Million New Jobs by the Year 2000! The book applied the principles outlined in Lyndon LaRouche’s 1982 Operation Juarez strategic study for creating an integrated Latin American Common Market, which he had written for his friend, then-Mexican President José López Portillo. Ibero-American Integration presented a roadmap for the physical integration of the continent through great infrastructure projects. It argued that “for reasons of both sovereignty and development, Ibero-America must build extensive rail systems that are rectified, double tracked, and eventually electrified. A modern highway system must also be built. The major river systems must be made navigable, and air transport improved. A second inter-oceanic canal must be constructed, as well as large, deepwater ports. And all of these must be integrated around nodal points for the efficient transshipment of goods and passengers…. so as to facilitate the rapid industrialization of Ibero-America, while at the same time opening up currently inaccessible regions which are favorable to human settlement” (Bazúa 1988, pp. 165–211). Ibero-American Integration circulated widely, in both Spanish and Portuguese, in the continent’s labor movement, military and economic and scientific circles, requiring a second printing of the Spanish edition in 1988 after its first 50,000-run sold out. Some 15 years later, the presidents of the 12 South American nations, meeting at their first-ever summit in Brazil on August 31–September 1, 2000, called for a regional planning network to be set up. The mandate of the “Initiative for the Integration of Regional Infrastructure in South America” (IIRSA) which resulted was to draft a strategic vision for creating large “basins of development” in the South American continent which would raise the living standards of its people.4 4 History of IIRSA. http://www.iirsa.org/Page/Detail?menuItemId=121. Accessed 25 May 2019.

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Enter China As is often the case in history, ideas for moving humanity forward may lie dormant for years, even centuries, but they retain their power. South America’s transcontinental rail project, now actively being pursued, is a case in point. President Xi Jinping’s offer at the CELAC 2014 summit for China to help build a transcontinental railroad connecting the Atlantic and Pacific coasts of South America, has turned that idea into an actual possibility. Xi and the then-Presidents of Peru and Brazil, Ollanta Humala and Dilma Rousseff, issued a statement of intent to form a working group to draft plans for designing, constructing and operating the railroad. Memoranda of Understanding on the project were subsequently signed with Brazil and Peru in 2015. Two possible routes across the heart of the continent are now contending for which will be built first. China Railway Eryuan Engineering Group Co. (CREEC) submitted a feasibility study to the three governments in October 2016, recommending a northern route. That northern route would run from Brazil’s Atlantic port of Santos in the state of Sao Paulo, through Brazil’s major soy-producing states of Mato Grosso and Rondônia, into Peru’s northern Amazon region, crossing the Andes at their lowest point at Saramirisa before ending in one of Peru’s northern Pacific ports, such as Paita. Although longer, the northern route avoids the greater geological difficulties of the higher portions of the Andes Mountains to the south. The Economists Association of Peru’s Ucayali region through which it passes organized a movement of business, labor, indigenous, and civic representatives throughout the northeast of Peru which has drafted farreaching proposals for the infrastructure, science cities, industry, and development which the railway can bring to this largely undeveloped Amazon region. The other proposed route is the Central Bioceanic Railway Corridor (CBRC) which the Evo Morales government of Bolivia has long championed. This would run from the port of Santos, through Bolivia, into southern Peru, where it would terminate at a Pacific port such as Ilo. The geographic terrain through which this Brazil-Bolivia-Peru route would pass is more difficult from an engineering standpoint, but it has the advantage that it is shorter than the Northern Route and that it can easily

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be connected to the Paraná-Paraguay waterway by rail, thereby immediately benefitting Argentina, Uruguay, and Paraguay, and thus six of South America’s 12 nations. The Morales government views the construction of this route as an existential question, to provide it with the access to the sea lost when Chile annexed Bolivia’s Pacific coastal territory in the 1879 War of the Pacific, and to ensure the success of its aggressive industrialization plans. Until a decade ago, Bolivia was one of the three poorest nations in LAC, unable to develop its significant natural resources, because controlling international financial and mining interests preferred to buy its raw materials cheaply. Now, under an agreement signed with China in 2017, Sinosteel Equipment and Engineering Co. has completed its final design for Bolivia’s first steel-producing complex near the country’s huge Mutún iron ore and manganese deposits, and work is expected to begin by mid2019. The Mutún steel complex is “a gigantic step for the industrialization of Bolivia,” China’s then-Ambassador to Bolivia, Liang Yu, emphasized to Bolivian daily El Deber when the agreement was first signed. He forecast that “expanding cooperation on such areas as productive capacity, mining and energy, infrastructure, the development of highways, airports, railroads and hydroelectric plants, and collaboration and exchanges in such areas as aerospace, telecommunications, science and technology, and protection of the environment, will drive the development of Bolivian industrialization; the value-added of Bolivian products will increase, and its capacity for autonomous development will advance” (El Deber 2017). China has made clear it is prepared to cooperate in whichever route the region decides upon, providing its feasibility has been adequately established (La Razón 2017). The biggest obstacle, however, has not been the choice of route, but reluctance bordering on outright opposition from recent governments of Peru and Brazil. There are signs that this may be shifting, however. Brazilian Vice President Hamilton Mourão told a Macauhub reporter during his May 19–24, 2019 visit to China, that Brazil is interested in the Transoceanic Railroad. “Mourão said the project is in the national interest and would benefit the Mercosur region in general, becoming a major factor of integration and facilitating the flow of exports to China, [and] noting that ‘we will negotiate this project, which I think is very important to Brazil’,” Macauhub reported (Macauhub 2019).

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In April 2019, Peru’s Foreign Minister signed a MOU on BRI cooperation while in Beijing for the second BRI Forum. That has opened the door to several long-discussed key infrastructure projects with China. Within weeks, on May 13, Peru’s Volcan mining company and China’s port and shipping giant COSCO signed an agreement to construct a megaport and adjacent logistics center at Chancay, 50 km north of Lima. The new port is projected to become one of the most important “hub” ports on South America’s Pacific Coast—which begs the question of the continental rail network required to move the region’s products to and from it.

Transforming the Caribbean Basin The nations of the Caribbean and Central America have historically been some of the poorest and most undeveloped in the Americas. The economy of the area is still dominated by sugar, coffee, and banana plantations, extractive industries (e.g., oil and bauxite), sweatshop assembly plants, and tourism, with the illegal drug trade piled on top. The lack of decent jobs combined with brutal drug gang terror (in Central America, in particular) has turned the region into a center of migration to the United States. Today, the national income accounts of many nations are kept afloat by remittances those migrants send back home to their families. Many of these nations now look to the Belt and Road for an entirely different future. Barbados, Jamaica, Cuba, Trinidad and Tobago, and the Dominican Republic have each put forward proposals for which of their ports could serve as a major “hub” for the Maritime Silk Road. The industrial park and Special Economic Zone which China’s Jiuquan Iron and Steel Co. (JISCO) and Gansu province have committed to develop in southwest Jamaica exemplifies the move up the industrial chain which these nations seek to achieve. The project “is intended to move Jamaica from exporting raw materials to developing value-added manufacturing and fabrication industries, led by the bauxite/mineral sector,” according to the Framework Agreement signed on February 8, 2018 (CGTN 2018). The first 27 of the 52 young Jamaican engineers receiving advanced training in China under that agreement returned in January 2019 to begin work at JISCO’s alumina plant. As it became clear how the Belt and Road could transform global economic activity and flow, a broader concept of unified regional development has taken root in the area, pivoted on the Caribbean Basin’s role as

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the crossroads of maritime traffic linking Eurasian economic activity with the Western Hemisphere. Panama placed itself at the center of that development when it established diplomatic relations with the PRC in June 2017. Given Panama’s geographic position, small size and near-total economic dependence on international services and traffic through the Panama Canal, establishing itself as a major regional hub for the Belt and Road was a natural. Within the following 21 months, then-President Juan Carlos Varela visited China three times; President Xi visited Panama, a historic first; and over 20 cooperation agreements were signed, centered on developing Panama as a strategic logistics, transport, finance, and technological “bridge” or “platform” for the Belt and Road in Latin America and the Caribbean. From the standpoint of overall Caribbean Basin development, the most significant project on the table is the planned high-speed rail line from Panama City to the border of Costa Rica. The railway involves building two sets of double-tracked rail lines—one for passengers which will go as far as the city of David, and the other for freight, which will extend another 50 km. to Paso Canoas in Chiriquí Province on the Costa Rican border. Reducing the time of travel from today’s 8 hours by road, to 2½ hours by train, the high-speed rail would open up production in this poorer, largely agricultural area of the country. Panama’s then-Commerce and Industry Minister Augusto Arosemena forecasts it will change the dynamics of the national economy on a scale equivalent to the effect of building the Panama Canal 100 years ago (EFE 2018). Discussion of extending that Panama high-speed rail into a Central American railroad is actively underway among technical and political policymakers in, minimally, Costa Rica, El Salvador, and Honduras.5 A Central American railroad would, in turn, be connected to Mexico and Colombia. This will be “Panama’s Inter-American Train,” former Panamanian Deputy Mireya Lasso wrote in May 1988: The New Silk Road — a network of rail lines, ports and highways promoted by China on several continents— … certainly won’t be exhausted by the 450 km. Panama-David line [which is] a small segment of a connection which could well extend from the Mexican capital to Medellin

5 Private communications with the author in 2018.

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(Colombia), almost 3,000 km, to end up uniting North and South America. The train is an ‘idea’ that can become a ‘project.’ (Lasso 2018)

The need for a Central American railway linking up to Mexico is well-accepted. The connection into Colombia is controversial, however. Laying the track through Panama’s southern jungle area known as the Darien Gap presents technological challenges, but its primary opposition comes from such powerful international environmentalist movements as the World Wildlife Fund (WWF), which argues that human development cannot be allowed to disturb “pristine” jungles which are, however, happily used as a base for drug-traffickers. Growing recognition of the economic benefits of connecting Central and South America by rail, however, has broken the long-standing taboo on public discussion of bridging the Gap.

Toward the Eurasian-American Land-Bridge That’s big, but what is bigger still is what could follow. While it is now accepted that the LAC nations are a natural part of the Maritime Silk Road, what has yet to be taken up officially is that the Americas should be connected by rail to the Eurasian Land-Bridge routes of the Belt and Road as well, through a Bering Strait Tunnel. The idea has long been discussed in Russia and the United States, going back to the 1890s. In 2007, Russia’s Council for the Study of Productive Forces and Ministry of Economics organized a conference on “Megaprojects of the Russian East: An Intercontinental Eurasian-America Transport Link via the Bering Strait.” At its conclusion, the participants, including Americans, Japanese, and Koreans, issued an appeal to the governments of the Group of Eight member countries, to place the Bering Strait megaproject on the agenda of their June 2007 summit (Baker et al. 2014, Section IV, pp. 10–16). The proposal is also well-known in China. At May 1996 “International Symposium on Economic Development of the Regions Along the EuroAsia Continental Bridge” in Beijing, the People’s Government of Hebei Province raised the “unprecedented development opportunity” for Hebei which would result from construction of the Bering Strait underwater tunnel, which it said “will become one of the bridgeheads connected with the Asian and North American Continental Bridge,” in its presentation (Tennenbaum 1997, pp. 62–64).

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In April 2014, one of China’s most famous tunnel and rail engineers, Wang Mengshu, urged the government to consider the feasibility of a rail connection to the United States, in an interview reported widely in and outside China. Wang told the New York Times in December 2014 that the Bering Street crossing “is a wish and a dream of not only China’s railway experts but also railway engineers in Russia, Canada and the U.S. whom I have spoken to. The technology developments in recent years in highspeed railway and underwater tunnels make it possible. It is a dream, but one that is within reach. The Chinese central government is not seriously considering it, not yet. But why not? We have the technology, and it is a good thing to do. It would benefit generations to come, and the environment. As railway engineers, we think it would be a great legacy to leave for future generations. It would connect continents. It would be a grand structure of human engineering” (New York Times 2014). US rail expert Hal Cooper, who has worked for decades with the Schiller Institute in promoting the Bering Strait tunnel—and who had drafted a proposal for the rail crossing of the Darién Gap published by Executive Intelligence Review that same year (Cooper 2009)—told RIA Novosti that even though political obstacles to cooperation between China, Russia and the United States remain, “after this announcement by the Chinese, [the project] will never be suppressed. It’s never going to be swept back under the rug again” (RIA Novosti 2014). What are the chances of actually building it? Wang told the New York Times: “That depends entirely on politics, because we have the technology. It depends on whether governments of the four countries can work together, make this dream come true and leave this amazing legacy for our children…. Some governments like to spend their resources on fighting wars. I think building a railway is far more meaningful than fighting wars” (New York Times 2014).

Where Next? The Belt and Road has arrived in the Americas, but is it here to stay? The answer to that question is increasingly “yes.” The case of Chile exemplifies how participation in the BRI has become a matter of State policy in many countries in the region, above changing governments. Chile’s President Michelle Bachelet (2014–2018), from the Socialist Party, enthusiastically participated in the first BRI summit in Beijing. Her

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government was the first country in the region to organize a seminar on its participation in the BRI. Leading the government team at that August 2017 “Chile and China, the Belt and Road: Opportunities for Trade, Investment and Financial Connectivity” seminar in Beijing, was its Minister Plenipotentiary for Asia-Pacific Affairs Eduardo Frei, a former President from the Christian Democratic Party. Bachelet’s successor, Sebastián Piñera, a businessman from the centerright National Renewal party, kept Frei at his post, sealed the MOU which formalized Chile’s participation in the BRI in November 2018, and himself attended and spoke at the April 2019s BRI forum in Beijing. US Secretary of State Mike Pompeo had personally traveled to Chile to warn Piñera 10 days before his trip to China that Chile should distance itself from China’s “predatory economics.” Piñera did not oblige. In his speeches in China, Piñera stated that Chile is “very happy that China is emerging as an enormous world power” and asserted that “the Belt and Road is, questionably, an initiative which will contribute to the growth and development of our countries, and the well-being of our peoples.” He offered Chile as a BRI business hub for Chinese companies reaching out to the rest of Latin America (Presidency 2019). Whether that continuity of policy will be the case for two of the three countries which established relations with the PRC in order to participate actively in the Belt and Road—El Salvador and Panama—remains an open question. El Salvador’s President Nayib Bukele, sworn into office on June 1, 2019, disappointed the anti-China lobby which had hoped he would immediately break relations with the PRC and recognize Taiwan again, as he had hinted during the campaign. Instead, Bukele warmly received China’s special envoy to his inauguration, Deputy Foreign Minister Qin Gang. Qin reported afterward that Bukele told him “our relations will have a brilliant future and we have great potential to realize many things” (El Diario 2019). Panama’s President-elect Laurentino Cortizo will be sworn in on July 1, 2019. Even the most ideological of U.S. China hawks recognize that this nation will not break ties with China and the Belt and Road immediately. But the history of US intervention in Panama going back to Teddy Roosevelt weighs heavy here, and US pressure on Panama against its ties to the BRI has stepped-up. A more cautious relationship toward the BRI may emerge when Cortizo assumes office, and some bigger projects, such as the planned high-speed railroad project, may be stalled or canceled.

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Brazil---Make It or Break It How fast the Belt and Road develops in the LAC region, and if, as desired, it becomes the vehicle for transformative, region-wide infrastructure projects, depends in great part on the outcome of ongoing political battles within the countries of Brazil and Mexico over whether to join the BRI. It is self-evident that the physical integration of South America’s infrastructure requires the participation of Brazil, the largest country in Latin America both in territory and population. Three successive regimes in Brazil had played an important role in fostering regional integration since the Fernando Henrique Cardoso government hosted the first South American Heads of State summit in 2001. That commitment was rolled back with the 2016 impeachment of President Dilma Rousseff. The Bolsonaro government which assumed office on January 1 2019 came in with a program of strict alignment with Washington, a return to University of Chicago neoliberalism, and hostility toward regional integration and China. A major plank of President Jair Bolsonaro’s 2018 election campaign was attacking Brazil’s ties with China. He famously accused China of “buying Brazil,” and made a point of visiting Taiwan early in the campaign, the first Brazilian presidential candidate to do so since Brazil recognized the PRC in 1974. His son and political advisor, Congressman Eduardo Bolsonaro, works closely with the notorious US anti-China lobbyist, Steve Bannon, as does Eduardo Araujo, the lowerlevel career diplomat Bolsonaro named Foreign Minister. Bannon was a guest of honor at the dinner the Washington, DC Embassy of Brazil held for President Bolsonaro the night before his meeting with President Donald Trump on March 2019. Economic realities often prove stronger than ideology, however. China has been Brazil’s largest trade partner since 2009, generating hefty surplus trade balances for Brazil for much of that time. Chinese companies have invested in 12 hydropower dams, seven power transmission companies, Brazil’s third-largest electricity utility (CPFL), Petrobras’s Comperj oil refinery, and Brazil’s second largest container port, Paranagua, among others. Since assuming the presidency, Bolsonaro has adopted a two-track policy. Ten days before his Washington, DC trip, the President announced, with Chinese Ambassador Yang Wanming at his side, that he would visit

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China in the second half of 2019. Vice President Hamilton Mourão was sent to China from May 19–24, 2019, where he was received by President Xi personally, as well as Vice President Wang Qishan and the Chairman of the National Council of the Chinese People’s Political Committee, Wang Yang. Each told Mourão that China would welcome Brazil’s full participation in the BRI. Mourão responded that President Bolsonaro will make that decision. He generally spoke cautiously on Brazil’s joining, asserting that it is not necessary for Brazil to do so, and if it were to do so, infrastructure investments would have to be through public-private partnerships, and employ Brazilians, not Chinese. But in meeting President Xi, he told him that “Brazil stands ready to align its investment plans with the New Silk Road” (CCTV, May 2019).

An Intertwined Battle: Mexico and the United States Mexico’s participation is critical, both because of its historic leadership role in the region generally, and toward Central America, specifically. But its geographic location immediately poses the battle of winning over the United States to the Belt and Road perspective. The importance of the latter was brutally demonstrated in November 2014, when the previous Peña Nieto government abruptly canceled the contract awarded to China Railway Construction Corp. (CRCC) to build a high-speed rail line from Mexico City to the industrial city of Querétaro—only two days after it had been officially announced. The excuse used for the cancellation was an outpouring of charges in the financial media of corrupt “lack of transparency” in the contract award, but according to reliable Mexican intelligence sources, what tipped the balance was the intense pressure demanding its cancellation coming directly from the Obama White House (Zepp-LaRouche and Beets 2018, pp. 285–287). President Enrique Peña Nieto had been preparing to leave for a state visit to China in which several other major infrastructure projects were on the agenda. After Mexico broke the CRCC contract, those plans for a new deep-water port on Mexico’s Pacific coast in the state of Nayarit, a major rail line from Nayarit through northwestern Mexico up to the US border, and a long-designed trans-isthmus rail corridor connecting the port of Coatzacoalcos on the Gulf of Mexico with the port of Salina Cruz on the Pacific in southern Mexico, were all abandoned.

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The current government of President Andrés Manuel López Obrador (often called AMLO) is engaged in its own delicate negotiations over the migrant crisis with President Donald Trump and his administration, and is well-aware of what happened in 2014. Mexico is reviewing the “New Silk Road“ project with China, but “Mexico has not signed anything; as of now there is only an understanding” which is under discussion because it could be an opportunity, given the lack of investment taking place in Mexico, Foreign Minister Marcelo Ebrard told businessmen on March 9, 2019 (El Economista 2019). At the time, there was much public discussion that Ebrard would represent Mexico at the upcoming second Belt and Road summit. Ultimately, no one from the Mexican government was included in the delegation to that summit. A 12-person delegation of members of the governing coalition parties was sent, mostly congressmen and senators. Heading the delegation was the president of AMLO’s National Regeneration Movement (MORENA), Yeidckol Polevnsky, a former president of the National Chamber of Manufacturing Industries who is close to the President. Polevnsky told Xinhua from Beijing that she is very excited about the BRI, “which can be very beneficial for Latin America,” particularly for infrastructure, because the Chinese have a lot of experience, offer much lower prices, and do not use financing to impose decisions on countries. Polevnsky pointed to the commonality of approach between the “common destiny” concept which underlies the BRI and López Obrador’s insistence that the migration crisis can only be solved by investing in the countries from which the migrants are fleeing, because generating “jobs, opportunities and economic development … in every country” will allow people to stay in their own country, rather than risk their lives traveling to another (Xinhua 2019). Alfonso Romo, the head of the Office of the Presidency of Mexico, revealed a month later that, once again, a US government had intervened to hold off Mexico’s development cooperation with China. Addressing the annual meeting of iron and steel industrialists on May 23, Romo recounted that, during discussions of the potential lifting of US tariffs on Mexican steel and aluminum, US Commerce Secretary Wilbur Ross had delivered four demands on Mexico. The second was specific: “We don’t want any very active participation of Chinese investment in Mexico, especially in strategic projects” (El Financiero 2019).

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Conclusion Much of the LAC region is staking its future on the BRI, and its farsighted leaders understand that to succeed, they must win the United States over to the new global paradigm of a “community of common destiny.” In a speech not long after Panama opened relations with China, the Panama Canal Authority’s economist, Eddie Tapiero, argued the case succinctly: The BRI “will change the world in the coming years…. The United States as the main partner of all countries in Latin America needs to be part of the initiative. With all the players working towards the same goal, the countries will achieve a balance in their strength and stability in the long term.” (La Estrella de Panamá 2017)

The growing strength of the BRI south of their border is waking Americans up to the reality that it is they who are the big losers from the Establishment’s adamant “no” to the BRI. US businesses are losing out as Europeans and others take up China’s proposal for “third-party collaboration” in building the BRI in the LAC. That process is not limited to Spain and Portugal, whose common language and culture and longer experience in the area make cooperation a natural. Rail and logistic companies from Switzerland, Germany, Austria, and Spain are negotiating their participation in the Central Bioceanic Railway Corridor, when that gets off the ground. Even New Zealand, located almost exactly halfway on maritime routes between Valparaiso, Chile and Shanghai, China, proposes that its role in the BRI should be as the “Southern Link… making New Zealand a major and natural connection between China and South America” (New Zealand China Council 2019). Serious thinkers also recognize that US-Chinese cooperation in bringing high-technology development to the LAC nations offers the United States the single most effective strategy for ending the migration crisis and eradicating the drugs and narcoterrorism which threaten the entire hemisphere. The prospects for the Belt and Road moving into North America from its southern neighbors are better than many imagine.

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Bibliography Books Baker, Marcia M., Spannaus, Nancy, and Zepp-LaRouche, Helga (eds.). 2014. The New Silk Road Becomes the World Land-Bridge, Section IV, pp. 10–16. Washington, DC: Executive Intelligence Review. Bazúa Rueda, Jorge, Parpart v. Henke, Uwe, and Small, Dennis (eds.). Second edition: 1988. La integración iberoamericana: ¡Cien millones de nuevos empleos para el año 2000! Washington, DC: Schiller Institute. A Integração IberoAmericana: Cem milhões de novos empregos no ano 2000! 1988. Rio de Janeiro: Sociedade Brasileira de Economia Física. Inter-Continental Railway Commission (ICRC). 1898. ICRC: A Condensed Report of the Transactions of the Commission and of the Surveys and Explorations of Its Engineers in Central and South America, 1891–1898. Washington, DC: ICRC. LaRouche, Lyndon. August 1982. Operation Juarez. Washington, DC: Executive Intelligence Review. Tennenbaum, Jonathan (ed.). January 1997. The Eurasian Land-Bridge: The ‘New Silk Road’—Locomotive for Worldwide Economic Development. Washington, DC: Executive Intelligence Review. Vásquez Medina, Luis E. 2012. La verdad detrás de La Guerra del Pacífico: El imperio británico contra el Sistema Americano de Economía en Sudamérica. Lima: Arquitas E.I.R.L. Zepp-LaRouche, Helga, and Beets, Megan (eds.). 2018. The New Silk Road Becomes the World Land-Bridge: A Shared Future for Humanity, Vol. II, pp. 285–287. Washington, DC: Schiller Institute.

Articles CAF-Development Bank. 28 March 2019. Group of Multilateral Banks to Create Center to Promote Connectivity and Infrastructure. https://www.caf. com/en/currently/news/2019/03/group-of-multilateral-banks-to-createcenter-to-promote-connectivity-and-infrastructure/. Accessed 25 May 2019. CCTV. 24 May 2019. Chinese President Xi Jinping Meets Brazilian Vice President Mourão, 3:10 minute. https://www.youtube.com/watch?v= RqfbM2xQZgc. Accessed 25 May 2019. CGTN. 16 February 2018. Chinese Province Eyes Billion-Dollar Jamaica Investment. https://news.cgtn.com/news/776b544e33677a6333566d54/share_ p.html. Accessed 26 May 2019. Congressional Research Service (CRS). 11 April 2019. China’s Engagement with Latin America and the Caribbean. https://news.usni.org/2019/04/

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12/report-to-congress-on-chinas-engagement-with-latin-america-and-thecaribbean. Accessed 25 May 2019. Cooper, Hal. 30 January 2009. Executive Intelligence Review. Rail Expert: Build the Darien Gap Rail Connector; Go Nuclear! https://larouchepub. com/eiw/public/2009/eirv36n04-20090130/eirv36n04-20090130_049rail_expert_build_the_darien_gap.pdf. Accessed 14 May 2019. ECLAC. February 2019. Social Panorama of Latin America 2018. https:// repositorio.cepal.org/bitstream/handle/11362/44396/4/S1900050_en. pdf. Accessed 12 June 2019. EFE. 9 March 2018. Panamá dice que el tren hacia el oeste será tan importante como el canal. https://www.eleconomista.net/economia/Panama-dice-queel-tren-hacia-el-oeste-sera-tan-importante-como-el-canal-20180309-0013. html. Accessed 3 June 2019. El Deber. 2 October 2017. Liang Yu: China es el segundo socio comercial de Bolivia. https://www.eldeber.com.bo/economia/Liang-Yu-China-es-elsegundo-mayor-socio-comercial-de-Bolivia–20171002-0005.html. Accessed 19 June 2019. El Diario. 2 June 2019. Vicecanciller Qin Gang: “Presidente Bukele me dijo: China representa el futuro… El Salvador necesita a China”. https://www. elsalvador.com/eldiariodehoy/vicecanciller-qin-gang-presidente-bukele-medijo-china-representa-el-futuro-el-salvador-necesita-a-china/609080/2019/. Accessed 10 June 2019. El Economista. 10 March 2019. Cancillería y la IP pactan trabajar en promoción del país. https://www.eleconomista.com.mx/empresas/Cancilleria-y-laIP-pactan-trabajar-en-promocion-del-pais-20190310-0102.html. Accessed 19 June 2019. El Financiero. 23 May 2019. EU pidió a México rechazar inversión china: Alfonso Romo. https://www.elfinanciero.com.mx/economia/eupidio-a-mexico-no-aceptar-inversion-china-alfonso-romo. Accessed 22 June 2019. Fernández Noroña. 21 April 2019. Desde China: Videocolumna de SDPNoticias. https://www.youtube.com/watch?v=KIMxelFpLyI. Accessed 29 April 2019. La Estrella de Panamá. 17 September 2017. El Canal de Panamá en la ‘Ruta de la seda’. http://laestrella.com.pa/economia/canal-panama-rutaseda/24022848. Accessed 22 June 2019. La Razón. 31 May 2017. Tres bancos de China están interesados en financiar el tren bioceánico. http://www.la-razon.com/economia/Embajador-Chinainteresados-financiar-bioceanico_0_2719528060.html. Accessed 19 June 2019. Lasso, Mireya. 2 May 2018. El Ferrocarril Interamericano de Panamá. La Estrella de Panamá. http://laestrella.com.pa/opinion/columnistas/ ferrocarril-interamericano-panama/24061207. Accessed 22 May 2018.

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Macauhub. 20 May 2019. Brazil Wants to Expand Strategic Partnership with China. https://macauhub.com.mo/feature/pt-brasil-quer-ampliarparceria-estrategica-com-a-china/. New York Times. 18 December 2014. Q. and A.: Wang Mengshu on a Railroad Linking China and the U.S. https://sinosphere.blogs.nytimes.com/2014/ 12/18/q-and-a-with-wang-mengshu-on-a-railroad-linking-china-and-theu-s/. Accessed 16 May 2019. New Zealand China Council. 2019. https://nzchinacouncil.org.nz/events/ building-the-southern-link-conference/. Accessed 12 June 2019. Presidency of Chile. 25 April 2019. CHINA - Presidente Piñera recibe el grado Honoris Causa de la Universidad de Tsinghua. https://prensa.presidencia. cl/discurso.aspx?id=94637; CHINA: Presidente Piñera inaugura Foro sobre Economía Digital e Innovación. https://prensa.presidencia.cl/discurso.aspx? id=94523. Accessed 30 April 2019. RIA Novosti. 13 May 2014. China-Russia-US Bering Strait Railroad Plan “Feasible.” https://russialist.org/ria-novosti-china-russia-us-bering-strait-railroadplan-feasible/. Accessed 16 May 2014. State Council of the People’s Republic of China. 24 November 2016. China’s Policy Paper on Latin America and the Caribbean. http://english.gov. cn/archive/white_paper/2016/11/24/content_281475499069158.htm. Accessed 17 June 2019. Vakis, Rene, et al. 2015. Left Behind: Chronic Poverty in Latin America and the Caribbean. World Bank. http://www.worldbank.org/content/dam/ Worldbank/document/LAC/chronic_poverty_overview.pdf. Accessed 12 June 2019. Wang Yi. 22 January 2016. De la Mano en la Nueva Era Salvando el Océano. http://www.chinacelacforum.org/esp/zyxw_2/t1528794.htm. Accessed 12 June 2019. Wang Yi. 18 January 2018. El Peruano opinion column. Author’s files. Xinhua. 26 April 2019. Franja y Ruta, una herramienta para integración regional y mundial de Latinoamérica. http://spanish.xinhuanet.com/2019-04/26/c_ 138011272.htm. Accessed 20 June 2019.

CHAPTER 14

China and the Great Urban Projects in Cabo Verde Ivete Silves Ferreira and João Paulo Madeira

Introduction Cabo Verde and China celebrate this year 44 years of political and diplomatic relations. This article focuses on the major guidelines of a long-lasting and multidimensional cooperation. It follows an interdisciplinary methodology based on the triangulation of data in order to facilitate the systematisation of the information collected from documentary sources. Cabo Verde benefits from a political stability that is complemented by a favourable institutional legal environment. China’s interest in the archipelago is essentially economic and commercial. It is, indeed, a

I. S. Ferreira (B) National Institute of Land Management (INGT), Federal University of Pernambuco, Recife, Brazil e-mail: [email protected] J. P. Madeira University of Cape Verde (Uni-CV), Praia, Cape Verde Centre for Public Administration and Public Policies (CAPP-ISCSP-ULisboa), Lisbon, Portugal © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_14

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relationship that has developed from Cabo Verde’s important geostrategic position in West Africa. In order to strengthen the cooperation and friendship between the developing countries and to expand within the international community, China outlined and implemented, after the Bandung Conference in April 1955, a development aid policy that has hitherto lasted. Cabo Verde-China cooperation was formalised in April 1976. However, it has existed since the beginning of the national liberation movement. At a time when we are celebrating the 44 years of Cabo VerdeChina cooperation, there is a need to understand how this small island country, poor in mineral resources, with a reduced market and a population of approximately half a million people, excels in the group of African countries with considerable commercial transactions. China maintains a close relationship with the archipelago. Considering, obviously, its reduced scale, one could question how it has aroused this special interest. Recently, Chinese traders have occupied central and strategic areas of the Plateau, the City of Praia historic centre, and already dominate the trade domestic market. In the end of the 1990s, there was a great influx of Chinese immigrants to Cabo Verde who occupied small retail stores, particularly in the textile, clothing, footwear and food industries. The hypotheses to be tested in this research are related to the One Belt, One Road Programme and the prospective of the archipelago to become a platform for investments in Africa; the ongoing largest private investment Cape Verde Integrated Resort & Casino Project is part of the enhancement of the Chinese investment, whose outcomes contribute to the effectiveness of this strategy. Through an interdisciplinary analysis, the research adopts a methodology which prioritises the triangulation of data. From different perspectives, we address the cooperation in various fields and seek to establish a reference theoretical frame in order to structure the object of study.

Strategic Pillars of Sino-African Relations The African continent has aroused interests from countries such as China to intensify trade relations, which have assumed a prominent position (Bräutigam 2008; Kabunda 2011; Madeira 2017). Although the SinoAfrican relationship started in the 1960s, with Chinese support during the period of movements for independence (Eisemann 2015), we have been remarking a certain revitalisation of the Asian giant’s interests in

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the African continent in recent decades, more specifically since the year 2000, marked by the holding of the first Sino-African Summit, which started being held every three years, having occurred after that, six more editions. China’s enthusiasm regarding Africa has given rise to various interpretations, being the most common related to the alleged exploitation of the continent’s natural and mineral resources, particularly oil. Several authors, such as Cooke (2009), Tavares (2010) and Shen (2013) show that, on the one hand, this relationship is well appraised by Africans and, on the other hand, there are peculiarities in this partnership that must be taken into consideration, given the differences between China’s direct investments and public investment. It is possible here to highlight the major steps of this relation. In 1993, the Chinese Ministry of Foreign Trade and Economic Cooperation developed a plan for the exploitation of African countries’ markets; in 1995, the Chinese government made several visits to Africa, having occurred in Beijing the National Conference on Work for the Reform of the Assistance to Foreign Countries (Keijzer 1992; Snow 1988). In 1996, China created ten centres for trade and investment in African countries. In 1997, Chinese companies in partnership with the Ministry of Foreign Trade and Economic Cooperation convened a Conference to discuss economic and trade cooperation with Africa; in October 2000, the 1st Forum on China-Africa Cooperation (FOCAC) was held in Beijing, in which the Chinese government decided to reduce or even forgive the debt to African countries (Hong-Ming 2004). The FOCAC has held meetings with triennial frequency for 15 years. The host has been alternately China and an African country. In December 2003, in Addis Ababa (Ethiopia), the Plan of Action for 2004–2006 was approved. In 2006, in Beijing, the 3rd FOCAC took place, in which decisions were taken in order to create a China-Africa Development Fund (CADFund). In November 2009, the city of Sharm El-Sheikh (Egypt) hosted the 4th FOCAC. This meeting was particularly marked by the announcement of new loans at very low-interest rates from China to Africa. The means to the accomplishment of projects in different sectors were also provided. At the 5th FOCAC, in July 2012, occurred again in Beijing, they established as a priority the implementation of initiatives that encourage the reinforcement of the strategic alliance. In December 2015, Johannesburg (South Africa) hosts the 6th FOCAC. The last (seventh) FOCAC was once more held in Beijing in 2018.

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These meetings have allowed the strengthening of Sino-African relations, particularly the “South-South” perspective (Mendes 2010), enabling the establishment of mutually beneficial trade agreements, particularly, the credits for project investment in Africa (Hackenesch 2011). Chinese diplomacy has paid special attention to the third world countries (Taylor 2006), by their enormous potential to become important allies, as they share identical interests to Beijing’s (Taylor 2006). China has identified five guiding principles in its relationship with other countries: (1) the non-intervention or interference in internal affairs; (2) the mutual non-aggression pact; (3) cooperation and mutual respect for territorial sovereignty and integrity; (4) mutual equality and advantages; and (5) the peaceful coexistence with other States (Anshan 2007; HongMing 2004). Beijing’s goal is to make use of its economic and political partnership with Africa and proceed with the South political and economic agenda, establishing a more equitable and fair international order (Shelton 2006). It has developed a platform, called the New Silk Road Initiative or One Belt, One Road, to strengthen trade relations between the various regions such as Central Asia, Russia and Europe, where the African continent may play a role of the utmost importance. African governments will have to promote a favourable environment for projects to succeed, particularly in the private sector so that they can effectively play a key role in this initiative (The Conversation 2017). The 7th FOCAC was held in Beijing, on 3 and 4 September 2018. At this meeting, the Cape Verdean and the Chinese governments signed an agreement to integrate the One Belt, One Road Programme. The Prime Minister of Cabo Verde, Ulisses Correia e Silva, recognised that “there is a great potential for the creation of a strong synergy between the Special Maritime Economic Zone project in São Vicente and the ‘laudable’ Belt and Road Initiative launched by President Xi Jinping” (Revista Cargo 2018).

Cabo Verde-China Relations: Case Study Cabo Verde has no mineral resources, which means it needs external flows, foreign direct investment and emigrants’ remittances. It is in this context that the relationship between Cabo Verde and China has been of vital importance, being currently an important economic partner. It was in April 1976, a year after independence, that Cabo Verde formalised

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its diplomatic and political relations with China. It is important to mention here that China was the first to establish an Embassy in Cabo Verde, whose headquarters are in the city of Praia. Likewise, Cabo Verde set up a Consulate General in Hong Kong that represented it within the framework of the Asian diplomacy. It only established an Embassy formally in Beijing in 2001. In 2005, Dr. Julio Morais was appointed the first resident Ambassador to China. Although Cabo Verde has, among the Portuguese-speaking African countries and the sub-Saharan African countries, one of the best ratings (125) in the 2018 Human Development Index (HDI), this country is at the end of the list of priorities of Chinese foreign policy due to its reduced internal market and lack of mineral and energy resources. Therefore, one may wonder what the real reasons are for China’s presence in Cabo Verde. The archipelago is politically stable and promotes a culture of peace with impacts on its foreign policy (Madeira 2019). It occupies an advantageous geopolitical space between the shores of the Atlantic, which eventually creates a climate of confidence that induces foreign investment. Aware of its limitations, Cabo Verde has sought to implement partnerships that value its specificities, in particular its privileged geostrategic position. It has prioritised programmes, projects and actions in strategic areas, which allow it to become a safe and competitive platform to provide services among African markets (Revista Macau 2015). China has been funding several projects in Cabo Verde, among which we highlight: the National Assembly, the Government Palace, the National Auditorium, the National Library, the Poilão Dam, the National Stadium, the Maternity Ward and the Appointments Centre of Agostinho Neto Hospital, the Electronic Governance project (E-GOV II) and the Technological Centre of Cabo Verde. In July 2017, they announced the construction of the new Campus for University of Cabo Verde. Since the 1990s, a significant number of small Chinese investors have arrived in Cabo Verde who started businesses in various sectors, such as the construction industry, sale of auto parts, car rental, maintenance and repair garages, mechanics, carpentry, locksmith, milling and aluminium industry. The Chinese population, though insignificant compared to its diaspora, starts causing some impact on the small Cape Verdean society and economy (Andrade 2008, p. 70).

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Several initiatives have fostered the rapprochement and exchanges between Cabo Verde and China. In 2011, the Cabo Verde-China Friendship Association (AMICACHI) was founded—it is a Cape Verdean nongovernmental organisation which aims to strengthen friendship ties and cultural exchange between both countries. Between 2011 and 2012, the University of Cabo Verde (Uni-CV) formalises partnerships with Chinese regional universities by strengthening cooperation in the field of human resources training and professional qualification. In 2015, the Uni-CV signs with Guangzhou University of Foreign Studies, a protocol for installation of the Confucius Institute in Cabo Verde, one of the first in the country, which encourages the promotion of the Chinese language and culture. The Ministry of Education and the Confucius Institute of the Uni-CV signed, in 2017, a cooperation protocol in order to include in the Cape Verdean education system, for the academic year 2017/2018, Mandarin as an optional foreign language so as to enable a greater cultural approach. Cabo Verde is auspicious in its relationship with China while country with high geopolitical value that makes it unique among other spaces, enabling its geographical proximity to important geopolitical and geoeconomic areas, in particular the African continent. The archipelago has been leading its political and diplomatic action with commitment and determination, trying to be helpful, aware that, consequently, it can stand out in the international context (Madeira 2019). Although Chinese investments in Africa have recently grown, they are still of little relevance, when compared to their global investments, and to those of countries such as the UK, the USA and France. These continue to dominate the volume of commercial transactions with Africa. Nevertheless, future prospects point to a possible increase in the pace of China’s investments in Africa, as well as a turning point in this partnership approach. China is showing signs of wanting to reconfigure its interests from an exclusively economic plan to other spheres or interests of foreign geopolitics (Graça 2010; Yu 2009; Hanauer and Morris 2014). With its ten islands, scattered in the middle of the Atlantic Ocean, between the American, European and African continents and with a location considered by many as being “strategic equidistant from Northern America and Southern Africa, halfway between Southern America and Central Europe, connected by regular sea and air routes” (Andrade 2008, p. 38), the archipelago has played a prominent role during the period of

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colonisation, having been used as a logistics platform in the context of trade exchanges, slave trade and supply of ships that crossed the ocean. The location of Cabo Verde has aroused, for different reasons, the interest of powers such as the USA, Europe and China. It should be noted that the “intensification of Sino-Cape Verdean relations fits into China’s strategic interest in using Cabo Verde as a platform to enter the African market” (Tavares 2010, p. 126). The fact is that, in addition to the “privileged” location, many speculations have been made regarding the reasons for China’s interest for Cabo Verde. Among the several factors presented, we can highlight: economic and political stability, stable economic and social indicators, free elections, absence of political, ethnic or religious conflicts, availability of workforce, easily usable with high level of productivity and which preserves the image and credibility among investors (Andrade 2008).

Macau as a Bridge Between Cabo Verde and China’s Interests The Cape Verde Integrated Resort & Casino Project presents itself as one of the largest private investments announced in Cabo Verde. It is being implemented by the Macau businessman, Dr. David Chow, who pointed out Macau, while Sino-Portuguese platform, as a fundamental means for the expansion of his business within the framework of the One Belt, One Road. Macau’s multicultural identity, since the arrival of the Portuguese in the mid-sixteenth century, inspired the Chinese enclave to incorporate the vision of East-West Bridge. Five centuries later, the territory is again under China’s control. However, it retained the Lusophone characteristics that allowed it to become “a pawn in a Chinese shadow play to reach overseas interests” (Mendes 2013, p. 44), being officially designated as China’s connection platform to the Lusophone World. This function assigned to Macau became more prevalent in 2003 within the framework of the creation of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking countries. Macau was elected headquarters of the Permanent Secretariat of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking countries.

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Forum Macau highlights the desire to project the image and elevate the level of multilateral cooperation. In this sense, the Chinese government provided the creation of the China and Portuguese-speaking countries Cooperation and Development Fund, with a total value of 1 billion USD. The initial capital was provided by China Development Bank and the Macau Industrial and Commercial Development Fund, both as corner stone investors of the Fund (Mendes 2013, p. 45). The Fund is intended exclusively to investment and funding applications submitted by Chinese companies, including Macau SAR, and by Portuguese-speaking countries. The capital is used as a connection axis aiming at promoting the development of companies, the advance of globalisation and the economic growth of the countries involved. It accomplishes “an important measure adopted by the Chinese Government to stimulate and deepen economic and trade cooperation between China and Portuguese-speaking countries” (Mendes 2013, pp. 53–54). There are many assumptions in relation to the goals underlying the creation of this Forum, such as the cultural approach and the consolidation of economic partnerships with the Portuguese-speaking countries. It is speculated that, in exchange, China seeks to obtain a kind of “loyalty” in the international system. The main goal of the institutionalisation, the permanence, the events and the exchange of visits that occur through Macau is mutual knowledge, the building of confidence, which will then result in China’s increasing political influence over these countries. In fact, these end up owing favours. In this logic of reciprocity, it is natural that China, instead of receiving the Portuguese-speaking countries in terms of investment, construction of infrastructures, preferential treatment in trade exchanges and other concessions, expects to get from them their loyalty in the International System (Gaspar 2009, p. 27). The first resident Ambassador of Cabo Verde in China, Dr. Julio Morais, believes that the friendship and cooperation relations can last for decades. They began with the arrival of the first Cape Verdean immigrants that came to work in the Macanese public sector, even before the independence of Cabo Verde. Forum Macau might have provided more conditions for a greater rapprochement between the two countries. It has allowed the strengthening of relations between Cabo Verde and Macau, particularly the contacts in terms of the economic, cultural and technical-institutional cooperation and has contributed to raise awareness about Cabo Verde in Macau

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(Macau SAR) and in the Pearl River Delta, until then hardly known by China (Revista Macau 2015). In the 12th Meeting for Economic and Commercial Cooperation between China and the Portuguese-speaking countries, held in Cabo Verde, in Praia, the Director-General of the Ministry of Commerce of China, Kang Wen, exalted the participation of the country which, though small, has already organised three editions of this meeting. This approach has enabled the signing of agreements in the field of higher education, particularly in scientific and pedagogical cooperation with the former Ministry of Higher Education, Science and Innovation (MESCI), currently Ministry of Education of Cabo Verde (ME) and the Macau Polytechnic Institute (IPM). This cooperation focused on the mobility of Cape Verdean students to the IPM, the granting of scholarships, teacher mobility, cultural exchange, scientific and pedagogical development in the areas of Chinese language and culture, and gaming and casino management (Inforpress 2016b). The Casino Project emerges in a context of turning point in the (official) partnership profile of more than four decades between Cabo Verde and China. This is, nevertheless, a relationship that, by the end of the 1980s, was based mainly on the public partnership. Since the late 1990s, with the economic liberalisation of Cabo Verde and the opening of China, it has also extended to the private sector. In the late 1990s, small- and medium-sized Chinese entrepreneurs arrived in the country, mainly investing in the trade sector (Andrade 2008). In 2006, with the strategic partnership between the two countries, the relationship extends to other areas, including tourism (Tavares 2010). At the end of 2007, China signs a memorandum of understanding with Cabo Verde, in order to facilitate tourist exchanges into this country. In addition to encouraging the movement of Chinese people to Cabo Verde, such exchanges were also meant to promote the building of tourist infrastructures in the archipelago (Mota 2008). At the same time, China renews its interest in the African continent, possibly due to the access to natural resources, commodities and markets, which represent important elements for its project of expansion and economic dominance (Hong-Ming 2004; Anshan 2007; Cooke 2009; Chen et al. 2018). With Cabo Verde, the strategic partnership represents the renewal of the partnership model so far implemented. It was under these conditions that the construction of the Cape Verde Integrated Resort & Casino Project, by the Macau Legend Development Ltd., was achievable.

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China and the Great Urban Projects in Cabo Verde The idea of the One Belt, One Road to re-establish trade routes and promote the development of great projects along these routes was released in September 2013 and officially announced by President Xi Jinping in 2015. The belt refers to the ancient land Silk Road connecting China to Central Asia and Europe. It corresponds to six main corridors: New Eurasia Bridge (from Western China to Western Russia), China-MongoliaRussia (from Northwest China to South-East Russia), China-Central AsiaWest Asia (from Western China to Turkey), China-Indochina Peninsula (from Southwest China to Singapore), Bangladesh-China-IndiaMyanmar (from Southwest China to India) and China-Pakistan (from Western/Southern China to Pakistan). The Road refers to the maritime route, to China’s New Silk Road through Southeast Asia to the Indian Ocean, until the Mediterranean. Several branches of the routes China-Indian Ocean-Africa and Mediterranean region, China-Oceania-South Pacific and China-Europe-Arctic Ocean have emerged. The One Belt, One Road Initiative has as goals the strengthening of economic diplomacy, the opening and promotion of trade and the internal development strategy. Until 2016, 68 countries had been involved, but these were not confined to the geographical limits of those routes. On the whole, there are 270 projects that add up to approximately 900 billion USD (D’Atri 2017).

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One Belt, One Road Initiative, planned and accomplished projects (Source BOF [2017]) While traditional political and economic partner of Cabo Verde, China has supported various sectors, particularly in infrastructure and major public works with the construction of buildings such as the Palace of the National Assembly, the Government Palace, Amilcar Cabral Memorial, the National Library, the National Auditorium, the National Stadium, Poilão Dam, the Infirmary and Operating room, the Maternity Ward and the Appointments Centre of Agostinho Neto Hospital, the doctors’ lodgings, the University of Cabo Verde and two rural schools that somehow symbolise that relationship. In the last two decades, following the economic liberalisation and the opening of Cabo Verde to globalisation, the investment interests in the country seem to have become more evident. These are being performed mainly by small- and medium-sized private investors. In terms of public partnerships, we highlight the construction, in 2006, of the first dam designed for the retention or storage of water and, in 2014, of the National Stadium of Cabo Verde. Recently, other sectors have been covered such as trade, construction, health and education.

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Among the identified projects, 97% are located in the municipality of Santiago, of which 85% are in the capital city of Praia. The possibility of implementing projects on other islands of the country has been considered, such as the rehabilitation of the Cabnave dockyards (company based on the island of São Vicente), in the amount of 65 million dollars. In addition, we emphasise the creation of a Ceramic Unit on the island of Boavista, dams, and council housing on the islands of Santiago, São Vicente, Boavista, Maio and Sal which, on the whole, amount to 100 million dollars. The Cement plant of Santa Cruz and the construction of the port, valued at 65 million dollars, will allow the improvement of the flow of industrial products (Mota 2008; Tavares 2010, Madeira 2017; Ferreira 2018). These investments have not been made so far. In what concerns private investment, we highlight the ongoing project Cape Verde Integrated Resort & Casino as aforementioned. Once implemented, it will be the largest private foreign investment in the archipelago, valued at about 250 million US dollars. Such investments, in the public and private sphere, demonstrate China’s intention to reinforce its presence in the country. David Chow announced that the Casino Project is part of the One Belt, One Road strategy, an initiative that can help place Macau as one of the important cities of the Maritime Silk Road, using vanguard to boost small- and medium-sized enterprises to expand from Macau (Macau Legend Development Limited 2015). The Casino Project is estimated as being around 15% of the GDP which, given its great significance in the economy of the country, may have large impacts (Lusa 2018). On the other hand, taking into account the initial characteristics of secrecy that have been presented, it certainly will not address the population’s needs in terms of infrastructure and collective equipment. Likewise, it will not guarantee a broad participation and debate on the solutions that will be implemented (Ferreira 2018). This is, after all, a project that, by its magnitude, might have a significant impact on the landscape and the environment involved. So far, despite its aridity, the island has been used by fishermen and inhabitants of the surrounding neighbourhoods such as Bairro do Brasil, Lém Ferreira and Achada Grande Frente. However, land and real estate speculation may result, in the near future, in the expulsion of these inhabitants.

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The Casino Project: A Turning Point in Cabo Verde-China Relations After a decade of the Casino Project negotiations with the Cape Verdean authorities, on 22 July 2015, David Chow, owner of the company Macau Legend Development Ltd. (MLD) signed in Macau the contract for the construction of the complex. This relationship of the entrepreneur with Cabo Verde dates back to 2002, particularly by the time of his visit to the archipelago, when he acquired Cape Verdean nationality. Even then, David Chow showed an interest in a partnership with the country in order to make investments in the tourism sector (Ferreira 2018). It was between 2005 and 2006 that the entrepreneur proposed the creation of the Integrated Tourist Complex of Gamboa and the islet of Santa Maria, currently Cape Verde Integrated Resort & Casino. The project, in progress in the city of Praia, aims to fill a 152,700 square metres area, organised into three domains. The first, on the islet of Santa Maria, will provide a hotel, a cultural centre, an International Conference Centre, a church and a museum. One of the purposes of this domain is to promote business in the complex and cultural activities of the city of Praia and the island of Santiago. The second, the Hotel Casino will be located at sea between the islet and Gamboa beach. The third and last refers to the resort on Gamboa beach that will include sports and leisure areas, twelve village-type houses, a car park and a hotel (Direção Geral do Ambiente 2015).

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Location of the Casino Project (Source Ferreira [2018]) It should be noted that in the past decade, Macau has emerged as the most lucrative area in the world due to the gambling activities, with earnings of 45 billion USD in 2013, a figure seven times larger than the revenue produced that same year by Las Vegas Strip casinos (Riley 2014). Unlike the highly regulated American casinos, those in Macau facilitate gambling for high rollers and do not question the origin of their wealth (Hanrahan 2015). For these and other similar reasons, Macau has been used as an example for a variety of Asian and Pacific States, which seek to leverage gambling tourism and the Integrated Resort model as a tool for social and economic development. However, Macau’s dominance is being threatened by neighbours (Sheng and Gu 2018). The two Singapore casinos have grown a lot in recent years (Reuters 2019). In addition, new ambitious Casino projects are emerging. They go from Japan to the Philippines and from Australia to the Russian Far East (Erheriene 2019).

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Therefore, Cabo Verde presents itself as an attractive destination for the enlargement of Macanese investments in the casino sector. In addition to the social, political and legislative stability, the investor identified as a major factor its strategic positioning in the vicinity of potential attractive markets of European, African and American continents. For example, Brazil, which has geographical and cultural proximity with Cabo Verde and where gambling is forbidden, appears as a potential consumer. Macau is known as The Asian “Las Vegas” for having great experience in casinos. It provides tourism products that attract wealthy people. The entrepreneur David Chow may also seek to reproduce that model of tourism in Cabo Verde, which meets the Chinese demands of the One Belt, One Road Programme. Through this project, the entrepreneur intends to include Cabo Verde on this ambitious strategy. In fact, this desire has been taken over by the Director of the project’s investment company, during the groundbreaking ceremony: Being Cabo Verde a small archipelagic country, located in the middle of the Atlantic Ocean, integrating five Portuguese-speaking countries, its strategic position will attract people and more investment from America, Africa, the Caribbean and Europe (Inforpress 2016a). Therefore, turning Cabo Verde into the African Macau seems to be a very likely scenario. This reinforces some ongoing important measures and actions, including the recent announcement of the creation of a Macanese Bank to support future investments in Cabo Verde (Silva 2018). David Chow, while President of the Legend Globe Investment Company, signed in June 2017 with the Ambassador of Cabo Verde in Beijing, Ms. Tânia Romualdo, a memorandum of understanding in order to open a credit institution. We are referring to the Sino-Atlantic Bank, taking into consideration that the financial sector has been a strategic tool for the economic development of the archipelago. After the launching of the Tourist Complex of the islet of Santa Maria, a project that represents approximately 15% of the Gross Domestic Product (GDP) of Cabo Verde, David Chow promises to continue to invest in the country in areas such as banking, and agriculture and environmental protection. The opening of a bank appears as the tangible step after the request for approval to the Central Bank of Cabo Verde. That intention is a consequence of the signing of the memorandum of understanding with the Government of Cabo Verde (Silva 2018). On the other hand, the fact that the businessman David Chow had been accompanied by the Chief Executive of Macau during the groundbreaking of the Casino Project

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in Cabo Verde, evinces here some interest from the Executive of Macau in creating conditions so that Cabo Verde can receive more investment from Macau and have increased involvement in the enlargement of China’s geopolitical and economic area of influence (Ferreira 2018). Cabo Verde enjoys international credibility, and it was highlighted by David Chow, as a potential linking platform between Macau and the Portuguese-speaking countries as well as with the African continent. Thus, it would not be surprising that this small country, in partnership with Macau, had some visibility in the context of China’s geopolitical and economic plans established in the One Belt, One Road Programme. This hypothesis is reinforced by the Director-General of the Ministry of Commerce of China, Kang Wen, who ensures that Cabo Verde has all the openness, from the government of his country, to also integrate the One Belt, One Road project. He adds that the initiative is open and inclusive, and that although Cabo Verde has not been involved, at the beginning, it can participate and negotiate directly with the Chinese government with regard to the means of participation (A Nação 2017).

Conclusion China and Cabo Verde have developed a long-term relationship compared to that of other economic partners of the archipelago. The major milestones of this relationship give us signs that it is, in fact, modifying. This occurs mainly due to the changes that often occur between both countries. The relationship begins in a period when both China and Cabo Verde assume an alignment close to socialist principles. They allied to defend different interests: Cabo Verde received considerable support from China in the struggle for independence. China, in turn, needed allies because, at this stage, one of its priorities would be to cultivate greater possible support to consolidate its international recognition. All this, had its expression in the dispute with Taiwan, which also helped the African countries winning, thereby, their sympathy (Yu 2009). After six decades of relationship with Cabo Verde, priorities have changed. China presents itself as a power of capitalist nature, with an imperialist project on the African continent. Gradually, we have been witnessing the extension of its presence in Cabo Verde, not only through the implemented projects and agreements but also in the context of private

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investment. The signing of the strategic partnership in 2006, the inclusion of tourism in the set of pillars of this partnership and the progress in the construction of the large ongoing tourist complex by a Macanese company, mark a new phase in this relationship. The MLD Company’s intention to open a Sino-Atlantic Bank shows that Chinese investments in the archipelago will continue and others will come. Through the Casino Project, David Chow has already expressed his intention to rely on Cabo Verde to reinforce the presence of Macau in the One Belt, One Road Initiative, announced in 2013. For a small-scale country such as Cabo Verde, this is not only a project of urbanisation but also an important tool for China’s geopolitical and economic aspirations. Cabo Verde, with the recent membership of the ambitious One Belt, One Road Initiative, is also showing signs of willing to maintain and reinforce the old partnership with China.

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CHAPTER 15

The Ultimate European Border: The Belt and Road Initiative Discovers Portugal Francisco José B. S. Leandro and Paulo Afonso B. Duarte

Introduction Borders are material and immaterial human creations to organize space. Borderlines have been the most visible symbol of human divides, as they were created to be the definitive material limit of immaterial cultural geopolitics (Johnson & Michaelsen, 1997, p. 3). Borders are the unnatural outcomes of historical hurdles, political struggles and social constructions, which create collective narratives of self-perception and differentiation. Feudal societies were based on hierarchical social dependency structures and not on territorial delimitation. Borders started to be virtually invisible, as they were composed of sovereign bonds (sovereign-topeople). It was the Westphalian concept of sovereignty and the transformation of the nation state into the sovereign state that brought

F. J. B. S. Leandro (B) City University of Macau (CityU), Macau SAR, People’s Republic of China e-mail: [email protected] P. A. B. Duarte Centre for Research in Political Science, University of Minho, Braga, Portugal © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_15

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significance to border studies. In fact, border studies have become an interdisciplinary field, critically examining border and identity understandings found in political and everyday discourses, bearing in mind that modern borders function as limits of direct action in the exercise of state sovereignty. In the same vein of thought, borders represent the maximum reach of state sovereign limits, measured from a centre of political gravity. Borders embody lines of opportunity for cooperation or lines of tension, which may disrupt the balance between two contiguous political units. Borderlines are physical lines of separation, but not necessarily lines of confrontation or competition. The merely physical existence and the way they look as human constructions depend upon the manner neighbours perceive one another. That is why borders perform different functions and possess a dissimilar value, depending on how balanced or unhinged the relationship is between sovereign neighbouring political units. Nevertheless, postmodern state borders are a sort of ‘hybrid’ combining the hard, closed and bi-dimensional borders of the classic Westphalian state, with permeable, immaterially framed and multidimensional borders of the modern state. An empirical observation of borders around the world yields different combinations of this ‘hybridity’, with some borders being completely permeable, and others attempting to curb all material and immaterial flows. This chapter argues that the Belt and Road Initiative (B&RI) makes a positive contribution to the implementation of the ‘de-bordering concept’ between China and European Union. In a context of hybrid (material and immaterial) and holistic (all areas of interaction between sovereign units) borders, Portugal can play an unprecedented role in the Silk Road Economic Belt, as well as in the 21st Maritime Silk Road, while enabling China to maintain a strong/stronger presence within European borders. This chapter aims at assessing the relevance of Portugal within the B&RI. The Portuguese case is remarkable as it displays both the hybrid dimensions of sea and land borders as well as the holistic nature of the B&RI. In fact a small country, the size of Portugal is important to China in many areas: economics, politics, military, culture and diplomatic prestige. Portugal is also important to China in terms of security understood in its broadest sense. This chapter is organized as follows. Firstly, we present a conceptualization of material borders; then we introduce the concepts of de-bordering, re-bordering and co-bordering. In the next section, we focus on the

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impact of the B&RI on borders and finally, we analyse Portugal’s potential contribution to B&RI, not only on its own, but also as a gateway to the European Union (a complex common border), with a significant presence in the Atlantic North. Lastly, we draw a few conclusions.

Conceptualizing Material Borders We live in an odd and complex world. On the one hand, the public narrative says that the world has become increasingly interdependent and globalized; that states are keen to join economic zones to overcome trade barriers, to be recipients of foreign direct investments (FDI) and to engage in bilateral trade agreements (BTA), preferential trade areas (PTA) or free trade agreements (FTA); and the political discourse acknowledges that common challenges cannot be tackled by single states in isolation. The emergence of multi-level multilateralism is another manifestation of interdependence and globalization. The main function of organizations such as the World Trade Organization (WTO), the Internet Governance Forum (IGF), the United Nations High Commissioner for Refugees (UNHCR), the International Organization for Migration (IOM) and the International Labour Organization (ILO) is to ensure that trade, information, labour and people flow as smoothly, predictably, securely and freely as possible and at all levels. We talk about movements across regions all the time: capital, people, goods, labour, services, culture, electronic waves, transportation means, submarine cables and innovative ideas. In this context, it appears that hard borders are doomed to fade away and will eventually disappear. We all want to be connected to the global cloud which probably represents the virtual anti-idea against any sort of divide. Moreover, global natural occurrences, such as climate warming, pollution, fauna migration movements, the proliferation of flora species, spread of diseases, river flows, typhoons, high and low tides, winds and rain, and digital connectivity, have rendered the idea of physical borders almost useless. On the other hand, the concept of political borders appears to swing between sovereign fault lines which constitute tense points of contact and lines of opportunity facilitating the management of common problems. Likewise, political borders may reflect fundamental imbalances that induce antagonism or they may provide opportunities for joint efforts to meet common needs. As Kristof (1959) argues, boundaries are legal instruments that provide stability in the political structure, at the both national

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and international level, and boundaries make a clear distinction between the spheres of foreign and domestic politics. Borders establish a difference in identity between ‘us’ and ‘others’—enforcing the recognition of the parties involved as equals. As Flint (2006, p. 153) asserts, ‘The identity of a nation depends upon the effective use of the boundary in conserving a sense of geopolitical “order” which is the maintenance of a particular domestic politics in the face of “outside” threats. The separation of a domestic “inside” from an “outside” realm of foreign policy has always been a fiction, but, arguably, this is increasingly so in the wake of intensified economic integration of the globe and related cultural and migratory flows’. Therefore, borders are a human creation that materializes the concept of the Westphalian state, and as a consequence, states build lines of separation (sometimes in the form of physical walls), reinforce the external protection of common borders, enter into exclusive bilateral agreements, criminalize in the strongest ways any allegiance to foreign states, do their utmost to prevent illegal border trespassing and safeguard their borders in the most assertive ways, often with a high degree of militarization. Flint (2006, p. 153) further adds that ‘boundaries and borders are an integral component of a state’s geopolitical code. The legitimacy and tenure of a government depends upon its ability to maintain boundaries from external threat’. The degree of militarization in the context of the securitization narrative becomes part of their natural reality. In fact, as Gelézeau (2015, p. 28) puts it, ‘the thorough militarization of the border regions contributes in evident ways to their “cultural” identity and is an integral part of the daily lives of the inhabitants’. Physical border security and foreign affairs are central concerns of sovereign states whose aim is to protect their nationals from the ‘outside world’. According to this line of thought, ‘sovereign’ borders as a Westphalian creation represent lines of separation, dividing equal power and differentiating national identities. Political borders are conventional lines that distinguish national interests, and they sometimes function as catalysts promoting mutual interests. They are the result of historical processes and were established by the dynamics of political power. According to Ulc (1996), European borders are unnatural, political constructions. Looking at European history, border drawing has been a consequence of the struggles about the formation and re-formation of nation states. Borders are the ‘scars of history’ (Ulc, 1996). They divide people due to political decisions; they are often the outcome of violent conflicts between nation states, but they may be determined peacefully, such as it was the

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case with former Czechoslovakia that after a referendum was divided into the Czech Republic and Slovakia in a so-called Velvet Divorce. Border stability depends on a correlation of forces, the circumstances determining the exercise of political power, the regularity of social and economic interactions within an arch of historical time, kept alive in the memory and identity of people separated by a border. According to the classical theory of borders, political borders are recognized, conventional demarcation lines, delimiting contiguous spaces of sovereignty exercised with supremacy over a territory and a population. Borders result from the transformation of nations into states, and they craft states across nations or transform a nation into multi-states. Borders mark the maximum range of the direct effects of state institutional actions within a system of public values enforceable by domestic law. In the case of the Demilitarized Zone (DMZ) between South and North Korea, the border represents foremost a deep division between the public values of both countries, and incompatible political ideals. However, the identity divide seems to be the most significant dimension. The programme to reunite Korean families1 is an indirect affirmation of their common Korean identity and is part of the very few measures to deborder the ‘hardest’ border in the world. Borders depict a certain conception of space. Furthermore, as Chauprade highlights, ‘borders are part of our geopolitical referential… they are the visible result of interaction between different forces composed of ethnic, religious, language, relief and the rush for resources’ (2003, p. 18). In this sense, borders represent the territorial and physical limits of political systems, binding all individuals whose presence within that territory is legally relevant. Nonetheless, borders go further because they are also conditioning elements of a state’s perception over its own physical geography and therefore a very important element when states consider foreign affairs options. Chauprade concludes that ‘physical geography is a constant factor, which stands as the foundation of the continuity of states’ foreign affairs’ (2003, p. 201). In the traditional categorization of borders, alongside the current political narrative, it seems that there is an acceptance of the narrative of ‘interdependence’, insofar as it concerns soft borders. Inversely, the idea of a hard border is met with a completely different reception. The classic concept of hard borders portrays a world of exclusion, confrontation, 1 Retrieved on July 2019, from https://edition.cnn.com/2018/08/19/asia/koreafamily-reunions-intl/index.html.

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fear, separation of cultures, incompatibility of interests, deploying the unknown and a rooted perception of antagonism. According to national narratives, hard borders frequently represent lines of ‘protection’ to prevent access and reinforce the national sense of belonging where the uncertain is to be feared. As Mostov stresses (2008, pp. 3–4), Hard borders and hard border thinking undermine people’s access to resources, opportunities, and protections; limit possibilities for democratic processes of social choice; and encourage relationships of domination and violence. Hard border thinking promotes and exacerbates political conflicts, blocks sustainable peaceful conflict resolution, and maintains skewed relationships of power in international markets and development programs.

Mostov further asserts that ‘hard border concepts fuel politics of fear and exclusion, fixing notions of membership and belonging and exacerbating vulnerabilities of those over whose bodies symbolic borders are constructed and for whom physical borders are lethal’ (2008, p. 123). Unquestionably, even when we refer to hard borders determined by natural geographical features, there are different types of hard borders, each with its own challenges, for example, mountains,2 rivers,3 lakes,4 deserts5 and forests.6 If one accepts that borders are used to separate what is different, then we also should recognize that all differences are not necessarily incompatible. Sometimes borders represent long-standing separators, and they function as ‘dividers’ in the historic, religious or economic context. Borders have become sites of conflict and contestation. In fact, as Laroche (2017, p. 32) underlines, ‘international politics is now characterized by several cleavages (North/South, South/South, Legal/Authoritarian States, among others)’. To separate what is thought to be incompatible creates a dilemma. The latter is based on the fact that states are increasingly ready to invest to improve the strength and the resilience of their hard borders. However, it appears that the greater the asymmetry between contiguous states, the 2 Mountains are difficult to oversee and control and they represent the natural separation of waterways. 3 Rivers are seen as natural barriers and as natural communication routes. 4 Lakes require common management. 5 Deserts and their unstable and changing landscape is difficult to manage. 6 Forests are difficult to exercise control.

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harder a border becomes. Consequently, the harder a border becomes, the greater its potential as a source of fear, discomfort, cleavages and violent conflict. The dilemma seems to be clear: the asymmetry between contiguous states triggers an escalation in hard border solutions, which seems to be an endless process. In fact, the more one invests to protect, the higher the perceived need to increase protection.

Conceptualizing De-bordering, Re-bordering and Co-bordering7 In this section, we shed light on three important concepts. The first is ‘debordering’ which refers to concurrent, voluntary, involuntary, multi-level, material and immaterial processes of fading, weakening, trespassing or removing the physical, cultural, legal and economic barriers which are preventing or impeding direct interactions between agents of two contiguous sovereign states, without compromising the exercise of sovereignty. A simple free trade agreement (FTA) is a good example of a de-bordering process because it allows for a more intensive flow of trade in goods between sovereign units. The main idea of these processes is to eliminate restrictions to the cross-border free interplay of national agents, with the intention to promote ‘harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions’ (European Union Commission, 20188 ). These processes should occur at all levels and involve a structured and intentional cross-border collaboration that aims at regionalization. The regionalization concept used here refers to a process of creating local development opportunities, not a political devolution of power. According to Blatter (2001, p. 76), In Europe, cross-border collaboration is producing another soft, but formalized, comprehensive and territorially defined layer in the European ‘multi-level-system’. In North America, by contrast, only informal, specific and non-territorial institutions are evolving across the national borders.

7 This section is based on a paper presented by Francisco Leandro at the International Symposium on Global Asia in Interdisciplinary Perspectives: Sustainability, Security, and Governance, Nanyang Technological University, Singapore, in 2018. 8 Retrieved on July 2019, from http://europa.eu/rapid/press-release_IP-85-38_en.htm.

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Delissen (2015) calls our attention to the fact that de-bordering creates opportunities and changes the attitude towards others, introducing a form of elasticity which accommodates different interests. In turn, MacCall emphasizes that within European Union ‘de-bordering is the underpinned by the process of Europeanization eliciting nascent notions of supranational citizenship and identity as well as more substantial form of supranational governance and territoriality’ (2012, p. 214). De-bordering does not necessarily suggest the removal of physical borders nor does it entail terminating the demarcation of sovereign limits. Indeed, de-bordering refers to simultaneous processes of boosting crossborder interactions, through the implementation of facilitating mechanisms compatible with the exercise of sovereign power. However, debordering does not eliminate the special divide because as Genova points out ‘Europe’s borders, like all borders, are the materializations of sociopolitical relations that mediate the continuous production of the distinction between the putative inside and outside, and likewise mediate the diverse mobilities that are orchestrated and regimented through the production of that spatial divide’ (2017, p. 21). Examples of de-bordering include the constitution of the EU Schengen space, free trade agreements, status of forces agreements, bilateral investments agreements, cross-border water management agreements, programmes of academic exchange and joint degrees, visa exemption regimes and the B&RI economic corridors and special economic zones. De-bordering also creates opportunities for intensifying immaterial flows such as capital, social media, culture, networks and digital content. Within the de-bordering dimension, Dodds (2007) called our attention to unbalanced side-effects created due to common sense of the word ‘de-bordering’. In fact, there are several layers to be considered, with different challenges and opportunities. ‘Concepts such as territory, borders, and scale take on a different meaning when considering war crimes in Democratic Republic of the Congo compared to the immigration of young men from North Africa to Southern Europe. If the global political boundaries are more porous to capital than to people, they are also more porous in general to men as opposed to women’ (Dodds, 2007, p. 62). The second relevant concept is ‘re-bordering’ which advances the idea of reshaping and relocating the ‘power’ of sovereignty and the ‘space’ in which sovereignty is exercised. Re-bordering calls for the relocation of a sovereign perimeter and transformation of a substantial portion of

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the perceptions of insecurity. Marcu (2015) puts forward the following notion: Re-bordering refers to challenging, expanding or altering the idea of Europe in order at once to accommodate Eastern Europeans, and potentially other neighbours, as new citizens of the EU, and to define its new spatial, cultural and conceptual boundaries. As action, re-bordering includes the bureaucratic legal and police practices aimed at establishing a tight perimeter around the EU, while opening up the internal EU borders (de-bordering). Thus, re-bordering, as I conceive it, is at once about inclusion and exclusion and its limits.

To a certain extent, re-bordering implies facilitating the ease of crossing internal borders while simultaneously exerting a higher level of control on a common external border. In the context of Brexit, some authors used the idea of swinging borders (such as Colin, 2015, pp. 67 and 82) as an exercise of variable inclusion and exclusion limits, emphasizing the ideas of reinforcing the external common requirements to be allowed in and joint efforts to harden the external common controls. Re-bordering also seems to produce an interesting phenomenon of transferring perceived insecurity from the centre to the periphery. Applying Genova’s argument, re-bordering entails the ‘unprecedented securitization of the external borders of the EU’s Schengen zone of free mobility’ (2017, p. 4). Arguably, both concepts of de-bordering and re-bordering are intertwined, and they correspond largely to the material processes of domestic economic and political integration. Likewise, in de-bordering processes, the external border is more exposed to illegal and unreported immigration, to new immaterial processes of digitalization disruption, and the formation of new transnational networks. Re-bordering applies to both soft and hard borders, and re-bordering calls for new considerations such as multi-layered borders combining perspectives on hard, soft and immaterial borders. The most evident example of re-bordering is the integration of states into federations, establishing a political rebordering. However, there are other types of re-bordering, as illustrated by the African Economic Communities such as the Economic Community of West African States (ECOWAS) or the South African Development Community (SADC). In addition, the European Union monetary union and Schengen can also be seen as co-bordering mechanisms.

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Finally, co-bordering appears to be the most demanding level of debordering, requiring a certain ‘joint’ dimension exercised voluntarily by contiguous states. Longo (2017, pp. 92–111) describes some essential elements that define the concept of co-bordering: Co-bordering appears to be creating overlapping jurisdictions in which two sovereigns can exercise authority over the same stretch of territory […]. Co-bordering can approximate some form of territorial ideal […]. Certainly, the concept of jointly managed borders has normative promise […]. States form tandem political institutions, and even create terms for overlapping legal zones, while at the same time preserving basic aspects of sovereignty […] re-pooling of state sovereignty […]. Co-bordering would provide the glue, adhering member states, which would be compatible with supranational constitutional structure. At an advanced level, co-bordering could pave the way for a legal-synching between neighbouring policies – a form of a legal pluralism through which the seeds can be planted for an enduring for of hierarchy – i.e. the formal and informal equivalence of units.

Creating joint institutional mechanisms for common action such as joint border controls, joint management of separation zones, facilitation and recognition of local transit visas, joint management of hydrographic basins, cross-border exchange of information and joint security units patrolling external maritime borders entail deliberate political efforts to use a common physical border as a positive point of contact between two sovereign entities. The co-bordering concept implies the notion of borderland, ‘regarded not as analytically empty transitional zones but as sites of creative [cultural] production that require investigation’ (Lugo, 1997, p. 51). The co-bordering notion transforms borderlands into ‘privileged locus of hope for a better world’ (Lugo, 1997, p. 3) as they gain from synergies delivered by positive contacts across border entities. Such co-bordering policies intensify border dynamics between two contiguous sovereign units, accepting that borders are not lines of mono-sovereignty but active domains for an international interplay of agents and institutions at multi-levels to serve common interests. Co-bordering concerns both sides of voluntary, active processes, avoiding the uneven exercise of power. Co-bordering is a sort of joint extension of sovereign power, seeking the maximization of mutual interests. Some examples of co-bordering are the establishment of joint border controls and border management

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institutions, the constitution of maritime joint development areas and the implementation of joint hydrographic basin management boards. De-bordering, re-bordering and co-bordering represent three different concepts and three different stages of continuous border transformation, in which de-bordering is the least complex, re-bordering the most complex and co-bordering the one that serves circumstantial joint interests. However, among these three concepts, only de-bordering does not require a physical contiguous border. In the case of China and Portugal, they are not proximate neighbours sharing a common physical border, but two states with a long common history, sharing many dimensions of immaterial borders.

The B&RI: What Are the Impacts on Borders? Following the conceptual framework on borders that was addressed in the previous sections, we now turn to a practical assessment of the B&RI, keeping the de-bordering concept in mind. We do not envision borders as static, nor do we consider contiguity a requirement for promoting debordering measures. Two current examples are the Arctic and the Asian Infrastructure Investment Bank (AIIB). Borders can undergo silent transformation as seen in the case of China’s increasing presence in Antarctica, or borders may have an assertive and blatant nature, as shown by the cases of both the East and South China Seas (Duarte, 2017). Albeit crucial in terms of border-shaping, and simultaneously a clear evidence of Chinese pragmatism, we must not forget that Antarctica, the East and South China Seas, and China’s participation in the space race, are not officially part of the B&RI. These far-flung sites best illustrate that China has no forbidden borders, only pragmatic interests. Moreover, they also show that China is a believer of the idea that borders must be flexible enough to serve the interests of the state, rather than the opposite. In practice, this means that in Chinese foreign policy, borders either in East or South China Sea or in the Arctic (while China is not an Arctic state, it claims that the Arctic is part of the mankind) should be allowed to expand, should it be necessary (Duarte, 2018). As for the Arctic, China has abandoned its traditional bystander approach, as evidenced by the launching of China’s Arctic Policy Paper9 in January 2018, which argued 9 Retrieved on July 2019, from http://english.gov.cn/archive/white_paper/2018/01/ 26/content_281476026660336.htm.

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that the Arctic cannot be hostage to the will of a few states that form the Arctic Council—which can be interpreted as a sort of de-bordering of the Arctic. Borders may thus become the object of revisionism when they no longer meet the interests of a state. That said, China could be called a ‘reformist revisionist’ that accepts some old imposed institutions while resisting and building its own world order if the latter no longer accommodates China’s ambitions (Buzan 2010, p. 18). Perhaps the most striking evidence in this regard is the creation of the AIIB which to a certain extent is the expression of a reformist revisionism or a de-bordering mechanism. Borders are also ideological and institutional as the AIIB case evinces. In fact, China believes that the Western institutions which emerged after the World War II are obsolete. They no longer reflect the distribution of power in the world, especially in connection to the rise of the BRICs. What is more, China perceives current international relations as extremely westernized. According to the Chinese view, the problem is not failed states, but a failed order, which can only be mitigated and corrected through the building of new institutions, such as the AIIB. The AIIB opened a new chapter in terms of pragmatism within the transatlantic cooperation. Actually, the accession of several EU states into the AIIB (Duarte, 2019a) has considerably frustrated Washington in whose eyes many of its EU allies are playing a hybrid game by joining the Chinese camp. In other words, the United States was astonished to see several EU states crossing what one could call ‘forbidden borders’ in terms of institutions, finance and even ideological spheres. This appears to be the result of a certain US entrenchment reflected by the current political sound bite ‘Let’s make America great again’. All in all, the Westphalian notion of borders is largely insufficient to explain the new trends of the twenty-first-century borders. The B&RI’s role is of utmost importance here: it is gradually and silently changing both the regional and sensu lato worldwide patterns of integration and communication. The B&RI is a Chinese concept with a global reach, subjected to national scrutiny by the participating states, aiming to induce multi-level de-bordering processes without modifying the limits of sovereign borders. Furthermore, the World Bank (2018)10 has emphasized three very important facts about the B&RI: 10 Retrieved on July 2019, from https://www.worldbank.org/en/topic/regionalintegration/brief/belt-and-road-initiative.

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It can transform the economic environment in the regional economies of its operation; it can substantially reduce trade costs and improve connectivity and the cost reduction will have significant consequences for certain goods impacting the mode choice and total flows of international trade.

Overall, the B&RI is based on a network of elements of connectivity between economic agents: land domestic development axes, international economic corridors, joint transit routes, sea lines of communications with a myriad of sailing options and special economic zones (and similar arrangements). Therefore, the concept of borders is endowed with a hybrid dimension, and both sea and land aim at serving Chinese domestic and foreign interests. The Chinese naval base in Djibouti could thus be presented here as an outstanding precedent in terms of strategic thinking and maritime doctrine; China seems to understand the importance of oceans whose role is complementary to land in terms of trade and human communication. More and more, China is concerned with the de-bordering of maritime borders, specially to make them safe for commercial purposes. Thus, the combination of the B&RI land component (the land belt) with the maritime component (the Maritime Silk Road) is intertwined with exceptional interface gateways (SEZs) between economic agents, using the elements of connectivity to promote and facilitate cross-border flows. The idea of shortening the distance between markets and production centres worldwide, under the principle of free trade, creating harmonized policies and respecting sovereign boundaries, appears to be a powerful de-bordering global initiative. The B&RI has turned global and it has extended far beyond Eurasia. The three Chinese domestic development axes are extended to six economic corridors and the Maritime Silk Road. This ‘3=6+1’ structure is the core network of a global strategy in Central and Eastern Europe (the B&RI for the Western Balkans, the Arctic Silk Road and the Greenland Arctic Base11 ); in Africa (the Maghreb-Sahel Silk Road, Great Lakes Silk Road, the Trans-Africa Highway, the Western Africa Railways, the AngolaTanzania Railways and the Great Lakes infrastructure plan); in Asia (the ASEAN integrated master plan of connectivity—The Thailand Regional

11 Retrieved 46386867.

on

June

2019,

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Connectivity Plan,12 the Southeast Asia Railways Plan—The Pan-Asia Railway Network,13 and the Mekong India Economic Corridor), in the Pacific (Trans-Pacific Maritime Silk Road); and in the American continent (the Latin America Silk Road, the Inter-Oceanic Railway, the Nicaraguan Canal, and the Cartagena-Caribbean Railway), all of which are complemented by other domains such as the Digital Silk Road, the Green Silk Road, Education Silk Road (EU/China), Cultural Silk Road and the Space Silk Road. But common to all these different domains are five development pillars: (1) promoting the construction of vital infrastructure through elements of connectivity; (2) advancing new financial institutionalism; (3) encouraging multi-level bilateralism and multilateralism; (4) fostering domestic functional integration; and (5) nurturing peopleto-people exchange. These five pillars have been constructed according to the Chinese model of socialism with Chinese characteristics for the new era, which has at its core the de-bordering of the development borders inside China. Notwithstanding, the hybrid essence of borders, as encapsulated by the Silk Road Economic Belt (the largest economic corridor in the world) and the 21st Century Maritime Silk Road also encompasses a holistic view. To better understand the importance of holism according to Chinese perceptions, one must revisit the so-called tianxia (all under heaven) concept. This goes back to the old times when China was the Middle Kingdom and the world was organized in concentric circles, all of which owed allegiance to a Chinese emperor whose mandate was assigned by heaven. The ancient notion of a centre surrounded by a huge periphery composed of inner subjects, outer subjects, tributary states and barbarians has great implications for the way China perceives borders: us versus the rest. Nowadays, China feels encircled by a world that is ruled by the rest, which to a large extent (military, politically, culturally and economically) means either direct or indirect dependence on the West (United States). What is interesting here is that while the Pax Americana and its borders and allies are a relatively recent development, in the case of China it is rather the opposite: a kind of déjà-vu. In fact, if one looks at world history, the United States and even the European Union are relatively new, young 12 Retrieved on July 2019, from https://canchamthailand.org/thailands-infrastructureplans-and-canadian-capabilities/. 13 Retrieved on July 2019, from https://photos.nomadicnotes.com/img/s7/v163/ p368258383.png.

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ventures. Instead, China (not as a state, but as a civilization) is thousands of years old, which explains the restoration of Pax Sinica (Duarte, 2017). The ideology of tianxia set historical precedents. De-bordering is part of tianxia and it is a means to counter the dominance of the Pax Americana. Coming back to the idea of a China that feels encircled by the West, one finds empirical evidence in the so-called Malacca dilemma. Although China has never been the object of a maritime blockade, the issue of encirclement is omnipresent in Chinese foreign policy. China believes the United States and its allies could pose serious threats to the expansion of Chinese trade, which relies heavily on the Malacca Straits (Duarte, 2019b). In the Pax Sinica that is gradually being rebuilt after a long interregnum in the history of mankind, borders are also spiritual and cultural. In fact, similar to the former Silk Road, in which China peacefully traded with the rest of the world, in the B&RI China is trying to catch up with the West, in the hope of appeasing the worldwide Sinophobia. How is China handling its cultural borders? Precisely, de-bordering with soft power. It was a book written by Joseph Nye and translated into Chinese in the 1990s that attracted Chinese attention to the term. China is trying to develop its own soft power—built upon the old teachings of Confucius, the Beijing Consensus, the concept of Chinese partnerships, the concept of fora and socialism with Chinese characteristics—as a kind of alternative to the Western world order, but made in China, replicating some of the contours of tianxia not comprising tributary states but cooperative and the non-cooperative states. This can actually have extremely negative impacts on borders, which are more than merely physical delimitations, contrary to the so-called Westphalian view. The negative consequences here are mainly connected to influence, economics and a new means of vassalage, where China’s interests are deeply embedded in the host state. To many small economies where money makes all difference between survival or collapse, China appears to play the role of the great saviour. Nonetheless, poor states tend to become hostage to China’s influence in the long term because they cannot afford to repay loans. Therefore, the B&RI seems to be creating a new world, not necessarily bad nor good, but where indebtedness together with unimpeded access to resources and free borders could become more and more common. What is curious is that while China is now preaching and practising globalization, the United States does the opposite. Thus, borders can be of utmost importance when it comes to the strategic interests of states. Colonialism has

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been eradicated, and neo-colonialism is following the same path. Imperialism and neo-imperialism are scorned at, and all hegemonic powers are facing immense obstacles. Borders can no longer be abolished or revisited without conflict. They can be hard or soft, made of fences and walls, ideological, cultural or political, or even materialize in economic protectionism versus the invisible hand, but they are always representing lines of identity separation. The only way to peacefully promote their inclusiveness in a modern world is through de-bordering and, if possible, re-bordering.

Portugal in the B&RI: Which Borders? In the section, we will address the importance of Portugal within the B&RI. The Portuguese case is remarkable as it concerns both the hybrid dimensions of sea and land borders as well as the holistic nature of the B&RI. In fact, when it comes to holism, one must highlight that a small country such as Portugal is important to China in terms of economics, politics and military, that is, in terms of security in the broadest sense.14 Unlike Brazil, Portugal is not a market of 200 million people, although it also has several interesting features that make it appealing to China’s B&RI. Portugal is like any other EU member state: a door to EU’s rich and large market. Portugal is literally the ultimate European border. The longest railway in the world is no longer the Trans-Siberian, but the rail corridor connecting Yiwu (in East China) to Madrid since the end of 2014. What does this mean in practice? At a moment when Portugal is engaged in restructuring the rail line that currently links Sines to the border with Spain (which will save approximately 140 km of railway), there is reason to believe that in the medium term, trains coming from China will no longer have Madrid as their final destination (Duarte, 2019c). Instead, Sines, Leixões and Beja (in Portugal) could be the ultimate border in the Silk Road Economic Belt. It is important to remember that the Portuguese deep-water seaport of Leixões, the closest port to Madrid, and that port of Sines offer flexibility to the New Economic Land Belt (NELP), in terms of an alternative access to the centre of Europe, not far from the Strait of Gibraltar, especially for commercial vessels crossing the Panama Canal. The location of Beja Airport, which in 2011 opened a

14 Especially after broadening the notion of culture, largely due to the intellectual contribution of the so-called Copenhagen School.

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new civilian terminal and became a dual-use military-civilian airport aiming to attract low-cost carriers, represents an opportunity to the Chinese transportation industry. However, the news does not end here. Actually, looking at the geographic location of Sines on the map, one immediately realizes how strategic this Portuguese deep-water port (also the European deep-water port closest to North America) is in the context of the hybrid borders encompassed by the B&RI. To be sure, Sines is precisely the site where the long land axis from the Far East meets the Far West after crossing Eurasia. Or, as one could also argue, Sines is where the land ends and the sea begins. In Sines, goods coming by train from China may in the future be uploaded into ships and proceed by sea to the Americas. Traffic in the opposite direction should be also possible, since after crossing the Panama Canal, ships carrying goods from China can then use Sines as a maritime hub (similar to the port of Piraeus in Greece) and continue their journey by train to the European hinterland. Due to its strategic location at the crossroads of the maritime arteries of the North Atlantic Ocean, the deep-water port of Sines is a tremendous asset. Nonetheless, geography is not everything. It certainly does not make too much difference for a shipping owner/company to navigate more 200 or 300 nautical miles to deliver goods if the host port (e.g. in Spain or North Africa) is ready to offer added value, such as tax benefits or lower tariffs. While distance matters, in a globalized world freight costs can easily be offset. That is why the Portuguese government should not adopt a bystander approach vis-à-vis all the potential that the 21st Maritime Silk Road offers to Portugal. How to convince Chinese investors to make the most of Sines while North Africa and Spain are so close competitors? Sines could, for instance, facilitate the entry of unfinished goods from China into Portuguese territory, which could provide much added value for the port (Duarte, 2019c). Offering the entry of Chinese unfinished goods for further processing so that they become EU goods is certainly a complex issue, however tempting for any Chinese investor, not least because Portuguese borders are also the EU’s borders. This would surely worry EU members, because they are already apprehensive about what they perceive to be an overly receptive stance that Portugal has taken vis-à-vis China. The Golden Visa could be used here as one outstanding example, due to security issues raised by several EU members. But there are other sensitive fields that seem to make Portugal a sort of case study in the EU in terms of what Chinese money can actually buy (Le Corre, 2018). The

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pace is quite telling. Some Portuguese businessmen are astonished by the fact that Chinese investors arrive at the negotiating table totally prepared. They do not ask details about a specific business or company in which they want to invest. Everything they ask relates to permission to close the deal. The Chinese Embassy, as well as Chinese living in Portugal, help a lot in the process by identifying in advance the most promising deals, so that the Chinese investor only needs to do the easiest part and ask: can I buy it? According to the Rhodium Group and the Mercator Institute for China Studies, over the last 18 years Finland and Portugal have been the two European Union Eurozone members with the highest level of Chinese investment in terms of their respective GDP. Indeed, before 2003, the year of the establishment of the Forum of Macao, the FDI inward bilateral stock was insignificant or even non-existent. Between 2000 and 2017, Chinese investment represented 3.1% of Portuguese GDP, at a time when the EU average was 0.8%. In 2017, the Bank of China received authorization to start operations in the Chinese market involving Portuguese bonds. That same year, the Chinese stock of direct investment in Portugal was e2,076,800 billion, which represented 1.7% of all FDI in Portugal. According to the Chinese Ambassador to Portugal, Cai Run, in 2018 China was the 5th larger investor in Portugal (Dário de Notícias, 15 June 2019). The year 2017 was also an important moment for the two sovereign states, because both governments further developed the 2016 MoU on Maritime Cooperation and signed papers establishing a ‘blue partnership’ in 2017 during the Blue Economy Partnership Forum held in China’s southeast Fujian. Portugal is the first country to officially launch a blue partnership with China. Aspiring to build a sustainable marine ecological environment, China can benefit tremendously from Portugal’s experience in marine governance. The blue partnership has also been included in the scope of joint building of the B&RI. In 2018, President Xi Jinping visited Portugal and both states signed one of the most ambitious trade deals (17 agreements15 ) in recent times with 15 Table grape exports; water cooperation; cooperation in the ‘one belt - one road’ particularly in electricity provision and infrastructures; Chinese enterprise creation in Matosinhos; cooperation in the car component industry; agreement on celebrations marking 40 years of political relations; agreement on commerce; agreement on shared service centres; agreement between RTP and CCTV; agreement between EDP and CTG; ChinaPortugal Technology 2030—STARlab nanotechnology, science, space, climate and water; creation of the Chinese Studies Centre at Coimbra University; agreements between the

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China. In the same year, Portugal opened a new Consulate General in Guangzhou and Air China announced the resumption of the BeijingXian-Lisbon flights,16 taking effect after August 30, 2019 (three times a week, with an availability of 440 seats on each flight17 ). In Beijing in April 2019, the two heads of state signed a MoU establishing a promising new mechanism of constant political dialogue (establishment of a Strategic Dialogue), during the second Belt and Road Forum for International Cooperation. A new technological laboratory, STARlab, jointly funded by Portugal and China,18 was launched in 2019 to focus on the construction of microsatellites and ocean observation. Research centres will be built in Matosinhos and Peniche in Portugal and in Shanghai. We should also bear in mind the possibilities offered by ‘triangular or trilateral cooperation’ (China-Portugal Africa-Europe-Latin-America), as mentioned by the Prime Minister of Portugal during the 2016 Ministerial Conference of the Forum of Macao, addressing areas such as agriculture, education, environmental sustainability, infrastructure and renewable energies. Electricidade de Portugal (EDP) and China Three Gorges (CTG) (wind power energy and hydro energy) are cooperating in Brazil, the UK, Poland and Italy; Rede Electrica Nacional (REN) and China State Grid are cooperating in Chile; Fidelidade Seguros and Fosun are cooperating in Peru; Mota-Engel (ME) and China National Complete Engineering Corporation (CNCEC) are cooperating on building infrastructure in several Portuguese-speaking Countries (PSC). The future looks promising in the light of the blue partnership (2017), and the sector of renewable energy is yet to be fully developed. Future economic and trade relations also depend on the role of Macao as a renminbi clearing centre and as a financial services platform. The

municipal authorities of Setúbal and Tianjin; agreements between CGD and Bank of China including the issue of special credit cards for Portuguese companies in China and the panda bonds; agreements between banks BCP and union pay; agreements between REN and State Gris for renewable energy; and Altice and Huawei in developing 5G technology. 16 Retrieved on 9 May 2019, from https://macauhub.com.mo/2018/11/09/pt-airchina-podera-retomar-ligacoes-aereas-directas-entre-a-china-e-portugal/. 17 Plataforma newspaper 262, 26 July 2019, p. 13. 18 Retrieved on 27 May 2019, from

3d3d414e7851444d31457a6333566d54/share_p.html.

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BOC Macao branch has established agreements with four Portuguesespeaking countries (PSC) (Portugal, Angola, Brazil and Mozambique) and eight PSC banks to provide financial services in renminbi. Since 2018, Banco Comercial Português (BCP) and Caixa Agricola have offered financial services in renminbi via Macao and these services include transfer of money to mainland China. In line with these events, in May 2019, during the Lusophone Banking Association meeting held in Macao, which brought together Portugal, Cabo-Verde and São Tomé and Principe, Portugal announced the very first issue of Portuguese bonds in renminbi. This fact makes Portugal to be the first European country to conduct such a financial operation. All these examples reinforce the argument that borders are not just piece of land or sea. Borders have become increasingly holistic not only in regard to Portugal, but also the EU sensu lato. They are holistic because they are mental borders as well, which perhaps are the most complex ones. There is widespread concern in the EU that one cannot serve two lords at the same time. How to please China and at the same time be part of NATO, engaged in several agreements with the United States, a country that has been an old ally of Europe for several decades? Certainly, the controversial Trump Administration’s policy towards the EU19 has contributed to an erosion of and prompted small countries such as Portugal to look for other options. This notwithstanding, China and the perception of China (mostly Sinophobia) is something that a European country cannot simply deny or avoid, especially because China is a recent factor in relation with the West, despite its millennial-old civilization. In this context, borders—which to a great extent are psychological—tend to foster increasingly heated debates among EU states: What can one actually sell to China? Portugal seems to be an exception within the EU—quite like Greece, one must acknowledge. By allowing Chinese investment in strategic sectors, Portugal seems to be promoting non-physical de-bordering. One striking example here is the initiative of issuing Portuguese debt in Chinese currency, an unprecedented move in the whole EU. What is more, an equally worrisome issue to EU partners,20 is the PortugalChina agreement to jointly develop STARlab, a lab that aims at producing

19 For example, the Trump administration supports Brexit and labels NATO as obsolete. 20 So far Germany and France have been the most vocal EU states criticizing Portugal’s

receptiveness towards China.

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microsatellites and monitoring the ocean. The narrative of working together for the sake of science does not reassure many EU countries, as seen in the Huawei 5G debate which fostered even more the discontent. Borders are increasingly determined by what happens online and in space. China is aware of that. Information means power and Huawei cell phones enable the Chinese government to kill two birds with one stone: serving civil and military purposes. How does this reflect on borders? The nature of borders is such that they become endowed with both civil and military aspects. Take the case of the Azores archipelago. Where does the science narrative end and where does espionage and the military use begin? The Lajes airfield on Terceira Island whose remote location in the middle of the Atlantic Ocean between North America and Europe serves the same purpose as the SIGNIT Chinese base on the Coco islands off Myanmar. Likewise, the Portuguese Lages Aero naval base in the Azores further increases access to the North Atlantic, to Sines in Portugal, a deep-water port and logistic platform to the heart of Europe, and the Arctic zone (Leandro, 2018, p. 235). The so-called technical stopovers made by some Chinese politicians (including Xi Jinping himself) in the Azores lead some, such as Devin Nunes, to warn US congressmen that China is interested in filling the void left by the US disengagement in the Lajes airfield.21 If nature abhors a vacuum, politics and states are not much different. And, thus, China is no exception in the sense that it could fill in the geopolitical and geostrategic void left by the United States in the Azores. Djibouti, the East and South China Seas, the space race or even the silent Chinese assertiveness in remote Antarctica leave no doubt that the only missing ocean, the Atlantic Ocean, is to become the next natural step in China’s attempt to fill the void, wherever it may be. On a planet with scarce resources, forbidden borders hold little meaning. The Azores are no exception, because they constitute the next logical border for China to overcome. The only exception is the North Atlantic which holds the NATO’s interest (the South Atlantic is somehow a different priority for NATO) and in the short to medium term, the North Atlantic appears to be out of bounds to China.

21 Retrieved on July 2019, from https://www.cbsnews.com/news/azores-withdrawalgives-china-foothold-between-us-europe/.

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Conclusion Building fenced and walled borders based on a narrative of fear is not a quick fix, and it mobilizes a sort of popular response to perceived threats. But this will not bring peace, stability and development to borders. The real investment in security is the one that accommodates asymmetries and at the same time preserves sovereignty. While de-bordering contributes to peace and development, it also calls for balanced solutions to avoid the dilemma of asymmetry in perceptions. The purpose of this chapter was to argue that B&RI makes an unequivocal contribution to de-border the Sino-Portuguese boundaries. It is reasonable to conclude that borders are alive, and therefore borders change with transmuting asymmetric perceptions on both sides. Physical border structures are the result of perception and governance. Even contiguous borders are living structures and their physical shape and the level of their ‘openness’ depend upon the interaction asymmetry between two or more states. In other words, physical and immaterial borders are a direct result of how states perceive one another. As the level of perceived asymmetry mounts, the border as a physical obstacle tends to intensify. The more the perceived level of confidence deepens, the easier it is to implement cooperative solutions, making a higher level of de-bordering possible. Furthermore, borders are multidimensional, and we have observed a shift from the bi-dimensional Westphalian border concept to a multilayered and material-immaterial concept of borders, which the classic sovereign powers struggle to curb. Even fenced or walled borders do not represent a sealed physical isolation of sovereign domain or offer full protection from external threats. The B&RI aims precisely at creating a set of economic, non-economic, material and immaterial mechanisms to clarify misperceptions and to balance asymmetries. The future will bring more walled borders and more immaterial flows moving across borders— in this context, the B&RI is a bridging initiative. As a multi-level and multi-state initiative, the B&RI operates under Chinese leadership, but it remains under multi-state scrutiny of national interests and active participation. The B&RI offers not only domestic and international physical mechanisms of de-bordering but also a platform for immaterial global governance. The B&RI elements of connectivity (domestic development axes, economic corridors, special economic zones, special administrative zones and fast transit routes) contribute to all these three types of border effects,

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in different ways and with dissimilar intensity. They promote the fading, weakening, trespassing or removal of obstacles and encourage crossborder interplay, as a multi-level process to create opportunities and change attitudes and perceptions, without compromising sovereignty. All in all, the B&RI can be considered a border shaper in the sense that something new is on the verge of changing the old patterns of integration in both regional and extra-regional spheres. Portuguese sailors made their way to the East some five centuries ago. Now, China is looking for new opportunities in the West, both by land and sea. Due to its geographical position, Portugal is literally the ultimate border for the Iron Silk Road22 that in the future will connect China directly to Sines. In turn, as for the 21st Century Maritime Silk Road, Portugal is the gateway to Chinese goods coming by sea and crossing the vast and complex borders of the EU. The borders of China’s engagement in the EU cannot be fully shaped by Beijing, without the support of Portugal. The seaport of Sines is bound to be the next Piraeus of the 21st Maritime Silk Road. Nonetheless, in the medium- and long-term future one will certainly hear more about the remote Azores, where just a few miles away from the Lajes airfield on Terceira Island lies the deep-water port of Praia da Vitória. The latter can be adapted to accommodate the biggest cargo ships in the world. A maritime axis, starting in the Pacific Ocean and crossing the Panama Canal, then continuing until Praia da Vitória before reaching Sines, is not only viable, but also promising if Portugal shows receptivity towards the B&RI, as has been the case so far. The North Atlantic is currently a sort of forbidden border to China, because of the roles played by the United States, NATO and the EU, which together will preserve their sphere of natural influence. The Azores facilities can be the Chinese entry door to the most ‘western forbidden sea’. As we have seen, borders are neither perpetually stationary nor forbidden, because they tend to reflect the shift of power on the international stage (Duarte, 2018). Albeit now a case study for the entire EU in terms of receptivity vis-à-vis the B&RI, Portugal should not open up too much nor completely close its door to China. The main challenge of de-bordering seems to be the right measure. A complex but healthy balance is of the crucial interest of all players. Portugal’s high standards and expertise

22 A metaphor for the railway corridors in China’s Silk Road Economic Belt.

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in microsatellite production and ocean surveillance, Portuguese public debt issuance in Chinese currency and co-developing 5G technology are just some examples of how sensitive issues (for the EU) are successfully handled through a mature partnership. However, the mental and psychological borders of the EU are perhaps the hardest of all boundaries, and Portugal cannot nor should it allow China to adopt the same risky behaviour that has been heavily criticized worldwide. For instance, Portuguese authorities should not shy away from insisting that China allocates an equal proportion (50%) of the labour force while operating within Portuguese borders (rather than acquiesce to the usual practice of 70% of the workforce made up of Chinese labour). Moreover, Portugal should ensure a strict respect for labour rights and take reciprocal steps to invest in the Chinese mainland market. Opening the Portuguese market to China is a win-win situation because it enables free competition in its domestic market. In Portugal, the game of football and its language (the fifth most spoken worldwide) are great assets for the Chinese, given not only the prestige of Portuguese football teams and players but also the role that the country can play to help China enter larger markets, such as Brazil. The need for highly qualified translators in Chinese-Portuguese (which is more and more valued), together with the launching of a TV channel broadcasting Chinese culture and news in Portuguese are two other promising fields of cooperation. To succeed as de-bordering shaper, the B&RI must attach equal importance to soft power borders, since if one fears a partner, one cannot make the most of a deal. As the ultimate European border from the Chinese perspective, Portugal cannot and should not be taken for granted.

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Kristof, L. (1959). The Nature of Frontiers and Boundaries. Chicago: University of Chicago. Laroche, J. (2017). The Brutalization of the World, from the Retreat of States to Decivilization. Paris: Springer. Leandro, F. (2018). Steps of Greatness: The Geopolitics of OBOR. Macau, China: University of Macau and Macau Institute of European Studies. Le Corre, P. (2018). A era dourada da China em Portugal. Retrieved on June 17 from https://www.publico.pt/2018/12/04/economia/opiniao/ dourada-china-portugal-1852751. Longo, M. (2017). The Politics of Borders: Sovereignty, Security, and the Citizen After 9/11. Leiden: Leiden University. Lugo, A. (1997). Reflections on Border Theory, Culture, and the Nation. In D. E. Johnson and S. Michaelsen (Eds.), The Limits of Cultural Politics. Minneapolis: University of Minnesota Press. MacCall, C. (2012). Debordering and Rebordering the United Kingdom. In T. Wilson and H. Donnan (Eds.), A Companion Border Studies. Hoboken: Wiley-Blackwell. Marcu, S. (2015). Boletín de la Asociación de Geógrafos Españoles n.º 69, 211– 232. Mostov, J. (2008). Soft Borders: Rethinking Sovereignty and Democracy. New York: Palgrave Macmillan. The Pan-Asia Railway Network. (2018). Retrieved on December 19 from https://photos.nomadicnotes.com/img/s7/v163/p368258383.png. Ulc, O. (1996). Czechoslovakia’s Velvet Divorce. East European Quarterly, 30(3): 331–352. World Bank. (2018). Retrieved on November 17, 2018 from https://www. worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative.

CHAPTER 16

China and the Portuguese Atlantic: The BRI’S Last Puzzle Piece Jorge Tavares da Silva and Rui Pereira

Introduction The debt crisis that affected the European Union (EU) from 2008–2010 is a consequence of the economic liberalization since the 1980s. The global lack of transparency and ethics, greed and supervisory failures are among the main reasons that lead to the subprime crisis. The delicate situation of Portugal leads the government to find solutions and alternatives in other geographical areas. It realized that its foreign policy was almost exclusively addicted to EU and neglected some of its traditional relations, including Asian linkages. Since the beginning of the Portuguese democratic project that this country almost directed all its foreign policy to the European Community and the Euro-Atlantic security community, based

J. T. da Silva (B) University of Aveiro, Aveiro, Portugal e-mail: [email protected] R. Pereira Ministry of Economy and Digital Transition, Lisbon, Portugal e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_16

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on the predominance of the USA. Nowadays, about 80% of the legislation applied in Portugal comes from Brussels and 80% of the Portuguese public investment (Lima 2016: 78). In this context, historical relations with China turn out to be less relevant and based on economic traditional activities such as agriculture, industry and maritime sectors. China is one of the countries in which the Portuguese government has reinforced its diplomatic relations, taking advantage from Beijing’s interest in Europe. Many millions of yuan are coming to the continent, helping in the construction of infrastructures, technological cooperation and the acquisition of companies. Both countries are living a “golden era” of bilateral cooperation. As referred Xi Jinping in a Portuguese newspaper opinion piece, in 2019 they celebrate their 40th anniversary of the establishment of diplomatic relations, in spite of different “political and social systems, historical contexts, and size of territory” (Xi 2018: 4). Portuguese government is trying to strengthen cooperation with this Asian giant in order to finance some of its economic sectors and investment projects in technological domains. China Three Gorges (CTG), a state-owned firm, acquired significant assets of the Portuguese energy company EDP, controlling a strategic domain. After a wave of Chinese acquisition of Portuguese companies, the Portuguese government is interested to advance into a new phase of installed investment, not in financial products but physical infrastructure. One of the main objectives is bringing investment to the maritime sector, particularly ports and shipping in a country with a long naval history. Portugal investment in the sea loses momentum after the Carnation Revolution of 1974, as shown in some indicators. At the end of the 1970’s, there were about 150 merchant ships of Portuguese conventional registration. By 1986 were only 72, and by 2013 about a dozen, with road transport replacing a substantial part of the Portuguese foreign trade transport quota. In Portugal, maritime activities represent at about 11% of the GDP (Correia 2010: 289). It has very low significance but enormous economic potential. This is one of the reasons why China and Portugal have signed a “blue partnership” that intends to reinforce collaboration in maritime and commercial projects. Xi Jinping considers Portugal as an important link between the terrestrial and Maritime Silk Roads and this is the reason why bilateral cooperation in this area became so important (Xi 2018: 4; Feng 2018: 30–31). The Port of Sines and the archipelago of the Azores are the points that have attracted most interest from China.

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The present chapter aims to evaluate the cooperation that is increasing in the maritime-port area between China and Portugal. We start by analysing Chinese investment in the European continent after the sovereign debt crisis and tensions with the US. Then, we focus in the investment in Portugal in the so-called second wave, particularly the maritime domain. We analyse the importance of the Portuguese sea, including a reference to its natural resources and its strategic value. Finally, we focus on the geopolitical variables and the game of interests that involves the “Portuguese sea”.

The European Growing Strategic Importance for China The European Union (EU) is gaining economic and strategic importance to Beijing, particularly after the financial crisis and the diplomatic tensions with Washington. This importance is relationally justified by the fact that we are facing the main trading block of the world and the largest exporting power. In 2017, China alone, excluding Hong Kong, accounted for 16.9% of world exports and the European Union, for all 28 countries, 15.8% (Eurostat 2018). In terms of bilateral trade, China is the second largest trading partner of the EU, after the USA, and the European Union is China’s largest trading partner. Bilateral trade accounts for more than 1500 million euros per day (European Commission 2018). Until 1970, China did not value relations with Europe, considering that the countries of Western Europe were subject to the political and ideological domination of the USA and that the European Economic Community (EEC) was no more than an instrument of the North Atlantic Organization (NATO) (Mendes 2010: 274). Meanwhile, bilateral relations have evolved since 1975 with the establishment of European Economic Community (EEC)China diplomatic relations, benefiting from the normalization of relations between Beijing and Washington in the Nixon administration time. From the mid-1980s, Western Europe gained strategic importance in the perception of a multipolar world and was no longer seen as a bulwark against Soviet power (Möller 2002: 10). During the China economic rise in the 1990s, and the China’s entry into the World Trade Organization (WTO), in 2001, that bilateral relations gained importance. In this sequence, annual summits are held since 1998, bringing together

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European Heads of State and Government with Chinese political leaders. Europe gained strategic importance for China, particularly following the involvement of the United States in conflicts in the Middle East, including the invasion of Iraq in 2003. Following this new scenario, it was announced the EU-China Comprehensive Strategic Partnership aimed to improve bilateral cooperation. Dialogues and negotiations were in preparation for the formal Strategic Partnership Agreement, to be announced publicly at the 9th Summit in Helsinki in September 2006, confirmed in later editions (Mendes 2010: 282). Under the EU-China 2020 Strategic Agenda for Cooperation, signed in 2013, the two sides agreed to establish synergies in several issues. The annual meetings benefit provide strategic orientations for the bilateral relationship, based on three fundamental pillars: the annual High Level Strategic Dialogue; the annual High Level Economic and Trade Dialogue, and the bi-annual People-to-People Dialogue (European Commission 2013). Broadly, Chinese investment in Europe has increased, just as China has gained influence in European political elites (Economist 2018). Last ten years, China has invested in European assets at least $ 318 billion. Nevertheless, in 2017 it occurred in a decrease of 17% over the previous year, but represented the second highest ever value, with 28.5 billion euros (Hanemann and Huotari 2018: 31). The investment plan in Europe follows the CCP’s guidelines, clearly reinforcing its links to the European continent, limiting the Euro-Atlantic linkage, when the Sino-US relationship goes through high levels of uncertainty. China’s investment has reached the whole continent, but it is very much focused on the big economies (UK, France and Germany), accounting for 75% of total investment in Europe in absolute terms. Even so, it is feared that weakened economies of the South and East would be easily captured and controlled by China, as it intends to participate in the wave of privatizations (Economist 2018). One of these small countries is Portugal, which, in the relation GDP-investment, is proportionally the country that is getting more of investment from China. These concerns will tend to create barriers to the arrival of investment from that Asian Country. According to Bloomberg report (2018), companies or investment funds linked to the state conduct about 63% of Chinese investments in Europe. The main focus sectors are energy, chemical industry and infrastructure. This includes the acquisition of the Swiss company Syngenta pesticide, the investment in the port of Piraeus in Greece and the nuclear power company Hinkley Point C in the UK or the Italian tire company

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Pirelli. Cosco’s participation in the Port of Piraeus not only represents a preferential entry for the EU but also a major maritime transhipment hub for the Mediterranean (Putten and Meijnders 2015: 11). In Eastern Europe, the 16 + 1 initiative was launched in 2012, a new platform for dialogue between China and sixteen so-called post-Soviet countries,1 eleven of which belong to the European Union (CEEC-China 2017). China’s Foreign Ministry has purposely set up a permanent secretariat for relations with this European area, but without permanent representatives from the European states, which indicates an asymmetrical relationship. China comes with many billion dollars of investment for the region, which is less strong economically. The idea is to be able to increase exports to this area, extend BRI to the region and gain greater capacity for influence, at a time when China-US is going through commercial tensions. Europe can be a very relevant partner for Beijing’s geopolitical aspirations, in a framework of overcoming American hegemony and building a multipolar world. In fact, while China defends a logic of multilateralism, it does not fail to exploit bilateral dynamics, especially with smaller countries, where it has strong negotiating power. These include the creation of a Chamber of Commerce, meetings of experts and think tanks, a forum of Young Political Leaders, a forum for Education, bilateral political dialogues, a Tourism Promotion Agency (based in Budapest) and an Investment Promotion Agency (based in Warsaw and Beijing) (Europe Now 2018). Of particular note was the creation of the New Silk Road Institute (NSRI), an independent think tank created in Prague in September 2015 to strengthen ties between Asia and Europe, publicizing BRI concepts in the country led by Jan Kohout, former Minister of Foreign Affairs of the Czech Republic and adviser to the President (Economist 2018: 20; NSRI 2018). The agreed rules and market rules complement EU projects and policies, avoiding divisions within the European bloc, and particularly harming relations with Germany (South China Morning Post 2018). In fact, competition among European players to capture Chinese investment is one of the risk factors. With the large-scale capital inflows, that the Economist (2018: 21) has called “supermarket of opportunities”, China manages to neutralize criticism to the less positive actions of its political model, particularly in the field of human rights. European foreign policy tends to be 1 The 16 + 1 initiative joins EU, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Croatia, Romania and Bulgaria; as non-members, Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia.

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conditioned by pro-China positions at its core. In 2017, for example, it was the first time that the EU did not issue a statement at the United Nations Human Rights Council, after being vetoed by Greece (Reuters 2017). The Greek position of avoiding “unconstructive criticism of China” occurs precisely when the Xi Jinping regime has increased the repression over its population. The Greek position was well received in Beijing political sphere. Geng Shuang, a spokesperson for the Ministry of Foreign Affairs, referred the importance of the non-politicization of human rights (Reuters 2017). At the same time, China is recruiting political prominent leaders from European countries to lead its organizations. It is an intention these figures would spread a positive image of the country abroad and increase the channels of influence in Europe. Front-runners such as Philipp Rösler, former Vice Chancellor in Germany (2011–2013), former French Prime Minister Pierre Raffarin or David Cameron, former British prime minister, work for Chinese organizations (Economist 2018: 22). In addition, Luis Amado, former Portuguese Ministry of Defence, is now President of the EDP Supervisory and General Council, controlled by Chinese interests. Chinese lobbying, used through economic power, along with the dynamics of soft power, helps to defend Chinese positions in political bodies. Some of the acquired companies have links to military and Chinese intelligence as well as to media groups. In addition to the educational and cultural initiatives that China has used to promote a positive image abroad, commonly known as soft power, it is also developing dynamics of sharp power. It is a new, authoritarian effort to monopolize ideas, to suppress alternative narratives and to explore partner institutions (Cardenal et al. 2017: 13). By taking advantage of the free information environment of democratic systems, the sharp power benefits from (?) the external democratic environment. Above all, there is an attempt to capture the external information media in order to spread the ideas and values of their interest. China’s power of investment in Europe is not enough to cover up its internal weaknesses. It is important to refer that since 2007 China’s debt almost quadrupled, which is equivalent to 282 percent of GDP (Corre and Sepulchre 2016: viii).

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The Second Wave of Chinese Investment in Portugal The 2019 calendar signs the 40th anniversary of the establishment of formal relations between the People’s Republic of China (PRC) and Portugal (signalled last 8 February), and the 20th anniversary transfer of sovereignty of Macau from the Portugal to China (to be celebrated next 20 December). A happy ephemeris setting the “global strategic partnership” signed by the two countries in 2005 and revised in December 2018, on the occasion of President Xi Jinping’s official visit to Portugal. This “golden era” of cooperation includes a wide range of areas, such as science, technology and innovation, cultural and political dialogues, trade and investment, and the sea economy, among many others. In terms of bilateral trade, according to Portuguese statistics (Instituto Nacional de Estatística—NE), China went from the 14th position to the 10th in the ranking of Portuguese exports between 2010 and 2015, which is quite significant. In 2018, Portuguese exports of goods were 658 million euros (−21.8%) and imports were 2.3 thousand million euros. The deficit of our trade balance was almost 1.7 thousand million euros. That year, China was the 13th client and the 6th supplier of Portugal. From January to May 2019, Portuguese exports slightly decreased (255 million euros, against e259 million euros in the same period of 2018), and imports increased 36.3% (e1.2 thousand million euros, which compares with e886 million euros). The main exports from Portugal to China in 2018 consisted on “Land Transport Equipment and Parts” (23.1%, against 34.2% in 2017), “Wood, Cork and Paper” (17%), “Ores and Metals” (14.1%), “Agricultural Products and Food” (11.2%) and “Machinery and Parts” (10.6%). From January to May 2019, a significant change has occurred, as the group “Land Transport Equipment and Parts” ceased to be the main group of products exported to China (it was replaced by “Wood, Cork and Paper”). As to imports in 2018 were mainly “Machinery and Parts” (35.5%), followed by “Textiles and Clothing” (14.2%), “Chemicals” (11%), “Other Manufactured Goods” (11%) and “Ores and Metals” (9.8%). This structure was maintained between January and May 2019. Regarding the bilateral trade of services in 2018, also with a deficit for Portugal, Portuguese exports were 245 million euros and imports amounted to 342 million euros. According to the latest estimates (2018), more than 1.5 thousand Portuguese companies are already exporting to China, which is a significant

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result for a small-sized country like Portugal. Either on goods or services, there is still plenty room for improvement and diversification, and it would be very important to promote a greater balance in bilateral trade (deficit on goods and services was almost 1.4 thousand million euros in 2018). However, more than trade, it is in bilateral investment where more developments have occurred in the latest years, namely as regards the Chinese investment in Portugal. Currently, Portugal is the 7th largest European destination of direct investment from China,2 with a stock of about 10 thousand million euros, further to the acquisition of participation in strategic companies such as EDP (and EDP Renewables), REN, GALP (in Brazil), Fidelidade (and Luz Hospital), as well as the French group Veolia (water treatment), Millennium BCP and BESI.3 Apart from these well-known investments, it is also worth mentioning, in the energy sector, the co-investment in a solar power plant (220 MW), through WeLink (English company) and China Triumph International Engineering, as well the investment from Dynavolt in a solar plant of 28.8 MW. On the other hand, COFCO invested in a Shared Services Centre in Matosinhos (400 jobs), and Preh Portugal (a German Group which was acquired by the Chinese Joyson Group) invested in an industrial unit for electronic components for the automotive industry in Trofa (600 new jobs). Therefore, the second wave of Chinese investment was made predominantly in sectors such as banking, insurance, energy, real estate, agro-food and agriculture (Corre and Sepulcher 2016: 1). Of course, the increase in the inflow of these funds was mainly due to the euro crisis and the lack of liquidity of Portuguese companies, as we have already mentioned. It includes the collapse of the Espírito Santo Group and the financial difficulties of organizations such as Portugal Telecom. The most significant business happened in 2011, when China Three Gorges (CTG) acquired 2 UK—42.2 thousand million euros; Germany—20.6 thousand million euros; Italy— 13.7 thousand million euros; France—12.4 thousand million euros; Netherlands—9 thousand million euros. 3 EDP—China Three Gorges, 23.27%—2.7 thousand million euros, CNIC, 4.98%;

Fidelidade—Fosun acquired 85% for 1.1 thousand million euros; BCP—Fosun holds 27.06% through a subsidiary in Luxembourg; Luz Saúde—Fosun (through Fidelidade) acquired 96% for 489 million euros; REN—State Grid acquired 25% for 390 million euros and Fosun holds 5.3% (through Fidelidade); BESI—bought by Haitong Bank, 379 million euros; EDP Renováveis—CTG acquired 49%, 368 million euros.

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21.35% capital participation in EDP, for approximately 2.7 thousand million euros. The Chinese media reported the operations considering that it was first major foreign acquisition in a European country in the middle of a sovereign debt crisis. EDP and CTG have joined forces to become world leaders in renewable energy production through a strategic partnership in joint projects. (EDP 2011; China Daily 2011). In the following year, the State Grid (SG) acquired a 25% stake in REN, for approximately 387 million euros. In 2013, Fosun acquired an 80% stake in Fidelidade, Multicare and Cares (Caixa Geral de Depósitos insurance portfolio) for approximately 1 thousand million euros (EDP 2011; Campos and Vicente 2016: 25–95). In 2017, CTG (Europe), based in Luxembourg, reported that it strengthened its position in EDP by acquiring 1.9183% of the share capital (EDP 2017). In 2012, the Industrial and Commercial Bank of China (ICBC) opened an office in Lisbon, and the Bank of China did the same in the following year. Huawei inaugurated a technology centre in Lisbon in 2016. That year, Hainan Airlines entered as a shareholder of TAP (the Chinese company was already a shareholder of the capital of the Atlantic Gateway consortium that acquired TAP). The Chinese group Fosun Group is interested in some new acquisitions, such as the Novo Banco, but also analyses opportunities in tourism and the food sector at the national level. Other important investments are the purchase of Veolia Water Portugal by 100% by Beijing Enterprises in 2012; the purchase of 100% of BES investment by Haitong in 2014 (Campos and Vicente 2016: 25–95). It is important to note that the official statistics in Portugal (Bank of Portugal) show a different number for Chinese FDI (around 2.5 thousand million euros), as a large part of Chinese investment operations has been fulfilled through subsidiaries (of those companies) in third countries. Considering only 2014, Chinese investment in Portugal was 1.8 thousand million euros (around 1% of Portuguese GDP). In absolute terms, we were only behind the UK, Italy and the Netherlands that year. However, considering the wealth of those countries, the Portuguese economy absorbed the most part of Chinese capital (amount of investment versus GDP) and, consequently, it was the EU Member State with the greatest capacity to attract capital of Chinese origin in proportional terms (Hanemann and Huotari 2018: 30–35). Furthermore, taking into account the Chinese FDI as percentage of GDP (from 2000 to 2017), Portugal is at the second place at the EU

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level, only behind Finland, with 3.1 and 3.2% of GDP, respectively (Ferreira and Rodrigues 2018). Therefore, Portugal has been clearly at the top of radar of Chinese investors in Europe, where the acquisition of capital participation in well-established companies is privileged, not being known large operations of greenfield investment for the time being. The Chinese investment strategy for Portugal is based on three main factors: (i) the acquisition of Portuguese companies’ capital under good conditions of price (and privileging know-how in specific sectors); (ii) the openness of the Portuguese economy; and (iii) the strong links to the European and Portuguese-speaking countries. As such, it would be desirable that the Chinese investment in Portugal would also be directed to the production of goods and services, as well as the maintenance and creation of new labour posts, thereby contributing for the reinforcement of the Portuguese economy competitiveness. As priority sectors for future Chinese investment in Portugal, we can highlight the following: – Automotive sector: Portugal can be an assembling destination with high-quality standards of production (including for electric vehicles) and a large offer of automotive components; – Agriculture and food sector: To build on the Chinese interest in the Alqueva region and other opportunities in Portugal, as well as to learn from our experience on Agriculture modernization; – Logistics and e-commerce: Chinese investors can benefit from the infrastructure investments foreseen in Portugal (namely in railway and ports), and Portugal can become a relevant logistics hub, taking advantage of its privileged geographical location; – Health sector: Chinese investors can explore opportunities on health tourism, biotechnology and medical equipment, among others; – Energy: Chinese investors have been mainly interested in projects related with solar energy production, and other renewable sources could also be explored. China is also the main beneficiary of the Authorization Program for Investment Activity (also known as “Golden Visa”). Until 30 June 2019, a total of 4.291 residence permits was granted, meaning a total investment of more than 60 thousand million euros. As to the Portuguese investment

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in China, it is still relatively modest. Two projects in the automotive sector, both in Dalian, stand out (Salvador Caetano Group, in partnership with Brilliance, created an industrial unit for the construction of buses for passengers’ transportation in airports; Sodecia Group created an industrial unit to furnish automotive components for Volkswagen). Other investments should be highlighted, namely in the pharmaceutical sector (Hovione), cork industry (Amorim) and ICT (NDrive, YDreams, Aptoide or Altitude Software). Also to note the increasing number of commercial representations in the agriculture and food sector (Sumol+Compal, Unicer, Enoport, Sogrape, Sovena), particularly in Shanghai and Guangzhou, as well as the presence of banking, legal and architecture services. In fact, products such as footwear, food and beverages (namely wine) have recently registered a significant growth on exports to China. Other sectors, such as the fashion cluster, luxury and design products, furniture and medical equipment, as well as services like ICT, tourism, engineering and consulting, offer good prospects of growth in the Chinese market. In order to be successful in China, Portuguese companies should invest on robust marketing strategies and on the protection of intellectual property. At the same time, they have to be resilient and be able to adapt to changing market conditions. On trilateral cooperation, there are plenty opportunities to explore in African Portuguese-speaking countries, East Timor and Brazil, namely in infrastructure and energy-related projects. The agreement between EDP and China Three Gorges for the creation of Hydroglobal, with the objective to develop common projects in Africa and Latin America, is an excellent example which can be replicated in other sectors. Such collaboration between companies from China and Portugal is already taking place in Angola and Mozambique, and the Chinese financial institutions have demonstrated their interest to finance this kind of projects (in partnership with Portuguese financial institutions). Portugal is also a founding member of the Asian Infrastructure Investment Bank—AIIB (a Chinese initiative, with its headquarters in Beijing), which provides new opportunities for Portuguese companies in Asia, and China in particular. An important note should be given to China’s potential as a tourist source for Portugal. In 2018, 315,000 Chinese tourists visited Portugal, up 13.5% over the previous year, originating 153 million euros of revenues (+18.9%). At the European level, Portugal was the 6th major destination in 2018 and it is expected to be in the top-5 shortly,

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eventually this year. For that objective, the resumption of direct flights between Lisbon and Beijing, next 31 August (with Xi’an as the final destination), will play an important role (Turismo de Portugal 2019).

The China’s New Pathways in the Atlantic and the Local Strategic Geography China’s interest in the Portuguese sea has been confirmed by several figures of the Portuguese government, in spite of not yet a consolidated reality. In addition, the Portuguese President of the Republic referred publically in the Luso-American Development Foundation (FLAD) that “a Chinese minister visits Sines almost every month, and soon there will be a decision about that” (Público 2019). The possible extension of the BRI to the Portuguese maritime area serves the bilateral interest, but it is also dependent on some variables, including interests from third parties. First, we should refer that Portugal is a country with a long-standing maritime tradition and its people have a direct conscience of the sea. It is a trace of culture which has taken centuries to assimilate (Neves and Duarte 2013: 3). Currently, the direct value of the sea economy in Portugal is 3.1% of the GAV (Gross Added Value) and it is responsible for 3.8% of total employment (EY 2019). Portugal is a country with a coast of about 942 square kilometres. Joining islands, it forms an Exclusive Economic Zone (EEZ) with 1.72 million square kilometres. This represents the third largest EEZ in the European Union (EU) that would be extended to the limit of the Portuguese continental shelf. With this recognition, there is an addition of 3.877,408 square kilometres, equivalent to 20 times the land area, the 11th largest in the world. The maritime space resulting from the merger of the EEZ and the extension of the continental shelf (PC) implies that the maritime territory would go from 18 to 40 times the land territory, equivalent to the territory of India (Público 2013). In fact, the continental shelf comprises only the soil and subsoil (not the water column), in all the extension of its terrestrial territory. The extension project of the Portuguese continental shelf is essentially legal and technical, supported by a complex multidisciplinary scientific investigation. Portugal will have a greater weight in the sea in its geopolitical importance and, of course, economic repercussions. It should be noted that this whole area—which we mention as “the Portuguese Atlantic”—is abundant in mineral resources and rare marine species, which can be used in medicine and pharmacology, which are currently included in the legal

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regime of the High Seas. There is also a strong probability of the existence of hydrocarbons, natural gas, methane, high purity ores and hydrothermal vents (Madureira 2017). The natural resources throughout this area are a factor of attraction for China, included in all opportunities provided the Portuguese sea. This includes tourism, shipping activities, transports and biotechnology. There is a continued work of collecting data and important samples for the scientific areas of the sea sciences, hydrography, geology, geophysics, geochemistry and biology through the Mission Framework for the extension of the continental shelf (EMEPC). This intends to support the consolidation of the technical and scientific arguments presented in the proposal (EMEPC 2019 and Madureira 2017). The Port of Sines is gaining increasing strategic importance in this new context. China is developing important strategic ports in the twenty-firstcentury Maritime Silk Road (MSR), nodes of global trade circulation, that play an important role in the economic development of countries along that road (Wang et al. 2019: 2). Firstly, the relative port congestion in the port of Rotterdam in the Netherlands can motivate the development of viable alternatives from Portugal. The creation of a new terminal in the Port of Sines—Vasco da Gama—is precisely to bring cargo from other ports. Last 25 July, the Portuguese government announced that the new Vasco da Gama Terminal will have a 50-year concession and will receive a total investment of 547 million euros (mostly private), with a foreseen capacity of 3 million TEU. The exploration concession will be made under the rules of public service, further to the opening of an international public procurement. If we add the project of XXI Terminal extension, with a foreseen investment of 642 million euros, the Port of Sines’ container handling capacity will evolve from the current 2.3 million to an overall 7.1 million TEU (Jornal Económico 2019). The Port of Sines is the main Portuguese oceanic port. It weighs 1.5% in the Portuguese economy, 2% of total employment and represents more than 56% of total container handling capacity in the Portuguese ports. With a recent construction (1978), it has a reference system, free of urban pressures, ensuring long-term expansion capacity. It also has adequate land access for current traffic and a road-rail evolution plan, which will allow responding to the future growth projections of the port and its area of influence. The Port of Sines is currently an energy asset for Portugal, the main international maritime platform for the movement of oil, refined products, LPG, Liquefied Natural Gas, petrochemical products and coal. The Port of Sines and its Industrial and Logistics Zone

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at the rear, with more than 2000 ha, are already an international logistics platform with capacity to welcome the major players in the maritime, port, and industrial and logistics sectors. It is the main port on the IberoAtlantic facade, whose geophysical characteristics have contributed to its consolidation as a national strategic asset. It is the country’s main energy supply port (oil and by-products, coal and natural gas) and, on the other hand, it already positions itself as an important general/containerized cargo port with high growth potential to be an Iberian, European and world reference. It is a demonstration of the technical capacity of Sines, however, it collides with the Portuguese periphery and the absence of a hinterland, as with other northern ports of Europe. Sines competes with other Mediterranean ports or in northern Europe, which intend to limit the competitive capacity of the Port of Sines to their advantage. Competition between countries in attracting Chinese investment may foster lack of unity among EU Member States. Italy, like Greece, has moved away from the EU’s critical line regarding the presence of the Middle Kingdom’s capital on the European continent, viewed with criticism by countries such as Germany. Last December 2018, on the occasion of President Xi Jinping’s visit to Portugal, it was signed the “Memorandum of Understanding on Cooperation Under the Economic Strip of the Silk Road and the Initiative on the 21st Century Maritime Silk Road”. However, like it happened previously with Spain, this signature didn’t entail a formal adhesion of Portugal to BRI initiative. In fact, it only establishes the modalities of bilateral cooperation under BRI, focusing on connectivity and electric mobility, among others. Portugal’s involvement in BRI has been slow, with China cooperating more intensively with European countries such as Greece and Italy. Portugal does not appear in the list of 50 countries that will have the most impact with the initiative until 2040, according to a study by Cebr—Centre for Economics and Business Research (2019). Nonetheless this complex background, the attempt to capture Chinese investment in ports and related infrastructure is among the main goals of the Portuguese government. The idea of the government is to involve the Middle Kingdom in the Portuguese Atlantic dynamics—devoid of capital—to be better able to compete in the globalized world. In 2016, it was signed in Lisbon (at the margins of the Ocean’s Meeting Conference) a Memorandum of Understanding between the Chinese Oceanic State Administration and the Portuguese Ministry of the Sea, which establishes

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cooperation in the fields of scientific research and the development of commercial projects related with the blue economy. In that same year, it was also proposed the establishment of cooperation with the Azores University for the development of joint studies on minerals exploration in the Azores Sea. One year later, in October 2017, the Portuguese Minister of the Sea, Ana Paula Vitorino, headed a business mission to China, which culminated with the signature of an Action Plan in the field of the blue economy, following the MoU signed in 2016. The mission included several activities held in Beijing, Shanghai and Hong Kong, including a meeting between companies from both countries with the objective to analyse possible consortiums for investment projects in the area of ports. Other sectors for potential business cooperation and investment were highlighted, namely blue biotechnology, aquaculture and shipbuilding, and platform construction for oceanic renewable energies. More recently, during President Xi’s visit to Portugal, it was also signed a Memorandum of Understanding on the Implementation Plan of STARLAB between the Portuguese company Tekever and the Chinese Academy of Social Sciences Institute for Microsatellites. This foresees the establishment, in Portugal, of a Research Laboratory for Advanced Technology in the fields of Sea and Space (comprising areas such as 4D vision, development of satellite platforms or technologies for oceans’ monitorization and surveillance). While Portugal aims to revitalize its maritime potential by attracting foreign investment, China may acquire knowledge for its own maritime strategy. China is frequently licensing foreign technology, pursuing merges and acquisitions to acquire desired technology, and sometimes develops joint projects with its foreign partners in order to get western intellectual property and pursue innovation pathways (Economy 2018: 124–125). Naturally, this process involves also the development of its business schools, attracting top academic, business and government leaders (Overholt 2018: 86–87). The acquisition of Portuguese maritime assets by China is not an easy process, because of the triadic relations with Brussels and Washington. In particular, the Trump Administration, namely through the American Embassy in Lisbon, is pressuring Portugal not to develop projects with China. Some days after the visit of Xi Jinping to Portugal, Washington sent Roland de Marcellus, Deputy Secretary of State for International Finance and Development, to Lisbon. He met with Portuguese prime minister and treated sensitive national security dossiers. He pressured the

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Portuguese government to avoid excessive cooperation with China, particularly in technological areas and in strategic assets, that involves BRI. In an interview to a Portuguese newspaper, he said that the USA recommends enhanced vigilance over Chinese investment. Particularly, “when foreign investors benefit from access to state subsidies or when they are acting on strategic, rather than commercial motivations” (Expresso 2018). At the second forum of the New Silk Road for International Cooperation (Beijing, April 2019), the German Economy Minister, Peter Altmaier, advocated the creation by the EU of a common Memorandum of Understanding and an alliance of the European peoples for the initiative. Germany, which has significant economic cooperation with China for years, is now warning of the need to develop joint European projects with China. China’s interest in the Portuguese sea is in progress, but it is dependent on the international diplomatic game. This involves the confirmation, or not, of the lack of interest from the USA at Lajes Base in the Azores. If the USA leaves, that would, most surely, put China in the place. The Portuguese government wants to privilege the old EuroAtlantic relationship, but that depends on the position of the USA on this specific issue. Also, one has to bear in mind that the future option of Lisbon on 5G network is closely related to the US-China increasing competition, and it might precondition future Chinese investments in Portugal (and from the USA as well). In the already mentioned FLAD Conference (2019), the Portuguese President of the Republic said to a relevant American assistance, “you have to be there when the time comes. We cannot put off a decision forever”. Lisbon is in a very sensitive position, divided between its own interests, the European commitment and the pressure from the USA. The Portuguese decision makers should have a clear view on the country’s permanent national interests and its hierarchy, in order to make the adequate political choices and decisions. Sooner than later, we will have to make choices (Monjardino 2019). In geopolitical terms, what is happening today between the USA and China is a classic dispute between the dominant power and the ascending one. As it occurred many times in history (e.g. the Sparta-Athens dispute), sometimes war can be inevitable. Let’s hope that the current conflict between the two major superpowers does not lead to the same end (Costa Silva 2019). And history shows us that a small country like Portugal, being confronted with the simultaneous and conflicting interests of great powers, may end up in a very negative position.

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Conclusion Following the first wave of Chinese investment that entered in Portugal to acquire assets in companies, the Portuguese government has sought to capture investment—greenfield, namely in physical infrastructure—for the maritime domain. This objective meets China’s internationalist purpose for acquiring port control, as it did in Greece and Italy. One of the ideas is to take advantage of the mega project “One Belt, One Road” (BRI) and extend it to the Atlantic, through the Portuguese territory. The most discussed assets in this objective are the Port of Sines and the Azores archipelago. In May 2019, the Portuguese Treasury issued debt of about 260 million euros (2000 million yuan) to potential Chinese investors. It is the first time that an Eurozone country issued the so-called Panda Bonds. This means it proves the strategic relevance of China to Portugal. Portuguese maritime assets are important in the Atlantic area, where it crosses trade flows with northern Europe. It is also a gateway into Europe if we consider the Panama and Nicaragua Canals and the Chinese strategic interests. In addition, the possible extension of the Portuguese continental shelf implies rights over maritime resources. These factors are attractive to China, but clash with the USA interests in the region. Lisbon is receiving pressure from Washington and Brussels on excessive cooperation with Beijing in strategic areas and technology sectors. The Portuguese diplomacy is entrenched and dependent on the evolution and outcome of the Sino-US trade conflict. Betraying the old alliance with the USA also means staying in a fragile position in Europe. Portugal is a small country on a board of global interests that can be highly damaging, if not wisely managed and balanced.

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CHAPTER 17

Assessing China’s ‘16+1 Cooperation’ with Central and Eastern Europe: A Public Good Perspective Weiqing Song and Lilei Song

Introduction China’s cooperation with the Central and Eastern European Countries (CEECs) was institutionalised in 2012 with the launch of the so-called 16+1 framework.1 Since its debut, there has been some contradiction between official Chinese rhetoric and some foreign critics’ assessments

1 The name reflects the platform’s aim of building a relationship between China and the 16 CEECs. Greece officially joined the Central and Eastern Europe side in April 2019, making it the 17+1 framework; however, it is referred to as the 16+1 framework throughout this chapter.

W. Song (B) University of Macau, Macao S.A.R., China e-mail: [email protected] L. Song Tongji University, Shanghai, China e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_17

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of the nature and purpose of this cooperation. In general, the official Chinese view, held by most Chinese analysts, is that the framework is a winwin game, based on equality and mutual benefits. In its official document ‘List of 5-year Outcomes of the Cooperation between China and Central and Eastern European Countries’, published in 2017, the Chinese government presents a list of over 200 positive outcomes in five main areas: policy communication, connectivity, economy and trade, finance, cultural and people-to-people exchange. In contrast, the initiative has been criticised in the West as a negative development in the region. The critics argue that China has used the initiative to create debt traps and promote the interests of China’s state-led egoist commercialism; some even argue it is China’s ‘Trojan Horse’, aimed at dividing the West for strategic reasons. We contend that there is no strong evidence that China intends to use the framework to exploit others economically or divide the West strategically; in fact, it simply would neither work nor serve Chinese interests. It is much more logical to conclude that China is using the 16+1 cooperation framework, which is part of China’s Belt and Road Initiative (BRI), to create public goods in the service of global economic governance. As a major developing state, China has actively participated in economic globalisation over the past decades. It has been widely recognised as a main beneficiary of this globalisation, as demonstrated by its remarkable economic and social development. Consequently, China has good reason to support further economic globalisation. In line with its new status and strength, China also aims to improve global economic governance. The BRI, including the 16+1 cooperation framework, was developed in this context. Contrary to the assertions of many Western governments, a recent large scale study by a group of European and American scholars has concluded that Chinese investments in ‘connective infrastructure’ have produced positive economic spillovers that lead to a more equal distribution of economic activity in the localities where they have been implemented (Bluhm et al. 2018). Accordingly, this chapter uses the 16+1 cooperation framework between China and the CEECs as a case study of China’s efforts to enhance international economic cooperation and global economic governance by initiating and contributing to the creation of global public goods. The 16+1 cooperation differs from the South-South relationships within the developing world or the traditional North-South pattern of international development cooperation. Although China is a developing

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state, it is also, according to various measures, a major economic powerhouse. It is a formidable manufacturing power and has accumulated considerable financial and technological power. In particular, it has become a major link in global production chains. That said, China still lags behind advanced economies in a variety of ways, including cutting-edge technologies and living standards. The CEECs are generally well integrated into the West, as they have completed their political and economic transition. However, most of the CEECs are still less developed than their Western partners, in terms of socio-economic development. This chapter focuses on the challenges of the 16+1 cooperation and their possible solutions. Informed by international relations theories, it posits that the 16+1 cooperation framework is a concrete step in China’s attempts to initiate, and to some extent provide, public goods that support global economic governance. In particular, it aims to create and enhance international connectivity during a period of dramatic and fundamental changes in the global economy. Despite intensifying globalisation and increasing demand for global governance, there are structural weaknesses in current global governance structures and inadequate global public goods. This has been exacerbated by the retreat of the United States from global affairs, driven by economic protectionism and radical nationalism in that country. Against this backdrop, this chapter argues that there are three possible solutions to the inherent challenges of managing collective action between China and its CEECs partners: dominance, reciprocity and identity. After an introduction to the general context, central research questions and the main argument/thesis, this chapter defines the 16+1 cooperation framework as a public good and develops an analytical framework for examining the research questions. The 16+1 process is then analysed in terms of results, obstacles and challenges, and feedback and responses from various sources. Three different IR theoretical principles are used to examine this process. The chapter concludes with some short remarks and policy suggestions.

China’s Vision of Global Public Goods For more than a decade, the terms ‘global governance’ and ‘public goods’ have frequently appeared in official Chinese discourses such as governmental documents, public speeches and policy commentaries. The Chinese government has consistently expressed its ambition to participate

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in global governance and, if possible, to initiate and provide public goods at global and regional scales. According to Wang Yi, the current Chinese foreign minister, this is the aim of the BRI, which has increasingly become an inclusive platform for international cooperation and is widely recognised as a global public good (Wang 2017). Originally an economic concept, a public or collective good is defined by two essential characteristics: non-rivalry and non-excludability. Nonrivalry means that there is no zero-sum competition between potential users of the same good; therefore, one user can use it without diminishing its availability to others. Non-excludability means that no user of the good can practically be excluded; therefore, it is available to all, whether they contribute to the provision of the good or not. These characteristics make creating public goods challenging, as it is difficult to provide something that benefits all group members regardless of each member’s contribution. Public goods necessarily tend to be under-provided, as people can free ride on the efforts of others. The concept of public goods has been widely applied to problems requiring joint effort, including many problems in international and global affairs. In international relations, the questions are how to provide global public goods that improve social and economic welfare and prohibit global public evils such as war, conflicts and environmental degradation. Among the many acute issues demanding global governance, it is necessary to prioritize the critical global public goods that can address the most urgent issues. The International Task Force, a multinational research group, defines the major issues that critically require the provision of public goods (International Task Force 2006, pp. 5–13). The challenge of creating public goods is particularly acute in the international arena, as each nation state is sovereign and equal to the others, so there is no central authority. Very often, efforts are facilitated or hindered by shared or conflicting interests, respectively, among members of a group. Failures to provide effective global public goods are described with a variety of terms such as ‘collective action problem’, ‘free riding’, ‘burden sharing’ or ‘tragedy of the commons’. There are numerous cases of public goods in international relations such as nuclear non-proliferation treaties, climate change accords and multilateral trade agreements. The provision of such global public goods runs into a number of key challenges, such as concerns about sovereignty, the different preferences and priorities of the involved governments, the weakest link problem and the ‘summation’ problem (ibid., p. 3). Furthermore, group members may not be able to

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agree on whether a certain global public good is necessary, or which of several global public goods should be prioritised, given limited resources, or who should pay and how resources, benefits, etc. should be allocated. In fact, the very nature of global public goods means that demand tends to excessively outweigh supply. Although there is high demand for effective global governance, the world today suffers from a structural weakness on the supply side. Apart from the perennial concern about state sovereignty, there is growing divergence between major powers over the direction and priorities of global governance in wide range of issues. This is reflected in a number of major events, such as the controversy over climate change, negotiation deadlock in the WTO and the weakness of global financial governance. Making things worse, the United States, which has long served as arguably the most important power in global economic governance, has, under the Donald Trump administration, become increasingly protectionist and retreated from its commitments in some major issues. Academics have used the concept of the Kindleberger Trap (Nye 2017) to describe the widespread concern about the lack of global leadership. Currently, the international community stands at a crossroads, as its system of global economic governance struggles to achieve financial stability, trade liberalisation and balancing, and equitable investment. The global economic governance system is becoming increasingly fragmented with the rise of different standards and rules across the world. Meanwhile, Chinese foreign policy has been undergoing steady and significant change. In general, it has shifted from reserved and passive positions to more active and assertive ones. Embracing the global economic order, China has a growing stake in not only participating in, but also contributing to, the provision of public goods at regional and global scales (Wu and Li 2014, pp. 115–116). Over the past decades, there has been a profound evolution in China’s strategies for global governance. As both a participant in and beneficiary of the process of globalisation, China has been progressively remoulding both its economic development and international identity (Liu and Zhen 2015). The relationship between China and globalisation has changed over time, and as China has become more powerful, it has begun to reshape the process of globalisation in its own favour. China has its own preferred vision of global governance. Despite the advocacy, mostly in the West, for the participation of non-state actors and civil societies in global governance, China promotes the leading role

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of state governments, which, in turn, requires intergovernmental cooperation and coordination, particularly in global economic governance (Xu 2017, p. 29). However, there is growing divergence among leading economies with regards to the norms and practices of global economic governance. Specifically, there is a split between those who continue to support an open and liberal global economy and those that are increasingly protectionist (ibid.). Since the global financial crisis in 2008, there has been a new trend in the visions and practices of economic globalisation—the ‘Gongshang, Gongjiang and Gongxiang ’ principle, reiterated by Chinese President Xi Jinping himself as the spirit of the BRI. It articulates the view that shared growth can be achieved through discussion and collaboration, which will lead to a fair, equitable, open and inclusive structure of global governance. This idea conforms to the new type of international relations, based on win-win cooperation, initiated by the Chinese government (Xu 2017, p. 32). The BRI has undoubtedly been defined by the Chinese leadership as a global public good. Xi Jinping states that the ancient silk routes embody the BRI spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit (Xi 2017). Thus, connectivity has been highlighted as the essence of the BRI. It is asserted that connectivity can be created and enhanced across major dimensions, including policy connectivity, infrastructure connectivity, trade connectivity, financial connectivity and people-to-people connectivity (Xi 2017). To illustrate, Xi cites the creation of the 16+1 Financial Holding Company as inaugurating financial connectivity between China and the CEECs. Indeed, China’s ambition to achieve connectivity leadership is evident in the BRI, which commits China to transregional, if not directly global, connectivity in a non-hegemonic manner. It integrates the existing states without undermining the positions of these states (Andornino 2017). This chapter focuses on China’s cooperation with countries in Central and Eastern Europe within the 16+1 framework. Although it officially kicked off before the BRI was implemented, China’s 16+1 cooperation with the CEECs has been completely incorporated into the BRI. In fact, the CEE region has become one of the focal points of the BRI (Vangeli 2017; Liu 2018). The decision to focus this analysis on the 16+1 framework is based on both scholarly and practical considerations. Methodologically, the China-CEECs cooperation presents a typical case study of the BRI. It exhibits China’s emphasis on connectivity. All major

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features of China’s connectivity politics can be observed, including proactivity (zhudongxing), multidimensionality (duowei lianjie), discourse power (huayuquan) and internalising implicit (Party) rules (qian guize) (Kohlenberg and Godehardt 2018). Practically, this cooperation has been institutionalised over a period of several years, providing more data for an in-depth and systematic analysis. The 16+1 cooperation framework between China and the CEECs can be understood as China’s attempt to strengthen the public good of connectivity. It is mainly an interregional public good, but has substantial implications for global connectivity. China has devoted enormous resources to developing this new approach. For example, China is complementing its economic investments with institution-building and policy coordination (Vangeli 2017). The partners are involved in this process and are invited to create specific goods of various types including some so-called impure public goods that do not fully meet the criteria of nonrivalry and non-excludability. For example, goods that are non-rivalrous but excludable are called ‘club goods’, and goods that are non-excludable but rivalrous are called ‘common pool resources’. In general, the 16+1 cooperation is difficult, as collective goods are easier to provide to small groups than to large ones. According to international relations theories, there are three possible approaches to the relationships underlying the provision of public goods, dominance, reciprocity and identity, which are summarised in Table 17.1. Table 17.1 Three approaches to the provision of global public goods Possible role

Capabilities and opportunities

Obstacles and challenges

Dominance

Benign hegemon

Reciprocity

Leading partner

Relative economic power; Decline of traditional power Substantial resources; Economic globalisation

Identity

Norm entrepreneur

Limited power and resources; Rivalry with other major power Divergence in interests and priorities; Complicated procedures Less popular than conventional model; Time consuming

Alternative experiences; More diversified world

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The dominance solution is based on the realist approach to international relations. It creates global public goods ‘by establishing a power hierarchy in which those at the top control those below – a bit like a government but without an actual government’ (Goldstein and Pevehouse 2014, p. 5). Here, dominance is understood as a complex process involving various mechanisms and not just the exercise of brute force. This approach provides orderly, stable, predictable outcomes, but may trigger resentment, oppression and other possible negative consequences. Informed by the liberal approach to international relations, reciprocity aims to reward cooperative behaviour that contributes to the collective good and punish self-serving behaviour that pursues self-interest at the expense of the community (Goldstein and Pevehouse 2014, pp. 5–6). In this approach, reciprocal habits and expectations form the basis of most international norms and institutions. To achieve global public goods, liberals focus on improving various aspects of multilateral institutions, including their effectiveness in terms of governance and accountability, and their adequate and appropriate financing (International Task Force 2006, pp. 14–18). This approach has the big advantage of providing strong incentives for mutually beneficial cooperation, but it suffers from several weaknesses such as an expensive institutional and infrastructural arrangement and potential downward spirals caused by mistrust and suspicion. In comparison, the third solution, identity, is based on much more deep-rooted psychological characteristics of international actors. Members of a strong identity community care about the group’s common interests, even, if necessary, at the cost of their own interests (Goldstein and Pevehouse 2014, p. 6). This approach to public goods is potentially the most sustainable, as demonstrated by the integration of Europe, which, despite various problems and shortcomings, has attained stability, particularly in terms of a security community. Nevertheless, this approach also tends to be the most cumbersome and time consuming, as it involves redefining the identity and interests of group members.

Global Public Good of the 16+1 Cooperation Framework The 16+1 framework marks the beginning of China’s bold endeavour to take a leadership role in engaging with a region that is not considered part of the Global South. It is a dramatic change in China’s relationship with

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these countries, which have been dormant for decades. The 16+1 cooperation was officially established as a multilateral framework in 2012 when then Chinese Premier Wen Jiabao visited Poland and met with leaders or high-level representatives of the 16 CEECs. Since then, China’s multilateral cooperation with the CEE region has progressed from ‘rediscovering’ each other to a structured exploration of common interests. It relies on a variety of increasingly frequent, diverse and/or institutionalised mechanisms and practices. Furthermore, growing multilateral interactions are coupled with an intensification of bilateral relationships between individual CEECs and China. First, the 16+1 framework provides China and the CEECs with a multilateral institutional mechanism. The annual China-CEE summit is the core of the overall framework. The cooperative agendas and outlines reached at the successive summits over the past eight years have defined the principles, directions and development strategies, most of which have been initiated by China. For example, China’s ‘Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries’, issued at the first Warsaw summit in 2012, mapped out the priorities for concrete projects and areas of cooperation within the 16+1 cooperation framework (MFA 2012). In addition to the summits, ministerial meetings are held every two years to flesh out cooperative activities in specific areas. Examples of such ministerial meetings include the China-CEEC Ministerial Conference on Promoting Economic and Trade Cooperation, the Transport Ministerial Conference for Interconnection, the Health Ministerial Forum, the Agriculture Ministerial Conference for Agroforestry Cooperation, etc. Finally, the Secretariat for Cooperation between China and CEE provides administrative support to the 16+1 framework. In September 2012, China voluntarily set up the Secretariat within its Ministry of Foreign Affairs to deal with daily operational and administrative matters. The Secretariat holds regular national coordinators meetings and quarterly regular meetings with the 16 embassies in China to ‘plan the direction and areas for future cooperation’ (Xinhua 2012). Specifically, it prepares for the summits and economic and trade forums and implements other administrative issues. In April 2015, the Chinese Ministry of Foreign Affairs set up a special representative for China-CEE countries cooperation. This representative has the important

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mission of coordinating China’s various governmental units and communicating with the governments of the CEECs. Together, these mechanisms serve as the institutional basis for strengthening China-CEE ties at different levels and across various sectors. Second, concrete and detailed projects have been carried out in specific areas and sectors. The current strategy focuses on economic exchanges in a select number of prioritised sectors. According to the ‘China and Central Eastern Europe Cooperation Medium-Term Plan’, adopted in 2015 (MFA 2015), the prioritised areas are investment and trade, connectivity, capacity and equipment cooperation, financial cooperation, scientific and technological innovation, agriculture and forestry, culture, public health and local government cooperation. A mechanism has been deliberately installed so that almost every country in the CEEC region can host a specific platform and therefore take a leading role in one area, usually an area that reflects their sectoral advantage and demand. For example, Hungary hosts the China-CEE Association for Tourism Promotion, as its economy relies heavily on tourism. Slovenia acts as the coordinator state for China-CEE forestry cooperation. Slovakia has established the ChinaCEE virtual technology transfer centre. Poland has established the ChinaCEE investment promotion agency and the China-CEE Business Council. Serbia hosts the Association for Transportation Infrastructure, as it regards infrastructure development as a developmental priority and is engaged in extensive cooperation with China and several other 16+1 countries in the development of transportation links along the so-called China-Europe Land-sea Express Route. Latvia hosts the China-CEE Association on Logistics Cooperation in Riga, and Bulgaria leads the cooperation in agriculture, hosting the Association on Agricultural Cooperation. Romania has established the 16+1 Energy Projects Dialogue and Cooperation Centre. In principle, host countries are meant to play a central role in agenda-setting and implementation for their areas. However, in practice, the work appears to be largely driven by exchange and cooperation with China, rather than multilaterally with other CEE countries. In addition to national level cooperation, local cooperation has become an important development. As of December 2017, China and the CEE countries had formed links with more than 60 friendly provinces/regions and created more than 100 pairs of sister cities. Cooperative projects have been initiated or implemented in such areas as industrial park construction, economy and trade, science and technology, education and cultural exchanges (Paper News 2019).

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Third, this cooperation has achieved a number of goals over the past few years. In its five-year assessment, China’s foreign ministry has identified ‘major achievements’ in five main areas (MFA 2017). In addition, it claims that the platform ‘resonated well with people from both China and CEE countries’. In fact, it has served as an important avenue for China to promote the BRI, particularly the ‘connectivity’ strategy, which is based on policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds. China sees the 16+1 cooperation platform as an important step in incorporating the BRI into the EU Common Market. It is an engine driving the establishment of China-EU ties and China-EU cooperation. In 2017, for example, the total trade volume between China and the CEECs reached US$67.98 billion, an increase of 15.9% over the previous year, and increased from 9.3 to 11% as a proportion of the total China-EU trade (Xinhua 2018). China has become the largest import source country for CEECs and the main export destination outside the EU. In addition, people-to-people exchanges have developed rapidly between the two sides. Tourism has become an area of major economic growth. Since the launch of the 16+1 cooperation platform, the number of direct flights between China and the CEE countries has increased significantly, in part to cope with the booming flow of tourists, which increased by 146% between 2011 and 2016 (Government of China 2017). The CEECs have also committed to developing tourist facilities that are more suitable for Chinese tourists’ consumption habits. Dominance Without a doubt, China plays a leading role in the 16+1 cooperation platform, as its overall power is much higher than any other member of the group. However, China is a newcomer, and it faces both internal divergence and outside competitors in the CEE. First, it is dealing with a regional bloc that does not have a unified framework. Indeed, the CEECs do not speak with one voice. For example, when the platform was first established, the lack of institutional arrangements in the CEE region made it extremely difficult to achieve effective multilateral cooperation projects and activities. Unlike other European sub-regional cooperation groups, such as the Benelux Economic Union, the Nordic Council or the Visegrád Group, the 16+1 group was proposed by China not the

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local countries, and reflects the vision and agenda of the Chinese government. The 16 countries do not have a sub-regional multilateral cooperation mechanism of their own. In addition, there are no CEECs that are likely up to serve as the ‘leader’ in unifying and coordinating relations with China. Therefore, China needs to play a dominant role in the group. Moreover, CEE countries tend to focus on the multilateral agendas that are most compatible with their own priorities and interests, neglecting those of the other countries in the group. Therefore, they find it more convenient and effective to work with China through bilateral agreements. This is particularly the case when the CEECs are dealing with difficult situations, such as ‘Brexit’ and economic nationalism in Western Europe and the United States. Meanwhile, the legitimacy of the EU is increasingly being questioned by nationalist and populist parties in the CEE, such as Fidesz in Hungary and the right-wing Law and Justice Party (PiS) in Poland. Consequently, China provides an alternative leader for the CEEC group. The EU and major Western European powers are suspicious of China’s promotion of the 16+1 cooperation framework. The EU is the most important external factor influencing the cooperation between China and the CEECs. To reassure the EU, China has reiterated that the 16+1 platform is a sub-regional cooperation, subordinate to the overall cooperation between China and the EU. However, this has not prevented the EU from forming a critical and negative understanding of this platform. It has asserted that economic cooperation between China and the CEECs lacks coordination at the EU level, although most CEECs are part of the European Common Market. In addition, the cooperation is criticised for a lack of transparency, which may run counter to the key principles of EU law. In fact, the EU is particularly concerned that China’s increasing influence in the CEECs may come at the cost of the decreasing influence of the EU. Brussels also worries that the 16+1 cooperation framework could translate in the long run into Chinese leverage over the EU, as some CEECs may shift their strategic outlook and priorities towards China. Prominent EU officials have even stated that the CEE could become China’s ‘Trojan horse’ in the West (Pavli´cevi´c 2019). They are concerned that the format could be used by Beijing to ‘divide and rule’ the EU (Grieger 2016). Furthermore, political barriers set up by the United States tend to hinder China’s ability to form quasi-alliances with some CEECs. Chinese scholars generally believe that the foreign policy of most CEECs is heavily reliant on Europe and the

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Atlantic alliance. As a matter of fact, the United States has substantial geo-strategic stakes in CEE. Since Montenegro became the twenty-ninth NATO member state, twelve of NATO’s member states are now from the CEE region. There is a ‘pro-American’ group in the region, including Poland and most of the South-eastern European countries. With the outbreak of the Ukrainian crisis, the United States announced a ‘return to Europe’ strategy and reiterated its commitment to providing security for the CEE. This makes geo-strategic calculations in the CEECs more complex. As a result of this internal and external complexity, the CEECs have somewhat doubtful and even contradictory attitudes towards the 16+1 cooperation framework. At the bilateral level, they continue to pay close attention to the BRI and the concept of a ‘community of human destiny’. They generally realise that as an important component of the BRI, the 16+1 cooperation framework has the potential to generate economic opportunities for both sides. At the multilateral level, most CEECs have to consider external factors and pressures, and they tend to lean towards their Western allies, due to realistic and sometimes normative considerations. For example, in April 2018, the ambassadors to China of all of the EU member states except Hungary jointly criticised the BRI (Martin 2018). Furthermore, in November 2018, the EU reached a common policy for implementing the Eurasian Interconnection Strategy, which is in direct competition with China’s BRI (European External Action Service [EEAS] 2018). These two events indicate that most CEECs support the EU’s use of their shared norms and rules to regulate China’s developmental model at the international scale. In short, the European Union and other Western powers have placed many constraints on China’s ability to play a leading role in the region. Reciprocity The 16+1 cooperation framework is presented as a primarily economic platform focused on short-term considerations and projects. This is clearly reflected in the mindsets of mainstream policy makers and analysts on both sides. The trade and investment sectors have been defined as the core of this cooperation, and it is asserted that mechanisms of trade and investment cooperation should ‘always be pragmatically pushed forward as the centerpiece of economic drive and win-win cooperation’ (Cui 2016). Before 2015, most Chinese analysts saw the 16+1 cooperation framework

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as an opportunity. Indeed, this opportunistic view still prevails in China. As China is influenced by the ‘new normal’ in the world economy, its own GDP growth rate is slowing, and it is motivated to develop business opportunities in regions like the CEE. Most of the CEEC governments are in turn interested in furthering economic and trade cooperation with China. They understand that China has prioritised the development of its service industries, which have developed various new business models. This provides opportunities for foreign companies, including those from the CEECs. CEECs with high quality and high tech products are eyeing the lucrative Chinese market. Other CEECs are expecting huge Chinese investments to meet their domestic demands in infrastructure and other sectors. However, the current level of cooperation is a little disappointing to people with high expectations. The trade data show that there is still a large deficit in the CEECs’ trade with China. Chinese investment to the region has not substantially increased, as originally expected. The CEECs realise that China supplements their trade and investment sectors, but is not a substitute for their traditional partners in the West. Furthermore, regardless of the size of Chinese investments, South-eastern European countries will continue to be integrated into Europe. It is also a problem that both sides remain ill-informed about each other’s domestic situations. In particular, the CEECs need to acquire much better knowledge and understanding of the Chinese domestic economy and society. To this end, both sides should strengthen exchange and cooperation in non-economic areas, such as culture, education and scientific research. Despite the multilateral 16+1 framework, many of the practical and concrete projects have been carried out at the bilateral level. Due to various hurdles, it is difficult to reach consensus on truly multilateral projects involving China and the CEECs. For convenience and efficiency, China has pursued bilateral options on quite a few occasions. These agreements still enhance China-CEECs cooperation, as bilateral cooperation within the 16+1 framework is qualitatively different from pure bilateral relations between China and individual CEECs. First, within the 16+1 framework, smaller countries in the region still have relatively transparent competition with their neighbours and have equal opportunities for cooperation with China. Second, the multilateral dimension of the 16+1 cooperation platform enables some countries with historical tensions and disputes, such as Croatia and Serbia, to interact peacefully and cooperate on mutually beneficial projects. Therefore, the CEECs generally pay attention to the

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key points of bilateral cooperation, which were raised by Chinese Premier Li Keqiang at the annual summit. The 16+1 cooperation framework provides the CEECs with an additional institutional venue to regulate relations between themselves and with other parties. For example, the nonEU member states in South-east Europe are happy to be in a favourable position between China, the EU, Russia and the United States. In terms of economic development, they prioritise issues of regional connectivity, transportation and communications; in particular, they hope that China can serve as a major source of investment in these areas. That said, the overall strategic needs of the CEECs and China are asymmetric. Due to its expanding global profile, China is more motivated to reach out to the CEE region, whereas the CEECs are generally smaller countries without many strategic goals beyond their immediate region. There is a reasonable concern on the Chinese side that the CEECs are not committed to jointly constructing a long-term cooperation mechanism with China. The rediscovery of each other after the end of the Cold War has not been driven by the strategic choices of the two sides. In general, the CEECs do not seek China’s political support, with a very few exceptions such as Serbia desiring Chinese support on the issue of Kosovo. The CEECs’ interest in strengthening cooperation with China is almost entirely driven by short-term considerations—in particular sustaining economic growth after the global financial crisis and the European debt crisis. On the Chinese side, this cooperation is based on more strategic considerations, as the CEECs provide an additional link in its bid for global leadership beyond the economic realm. Some developments have met China’s original intentions. For example, due to objections by four member states from the CEE region, the EU failed to make direct reference to China when it released a joint declaration on the issue of the South China Sea in 2017. This sent a warning signal to the West, although the objecting countries made the decision for different reasons: Hungary and Greece have become much less willing to criticise Beijing due to their closer relations with China, whereas Slovenia and Croatia held the position because of their own maritime disputes. In short, differences in strategic priorities exist between the two sides, and this in turn hinders the development of further cooperation.

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Identity Identity politics are a factor in China-CEECs relations. In the minds of many people in the CEECs, China is still a communist country. This reminds them of their own unhappy communist histories, and its substantial legacy in their contemporary politics. Memories of Stalinism and the Brezhnev Doctrine have a direct impact on the way that China is perceived, and contribute to a negative image of China in the CEECs. In their eyes, China remains one of the ‘others’, outside the community of Western values. On the Chinese side, many people think that they understand the CEECs due to similar communist histories. They view the CEECs as economically rigid and politically unstable. This mentality has been present in a number of sensitive issues in bilateral relations, such as Taiwan, Tibet, human rights and the Chinese diasporas in the CEECs. China has attempted to build relationships with the CEECs by carrying out public diplomacy in the form of ‘people-to-people’ exchanges. It runs cultural activities, such as the Confucius Institute, think tank networks and forums for young elites. However, these activities have had minimal effect on the relatively negative attitudes of the CEECs to China. Furthermore, the societies of the post-transition CEECs are now increasingly politicised and polarised, like their Western European neighbours. On several occasions, China’s efforts have been impeded by missing links between the government and society in a number of the countries in the region. For example, in the Czech Republic, a big segment of the society disapproves of the government’s policy of strengthening relations with China. This lack of a common identity has created obstacles to China’s engagement with the CEE region. The Hungarian Ambassador to China has admitted that different values constitute the biggest obstacle to cooperation between China and the CEE region, and even overall China-EU relations (Ju 2014). As a result, the political foundation for China-CEE cooperation is not solid, which creates difficulties for the implementation of some agreed upon proposals in the 16+1 framework. The process of ‘moving closer to the West’ as part of their political and economic transition, also means that most CEECs have adopted Western values. Indeed, quite a few countries in the region have developed consistent moralist foreign policy orientations that promote human rights, democracy and rule of law in international relations. This directly affects their relationships with China. The communist ideology that they used to share with China

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provokes antipathy towards this Asian power. In fact, anti-communist stances in the CEE region are sometimes even stronger than those in Western countries. Furthermore, influenced by pro-Western media, many people in the CEECs see China’s public diplomacy as ‘Chinese propaganda’. More broadly, China and the EU diverge notably in their economic models, as highlighted by the disputes over the recognition of China’s market status. As most of the CEECs in the 16+1 process are EU member states, this normative difference largely applies to China’s relations with its CEECs partners (Song 2018, pp. 762–763). Europeans have for a long time criticised China’s lack of market access, protection of its capital market and unfair behaviours such as dumping and forced technological transfer. Furthermore, the EU and its member states generally believe that China is not doing enough to protect intellectual property rights, data and privacy. China has rejected these allegations and, if necessary, defended its position as legitimate for a developing state. In fact, the compromise between pragmatic cooperation and normative systems is always difficult. This is vividly exemplified by the ongoing controversy over Huawei Technologies Co. Ltd, the leading Chinese information and communication technology provider in 5G technology. The governments of Poland and the Czech Republic have stated that they share the US position that the Chinese company has the potential to be a threat to national security (Bachulska and Turcsányi 2019). This position has as much to do with identifying themselves with the West, as with real security concerns.

Conclusion To conclude, the 16+1 cooperation framework, part of China’s BRI, was established to expand and deepen exchange and cooperation between China and the CEE region. Therefore, it can be understood as an effort to construct a global public good, specifically connectivity. If successful, it would add an important component to global economic governance. This study assesses this process using three theoretical concepts from international relations: dominance, reciprocity and identity. From the dominance perspective, China has been on steady rise over the past decades, but it is still not yet a full-fledged global power. Given various constraints, China cannot form a US-style economic empire; it more closely approximates a benign hegemon with limited range and

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scope in the current global economic order. It could follow the American model in a few selected areas and regions by taking the lead in the current economic order, namely, by bearing the costs and responsibilities of creating and sustaining global economic public goods. That said, China is facing quite a few obstacles to contributing to global public goods. It does not have sufficient historical legacies and contemporary experiences in these areas or sufficient economic power. Within the existing global order, China is constrained in its attempts to create a completely new structure and attract the majority of followers around the world. This is why the Chinese leadership has emphasised that the BRI is not meant to ‘reinvent the wheel’, but rather to ‘complement the development strategies of countries involved by leveraging their comparative strengths’ (Xi 2017). For supporters of reciprocity, China’s attitudinal shift towards international organisations and multilateralism is a major development in contemporary international relations. Currently, China is an influential participant in most major multilateral institutions. Recently, its efforts to initiate rules and institutions have become more substantial. Although it has been difficult for China to expand its power and influence in existing institutions, it has individually and collectively participated in creating new entities such as the G20 and the BRICS group, and taken a leadership role in creating new institutions such as the Asian Infrastructural Investment Bank and the New Development Bank. However, it has faced the perennial problem of multilateral cooperation, namely, divergent interests and priorities among participating members. Its efforts are further complicated by issues of transparency and accountability, as well as effectiveness. Furthermore, given its particular political system, it relies almost solely on state-sponsored actors, with little input from civil society. This has been widely criticised as inconsistent with the generally liberal economic international order. According to the social constructivist approach, China has attempted, to some extent, to form a common identity through its normative foreign policy with other states. For example, China has stressed the concept of a ‘Community of Shared Destiny’ in its vision of global governance. This concept is understood as a new ideational framework, adopted by the Chinese government to promote and improve global governance; it shifts the focus from nation states to the whole human community. However, the meaning of the concept is ambiguous and it is impracticable in reality. To put it simply, global governance is about the issue of legitimacy, which

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depends largely on group identity. For this reason, it is still a challenge to decide which global public goods to produce, in what quantities and who will pay—and ultimately who should make decision for these questions (Bodansky 2012, p. 652). This problem can be seen in the EU’s own connectivity project in Asia, which is a direct response to China’s BRI and does not align with Chinese concepts and practices. In this regard, China has a long way to go before the majority of the world accepts its views of public goods and reaches a consensus on how to implement them. Each of the theoretical perspectives provides a partial yet insightful view of China’s foreign strategy as it applies to the CEECs and more broadly the BRI. Together, they provide a more complete picture of the opportunities and obstacles in China’s efforts to initiate and contribute to global public good. Hopefully, this study offers some insights into how global public goods can be better achieved.

Bibliography Andornino, Giovanni B. 2017. The Belt and Road Initiative in China’s emerging grand strategy of connective leadership. China & World Economy 25(5): 4–22. Bachulska, Alicja, and Richard Q. Turcsányi. 2019. Behind the Huawei backlash in Poland and the Czech Republic. The Diplomat, 6 February. https:// thediplomat.com/2019/02/behind-the-huawei-backlash-in-poland-and-theczech-republic/. Accessed 25 May 2019. Bluhm, Richard, Axel Dreher, Andreas Fuchs, Bradley Parks, Austin Strange, and Michael Tierney. 2018. Connective financing: Chinese infrastructure projects and the diffusion of economic activity in developing countries. AidData Working Paper #64. Williamsburg, VA: AidData, A Research Lab at William & Mary. Bodansky, D. 2012. What’s in a concept? Global public goods, international law, and legitimacy. European Journal of International Law, 23(3), 651–668. Cui, Hongjian. 2016. Institutionalized cooperation has become the main trend of China-CEECs cooperation. China Institute of International Studies. http:// www.ciis.org.cn/chinese/2016-11/07/content_9139510.htm. Accessed 24 May 2019. European External Action Service (EEAS). 2018. Connecting Europe & Asia: The EU strategy. https://eeas.europa.eu/regions/central-asia/52916/ connecting-europe-asia-eu-strategy_en. Accessed 1 April 2019. Goldstein, Joshua S., and Jon C.W. Pevehouse. 2014. International relations (10th ed.). London and New York: Pearson Education.

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Government of China. 2017. Big jump in Chinese tourists’ visit to the CEECs. In 21st Century Economic Report. http://www.gov.cn/xinwen/2017-11/30/ content_5243576.htm. Accessed 25 May 2019. Grieger, Gisela. 2016. One Belt, One Road (OBOR): China’s regional integration initiative. Briefing, European Parliamentary Research Service. http:// www.europarl.europa.eu/RegData/etudes/BRIE/2016/586608/EPRS_ BRI(2016)586608_EN.pdf. Accessed 23 May 2019. International Task Force on Global Public Goods. 2006. Summary: Meeting global challenges: International cooperation in the national interest. Summary Report of the International Task Force on Global Public Goods. https://www.keionline.org/misc-docs/socialgoods/InternationalTask-Force-on-Global-Public-Goods_2006.pdf. Accessed 18 March 2019. Ju, Weiwei. 2014. Commentary on speech by Hungarian ambassador to China. Chinese Journal of European Studies 1: 145–147. Kohlenberg, Paul J., and Nadine Godehardt. 2018. China’s global connectivity politics: On confidently dealing with Chinese initiatives. SWP Comment No. 17. German Institute for International and Security Affairs. Liu, Debin, and Zhen Yan. 2015. Engaging with globalisation: Chinese perspectives. Third World Quarterly 36(11): 2002–2022. Liu, Zuokui. 2018. The “16+1 Cooperation” under the “Belt and Road” initiative. In China’s relations with Central and Eastern Europe: From old comrades to new partners, ed. Weiqing Song, 29–47. Abingdon, UK: Routledge. Martin, Nick. 2018. Report: EU countries to be straitjacketed by China’s New Silk Road. Deutsch Welle, 18 April. https://www.dw.com/en/report-eucountries-to-be-straitjacketed-by-chinas-new-silk-road/a-43437084. Accessed 25 May 2019. MFA of PR China. 2012. China’s twelve measures for promoting friendly cooperation with Central and Eastern European Countries, 26 April. https:// www.fmprc.gov.cn/mfa_eng/topics_665678/wjbispg_665714/t928567. shtml. Accessed 23 May 2019. MFA of PR China. 2015. The medium-term agenda for cooperation between China and Central and Eastern European Countries, 24 November. https:// www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1318038.shtml. Accessed 23 May 2019. MFA of PR China. 2017. 5-year outcome list of cooperation between China and Central and Eastern European countries, 28 November. https://www.mfa. gov.cn/mfa_chn//ziliao_611306/1179_611310/t1514537.shtml. Accessed 9 January 2019. Nye, Joseph. 2017. The Kindleberger trap. Project Syndicate, 9 January. https://www.belfercenter.org/publication/kindleberger-trap. Accessed 16 March 2019.

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Paper News. 2019. Fruitful results of China-CEECs regional governments cooperation. The Paper, 9 January. https://www.thepaper.cn/newsDetail_ forward_2831827. Accessed 23 May 2019. Pavli´cevi´c, Dragan. 2019. A power shift underway in Europe? China’s relationship with Central and Eastern Europe under the Belt and Road Initiative. In Mapping China’s ‘One Belt One Road’ Initiative, ed. Li Xing, 249–278. Basingstoke, UK: Palgrave Macmillan. Song, Weiqing. 2018. China’s long march to Central and Eastern Europe. European Review 26(4): 755–766. Vangeli, Anastas. 2017. China’s engagement with the sixteen countries of Central, East and Southeast Europe under the Belt and Road Initiative. China & World Economy 25(5): 101–124. Wang, Yi. 2017. Moving forward with the guidance of Xi Jingping’s thought on foreign affairs. Chinese Ministry of Foreign Affairs. https://www.fmprc.gov. cn/web/wjbz_673089/zyjh_673099/t1489118.shtml. Accessed 13 March 2019. Wu, Zhicheng, and Jintong Li. 2014. Guoji Gonggong Chanpin de Zhongguo Shijiao yu Shijian (Supply of international public goods under Chinese perspective and its practice). Zhengzhixue Yanjiu (CASS Journal of Political Studies) 5: 111–124. Xi, Jingping. 2017. Full text of President Xi’s speech at opening of Belt and Road. Beijing Review, 1 May. http://www.bjreview.com/Documents/ 201705/t20170517_800096439.html. Accessed 23 May 2019. Xinhua News Agency. 2012. China—Central and Eastern European countries cooperation secretariat for first Meeting of the National Coordinator, 6 September. http://news.xinhuanet.com/politics/2012-09/06/c_ 112988940.htm. Accessed 1 May 2019. Xinhua News Agency. 2018. Big increase in trade between China and the 16 CEECs in 2017, 1 June. http://www.xinhuanet.com/fortune/2018-06/01/ c_1122926420.htm. Accessed 25 May 2018. Xu, Xiujun. 2017. Zhongguo Canyu Quanqiu Jinji Zhili de Lujin (China’s approach to participating in global economic governance). Guoji Wenti Yanjiu (Studies of International Issues) 6: 28–39.

CHAPTER 18

Germany’s Attitude Towards the Belt and Road Initiative: The Impact of Non-state Actors on German Foreign Policy Towards China Joanna Ciesielska-Klikowska

Introduction Cooperation between Germany and China has become increasingly close in recent years, as Chinese activity on the European continent is growing, especially in the economic sphere. The People’s Republic of China (PRC) has already achieved the position of one of the major players on the international arena and is boldly pursuing the policy of foreign expansion. Its basic instrument is the Belt and Road Initiative (BRI), which in recent years has been one of the most important projects of the Chinese authorities, assuming the intensification of economic cooperation and cultural exchange of countries along the New Silk Road. This concept, initiated as One Belt One Road Initiative, by President Xi Jinping in Autumn 2013,

J. Ciesielska-Klikowska (B) University of Lodz, Łód´z, Poland e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_18

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is today a strategic economic and political project involving countries in Central Asia, the Middle East, North Africa and Europe. As the concept of BRI involves the Federal Republic of Germany (FRG) to a great extent, it seems to be a vast opportunity for German industry, education sector or German regions seeking their partners among Chinese provinces and cities. But it also requires politicians to create a clear strategy for dealing with the PRC. The aim of the article is therefore to identify the problems and challenges that exist in relations between Germany and China, with the main emphasis put on the German foreign policy. The starting point is the assumption consistent with Brummer’s and Opperrmann’s (2019) approach that in the liberal theory of international relations and in German conditions, decisions made by politicians are the result of the pressure exerted on them by non-state actors, in particular by economic circles. This paper is structured as follows: after the introduction part, the theoretical framework and the methods used in the research will be presented. Subsequently, the political base of German foreign policy after 1949 and the foundations for German-Chinese cooperation will be briefly presented. The next section will show the economic cooperation of Germany and China in times of the BRI, then the fears and challenges facing the German economy, and proposals for their regulation. The article will end with conclusions summarizing the research carried out.

Theoretical Approach and Methods The contemporary world can be presented through the prism of two, at the same time mutually exclusive and complementary, elements—globalization, characterized by constantly intensifying cooperation as well as competition of the individual states, and regionalization, described as a return to what is local and close to society. In fact, these two elements permeate continuously, indicating that the multipolar world is simultaneously a collection of integrating, cooperating and interpenetrating units whose symbiosis is the content of the modern world. Already Robert Keohane and Joseph Nye (1973, pp. 158–165) argued that not only independent states create international relations and foreign policy, but more and more often non-state actors, such as multinational companies, international organizations or non-governmental organizations as representatives of the citizens, influence it. Keohane and Nye were first who spread this

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concept, subsequently laying the basis of the liberal paradigm of international relations theory. Hereby, the state-centric world in which the countries operate as major actors was restored by the multicentric world, which contains a variety of state and non-state actors. As it was afterwards underlined by Andrew Moravcsik (1997), the relationship between the state and society is of key importance for the state’s activities in the international arena. In every state, there are views, interests and institutions shared by the public or by particular social or professional groups that influence the behaviour of states by shaping state preferences. Those state preferences, on the other hand, can be defined as the fundamental social goals underlying them any strategies undertaken by national governments. In practice, international relations are based on the configurations of these preferences. Klaus Brummer and Kai Oppermann (2019, pp. 51–54) show furthermore that in the liberal analysis of foreign policy the assertive intermediary institutions (such as universities, NGOs or business associations) are used as instruments in the distribution of values and social interests, and transfer them to the political system and then, in accordance with the institutional participation opportunities (such as the number of institutional players represented by the political parties), to the national government. Different priorities of political and economic values as well as assertiveness in government policy are applied (Moravcsik, 1997, pp. 513–553; 2008, pp. 234–254) in order to explain the compatibility of these preferences with those of third countries. Thus, non-state actors (such as trade unions, business organizations, academic circles and think tanks) can—and in practice actually do—influence the shaping of foreign policy of the government towards third countries. From this perspective, one can find various answers to the question of how dependently or independently of social preferences the German federal government shapes its foreign policy. Following the arguments of Thomas Risse-Kappen (1991, pp. 479–512), the democratization of German foreign policy by SPD in the late 1960s changed the way foreign policy was controlled by the head of the government, and since the unification of two German states—at least in the area of security policy—a strong society in Germany has had a significant impact on the decision-making process, including through elections, creation of new party groups, trade unions or professional groups. The growing involvement of the Federal Republic in international organizations, in particular in the European Union, has also strengthened the autonomy of executive power over other entities (legislative and judicial). On the other

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hand, according to Sebastian Harnisch, these actors seek increasingly to hedge the executive through procedural and normative demands in order to assert their own position in the decision-making process and their policy preferences (Harnisch, 2009, pp. 455–468). It can therefore be said that in German political reality, non-state actors, and, more broadly speaking, society, play a huge role in shaping the foreign policy of the federal government. Pressure from the business community or NGOs may change the direction of the government’s actions. In relation to German-Chinese affairs, one can also notice an interesting correlation, called the “triple helix model”. Referring to Henry Etzkowitz and Loet Leydesdorff study on universityindustry-government relations (1995), followed by a model of profitable cooperation between these three actors with each other in form of a book (Etzkowitz, 2008), it is clearly visible that in Germany this formula works well in the Chinese context. Indeed, the German cooperation with the PRC in recent years has gained enormous dynamism, but its driving force was not the federal government (or not to a key degree), or the scientific hubs, but to greatest extent it was the business sphere. Analysing the years of Sino-German cooperation after 2013 and imposing the BRI, one can confidently say that it was the economic sector that was the flywheel of relations with China, determining the perception of the PRC as well as forcing the federal government to introduce appropriate facilities and safeguards for the cooperation (Graph 18.1). The task of this text is therefore to analyse how and to what extent the political decisions are dependent on the position of non-state actors in the Sino-German perspective in the years following the introduction of the BRI. Since the key field of cooperation between Germany and China is the economy, the author will focus mainly on the issues of pressure exerted by industrialists’ environment. At the same time, the author would like to refer to the discourse among politicians to a smaller extent, because it is the subject of many available press articles and scientific analyses (i.e. Godehardt, 2014, 2016; Rudolf, 2015; Stanzel, 2016; Gaspers and Lang, 2016; Ghiasy and Zhou 2017; Pepe, 2017; Makocki, 2017; Schiek, 2017); hence, to not duplicate information, the author will relate to selected political decisions. Referring to the source database, the academic literature examined the issue of non-state actors in international as well as German political system in past decades (Risse-Kappen, 1991; Wolf, 2000; Biersteker and Hall,

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University / society

Politics/ government

Business sector

Graph 18.1

The “triple helix model” of the German cooperation with China

2002; Metzges, 2006; Kaarbo, 2008; Steffek and Nanz, 2008; Von Bernstorff, 2008; Take, 2015) but their impact on Sino-German relations is so far a topic in the scientific narrative virtually unexplored. Only Harnisch (2017) concentrates on examining the importance of social preferences for the attitude of the Federal Republic towards the Chinese Belt and Road Initiative. Therefore, the research had to be based not only on an in-depth literature review, tracking the political discourse and analysing of numerical data obtained from the German Statistical Office, but also on a series of interviews carried out with the German authorities, researchers and officials responsible for cooperation with China as well. Interviews have been conducted over 12 months (May 2018–June 2019) through visits to German offices, associations and companies involved in cooperation with the

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PRC. Their effect is the statement that non-state actors, and in particular economic circles, play a significant role in shaping Germany’s foreign policy towards China in the era of BRI.

Basic Directions of German Foreign Policy After 1949 Since its establishment in 1949, the FRG considered only as a proper direction for its foreign policy a lasting alliance with the Western world, assuming that the future reunification with the German Democratic Republic—the most important goal in foreign policy of the Bonn administration—can be realized when the FRG gains the confidence of the Western allies. Therefore, the vital goals of its foreign policy were related to the Europeanization and construction of a common Europe (Bahr, 1998, pp. 24–25). The end of the Cold War and the disintegration of the post-war international order in the early 1990s gave Germany new opportunities in internal and foreign policy. The dynamics of political events that ended with the collapse of the Soviet Union in 1991 turned out to be very beneficial for them. The course of events led in 1990 to the unification of the two German states and brought them full sovereignty, which—contrary to fears of the global powers (Bozo and Paolini, 1990, pp. 119–138; Weidenfeld, 1998)—did not negatively affect the European orientation of this new Germany (Stürmer, 1991). The progressive construction of a peaceful Europe and ever closer integration within the new European Union strengthened the role of Germany as the driving force of these processes, and for the work of uniting the continent, there was no alternative in German foreign policy. Indeed, for the last 30 years, Germany—once an economic giant, but also a political dwarf, guarded by several decades by four powers—has changed beyond recognition. From the object of European integration, Germany became its main subject in the late 1990s, not only in the economy but also in European politics, using European rhetoric masterfully to push through its own solutions and demands—now Germany is the most politically and economically powerful member state of the European Union, whose importance and international rank are irrefutable. However, after breaking into “independence” and regaining “normality”, the Germans found themselves at crossroads, because for the first time in post-war history they began to go beyond the European framework and

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demanded to be treated as a “normal state”, which has its own national interests, located both in Europe and outside the continent. These new expectations of the Germans were perfectly sensed by socio-democratic Chancellor Gerhard Schröder, who—taking power after Helmut Kohl in 1998—admittedly sustained the work of expanding and deepening the European community, but at the same time represented Germany as a “great power” (Grossmacht ), which should be conscious and certain of its position and responsibility not only for the fate of the European continent, but also much more widely, for the fate of the world. According to Koszel (2015, pp. 265–266), this new perception of the role of Germany has initiated the evolution of German foreign policy and the erosion of the previously very clear identification of Germany’s interests mainly with the interests of Europe. Angela Merkel from the Christian Democratic Party (CDU), on the other hand, returned to the European course, putting on a strong Europe and a powerful German-French tandem that set the tone for European Union affairs (Ciesielska-Klikowska, 2017). Nonetheless, events related to the economic crisis since 2008 and the financial crisis since 2010 caused that Germany began to seek new political and economic players in countries outside the traditional circle. In face of the EU’s instability, the limited involvement of the United States in European affairs, numerous conflicts in its immediate vicinity and global challenges, Germany started to show definitely more initiative in foreign policy. Declarations of Germany’s greater international involvement were embodied by highest representatives, President Joachim Gauck (2014) and Foreign Minister Frank-Walter Steinmeier (Auswärtiges Amt, 2017a). An evidence of the intention to develop the global dimension of German foreign policy and targeting it to emerging countries was the creation of a new category of partners, the “forming powers” (Gestaltungsmächte). In the governmental foreign policy concept “To shape globalization - to expand partnerships - to share responsibility” (Globalisierung gestalten Partnerschaften ausbauen - Verantwortung teilen) from 2012 this category included countries with which Germany does not cooperate within the EU, G-8 and NATO, and which show significant economic potential or high rates of economic growth, a strong will to act in a variety of fields and which can be attributed central to shaping regional processes, international governance and/or global order (Auswärtiges Amt, 2012). The main reasons for separating the new category of partners with which Germany wanted to share responsibility for global challenges were both the pursuit of Germany to maintain the global liberal order and the desire to

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promote democracy, as well as the aspiration to shape political and economic cooperation in the context of globalization. Therefore, Germany was consistently in favour of a UN reform to better reflect the shifted distribution of forces in the world. This aspiration could also be considered as the reason for interest in developing cooperation with emerging countries (SWP and GMF, 2013). Germany saw in advance the processes of multipolarization of the world and shifts in the global balance of power, which are to a large extent the result of the growing economic, political and military importance of the countries defined in the 2016 White Book (Weißbuch) as “key countries” (Schlüsselstaaten)—primarily from Africa, Latin America, but first of all Asia. Of all the regions that were depicted in the 2012 strategy, the Asian continent was seen as crucial, and in the category of the emerging powers, the PRC was perceived as an essential partner.

Framework of German-Chinese Cooperation This China direction seemed to be a natural extension of cooperation with Russia begun by G. Schröder, while at the same time being a pivot for a slower relationship with the United States. Reasons for the interest of successive German governments under Chancellor Angela Merkel in building relations with China were primarily defined by economic development, investment and business cooperation. Indeed, Germany has seen China as its crucial economic partner in Asia, mainly due to the economic potential and impressive dynamics of growth in recent years (World Bank, 2019) (Fig. 18.1). Currently, German-Chinese relations are one of the most complex and intense bilateral relations that Germany has with any country. Their roots date back to the 1970s, when diplomatic relations were formally established in 1972 (FRG-PRC), although intensive bilateral contacts have already taken place in the nineteenth century (Kitchen, 2011; Behrendt, 2017, pp. 38–54). From the early 1990s, one can speak about the development of special German-Chinese relations. They were characterized by high pragmatism, which caused that the problems of human rights, Taiwan or Tibet—often complicating the relations of the PRC with other Western countries—did not play a significant role. This was due to Berlin’s prevailing attachment to the economic nature of these relations and the

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Fig. 18.1 Germany’s and China’s GDP annual growth rate (2010–2018) (Source TRADINGECONOMICS.COM)

mutual recognition of the role played by partners in the world. In Germany, for many years, there was an awareness that for effective policy it is necessary to understand and take into account the local conditions and enormous diversity of the country, which—as emphasized in the official document of the German Ministry of Foreign Affairs—“offers many opportunities and places important tasks” (Auswärtiges Amt, 2002). Thus, the German Chinapolitik has been developing over the years as a strategy of silent diplomacy (not touching topics sensitive to Beijing), focused solely on building intensive economic cooperation, also in the multilateral dimension (including within the G20, G8+5) (Bundesregierung, 2007). Looking at specific data on cooperation allows to state that China is the most important political, economic and cultural partner of Germany in Asia—and vice versa, Germany has become China’s most important partner in Europe. Politically, a close relationship is reflected in the intergovernmental consultations organized yearly since 2011—their task is to develop interstate dialogue on issues identical for both governments in the dimension of domestic and international policy, which are an element of the signed in 2004 “Strategic partnership in global responsibility”. The dimension of this close political cooperation was raised to the status of “Comprehensive Strategic Partnership” during the state visit of Chinese leader Xi Jinping in Germany in March 2014. In total, at the

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intergovernmental level, there are now more than 80 mechanisms for dialogue between individual ministers, secretaries of state, heads of departments and heads of government agencies. The key formats of political and economical cooperation include the strategic dialogue between foreign ministers in security policy as well as the high-level fiscal dialogue of the finance ministers and presidents of the Federal Reserve. In addition, there are more than 1000 partnerships between universities and an intensive exchange between NGOs from both countries (Interview with German Government Official, 2019).

Economy as the Driving Force for Cooperation in Times of BRI The priority of mutual cooperation is put undoubtedly on the economic cooperation—indeed, already in 1978, the Federal Republic was in the 4th place among the world’s and in the 1st place among the European trade partners of China, while for Germany, partner No. 1 in the post-war period were the United States and France, China on the contrary remained a second-class partner at the time, mainly for political reasons. This situation began to change from the mid-1990s, when during Helmut Kohl’s Chancellery, the “Asian Strategy Document” was endorsed, promoting economic cooperation with Asian countries and staving off the deficit of German investment and representation in the region (Szczurowicz, 2013, p. 91). However, the most important breakthrough for their bilateral collaboration was the implementation of the BRI, a project proposed by Xi Jinping in September 2013. This Grand Design is nowadays considered as the largest infrastructural and investment idea in history, since it covers about 70 countries inhabited by 65% of the world’s population (4.4 billion people) and responsible for 40% of world GDP (Campbell, 2017). Starting from 2013, the BRI aroused great attention among Asian and European countries, and soon gained widespread political and economic interest also in Germany—by means of intensive cooperation, which developed after 2013 at the level of two states as well as their individual regions and cities, and in the area of individual sectors of the economy, Germany and China became the closest partners in the economic sense. The data shows that bilateral economic transactions accelerated as snowball—in 2016 amounted to almost EUR 170 billion, in 2017 to EUR 186.6 billion and in 2018 to EUR 199.3 billion (Destatis,

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2018), transforming Germany and China to the most important trading partners—their two-sided trade exchange since 2005 is presented in the Fig. 18.2. Figure 18.2 shows a strong increase in the value of trade (imports and exports) for Germany to China, yet with a stronger increase in China. The figures mirror a great opening of the Chinese economy in times of the BRI and show the substantial increase in Sino-German trade relations which resulted in these countries becoming each other’s leading economic partners. Furthermore, according to the German think tank Mercator Institute for China Studies (Merics), as many as 31% of PRC investments in the EU in 2016 were investments in Germany. EY consulting company proved moreover that Chinese investors spent EUR 12.2 billion in 2017 for the purchase of German companies, which was an increase of 9% compared to 2016 and the largest ever expenditure in this area. In 2018, investment fell (EUR 10.7 billion, down 22%); nevertheless, Germany (and the UK) was still the most popular target country for Chinese investments in Europe (EY, 2019). 120 100 77.27

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Reservations of German Political and Business Circles Analysing data from individual sectors of the economy, it should be stated that investors from the PRC, in the period after 2013, were especially interested in German enterprises operating in the electromechanical and chemical industry, which afterwards caused critical opinions in the industry. Though, in the years 2013–2015, the attitude towards this Chinese project was positive in FRG—in particular after the visit of Xi Jinping in Duisburg in March 2014, when the significance of infrastructure initiatives, especially rail connections between Leipzig and Shenyang, Duisburg and Chongqing, were emphasized (Cnotka, 2014). Besides, during a Europe-China summit on economy and politics in October 2014 in Hamburg, the BRI was seen as a huge, prospective project that Germany should become an important part of. In fact, however, the subject of German-Chinese cooperation remained a field of attention only for specialists and interested the public opinion only to a small extent. Initially, it seemed that bilateral relations have strong foundations, among others in European Union regulations, and therefore will be developed safely in the following years. Yet, scarcely taking over the leader in the field of robotics, Kuka, in 2016, buying shares of the Krauss-Maffei machine industry company as well as shares of the EEW Energy, a renewable energy concern1 (Der Spiegel, 2016) in the same year, was a breakthrough—causing a broad discussion in the German political, economic and social circles on the need to develop a new Chinapolitik, a policy that would not limit economic cooperation, but would put it into a specific framework, consistent with free-market trade rules, based on free competition but also with respect to law and private property, in force in Germany and in the European Community. This goal was to be served, inter alia, by the following decisions taken in the subsequent months by the political circles of Germany, whose background lay in the creation of the conditions for cooperation between Germany and China under the BRI’s umbrella: • Implementation of the German initiative of the EU-China Connectivity Platform within the European Union, a mechanism to avoid 1 It was, until now, the most expensive acquisition of a German company by a Chinese investor—for EUR 1.4 billion.

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conflicts and develop a common position on bilateral issues using the synergy effect with the PRC; • Active participation of the FRG in the construction of the Asian Infrastructure Investment Bank (AIIB)—a competitive institution for the World Bank and the International Monetary Fund, headed by China. Germany supported the creation of the bank with USD 4.5 billion and it was one of the largest shares among all member states (and the largest among countries outside the Asian region) (AIIB, 2015, pp. 30–31). These actions were to lead to the normalization of economic relations with China, help to bring them into a specific framework and allow the German side to apply political control over them (to some extent). Yet, the wide-discussed takeovers of companies by Chinese investors (Reuters, 2016; Deutsche Welle, 2017) showed that Germany has difficulty in assertively defending its interests in bilateral relations with China. The Federal Ministry of Economy and Energy admitted expressis verbis that China is on its way to becoming the “largest economy in the world and one of the largest geopolitical players in the 21st century”, and thanks to activities under the aegis of the BRI, it wants to become an economic superpower (Dams and Grabitz, 2018), indicating that this expansion of China may pose a threat to the high position of the European Union and some of its member states (primarily Germany). Thus, Germany was more often looking at the New Silk Road concept with great interest, but also with caution—since Chinese influence in Europe was growing, the economic and political circles closed the ranks to convince that the European Union should oppose the Chinese geopolitical strategy by creating its own cooperation project with the PRC. The effect of this discussion was the European Commission’s document entitled “EU-China - A strategic outlook” presented in mid-March 2019, in which China was named as “system rival” for the first time and the Commission proposed actions that must be taken up in relations between the Community and the PRC in order to systematize mutual cooperation, guarantee investment freedom and jointly solve global challenges (including climate change, development of the newest 5G technologies, Iran issue) (European Commission, 2019, p. 11). In fact, the year 2016 and, above all, the acquisition of Kuka, was a turning point in China’s economic activity in Germany. From this

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moment onwards, the German economical and political circles were looking very critically at the development of Chinese investments in European countries, i.e. in the field of robotics, electromobility or information technology, since they were anxious about China gaining easy access to strategic knowledge.2 Quidem, more buyers from the PRC were interested in technologically sensitive industries, an example of which apart from Kuka was Deutsche Bank (10% of shares bought by the HNA Group) or Daimler (9.7% shares purchased by Geely) (Stanzel, 2016; Gobble, 2019). According to data from the Institute of German Economy in Cologne, in the period 2005–2018, Chinese enterprises acquired over half of the shares in more than 200 German companies (Rusche, 2019). This trend caused growing concern among public opinion, industrialists and politicians. The media more and more often emphasized that Chinese enterprises buy German companies “in high quantities” and described the main strategy of the Chinese as “to disembowel and take advantage” (ausweiden und ausschlachten) (Nass, 2018). This approach was confirmed in an interview with Dr. Oliver Franke, who indicated that in fact: Germans are often too naive in dealing with Chinese companies, looking at them through the prism of the liberal market and clear game rules. (Interview with Dr. Franke, 2019)

Analysis of political discourse also indicates that German politicians are becoming more and more aware of this danger—after 2016 the federal government was looking critically at Chinese investments on the German market, which led to the failure of talks on the acquisition of Aixtron (a device for the semiconductor industry manufacturer) and Ledvance (a daughter company of Osram lighting group). The politicians began to voice critical opinions about the danger of buying Chinese companies from the key sectors of the German economy and thus enabling them to 2 According to joint research carried out by Merics and Rhodium Group, in 2018 Chinese companies have realized foreign direct investments (FDI) in European Union countries worth EUR 17.3 billion, which was a 40% decrease compared to the level in 2017 and over 50% in relation to the peak of these investments, which was achieved in 2016—EUR 37 billion. The lion’s share of these investments was received by the so-called big three—Great Britain (EUR 4.2 billion), Germany (EUR 2.1 billion) and France (EUR 1.6 billion), but their share in total Chinese FDI fell from 71% in 2017 to 45% in 2018 (Hanemann et al., 2019).

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reach strategic know-how (Reuters, 2016). Moreover, this rapid growth of Chinese FDI was assessed in Berlin as the reason for opening up the discussions on the accessibility of the Chinese market (i.e. solar, chemical, steel industries) for German and European companies. Effect was a hard dispute during the Belt and Road Forum held in May 2017 in Beijing (Pendrakowska and Bachulska, 2017). From the point of view of the federal government, over the past three years, it has become increasingly clear that PRC is using its progressive investment activities not only for an economic struggle, but also to exercise political pressure and influence decisions on the EU member states. During a conversation with a civil servant, it was admitted that: the Chinese side has an interest in German policy, because they consider it a gateway to impacting the European one. I believe they overestimate us in this regard. Nevertheless, if this is what they’re interested in, it’s vital for them to keep close economical and political dialogue. (Interview with German Government Official, 2019)

As a result, the perception of growing Chinese power was becoming more and more sceptical in Berlin—it was so throughout the 2017, when the Vice-Chancellor and Foreign Minister Sigmar Gabriel emphasized the need to create a common EU foreign policy towards China in his speech in Paris in August 2017, when said that EU must conduct a common foreign policy towards China (Gabriel, 2017). He underlined this conclusion also in the exposé entitled “Europe in an uncomfortable world” (Europa in einer unbequemeren Welt ), presented in December 2017, when he said that the BRI is a geostrategic idea that makes China enforce its vision of international order (Auswärtiges Amt, 2017b); he pointed out as well that “there is no need to sacrifice German companies on the altar of the free market”. At the same time, Chancellor Angela Merkel became more and more distrustful, what was exemplified by her strong support for the amendment of the Federal Trade Regulation in July 2017, which hindered the acquisition of German companies operating in the know-how sector by foreign enterprises (BMWi, 2017). The regulations were additionally strengthened in December 2018, when the federal government introduced the obligation to conduct an investment audit in enterprises, where the foreign investor’s share will amount to at least 15% (instead of 25% as before)—if the company is active in the defence sector or in the field of significant technologies for civil security. The Minister of

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Economy, Peter Altmaier, pointed out that through that “the interests of national security as well as public policy and security issues will be better protected” (Der Tagesspiegel, 2019; Hanke and Cerulus, 2019; BMWi, 2019). The German side was also closely monitoring the implementation of the “Made in China 2025” strategy, introduced by Prime Minister Li Keqiang in May 2015—it lists 10 industries in which China strives to achieve a leading position by 2025 (i.e. robotics, information technologies, aircraft and electric vehicles), and is to some extent modelled on the German “Industrie 4.0” strategy (Corrocher et al., 2018). However, in China, it is the state, not the industry, which is the driving force of innovation and investment. As Heilmann and Wolff indicate (2019), China’s industrial policy aims to acquire important industrial technologies and in the medium term wants to lead to the replacement of the current technological leader in the automotive industry, machines and the chemical industry, namely Germany. As they argue, the FRG should therefore create a “foreign policy fortification” that should protect Germany from “adopting strategic technologies through market manipulative practices” (ibidem).

Challenges and Expectations of German Industrialists Nonetheless, the fears accrued over the years 2013–2018 do not reduce bilateral cooperation—German companies are determined to cooperate with Chinese enterprises, but in fact they are also the driving force for the creation of a specific framework, in line with European and German law, which would prevent the German champions from taking over by Chinese ventures. Through participation in numerous conferences, seminars and meetings with representatives of the federal government, state officials but also representatives of independent think tanks, party foundations and NGOs, in particular German industry-focused, German entrepreneurs indicate which fields of cooperation with China are in practice profitable and which are in danger of being taken over (also partly), and what the federal government can do to make cooperation “work on the right track” and bring benefits to both sides. In spite of all struggles in the two-way cooperation, the German industrial circles exert pressure to keep Germany in promoting the bilateral

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cooperation. There are even voices warning against too rapid use of stateowned investment control instruments, prepared ad hoc, due to the current situation in international relations and short-term planning. The key opinion in this matter is invariably presented by the Federal Association of German Industry (Bundesverband der Deutschen Industrie, BDI). The BDI is the leading organization of German industry and industry-related service providers, established in 1949. It represents 40 industry associations and more than 100,000 companies with around 8 million employees (17.7% of all German employees). The Federation has 15 representations to stand for the interests of the economy at the regional level. Yet, the development of economic cooperation after launching of the BRI in 2013 forced BDI to open its office also in Beijing (in September 2016, the 4th BDI’s office around the world after Brussels, Washington and Tokyo). However, BDI is not only the largest association of German industry—from the perspective of liberal theory, it is also an important political player. In fact, the BDI is a non-state actor, who co-shapes the foreign policy of the state because it lobbies on behalf of industrially active enterprises and participates in all important legislative processes in Germany. The interviewed representative of the BDI clearly underlined that: available statistics on Chinese investments in Germany do not indicate that concerns about the loss of competitiveness and the outflow of technology from Germany to China are justified. (…) But we must be careful not to be sold out. (Interview with the BDI representative, 2019)

Indeed, industrialists associated with BDI warn not to lose sense and carefully look at every activity undertaken by Chinese companies, which are competitors indeed—but not a threat. They also stress that fair trade and investment rules cannot be imposed with force and oppose the practice of a policy modelled on the approach of US President Donald Trump, meaning risking the transformation of the economic dispute into a new trade war in the area of the new technologies. This BDI opinion was officially presented in the document (2019) entitled “Partners and system competitors - how should we deal with a Chinese state-controlled economy?” (Partner und systemischer Wettbewerber - Wie gehen wir mit Chinas staatlich gelenkter Volkswirtschaft um?) published on 10 January 2019. The paper combines the political practice in Germany with the European Union, suggesting that the federal

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government should intensify already taken actions (e.g. the mechanism of investment screening at the EU level) and implement new ones. The most important thesis of BDI’s paper is the existence of systemic competition between the German/European model of a liberal, open and social market economy and the Chinese model of the economy shaped by the state. According to the document, the Chinese market—in addition to fulfilling the role of an important sale, supply and production market—is increasingly fulfilling the role of a research and development centre that could provide European companies with a convenient test field or pilot market for artificial intelligence technology. At the same time, Chinese companies become competitors for German corporations in fields where they have so far mainly imported technologies and know-how from the FRG, and competition on third-country markets is also growing, mainly through the BRI project. The BDI report stresses that foreign investments, also from China, are generally favourable from the point of view of Germany. However, freedom in ownership and contracting are the pillars of a liberal free-market economy that must be preserved. At the same time, it is necessary to introduce new instruments for market and competition protection at the EU level in order to ensure a balance of opportunities in economic relations with the PRC. BDI warns, however, against an easy transition from measures to protect competitiveness to protectionism, as is the case for US administration activities. German civil servant, asked by the author to comment this paper, underlined that: when BDI makes a statement like that, it’s obvious they have a lot at stake in China. If they come out with a strategy, where critical elements are stronger in the past, it affects how the federal government and activists discuss China. This strategy is a big news topic, and it affects how media report on China. (Interview with German Government Official, 2019)

Analysing this declaration as well as BDI’s document, it should be stated that the reaction to China’s policy must be balanced and its aim should be not to isolate or abandon the cooperation, but to make it more structured, in line with the guidelines of the World Trade Organization and European Union regulations. Despite systemic differences, a tight German cooperation with China should be developed for pragmatic reasons and for their own interests—cooperation despite competition is necessary. In Germany, this BDI document was seen as a continuation of the intensification of reactions to economic practices of the PRC (i.e. foreign investment control mechanism) and proved that China is perceived

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as an economic competitor that is challenging Germany. The paper was supported by Association of German Chambers of Industry and Commerce (Deutsche Industrie- und Handelskammertag, DIHK) (Morozowski, 2019, p. 5). Though the BDI recommendations cannot be considered as a federal government position, the association is an important participant in the German public debate, and its lobbying activity often contributes to the shaping of political practice in Germany. It is also the main flywheel for the functioning of the German “triple helix model” with regard to China and undoubtedly imposes a way of perceiving and resolving disputable issues. The effects of BDI’s approach can be seen in both the steps taken by the German administration at the national, and international levels within the framework of the European Union (e.g. the newest paper “EU-China - A strategic outlook”).

Conclusion German-Chinese cooperation has been continuing for several decades, but the BRI certainly gave a perfect frame for it. The chapter implies that Germany—through close cooperation with the PRC—wants to strive to maximize the benefits of the BRI and create a synergy effect, based on the “win-win” principle—a declared position of China as well. Interviews and analysis conducted by the author of the study illustrate that not the politics itself, but the economy and industrial cooperation remain the driving force for German-Chinese collaboration. Each of the interviewees stressed unequivocally that the key field of cooperation is exactly the economy, and politics and academy are “adapting” to its needs: Undoubtedly, all three elements are important - both the social environment, including universities, and the political environment, as well as the business community. But to be honest - the economic sector has the greatest influence on politicians. Without pressure from the economy, there would be no such far-reaching German-Chinese cooperation. (Interview with Dr. Franke, 2019) The political relationship between Germany and China is pretty close. But the economic one – even closer. Comparing those to societal, academic, and cultural relations, that third pillar is noticeably less developed. (Interview with German Government Official, 2019)

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There are so many opportunities for cooperation with China - regional cooperation, cooperation of cities, cooperation in particular sectors such as digitalization, environmental protection, city management, urbanization, education, but all of them have one common element - the economic collaboration. It’s the basis for Sino-German relations. (Interview with Dr. Henkel, 2018)

The actual significance of economic cooperation, and therefore also of the pressure exerted by the economic circles in Germany, is enormous. The data and thorough analysis of the steps taken by the federal government in recent years confirm that the soft power of the industrial sector cannot be overestimated. Of course, the political approach, the interests of Germany and the European Union as a community are extremely important, but the steps taken by politicians are a derivative of the positions of many environments and their expert knowledge—among these environments business plays a leading role. Taking into account the perspective of the liberal theory in foreign policy, it should be noted that Germany’s reaction to the New Silk Road cannot be adequately explained by power politics or the geo-economic approach. On the contrary, German political behaviour shows a dependence on substantive analyses prepared by non-state actors. Referring to the theoretical approach, only through liberal analysis the decisions and steps taken by the German government can be explained. Undoubtedly, the driving force behind these decisions is the economic circles and to a lesser extent, the NGOs, think tanks or academic circles, which exert pressure but also present specific problems, challenges and scenarios for their solution. In the German reality, non-state actors play a great role in shaping relations with China.

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CHAPTER 19

New Silk Road and Prospects for Turkey ˙ Ahmet Salih Ikiz

Introduction Westernization has always been conceptualized as economic growth and development from the Ottoman times to young Turkish Republic, and so Western values and techniques were modified to our country. Although we accomplished this in surface, the orientalist roots remained in the core of social structure of country. Thus, Turkey attempted to organize capitalist Western economic structure in eastern habits. The latest developments in our region and extending Asia-Pacific region stem from the positioning of the global economy-politics’ ambitious countries towards 2050– 2100. China’s One Belt One Road initiative (B&RI) represents a strategic process towards strengthening the economic and political cooperation between regions that will be home to 83% of the world population, and it will provide great B&RI to Turkey as a crossroad. In this study, I aim to give some projections for coming decades under those arguments and draw possible benefits of B&RI.

˙ A. S. Ikiz (B) Mu˘gla Sıtkı Koçman University, Mu˘gla, Turkey e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_19

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Turkey Past Present and Future Do˘gan Avcıo˘glu says in his famous book, “Regime of Turkey”, that Turkey has oriental roots with attempts to cope with occidental cultures (Avcıo˘glu 2016). Very concise explanation of current situation can be explained by following statement. Turkey is kind of a man walking towards west in a train heading towards east. Even though founding fathers set ought a Western form of state, there is an underground dominant eastern lifestyle. Solution to this conundrum may take generations. Turkish Exodus to Anatolia Turkish inhabitance in Eurasia starts from fourth century BCE in the region. There were hundreds of nomads in Central Asia. The federation of those tribes created a hegemony in Central Asia with relatively long ruling. That kept security and stability from China to Byzantium on Silk Road and created Pax Turcica. Therefore, that identity formation with same language, cultural habits and religious ceremonies easily created within those tribes in spatial dimension. The Chinese threat, scarce natural resources for nutrition and internal conflicts forced them to move to west after eleventh century CE. Migration of tribes was also the beginning of the establishment of new civilizations and states in Anatolia. In chronological order, Seljuk Empire, Ottoman Empire and finally Turkish Republic founded in this land. Nomad Turkic Tribes have migrated today’s Anatolia in ninth century CE from Central Asia. They refrain civic habitat for couple of ages and retain nomadic culture with hunter and collector habits. However, it was inevitable that those eastern newcomers interacted with local inhabitants. Local traditions and habits created a vacuum effect and had vessel function for Turkish tribes’ cultural values. The cultural stratification in Anatolia goes BCE 5000 until Hatti civilization in different aspects (Akurgal 2002). Thus, Turks adopted the public rules and modes of Pax Romana during the establishment of permanent settlement. In historical dialect, it is obvious that the successful solid foundation of new civilization depends upon the adaptation of sustainable and novel governance suitable for geographical location. Ottomans had close borders with Roman Empire and implemented many habits from them. Many Byzantine traditions had adapted in governance including fratricide after Fatih Sultan Mehmet’s succession. The imperial borders of Ottoman Empire

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have almost reached former Roman Empire, besides Western Europe. Thus, Ottoman period was named as Pax Ottomana by Turkish academia (Ortaylı 2006). Ottoman state used devshirme method (Christian conscripted to brought up for the janissaries) in order to raise loyal top government officials. That method created a nation (millet) quite similar to today’s mixed salad terminology in USA. During the Seljuk Empire and Ottoman Empire, the Central Asia still had Turkic origin Mongols. When Ottomans transformed into Islamic dominant global state, Mongols were trying to sustain their persistence in Asia. In early sixteenth century, Turks in Central Asia lost their independence under Russian occupation. That dimension nevertheless created Russian dominance and oppression on language and culture. So that until early twentieth century Turks living in Central Asia, Anatolia and other parts of Ottoman Empire did not need any other language for communication to maintain common identity in most of the daily life. For example, Findley found similarities of Turkish rugs and carpets in different parts of Anatolia and Central Asia with resemblance in history (Findley 2011). Loss of momentum of development of Ottomans and Russian policies vanished the communication of Turks in west and east, especially after World War II. After 1917 revolution, Russian central government privileged the self-determination of Turkic states in language and education in order to end the traumatic totalitarian chauvinist policies of old imperial regime. Thus, Muslim Turks in Central Asian Republics were quite convinced and supported USSR regime for a period. Foundation of Turkish Republic Ottoman Empire collapsed after the Balkan wars and World War I. In the following years, nation states were the new players in world order disintegrated from ex-Ottoman territories. From the beginning of nineteenth century, Ottoman Sultans choose Western methodology in education, science and technology in order to cope and cure the decline of empire. The idea was followed by founding fathers of Turkish Republic after 1923 until today. Thus, Westernization in Turkey was always conceptualized by economic development and civilization. Political leaders used narrow definition of nationalism and used term Turk as a means of catalyser for citizenship. New form of Turkish identity was intermingled with Western concepts. The last and 17th Turkish State in Anatolia built after the legendary independence war in 1923. Turkish Republic is a unique

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democratic regime in Muslim world. Thus, colonized Muslim countries suffering from imperialist powers, conceptualized Turkey as a role model of freedom. The main solution to under-development was Western capitalist framework from the very beginning of Republic. Turkey was the first Muslim country, which had implemented liberal economic order at home. It was not an easy task though in a very short period as a NATO border country with USSR. During the Cold War, Turkey had the main task of being a bumper state between the two blocks at the cost of internal unrest and terrorism. Being a NATO member, Turkish foreign policy had restrictions during Cold War. There were very few deviations from Western policies. For example, Cyprus issue was one of the main fractures of US-Turkish relations in 1970s. Military operation for Turkish Cypriots in the island had fierce critics from west with economic embargo to Turkey. World War II nearly erased all European power in the global world order. That was the beginning of US empowerment in foreign policy in world order. US policy mainly leans on containment policy due to fear of USSR war capacity. Border and edge countries like Turkey had solid support from USA as a bumper state. Creation of US-led opposition movement in USSR neighbour countries and Turkic Republics was the main aim to destabilize possible Moscow penetration on Western world. In those times, there was no international relation between Turkic states and Turkey owing to fact of Soviet ironfist. During the Cold War, the world had two polar powers, USSR and USA. Those countries were the main determinants of pivot and bumper countries’ foreign policies. The US strategy was to impose and improve moderate Islamic power around USSR. Under the green zone approach, Islamic groups in periphery countries were supported by USA. The main aim was to create artificial enemy to Marxist, atheist communist world. Containment policy is a theoretical reflection of Rimland theory of Spykman. Contrary to Heartland theory, Rimland approach focuses on crescent of Eurasian regions. In order to diminish USSR power in Eurasia, USA must target to improve its penetration on those countries. The North Korean, Vietnam and Afghanistan wars were the main power struggles and conflict zones during the Cold War since they were vital countries under this policy. Dramatic collapse of USSR due to economic inefficiencies ended Cold War period. Following 1980s, Turkish economy shifted from import substitution model to export promotion model and liberalization with an increasing

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integration to global financial system. It is obvious that Turkey has Western preferences and parameters from the very beginning of foundation of Republic. It is under NATO security umbrella and was one of the first applicants to EU. Those organizations were instrumental as a stability anchor in the country for years. Following the disintegration of communist block and recent formations of a new security organization in the new global order brought thresholds of new turnouts to Turkey. Turkey followed state-controlled market economy rules and regulations from the very beginning of Turkish Republic in 1923. Following the multi-party regime in 1950, the state economic policies provided stimulus for private enterprises with more liberal rules. However, until the 1980s, Turkey followed import substitution model in foreign trade with fixed exchange rate regime. There was strict state control on local banking system, command on interest rates with high share of public banks. Turkey transformed from that model by export promotion model after 1983 with floating exchange rate regime. Financial system was deregulated and there were less intervention monetary markets. Turkey is the unique example of well-functioning market economy in Muslim world and 17th biggest economy in world in 2018. In the following chart, concise global share of Turkish economy is shown (Picture 19.1). Turkey in Next Century British and following US dominance in world order will have new global players such as Russia, China, Japan and Turkey. The Caucasus and Central Asia will be main interest of all those countries. The world witnessed that the growing economies like China and India have become part of the global market and integrated into the global economy in the last 20 years with rapid globalization process. With high performance of emerging economies like China and India, developed countries’ share of global GDP declined, while developing countries’ share increased. These trends in the global economy negatively affected the role of USA, Europe used to be a dominant before, and emerging new powers increased room for manoeuver. Kazakhstan and Turkmenistan have strong economic path and attained high growth rates. With other Turkic Republics, Turkey would increase the volume of international trade and economic cooperation in coming years. Southern Caucasus is the main location for energy and transport corridors to Eurasia.

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Picture 19.1 Turkish GDP in globe

China has close historical ties with eastern Turkistan. The hew Silk Road project and Shanghai Security Organization improved economic bridges between those countries and China. According to World Energy Institute resources, Chinese demand of energy resources is higher than USA since 2009. This indicator reveals the Chinese eagerness towards Central Asia. In order to secure its energy demand by close energy suppliers, China will cooperate with Russia, and to maintain financial stability and interior stability, China will be one of the main powers in the region. Even if Russia and China got some imperial balance on region, their international power would decline due to the interior problems. Although China has very fast economic growth rates, the regional disparities in economic growth and education are quite high in different geographical parts

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of the country. Unsustainable economic achievements will create social unrest on low-income masses. Therefore, it may have to concentrate on internal issues with weak interest in Turkic world. Putin’s dominant strategy in region must be supported by economic and financial power. On the other hand, Russia’s incompetitive global industrial production creates relatively weak economic structure depending on export revenues of raw materials, precious metals and energy resources. There are some backward trends in Russia. First, the population is seriously declining which diminishes military power that is essential to defend any threat from Western borders. During the Napoleon’s French attack and German invasion in World War II followed flat lines close to ST Petersburg. Loss of military power and declining economic growth due to the declining energy revenues curb Moscow for any other attempts to Central Asian countries. The internal conflicts of both countries will increase the importance of Turkey, Japan and Poland. Turkey has special spatial memory coming from historical ties in Eurasia, which helps construction of cultural bridges between Muslim and Turkish minorities. Then, the expected political map for 2050 in the region will be as same as the Friedman’s expectations in his book (Friedman 2011). Russia is not happy with US dominance in Eurasia. So in order to lessen US intervention, they would prefer to have closer relations with Turkey based on economic interests. Turkey would enjoy the economic benefits of close relations with Russia and Muslim Turkish Republics even if with the expense of neglecting his Western alliances such as EU and USA (Ahmad 2015). So far, it seems that USA’s loss against Russia will not go far, since after 2020 Russia has a third disintegration process. Our homeland Turkey in those times would have to reinforce its penetration and even move so far to Caucasus and Ukraine in order to create new crescent strategy around Russia. The ethno-linguistic similarities and Ottoman Turkic past would also help promotion of this policy. There are a vast number of agencies and organizations playing an important role in development path of those countries. For example, the success of cultural, economic and social projects of Turkish TIKA organization has positive impacts on Turkish presence after 1993. The spatial history in Central Asia has two main grounds in sociological cluster analyses. The first one is religious identity, dominated by Islam, and the second is ethnic identity dominated by Turkish ancestors. Those two elements in this region conserved in daily traditions and culture. Those two sub-identities had long-lived cultural heritage in Kazakhstan,

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Uzbekistan, Turkmenistan, Tatarstan, Kirgizstan, Mongolia and Caucasus. Since first presence of different ethnic Turkish tribes, nomad culture has grown in steppes and plains of Central Asia. Religious belief of those people was shamanism, which is the adoration to natural objects, mountains, sun and others. Shamanism is quite similar to old Roman pagan belief in a sense. From the very beginning until these days, some daily habits and superstitious beliefs are very similar to old shamanic beliefs in Turkish culture such as water cult, nevroz and worship to sun and moon. There are also same daily routines in those geographic regions, similar cuisine, clothing and language. All these embodied in the genetic code of cultural norms in all Turkish origin people. Following the Islamization of those tribes, the second identity formation process began. The Sufi belief in this region re-emerged and transmitted to Western world by emigration of those tribes to Asia Minor and Balkans in eleventh century. The colonization of Anatolia as old Roman country by those cultures created similar cultural origin from Central Asia. In modern geo-economics the variables of spatial location, identity and economics are the main determinants of strategic analyses. The common spatial history and culture will build Turkish kalpak in Central Asia in 2030 and after. The Japanese-Turkish cooperation against Russia will also hamper Russian dominance on Turkic Republics (Passig 2010). Turkey will be new regional power between East and West with its considerable independent military and political power. The security of energy corridors in Hazar Lake region will be the main priority of Turkish government. In order to maintain this aim, Turkey may use military and other tools in significant ways that will be the beginning of new big game. Turkey has long history with EU but had different outcomes compared with current members. Even if one day Turkey joins EU, it will be either different form of EU or different Turkey. One of the possible future expectations for EU is that there will be different layers of union so that Turkey will be in periphery rather than in core EU. The volume of foreign trade for Turkish economy is high with European partners. The sustainability of European internal security depends upon the Turkish borders control. Meantime, Turkey serves as an energy hub for Europe that it is the main passage for Central Asian energy corridor. Due to high FDI from European Union countries to Turkey, there is expectancy of positive spillover effects of economic growth and employment in home with win-win strategy with EU membership.

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It is expected that competition among the USA, EU, Turkey, Russia, China, Iran and other actors over the routes of oil and natural gas reserves on Eurasia will spillover effects on international markets, and Turkey will become one of the key countries of the East–West as well as the North–South Energy Corridor. Providing sustainable economic growth and financial stability, Turkey would become energy market where almost ¾ of the entire world main energy supply in its neighbour countries. According to International Energy Agency estimations, there are high expectations in future for strong performance of Turkish economy. It is the biggest economy among those countries, and compared to neighbours, it has pivotal role. There are some structural problems in Turkish economy such as current account deficit and high unemployment rate. The maintenance of low cost, sustainable energy supplies and promotion of investing in competitive innovative new industries will likely boost successful economic model for Turkey. According to IMF-derived data set, Turkey has the potential of 5th biggest economy by 2030 (Picture 19.2).

Turkish-Chinese Historical Ties Due to geographical borders, Turkish-Chinese relations had long historical ties to 3000 BCE. When Turks were nomad tribes in Asia, China had civic state organization in cities. They both have common interests in Asia for controlling trade routes. Mete Han (BCE 209-199) defeated Chinese and ruled them until CE 200. During the Huns era, there were interracial marriages between Chinese royal princesses with Hun dynasty. Furthermore, Chinese generals employed Turkish martial arts in order to defend their country. The Turkish horse training was adapted by China in fighting in order to cope with Turkish attacks. Chinese predominance ended in the beginning of eight century by the Gokturks when China had divided into two due to the interior conflicts. China has long tradition of written history. Therefore, we may have relevant information about Turkish tribes from Chinese documents. In Orhon Inscriptions in 725 AD, there was specific detailed information about nomad Turks in Central Asia and Chinese Emperors. In those scripts, it referred that Bilge Tonyukuk, famous grand vizier of Turks, was born in Chinese land. Those monuments are the first written documents about ancient Turks. During the Tang Dynasty (618–917), Göktürk State of Turks had prosperous and stable ties with China with the brilliant welfare of Silk Road. In 744, Uyghurs founded a new Turkic state in Otuken by defeating Gokturks.

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Picture 19.2 Top 10 economies in world by 2030

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China at those times has both internal conflicts and attacks from Tibet that Bogu Kagan helped China and send troops to combat their enemies. Turks started to cultivate fertile lands of former Chinese territories and improved trade with them. Until those times, Islam did not penetrate in China. Islamic belief had followers among Turks after the Arab penetration in Bukhara. In addition, the Arab merchants in thirteenth century were the main influencers of Islamic belief in China. After 1000 AD, Turks began to immigrate westward to Anatolia, and by the end of the eleventh century, they were settling in Turkey. Anatolia was the backbone of trade route for ages from East (China) to West (Europe) and the network used from 130 BCE to 1453 CE, when the Ottomans impeded trade with the west and closed the routes. In turn, European merchants needed to find new trade routes to meet the demand. During the Ottoman Empire, relations between the two regions continued, with the name for “Ottoman” in Chinese (“Rumi”) appearing several times in historical documents and Ottoman tributary delegations travelling to China, especially during the Ming Dynasty (1368–1644) (Fidan 2013). There were documents that in sixteenth century Ottomans were selling weapons to China due to technical skills (Fidan 2010). In both Ottoman and Chinese archives, there were few remarks about relations. The main reason would be Ottoman concentration on Europe rather than Asia. Ottoman Empire was concurring Balkans and there were less attempts to spread around Central Asia. In addition, Uygur Turks and others left in Central Asia rather isolated to rest of the world. During the Abdulhamid reign of Ottomans, there were information-gathering efforts from China for special purposes. In order to awake Muslim identity in globe, Ottoman media had news about Muslims in Chinese territories (Kurt 2017). The imperialist foreign policy of Abdulhamid Khan was based on using Caliphate institution as a leader of Islam. In order to reach his targets, he helped to found Muslim schools in Beijing called “Dar-ul Ulu mil Hamidiyye” (Yamazaki 2018). Due to internal conflicts and independence war, Ottomans in twentieth century and Turkish Republic after 1923 had limited efforts with China in international affairs. Meantime, China had severe crisis in country. In modern times, Republic of Turkey had its first official contact with China in 1920, and following years in 1940s, China wished to open a diplomatic mission in Istanbul. After World War II, Turkey joined NATO and became the ally of Western world. Due to the neglect of PRC diplomatically by Western countries, Turkey officially recognized Taipei for

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Chinese state. Until the famous Kissinger visit in 1970, international policy towards PRC had very limited ties. In 1971, Turkey officially started diplomatic relations with China following Paris meeting between parties. During the Cold War era, two polar world system was dominated by USSR and USA. However, China had also conflicts with Russia so that they prefer to choose US option on table for risk elimination in international arena. Turkey has both limited economic and political relations with China for couple of decades due to its NATO alliance. China was less reactionary in world politics compared to USA, USSR and affairs that are more concentrated to regional. The impact of peaceful non-threatful foreign policy of China is a well-functioning mechanism. After 1980s, Turkey wished to vanish isolationist foreign policies of EU by new partners such as China. In 1981, Foreign Affairs Minister Ilter Turkmen and then a year after Turkish President Kenan Evren visited China. In following years, in 1985, the visit of Prime Minister Turgut Özal enabled Turkish businessmen to grasp the importance of the Chinese market (Akçay 2017). Turkish-Chinese relations lost its momentum after 1991 due to the Uyghur conflict. There were few visits for official arrangements. The refusal of Western companies to sell certain weapon systems to Turkey forced them to have military cooperation with China in order to buy special ballistic missiles in 1997. Turkish-Chinese relations were mainly on economic basis for years due to huge Chinese exports. Turkey’s cooperation with SEO gave way to more strategic relations. China and Turkey had been suspicious to west due to the colonial policies in nineteenth century of the Western world. The Western countries aim to weaken both Ottoman Empire and China in order to reach their grand strategy in Asia (Gallia Lindenstrauss 2017). Then, Turkey aimed to follow independent foreign policy, especially after Cold War period. Even though Turkey is NATO member, Turks considered expanding their military cooperation with China by purchasing anti-missile defence systems in 2013. Even if it was cancelled in 2015, it was a paradigm shift in Turkish defence policies.

One Belt One Road and Turkey The general conception of B&RI is that of an entry in a multipolar world. A new regionalism era has introduced regionalization based on the joint effects of knowledge and trade. The 2008 crisis initiated by US financial system shaken the credibility of liberal development policies. In the meantime, Chinese state-led development efforts strengthened economic

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ties in the Asia-Pacific region (Callens 2017). On the contrary, instabilities and compartments mark Central Asia; the Chinese B&RI must meet these challenges and opportunities for Asian regionalism. Chinese dominance in global trade after 1990s has initiated its efforts as global player in world order. Rather than using hard power (China has the biggest army in world), the preference is given to soft power with trade and diplomacy. Thus, B&RI would serve as a fundamental tool for that aim. The aim to revive the ancient Silk Road thus will be the symbol of power. That project involves about 65 countries, about 4.5 billion people and about 40% of global GDP. Construction of new roads, railways, ports, pipelines and other infrastructures are expected important spillover effects on countries on the corridor. B&RI discourse is twofold. The first consideration explains as an another form of capitalist undertaking aiming to enrich Chinese stakeholders which serves global financial capitalism. That would not be a real threat to US economic hegemony in world. In fact, it is just a transfer of production plants to Asia for cost minimization purposes. Optimization of plants will boost companies’ profits. The headquarters in Western countries hold key decision makers in whole process from innovation to marketing. Meanwhile, huge current account surplus of China was deposited in US dollars, while Central Bank of China holds highest dollar reserve in the world. Thus, USA and China have a chaotic relation based on pure economic matters. In that case, China does not have any hegemonic attempts to US-dominated global order. Recent developments in Chinese foreign policy and economic structural changes create suspicious elements about the new form of capitalism approach. Chinese economy had another change in trade relations in which the country became capital exporter. Chinese Outward Foreign Direct Investment sharply increased especially after B&RI. The state-led enterprises made tremendous impact on other countries’ economic patterns (Fig. 19.1). The new form of capital outflow from China invests not only in form of profit-driven private enterprises but also state-led huge infrastructure investments such as ports, railways, roads and bridges. That differs from Western companies that former operates for lucrative markets in developing and underdeveloped countries, whereas China rather supports development efforts of those countries by huge infrastructure investments (Table 19.1).

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Fig. 19.1 OFDI of China (Source Zhang 2017) Table 19.1 China’s outward FDI to B&RI countries (USD mn) No.

Country name

2010

2011

2012

2013

2014

2015

1 2 3 4 5 6 7 8 9 10

Singapore Russia Indonesia Laos Malaysia Vietnam United Arab Emirates South Korea Turkey India

1119 568 201 314 164 305 349 −722 8 48

3269 716 592 459 95 189 315 342 14 180

1519 785 1361 809 199 349 105 942 109 277

2033 1022 1563 781 616 481 295 269 179 149

2814 634 1272 1027 521 333 705 549 105 314

10,452 2961 1451 517 489 560 1269 1325 628 705

Source CEIC

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All those developments in last decade truly set Chinese policies in different form of thought that it is rather a rise of new hegemonic power from B&RI. The second B&RI discourse is based on the construction of new hegemonic power by Sino-centric Asian dominance. The possible outcome would be a diminishment of US power in globe. Current B&RI may serve a soft power tool for aim. Beijing opts for using soft power rather than hard power to reach its foreign policy goals. Even the inventor of the term soft power, Nye, argues that China has been struggling to strengthen its capability to influence other countries without force or coercion (Aydın 2018). Thus, B&RI would be rise of Asian-centric world with new form of state-led capitalism. B&RI and Europe From the ancient times until the Ottoman era, Central Asia and today’s Turkey was a main trade route for goods from inner Asia to Europe, which was called the Silk Road due to silk being the main trade. Pax Romana period and following ages were the heydays of camel caravans from China to other countries on that road. The trade routes reached until the centre of Western European cities with the glamour of Eastern flavours. The Silk Road courses extended from China through India, Asia Minor, up all through Mesopotamia, to Egypt, the African landmass, Greece, Rome and Britain. The best aspect of the Silk Road was the trading of culture. Craftsmanship, religion, theory, innovation, dialect, science, design and every other component of human progress were traded through the Silk Road alongside the business merchandize the vendors conveyed from nation to nation. Therefore, it was rather one-way trade route and not too much product sold from Europe to China as today. China has limited efforts to revitalize this ancient trade route for decades due to its unstable affairs both interior and abroad; also country had very limited goods to offer for international markets due to collectivist economic model. British academic John MacKinder wrote his book Historical Pivot of the History and introduced Heartland theory. According to the theory, world strategic centre heartland, situated in central Asia and Volga Basin geographical regions. This region is like a natural castle with its topographic and geographic location. His assumption based on the geographic

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location of land is important. So whole world is divided into 3 geographical locations: Heartland (Kalpak) Eastern Europe and Siberia Inner Crescent Turkey, Germany, India and China Crescent United Kingdom, South Africa and Japan. Thus, if any country or political power rules Eastern Europe influence Heartland. The geopolitical centre of Eurasia lies on Heartland. Therefore, the political master of Eurasia is the world leader in geo-economics. But some has to bear in mind that all these theories became much more complex in today’s cyber global society where small minor change in any part of the world would create a butterfly effect in some other country. B&RI is also a critical project for European Union. Strategy wise, it is designed to accelerate the movement of goods between China and Europe, which is an excellent opportunity for a European continent that is still struggling to recover from the crisis. EU has been China’s largest trading partner since 2003. Increasing Chinese-EU ties is a very useful leverage for Chinese-Russian relations. European countries have twin relations with Russia and China, concerning energy supply and trade connections. China manoeuvres to block Russian attempts in cutting them off: after the rejection of Chinese initiative to create a free-trade zone among China, Russia, Kazakhstan, Kyrgyzstan and Tajikistan, Russia created its own Eurasian Custom Union with Kazakhstan and Belarus (Franza 2017). Chinese grand strategy is to be regional and global leader in economic, political and cultural arenas in both Asia and globally. China has recently achieved win-win cooperation and shared benefits with all other countries to promote One Belt One Road. In this way, Chinese dream and European dream can complete each other. China has a strong drive behind B&RI in economic basis. The idea of increasing penetration in foreign markets from Beijing to Berlin is possible by new cost-efficient trade route via railways. Also China depend upon large energy resources from Middle East and Central Asia. New B&RI reduces the dependence of Malacca Strait for crude oil transport (Keyvan 2017). Belt Road Initiative of China is considered as second Marshall Plan for Europe by many scholars that reformatting European continent by

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new trade corridors (Yavuz 2017). Nevertheless, it has different political agenda and less ideological compartments compared to US Marshall aid to war-torn European countries in post-world war period. The US Marshall Plan was aiming to prevent Europe from Russian influence by increasing US dominance by NATO umbrella, whereas B&RI has less military background underneath. Similarly, the endpoint of B&RI is located in Europe. It shows that China wishes to intensify relations with traditional US allies in Western Europe, which in turn undermines US influence in the region (Shen 2016). Central Asia, Turkey and B&RI The geological borders of Eurasia is Central Turkic Republics. In broader sense, Eurasia reaches China, Afghanistan Pakistan and Russia. Those different geographical definitions also reflect the Turkish and other countries’ approaches to region. Turkey for a long period of time rather engaged in narrow definition, while Russian Federation and USA concentrated on broader sense. Especially after 9/11, Russian Eurasian policy considered Turkey as rival country. The theoretical background of Eurasian policy had changed as it turned to opposition to Westernization in cultural and economic life. Following Putin’s presidency, the foreign policy of Russian Federation radically changed and shaped by Dugin’s Neo Eurasian philosophy. In former USSR borders, establishment of Commonwealth of Independent States improved the relations with former USSR countries. China, Russian Federation, Kazakhstan, Kirghizstan, Tajikistan and Uzbekistan founded Shanghai Security Organization for that aim. This has similar functions of NATO for those countries. This new paradigm possibly aims to solve the integration problems of multiethnic Russian society by eliminating Atlantic democratic codes and transform authoritarian governance with state-controlled economic system. In today’s global society, the historical legacies of ancient civilizations become quite significant in collective identity formation. Preserved identities in former USSR countries are very essential leverage for the foundation and integration of Turkic Union in that part of the world. Hard power always must be accompanied by soft power in international relations. The historical heritage of Turkish culture in those countries will serve an eminent tool for that. The general discourse was the reflexive division of Islamic conservatives and contemporary nationalists. The left-wing nationalists cooperated with Bolsheviks and the domain governing mind until mid-1930s. The tone and intervention of USSR

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policies towards Turks changed after Stalin era. The education system centralized by Russian alphabet, international relations of republics with foreign world restricted and central planning changed economic distribution channels radically. This was the beginning of the isolation of Central Asia from other countries but mainly Turkey. Therefore, after the disintegration of USSR in 1991, the economic, cultural and educational corporations with bilateral policies increased between Turkey and Turkic world. Somehow, the oversimplification of differences between Anatolian Turks and Asiatic Turks sometimes created artificial relations among partners. Turkish behaviour towards the region sometimes like older brother of those states in turn created negative impacts on Turkish presence. For decades, Turkic Republics experienced the same treatment and policy by USSR and got hostile experiences. As a reaction to the same parental treatment by Turkey, they do have limited support to the integration efforts of Turkey. Thus, the both parties have lost their momentum in further cooperation in different aspects of relations. For example, today the foreign trade between those countries and Turkey is less than 3% in all Turkish foreign trades. Most of the Turkic Republics still do bind to Russian interference since most energy infrastructure belongs to Moscow. The poor human capital and lack of education need Russian technological workforce and engineers. The strategic shift mainly affected by Russian dominant policy in region and energy security and corridors policy became the main concern in formation of Turkish international policy to Central Asian countries. Russian policy towards Central Asia was reshaped in 2000, and this geographical region became area of interest and power infusion for Russia. The increasing economic penetration of Russia melted the power infusion of USA to Turkic world. Turkey also lost its momentum with Turkic world due to declining volume of trade. In addition, Russia became main player in defining the energy transport routes of those energy-rich countries. The economic power of Russia backed some military interventions to Georgia and Ukraine by stretching its muscles. The spatial ties in history survived but overshadowed by Dugin’s strategy in Turkic world. The Blue Stream was a total bypass of supplier countries, and Russia got an advantage in the international chessboard by starting to construct Turkish Stream. One of the main objectives in B&RI was the involvement of Turkey, reinforcing the sense of regional ownership, by connecting Europe to Asia, notably the Caucasus, Central Asia, East Asia and South Asia, to create connectivity between the East–West Corridor and the North–South

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Corridor. The huge market expansion created large economic scales by providing a concrete contribution to the development of regional cooperation in Eurasia. The PRC-Central Asia-West Asia Economic Corridor includes five Central Asian countries—Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan—as well as Iran and Turkey in West Asia. The corridor plan coalesces with national development strategies such as Kazakhstan’s “Road to Brightness”, Tajikistan’s “Energy, Transport and Food” and Turkmenistan’s “Strong and Happy Era” (James Villafuerte* 2016). The Arabic proverb “If speech is silver, silence is gold” suggests that there is an immeasurable value in what remains unsaid. These words perfectly describe the situation, which is currently taking place in Central Asia for Chinese policies. For years, China had different perceptions in globe whether it is Crouching Tiger or Hidden Dragon (Siddiqui 2015), but B&RI definitely provides an indicator that China will change strategic plans of other countries in developed world. B&RI will mostly serve to get Chinese products to European markets; meantime, exports in China’s GDP have been decreasing. The Eurasian market would be saturated by Chinese goods with new exporting opportunities. B&RI USA and Turkey Belt and Road Initiative has stark contrast to the US “America First” policy under President Trump’s administration. Trump has denounced in a very vulgar way that several free-trade agreements as unfair to American workers, and has pledged to withdraw the USA from the Trans-Pacific Partnership (TPP) agreement. The most likely replacement for TPP as the Asia-Pacific trade agreement is the Beijing-backed Regional Comprehensive Economic Partnership (RCEP) agreement (Astrid Nordin 2018). But the focal point is that President Trump’s power is limited compared to long-term achievement of B&RI. If conceptualized, the new capitalism discourse of Belt Initiative would serve the dominant hegemonic power of US global power. Therefore, that new form of capitalism would enrich Chinese and American shareholders welfare. Whereas production plants are in Chinese mainland with costefficient techniques, headquarters will remain in Atlantic side in order to take final decisions. This is what happens today that US companies tend to produce in China for competitive production. On the other hand, Chinese soft power is becoming tenser in globe. They have their own global

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brands exporting all over the globe. Production stage shifted from innovation to invention so that China is now creating new technologies rather than implementing from west. Chinese diplomacy has become much more active in international arena. Soft power is accompanied by the Chinese army. Finally, B&RI created vital trade link with many countries. That all seems to be threat to US hegemonic power in globe where new form of security organization, Shanghai Organization, became evident by Russia and China. Currently, the two main trade axes are the transatlantic and transpacific ones having the USA at its centre. Turkey is merely a marginal element within the transatlantic part of this network. The TTIP project, which aimed to create a free-trade zone between the USA and the European Union, also put Turkey in a disadvantage. In fact, the country, as a part of the European Customs Union, would have to open its market to American goods while not being able to access the American consumer market under the same terms. Besides Turkey, some European countries are highly involved in B&RI. Latest issue is G7 country Italy has declared its B&RI involvement which is harshly criticized by USA. Thus, in coming years, the US approach to Turkish policy challenges in B&RI will reveal possible outcomes. Turkish Role in B&RI Turkey is on the “Middle Corridor” of B&RI project. Thus, China will have a more convenient and efficient connection with Europe through Central Asia, and it will contribute significantly to the transportation of goods, energy and prosperity of country (Kısacık 2017). As a G20 country, Turkey became very lucrative market for Chinese investors. Its geostrategic location is considered as a main gateway to the Middle East, Central Asia and North Africa, so it has a central position for B&RI in terms of land, sea and air transportation. The B&RI infrastructure projects in Turkey are development of railway infrastructure, the use of ports and the creation of highway connections. Regarding “The 21st Century Maritime Silk Road” project, even if the major partner of China in Mediterranean region is Greece, Chinese companies have also been investing in Turkish ports since 2015 (Akçay 2017). Chinese company bought a 65% stake at the Kumport terminal in Istanbul. It seems that it is not for a Maritime Silk Road hub but rather a gateway to the Turkish market.

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The revival of the Silk Road will also make important contributions to the Republic of Turkey’s economy. New logistic projects enable country to meet energy demands and the transportation between China, Central Asia, Turkey and Europe. It will lower the costs for raw materials from Central Asia and create markets for exports produced by itself to the region. In addition, a safe and a risk-free transportation route would be highly attractive to an audience that aims to trade and invest (Balcı and Kaya 2018). There are expectations in foreign direct investment flows in region due to increasing relations (I¸sık 2017). It is evident that every state on the Silk Road has a determining strategic position. However, the location of Turkey is exceptional. Turkey, in a sense, constitutes the heartland of the Silk Road Project and has recently embarked on intensive infrastructure projects such as Marmaray, Yavuz Sultan Selim Bridge, Eurasia Tunnel, 1915 Dardanelles Bridge, 3rd International Airport in Istanbul and so on (Erol 2018). The fundamental part of the B&RI Middle Corridor connecting Azerbaijan to Turkey via Georgian railway network called Baku–Tbilisi–Kars railway (BTK) is an important network of old Silk Road as shown in Map 19.1. BTK has the capacity to carry one million passengers and 6.5 million tons of freight per year in its initial stage of operation (Çolako˘glu 2019). That would flourish with the integration of China and the Middle Eastern and European markets through Central Asia. The backbone of Middle Corridor is based on Kars–Edirne railway modernization of Turkey. That includes close corporation between State Railways of the Republic of Turkey (TCDD) and the Ministry of Transport of the Peoples Republic of China (MoT, China). While Turkish party insisted on full financial support from China without offering any tender, Chinese side wishes to Chinese companies’ involvement in whole construction process. In the meantime, Turkey agreed to modernize TCDD signalling technology with a $40 billion deal with German company Siemens which is a kind of odd as Beijing would have liked Chinese companies get it. Following the modernization of Kars–Edirne railroad with newly constructed Yavuz Selim Bridge on the Bosporus, Beijing-London iron road will be fully functional. There are two more potential railway corridors for Europe in B&RI. Northern Corridor passes through Russia via Trans-Siberia railroad. However, Georgian-Russian conflict and harsh weather conditions may exclude this route from table. The other potential route is Southern Corridor that passes via Trans-China Railway (TCR) to Kazakhstan. Under this

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Map 19.1 Baku–Tbilisi–Kars railway (Source Giorgi Balakhadze, https:// commons.wikimedia.org/w/index.php?curid=52167737)

scenario, the route would involve through Kyrgyzstan, Uzbekistan, Turkmenistan and Iran before reaching Turkey. However, US sanctions for Iran may also affect feasibility of that route. Ankara is not willing to completely rely on Moscow or Tehran on this strategic transport project, which is the main key of a gateway to the entire Asian continent. Those countries played a crucial role in facilitating Turkish policies towards Central Asia in the post-Cold War period. Turkey as a corridor between east and west has very politically unstable neighbours in eastern borders. In the B&RI’s initial stages, Turkey could provide a safe haven for capital and goods in the relatively unstable region. The fact that Turkey has a stronger currency than Iraq, Syria, Lebanon, Georgia or Azerbaijan and, in contrast to Iran, faces no economic sanctions, means that it can be a locomotive force for development in the region. This is why Turkey should improve its positions in the B&RI and have a more constructive attitude towards the project (Kadılar 2017). Chinese B&RI initiative not only serves as transportation and trade improvement via Turkey but also aims to promote joint use energy and

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Map 19.2 B&RI Corridors eurasia-the-new-silk-road/)

(Source

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other natural resources in different stages, mining plants and construction of pipelines for gas and oil. Since 2015, the financial cooperation between Turkey and China increased due to the fact of Chinese infrastructure loans. There are acquisitions from Chinese banks in Turkey and both Central Banks agreed to use Turkish lira and Chinese yuan instead of dollars and euros. In addition, Chinese state banks with Asian Development Bank provide loan to some energy projects in Turkey (Map 19.2). Bottlenecks for B&RI In the meantime, some recent developments would hamper potential success of initiative in future. Political decisions of governments in Zimbabwe, Pakistan and Sri Lanka deteriorated potential future of B&RI for China. Those countries rejected Chinese infrastructure investment plans in their countries. In addition, there are some hesitations about possible funding of that huge project (Kurt 2018). Chinese policy formation is always seen as monolithic decision-making process. Local governments do not have any power in that process due to

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the centralized top to bottom approach in governance. Even if B&RI is globally recognized project, Chinese regional and interior policy makers may have different perceptions. Beijing’s central agencies are often not fully capable of coordinating political actors within China and producing one unified official Chinese narrative (Zeng 2019). There is significant impact of B&RI on Belt countries’ economic growth. However, for Turkey, there is no statistical relationship on this beneficial investment. Main foreign trade partner of Turkey is EU. In addition, the weak export of Turkey that is well supported by a weak lira and a continued revival of the European economy had those implications (Ruankham 2017). Chinese Multinational Enterprises are investing in Belt countries in increasing proportions. Institutional and cultural distance plays important role in investment plans (Zhang 2017). These countries have different levels of infrastructure harnessing similar transportation plans. Most of the Belt and Road countries in Central Asia are countries in transformation with poor standards in their railroads, and it differs in each country. Government decision-making process is not flexible enough to cope with huge investment projects. Finally, there are some financial risks about B&RI in future. China would face some problems in long term due to huge financial amount of project. In case of the slowdown of Chinese economy, cash flow for B&RI is severely affected. Chinese banks have limited experience assessing credit risk in the B&RI region that would have moral hazard for asset management policies.

The One Belt One Road Project: An Opportunity for Turkey It is obvious that the One Road One Belt project provides many opportunities and challenges for Turkey. Current trend of west-centric trade system leads to unfair and unbalanced regional economic development in the country. The Turkish south-east border countries are very unstable and have negative spillover effects. Additionally, NATO-USSR block would be replaced Shanghai-NATO block in the near future.

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Diversion of Turkish Peripheral Trade Pattern Even though current tendency of Turkish foreign trade is concentrated in European continent, it dropped to 55% in 1999 and to 40% in recent years. While trade volume with the Iraq, China, Iran and the South Caucasus increased, EU still holds 75% of Foreign Direct Investment of country. The B&RI initiative would change the peripheral status of Turkey by diversification of trading partners. Reduction in export delivery process would leverage to higher trade intensities. Turkey would be a step stone for Chinese companies as a customs union country. Europe also wishes to leave Russian Eurasian Land Bridge due to the political reasons for B&RI Turkish route. Russian annexation of Crimea is a factor that could push European countries to opt for the Turkish route for obtaining Chinese products (Bora 2017). Transforming from Western-oriented trade pattern to Pacific Axis would have favourable impacts on Turkey. Besides general welfare effects, B&RI would diminish peripheral impacts of trade pattern. The research findings of GDP effects of B&RI reveals that with optimist expectations Turkey would manage to increase GDP by %0.22 with declining transportation costs (James Villafuerte* 2016). Diminishing Regional Disparities with the B&RI Project in Turkey Due to the unbalanced development among country’s regions, the infrastructures such as railroads, transportation facilities and others have diverse quality in different parts of Turkey, so Western cities are much more connected to the global economy. Thus, Aegean and Marmara regions incurve high GDP per capita with high investment levels. Istanbul got 1/3 of GDP with high urbanization rate, which also has negative external economic impact such as pollution and traffic. More than 25% of Turkey’s population is still working in the agricultural sector, and eastern provinces have low level of GDP per capita compared to Western cities. This is quite similar to coastal and inland cities of China. B&RI would improve the quality of transportation infrastructure with new constructions in eastern part of Turkey. The increasing investment would accelerate economic growth in these impoverished parts. Trans-Anatolian high-speed rail will connect Sivas and Erzurum to global economic network. The cost of production is quite low in eastern provinces of Turkey owing to the fact that they have a young labour force and low wages. Meantime, B&RI would

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also minimize security risks in region. Improving transportation network capacity enlarges exports from those parts to whole globe as well. B&RI Would Stabilize Regional Security Issues Political instability in West Africa to Central Asia and Middle East generates vast number of refugees and migrants from those regions towards Turkey and Europe. On the other hand, religious extremist terrorist groups in those regions are creating both instability and adverse effects on economic prospects and quality of life in Turkey. US-led coalitions’ interventions to Iraq, Syria and Afghanistan seems increased instability in the region thus B&RI would revitalize cultural, intellectual and economic life in Central Asia and the Middle East with positive spillover effects with alleviating security risks. Geoeconomic Paradigm Shift in Turkish Foreign Policy B&RI would radically affect the geopolitical landscape of Eurasia. In order to cope with that, Turkish foreign policy must be redesigned in some parts to adapt to that new world. Under this economic basis, Turkish foreign policy makers would much more prefer to promote relations with some countries such as Iran. The southern route of the New Silk Road reaches Turkey via Iran. Obviously, Turkish-Iranian relations play a significant role to form a bridge between Asia and Europe. US foreign policy aims to isolate Iran from global economic financial inflows. Even if there is no expectancy for a US military intervention to Iran, tension between Saudi Arabia and Iran is threatening the region’s stability. US policy towards Iran can be easily traced by following statement (Nader 2012). If carrots are out, what about sticks? It seems reasonable to think that the United States might consider the use of punitive measures against China if positive inducements, which are mostly politically unpalatable, appear unlikely to succeed. This would include sanctions against Chinese defense and energy firms conducting business with Iran.

Europe needs to diversify its hydrocarbon sources import from Russia, and Iran is clearly a perfect candidate for that policy. If this is the case, Turkey will become the transit route for this potential pipeline. Turkey

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rationalized its relations with Iran after AKP era. Although they are on different sides in the Syrian conflict, both parties have common interests with B&RI. Increasing trade with Iran will have positive impacts on Turkish economy and both parties to avoid any conflict in Middle Eastern policies. Turkey has a less antagonistic relationship with Europe compared to Russian-EU relations. B&RI initiative makes Turkey the potential transportation hub. Modernization and update of customs union agreement with Europe could yield benefits for Turkey’s role in the B&RI project. Multi-level EU enlargement would improve dialog with Turkish membership with EU. Since EU members have different growth patterns and development levels, it may need different levels of integration among member states. After the economic crises in Greece and Spain, different layers of integration are put on table. Multi-layer EU project would expand Chinese influence on Europe. By obtaining benefits from the B&RI initiative, strong partnership with Europe is much more feasible for Turkey.

Bibliography ˙ Ahmad, F. (2015). Modern Türkiye’nin Olu¸sumu. Istanbul: Kaynak. Akçay, N. (2017). Turkey-China Relations Within the Concept of the New Silk Road Project. Ankasam, 73–96. Akurgal, E. (2002). Ancient Civilizations and Ruins of Turkey. USA: Kegan Paul. Astrid Nordin, M. W. (2018). Will Trump Make China Great Again? The Belt and Road Initiative and International Order. International Affairs, 231–249. ˙ Atagündüz, G. (1979). Izmir’de Hava Kirlenmesi (s. 1). ˙ Avcıo˘glu, D. (2016). Türkiye’nin Düzeni, Dün Bugün Yarın. Istanbul: Kırmızı Kedi Yayınları. Aydın, G. (2018). China’s Hard Power Versus Soft Power in Central Asia: An Analysis of the ‘One Belt-One Road Initiative’ as a Soft Power Instrument. Caucasus Internationa, 63–76. Balcı, M., and Kaya, F. (2018). The Strategic Importance of New Silk Road in the Context of Turkish, American and Russian Foreign Policy Perspective. A. O˘guz içinde, Global and Economic Studies in Terms of Economic and Social Issues (s. 118). Almaty: Al-Farabi Kazakh National University. Bora, S. I. (2017, August 7). The New Silk Road Initiative: Turkey’s Stakes in the Global Developmental Project. Avim: https://avim.org.tr/en/Analiz/thenew-silk-road-initiative-turkey-s-stakes-in-the-global-developmental-project#_ ftn12 adresinden alındı.

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Callens, S. (2017). The Intensive Exchanges Flows: About a “New Regionalism”: OBOR («One Belt, One Road»). Universal Journal of Management, 5(3): 124–132. Çolako˘glu, S. (2019, January 29). China’s Belt and Road Initiative and Turkey’s Middle Corridor: A Question of Compatibility. Middle East Institute: https://www.mei.edu/publications/chinas-belt-and-road-initiative-andturkeys-middle-corridor-question-compatibility adresinden alındı. Erol, M. S. (2018). Ankasam: https://ankasam.org/category/konular/ ekonomi-politik/ adresinden alındı. Fidan, G. (2010). http://acikarsiv.ankara.edu.tr/browse/5945/ adresinden alındı. Fidan, G. (2013, October 4). Sino-Turkish Relations: An Overview. Middle East Institute: https://www.mei.edu/publications/sino-turkish-relations-overview adresinden alındı. ˙ Findley, C. (2011). Modern Türkiye Tarihi. Istanbul: Tima¸s. Franza, G. (2017). The Silk Road Renaissance. Milano. ˙ Friedman, G. (2011). Gelecek 100 Yıl. Istanbul: Pegasus Yayınları. Gallia Lindenstrauss, G. L. (2017). China and Turkey: Closer Suspicion with Mixed Suspicion. Researchhgate: https://www.researchgate.net/publication/ 317646376_China_and_Turkey_Closer_Relations_Mixed_with_Suspicion adresinden alındı. ˙ I¸sık, H. (2017). Tarihi Ipek Yolu Projesi ve Tarih Bölümü Ö˘grencilerinin Bu Yol Hakkında Bilgi Düzeylerinin Belirlenmesi. Türkiye Sosyal Ara¸stırmalar Dergisi-, 145–176. James Villafuerte*, E. C. (2016). The One Belt, One Road Initiative Impact on Trade and Growth. 19th Annual Conference on Global Economic Analysis: https://www.gtap.agecon.purdue.edu/resources/download/8280. pdf adresinden alındı. Kadılar, R. (2017). One Belt One Road Initiative Perks and Challenges for Turkey. Turkish Policy Quarterly, 85–90. Keyvan, Ö. (2017, Temmuz). Bir Ku¸sak Bir Yol Giri¸simi Çerçevesinde Türkiye˙ skileri. Ankasam: https://ankasam.org/bir-kusak-bir-yol-girisimiÇin Ili¸ cercevesinde-turkiye-cin-iliskileri/ adresinden alındı. ˙ Kısacık, S. (2017, November 14). Çin’in Yeni Ipek Yolu Projesi Kapsaminda Bakü-Tiflis-Kars Demiryolunun Önemi. Uluslararası Politika Akademisi: http://politikaakademisi.org/2017/11/14/cinin-yeni-ipek-yoluprojesikapsaminda-baku-tiflis-kars-demiryolunun-onemi/ adresinden alındı. Kurt, N. F. (2018, Subat ¸ 6). Bir Ku¸sak, Bir Yol” Projesinin Halkaları Nasıl Koptu? 21. Yüzyıl Türkiye Enstitüsü: https://21yyte.org/tr/merkezler/ bolgesel-arastirma-merkezleri/asya-pasifik-arastirmalari-merkezi/bir-kusakbir-yol-projesinin-halkalari-nasil-koptu adresinden alındı.

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Kurt, S. K. (2017). XIX. ve XX. Yüzyıllarda Osmanlı Basınında Çin Müslümanları ve E˘gitimi. Bilig, 233–259. Nader, S. H. (2012). China and Iran Economic, Political, and Military Relations. RAND: https://www.rand.org/content/dam/rand/pubs/occasional_ papers/2012/RAND_OP351.pdf adresinden alındı. ˙ (2006). Osmanlıyı Yeniden Ke¸sfetmek. Istanbul: ˙ Ortaylı, I. Tima¸s yayınları. ˙ Passig, D. (2010). 2050. Istanbul: Koton kitap. Ruankham, W. (2017). A Rise of China’s OBOR to the Regional Economy and Power. Journal of Economics and Management Strategy, 4(2): 51–66. Shen, S. (2016, February 6). How China’s ‘Belt and Road’ Compares to the Marshall Plan. The Diplomat: https://thediplomat.com/2016/02/how-chinasbelt-and-road-compares-to-the-marshall-plan/ adresinden alındı. Siddiqui, H. (2015, June 15). Bridging Eurasia: The New Silk Road. Nato Association Canada: http://natoassociation.ca/category/ncc-authors/hasansiddiqui/ adresinden alındı. ˙ Yamazaki, N. (2018). 20. Asrın Ba¸slarında Pekin’deki Islâm Mektepleri ve Yabancı Müslümanlar. M. Dündar içinde, Abdürre¸sit ve Zamanı: Türkiye ve Japonya arasında Orta Avrasya. Ankara: TTK. ˙ Yavuz, Y. (2017, May 16). Çin’in Ipek Yolu Projesi ikinci Marshall Yardımı mı. Odatv: https://odatv.com/cinin-ipek-yolu-projesi-ikinci-marshall-yardimi-mi1605171200.html adresinden alındı. Zeng, J. (2019). Narrating China’s belt and road initiative. Global Policy: http://www.research.lancs.ac.uk/portal/en/publications/narrating-chinasbelt-and-road-initiative(e398859f-81c9-4b28-89c2-d30d5b49e286)/export. html adresinden alındı. Zhang, L. (2017). How Do Cultural and Institutional Distance Affect China’s OFDI towards the OBOR Countries? Baltic Journal of European Studies, 24– 42.

CHAPTER 20

Afghanistan and the Belt and Road Initiative Carlos Martins Branco

Acronyms AAN BRI CACCP CCAWEC CNPC CPEC DW ECNS ET ETIM GKtoday ICG IS-K MCC MENAFN

Afghanistan Analysts Network Belt and Road Initiative China-Afghanistan Comprehensive Cooperative Partnership China-Central Asia-West Economic Corridor China National Petroleum Corporation China-Pakistan Economic Corridor Deutsche Welle English language website of China News Service The Economic Times East Turkestan Islamic Movement General knowledge Today (Indian website) International Crisis Group Islamic State Khorasan Metallurgical Group Corporation Middle East North Africa Financial Network

C. M. Branco (B) IPRI, Universidade Nova de Lisboa, Lisbon, Portugal e-mail: [email protected] © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_20

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MFA MoMP MoU MPRA NATO NDTV OBOR OEC OECD PRC QCG RATS RECCA SAIL SCO TIM TIP VOA WSJ Xinhuanet

Ministry of Foreign Affairs Ministry of Mines and Petroleum Memorandum of Understanding Munich Personal RePEc Archive North Atlantic Treaty Organization New Delhi Television Limited One Belt One Road Observatory of Economic Complexity Organisation for Economic Co-operation and Development People’s Republic of China Quadrilateral Coordination Group SCO Regional Anti-Terrorist Structure Regional Economic Cooperation Conference on Afghanistan Steel Authority of India Limited Shanghai Cooperation Organization Turkistan Islamic Movement Turkistan Islamic Party Voice of Afghanistan Wall Street Journal Official State-run Press Agency of the PRC

Introduction This chapter has a twofold objective: to understand how China’s cooperation with Afghanistan has served the purposes of the Belt and Road Initiative (BRI) and to assess the role played by Afghanistan in the implementation of that project. How does Afghanistan fit in it? This study covers the period between 2001, when the United States toppled the Taliban regime, and 20181 and is carried out in three domains—political/diplomatic, economic and security. The text is organized in four sections dedicated to the three aforementioned fields of research plus one to concluding remarks. In the first one,

1 Despite this editorial deadline, the last trade data refers to 2017, and the information on peace initiatives extends to 2019.

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we examine the evolution of the bilateral and multilateral initiatives carried out by China in the political and diplomatic front, and their connections with the economic and security fields. We dedicate especial attention to the analysis of the efforts undertaken by Beijing to find a political solution for the conflict in Afghanistan, which could favour the development of BRI projects. In the second one, we study the evolution of the economic relations between China and Afghanistan, along aid and development financing, bilateral trade and investment in natural resources, focusing our attention on the way these matters can affect the implementation of BRI. In the third one, we examine how security in Afghanistan can affect security in Central Asia and China; how it influences China’s competition with the United States in Central Asia; and its connection with the viability of the BRI land corridors that circumvent Afghanistan. In the fourth and final section, we make a resume of the findings that emerged from the research. We argue that the reasons—economic and security—why Afghanistan is important for China are not necessarily connected to BRI. The unfortunate combination of geography and security makes Afghanistan a secondclass actor concerning BRI. The integration of Afghanistan in the BRI is not a priority for China. Not surprisingly, no BRI land corridor crosses Afghanistan. The closest—China-Central Asia-West Economic Corridor (CCAWEC) and the China-Pakistan Economic Corridor (CPEC)—go around the country.2 “China has been reluctant to explain in which manner Afghanistan will be linked to the BRI, as well as concrete investments in Afghanistan under the project” (Jayaram 2016). “As the project took shape, it became clear that China prioritized certain countries, like Pakistan, and ignored some others, such as Afghanistan” (Safi and Alizada 2018), and it is not yet clear how Afghanistan will be connected to the BRI. The access to Afghanistan’s natural resources and the transit through its territory of hydrocarbons from Iran, Turkmenistan and the Caspian Sea, i.e., the economic reasons why Afghanistan is important to China, are not related to the BRI.

2 The CCAWEC connects Urumqi, Kazakhstan, Kirghizstan, Tajikistan, Turkmenistan, Iran, Turkey, the Persian Gulf, the Mediterranean Sea and the Arabian Peninsula; the CPEC connects Kashgar, Khunjerab Pass, Islamabad and Gwadar, accessing the Indian Ocean and the Hormuz Strait. See a comprehensive explanation on BRI land corridors and Maritime Silk Road in Leandro (2018, 4–5).

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The Political and Diplomatic Front In the first years after the fall of the Taliban regime, in December 2001, China’s political and diplomatic relations with Afghanistan kept a lowprofile.3 That “shyness” was replaced in the last years by a progressive assertiveness at both bilateral and multilateral levels, these latter within the framework of regional organizations and through ad hoc arrangements. “There are signs suggesting a gradual shift in stance on Afghanistan from disinterest to growing engagement” (Hong 2013), or, as Pandey (2019) remarked, there is a discernible evolution of China’s behaviour towards Afghanistan “from calculated indifference to strategic engagement”. The evolution of China’s political and diplomatic relations with Afghanistan was linked to Beijing’s economic interests and security concerns, which were coherent and synchronized with its overarching strategy to the wider Central Asia region. The top priority of China’s foreign policy is “neighbourhood diplomacy” (Julienne 2014). This strategy fits in a defensive realism approach (Shiping 2008) of promotion of a neighbourhood strategy.4 Sponsoring “security through cooperation, the hallmark of defensive realism, […] a pillar of China’s security strategy under Deng” (Shiping 2008) remains valid today.5 That strategic approach provided the ideological base for the behaviour adopted by Beijing in Afghanistan and in other countries of the region. Thus, in June 2006, Presidents Karzai and Hu Jintao signed in Beijing, among other several agreements and memoranda,6 a “Treaty of Friendship, Cooperation and Good Neighbourly Relations”7 and an “Agreement on Trade and Economic Cooperation”, two important agreements 3 Despite being a low diplomatic priority for Beijing, China was one of the first states to establish official relations with the Afghan Transitional Authority. In February 2002, China reopened its embassy in Kabul after seven years closed. 4 Which is radically different from supporting insurgencies in other countries, as China did under Mao. 5 On a different approach to China’s neighbourhood policy, see Chung (2010), chapter 2, Godement (2014) or Lin (2005). 6 According to the final joint statement of President Karzai’s state visit, beyond the signature of the “Treaty of Good-Neighbourly Friendship and Cooperation” and the “Agreement on Trade and Economic Cooperation”, the two sides signed 10 agreements, protocols, exchange letters and memoranda of understanding, most of them of economic nature. For a full list of those documents, see Zhu (2006). 7 The “Treaty of Friendship, Cooperation and Good Neighbourly Relations” is an expression of the so-called China’s “Good Neighbour Policy”, a diplomatic approach oriented to cooperative multilateralism, particularly in the regions surrounding China,

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that framed then one the future of the cooperation between the two countries.8 Trade and economic relations were considered “an important part of China-Afghanistan good-neighbourliness and friendly cooperation” (Zhu 2006). To materialize the implementation of the “Agreement on Trade and Economic Cooperation”, both countries agreed to set the “ChinaAfghanistan Joint Economic and Trade Committee”. This body was responsible to oversee the cooperation in infrastructural areas, such as those related to the development of natural resources, power generation and road construction. To help increasing Afghanistan’s export to China, Beijing announced a zero-tariff treatment for 278 products that Afghanistan used to export to China, as of 1 July 2006, a measure that has not produced meaningful results (see Fig. 20.1). The summit also addressed other issues (national defence, security and police affairs) and served various China’s foreign policy goals, such as Afghanistan’s recognition of the “One-China Policy”. It was an opportunity that China used to claim it was, like Afghanistan, a victim of terrorism, and as such was ready “to work with the Afghan side to fight terrorism, separatism, extremism, organized crime as well as illegal immigration, drug trafficking and illegal arms trade” (Zhu 2006).9 The relations between both countries matured and high-level exchanges became routine. In March 2010, President Karzai paid a visit to China and signed with President Hu Jintao the “China-Afghanistan Comprehensive Cooperative Partnership” (CACCP), which articulated the cooperation in five domains of action.10 “Both Afghanistan and China

through “consultations, negotiations, and seeking common ground while reserving differences” (Chung 2010, 7). On China’s “Good Neighbour Policy” towards Russia and Central Asia (adopting the “Five Principles of Peaceful Co-existence”: mutual trust, mutual benefit, equality, peaceful bargaining and respect for differences in the search for common development) see Chung (2010, 22–23). 8 Good neighbourhood became an important feature of China’s foreign policy. To nurture those relations, China signed similar treaties with other countries it shares border (Russia, Kyrgyzstan and Pakistan). 9 For complete information on the major aspects discussed in the summit, see Zhu (2006). 10 (1) political and diplomatic; (2) economic and trade; (3) humanitarian; (4) security and police affairs; and (5) multilateral efforts to build the comprehensive cooperative partnership of good-neighbourliness, mutual trust and friendship for generations, see Souza (2010).

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pledged to step up greater economic engagement and cooperation in the security sector”. The three agreements signed by the two countries span wide-ranging economic and technological cooperation that include providing favourable tariffs for some Afghan exports and technical training programmes.11 In November 2011, China participated in the foundation of the “Heart of Asia - Istanbul Process”, a forum to discuss regional cooperation among Afghanistan, its neighbours and relevant organizations engaged in the country’s reconstruction, covering 3 pillars of action: political consultations, confidence-building measures and cooperation with regional organizations. A few years later, China used this forum to promote BRI.12 This initiative has produced a few, rather mixed, results.13 In 2012, the Sino-Afghanistan political cooperation went a step further and was upgraded to the level of a “strategic and cooperative partnership”. One practical consequence of this new arrangement was the formulation of an action plan signed in Beijing by Chinese President Hu Jintao and his Afghan counterpart, Hamid Karzai, in which they expressed their willingness to convene regular meetings “to deepen political mutual trust and maintain close high-level contacts, so as to enhance strategic communication on major issues” (China Daily 2012).14 2013 and 2014 were two crucial years for the region and for Afghanistan. In 2013, President Xi Jinping announced the “One Belt One Road” (OBOR) project, and in December 2014, ISAF, the NATO mission in Afghanistan, was replaced by the 13,000 strength non-combat NATO-led “Resolute Support” operation responsible for advising and assisting Afghan security forces and institutions. The significant reduction of international troops and the shift from a combat to a non-combat

11 For complete information on the major aspects discussed in the summit, see Joint Statement (2010). 12 In June 2016, under the Heart of Asia-Istanbul Process, China organized a seminar

and Field Trip on the “One Belt one Road initiative”. 13 For an evaluation of the Heart of Asia/Istanbul process as of November 2014, see Kazemi (2014). 14 Important to emphasize the fact that China has established strategic partnerships, similar arrangements, with all five Central Asian countries. See the text of the joint declaration of the summit in the website of the PRC embassy in the United States (2012).

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operation was a clear indication of the ongoing gradual US disengagement from Afghanistan. In 2014, nearly one month after his inauguration and a few months before the end of ISAF, Ashraf Ghani, the new elected Afghan president, in one of his first trips abroad paid a visit to Beijing where he reiterated the pledges on Sino-Afghan relations made four years before by his predecessor. Among other things, he signed a security accord resembling the one signed by Karzai pledging support to China in its fight to the East Turkestan Islamic Movement (ETIM), a Muslim separatist group founded by militant Uighurs, members of the Turkic-speaking ethnic majority in northwest China’s Xinjiang, and backing the “one-China policy”. In return, China pledged $327 million in aid, “an amount greater than all the aid China has offered Afghanistan since 2001” (Spegele and Hodge 2014), which is estimated in an amount close to $250 million. In 2015, the agendas of the major players involved in one or other way in Afghanistan started changing priorities. To find a political solution for the Afghan conflict became a major concern. Beijing took various démarches in the political front: tried to mitigate Afghanistan and Pakistan’s sour relations, bringing them politically closer; put pressure, jointly with other powers, on the major contenders to engage in negotiations; and engaged directly with the Taliban to persuade them to join the political mainstream, and negotiate with the Afghan government and the United States. In early 2015, “China began facilitating talks between the Ghani government and the Taliban. However, the efforts made little progress, partly because of deteriorating relations between Afghanistan and Pakistan on account of continuing Taliban attacks in Kabul” (Ramachandran 2018). Acknowledging “that its efforts to get the Taliban to the negotiating table would make no progress so long as Pakistan and Afghanistan remained at loggerheads, China set out to bring Pakistan into its peace efforts” (Ramachandran 2018). Thus, China sponsored the creation of a trilateral dialogue with Afghanistan and Pakistan at foreign ministers’ level to develop an empathic relation between both countries, a fundamental premise to achieve peace.15 This trilateral mechanism “has set up three key directions: building political mutual trust; reconciliation, developmental

15 This “forum” met for the first time in Beijing on 26 December 2017.

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cooperation and connectivity; and security cooperation and counterterrorism” (Rao 2019).16 These vectors of action were evident in the China Minister of Foreign Affairs Wang Yi statement while visiting Afghanistan and Pakistan, in June 2017: “China sincerely wishes for Afghanistan and Pakistan to improve relations, rebuild mutual trust, strengthen cooperation, and achieve mutual safety and development” (Shams 2017). These appeals were to a certain extent effective and beard fruits. In the second foreign ministers meeting held in Kabul, in December 2018, “China, Pakistan and Afghanistan agreed to cooperate on counterterrorism and coordinate to call on the Taliban to return to the negotiating table and to move ahead the Afghan-led and Afghan-owned reconciliation process” (ET 2018). As we discuss in the section dedicated to security matters, Beijing has a vested interest in establishing good relations with the Taliban and getting their collaboration to help dismantling the Uighur insurgents’ camps based in Afghanistan, allegedly used as safe havens to prepare attacks in Xinjiang. This trilateral dialogue also met in other formats than ministers’. In a second meeting held in May 2018, “China pledged to play a constructive role in improving Afghanistan-Pakistan relations” (MFA of PRC 2018), and the three sides agreed, among other issues, to continue pushing forward trilateral practical cooperation and study the feasibility of extending China-Pakistan Economic Corridor to Afghanistan (MFA of PRC 2018). China had announced in December 2017 “that it would be willing to extend CPEC to Afghanistan. However, Beijing has not specified what this means in detail, nor who will pay for it” (Stanzel 2018).17 In Islamabad, the three countries met in November 2018 for the fourth time under the theme of Economics, Culture and Connectivity in the light of CPEC (CPEC 2018). Afghans were very pleased with this debate, because “from the first day, Kabul pragmatically wished to be a part of two Chinese regional projects — OBOR initiative and the CPEC”

16 Others, more sceptical, consider that this mechanism was created fundamentally “to increase cooperation between the hostile neighbours in order to develop effective counterterrorism mechanisms” (Shams 2017). 17 Still according to Stanzel (2018), “to extend CPEC to Afghanistan” could mean only small-scale projects for instance, joint industrial parks.

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(Kalil 2017).18 The Afghan representative in the meeting expressed his support to “CPEC and its expansion into Afghanistan as it will further develop the country internally as well as strengthen the international relations of the countries in the region” (Media Today 2018). In addition to this trilateral ad hoc arrangement, China joined the “Quadrilateral Coordination Group” (QCG) with the United States, Pakistan and Afghanistan, which aimed at resuming the peace negotiations with the participation of the Taliban. The QCG met the first time in January 2016 and held four meetings in the very first month of its existence to discuss how to revive the peace process and seat the Afghan government, the Taleban, which has refused to talk directly to the Afghan government, and other armed groups at the same table.19 To accomplish that task, Pakistan plays a major role. The Taleban were officially invited to attend these meetings but declined.20 Moreover, China also participates in other ad hoc tripartite consultation initiative on Afghanistan with Russia and the United States. It was within the framework of this arrangement that in April 2019 great powers reached a large consensus on the future political solution for the conflict, making it an “inclusive Afghan-led peace process” (Xinhuanet 2019). China also took some unilateral diplomatic initiatives regarding the Taliban’s engagement in the peace talks. Among others, China hosted in June 2019 a Taliban delegation headed by Abdul Ghani Baradar, the Taliban representative in Qatar, “as part of the efforts to promote peace and reconciliation in Afghanistan” (Reuters 2019). Beyond its participation in ad hoc arrangements, China has been very active supporting Afghanistan in the Shanghai Cooperation Organization (SCO), an organization that has been paying close attention to Afghanistan. China used this forum for several purposes connected to Afghanistan. In the SCO summit held in Astana, in July 2005, China signed the joint declaration of the meeting “calling for a timetable for the

18 Kalil (2017) pointed out that Afghanistan and China signed in 2016 an MoU on OBOR, and according to an IMF report, Beijing has allocated some money to Afghanistan from the OBOR fund. However, no further information was disclosed. 19 It is important to underline that the Taleban sat in various occasions in the same room with Afghan government representatives, however, in lower key events not directly related to Afghanistan, such as a peace seminar in Oslo, March 2015. On this issue, see Ruttig (2016) and NDTV (2015). 20 For a comprehensive analysis on the role played by the QCG in the search of peace, see Ruttig (2016) and GKTODAY (2019).

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withdrawal of US-led anti-terrorist forces in Afghanistan and cessation of leased military facilities in SCO countries, citing the end of large-scale operations against terrorism in Afghanistan” (Chung 2010).21 Still in 2005, in the SCO’s heads of government meeting held in Moscow, in October, was created “a SCO-Afghanistan Contact Group composed of members of the SCO Secretariat Staff and senior diplomats from Afghan embassies in SCO states” (Chung 2010, 59).22 The SCOAfghanistan Contact Group started working in 2005 but its activities were suspended in 2009 to resume activity much later in 2017. In the meeting of the Council of Foreign Ministers of the SCO held on 22 May 2019 in Bishkek, the ministers “decided to submit for consideration by the heads of state a proposal to sign a roadmap for further action of the SCO-Afghanistan Contact Group” (SCO 2019).23 In 2009, following an initiative of the Russian President Vladimir Putin, “the SCO host[ed] an international conference on Afghanistan with the aim of interdicting the drug trade and boosting stability there (Eurasianet 2007).24 In 2012, at the SCO summit in Beijing, Afghanistan granted the observer status.25 It is undeniable, the multiplication of political and diplomatic initiatives related to Afghanistan where China is present or even promote, 21 Chung (2004) argues that China wants to strengthen the SCO to counter US influence in Central Asia. “Diplomatically, China fears that the American presence means that regional states will be less accommodating to China’s political demands. Economically, China worries that the United States’ support for American petroleum companies will compromise Chinese efforts to wrest concessions from Central Asian governments”. 22 This issue will be developed with more detail in the section dedicated to security cooperation. 23 It is important to underline that China’s support to Afghanistan through regional organizations is not limited to the SCO. One good example of that is the “Regional Economic Cooperation Conference on Afghanistan” (RECCA). For further information on the RECCA activities in support of Afghanistan, see Govserv (2019). 24 “The narcotics problem with Afghanistan was in fact first raised at the Fourth SCO summit in June 2004 at the Uzbek capital of Tashkent, where an accord was achieved to tighten customs regimes bordering Afghanistan, improve anti-drug smuggling efforts, and develop and implement relief programs for poppy farmers in that country” (Chung 2010, 64). On the economic implications of the opium economy and its relationship with security, see Byrd (2008). 25 We refrain to mention all decisions taken by the SCO on Afghanistan, such as “The Plan of Action of the SCO Member States and the Islamic Republic of Afghanistan on Combating Terrorism, Illicit Drug Trafficking and Organized Crime” signed in 2009 because its scope goes beyond the Sino-Afghan relations. For detailed information on the relations between Afghanistan and the SCO, see Feihong (2012).

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which started much before the announcement of the OBOR. They prepared the ground for investments of Chinese companies and to safeguard China’s security concerns. A stable Afghanistan contributes to neutralize the Uyghur Muslim separatism and delegitimize the US military presence in Afghanistan and Central Asia. Recently, China dedicated considerable energies to the Afghan peace process, pressuring the Taliban to seat at the negotiation table. These are the major reasons why “Afghanistan climbed in china’s priorities, but… far from being a top priority” (Ruttig 2018), whose connection with the BRI is loose, indirect and distant.26

The Economic Relations In this section, we examine the evolution of the economic relations between China and Afghanistan to understand whether and how they were connected to the BRI. We studied the China-Afghanistan economic cooperation in three major areas: (1) aid and development financing, (2) bilateral trade and (3) investment in natural resources. The depth of Chinese engagement in these areas has been largely dependent on the evolution of the security situation and the Afghanistan’s political stability. Even “without contributing with military forces or sizable reconstruction financing for Afghanistan” (Zyck 2012) and refusing any direct military involvement, China became the largest investor in the country,27 leading some to accuse it of “free-riding” at the expenses of others. 1. Aid and development financing

26 Despite the desperate efforts done by some Afghan politicians and academics to deny this evidence, one example is the report prepared by Mariam Safi and Bismellah Alizada with the appealing title “Integrating Afghanistan into the Belt and Road Initiative” where sometimes Kabul’s undertakings (economic development, investment in national infrastructures, etc.) to benefit from BRI are mixed with BRI adaptation to serve Kabul needs. It is required a separation of actorness. Kabul should do everything it can to benefit from the BRI, not the other way around. This blurriness is obvious when Safi and Alizada state that in May 2017 “China included Afghanistan in the BRI plans, potentially through the CPEC”, or consider the possibility “to extent the CPEC to Afghanistan and to eventually connect it to the China–Central Asia–West Asia Economic Corridor”, without explaining why China would/should link the CCAWEC to the CPEC. What does China benefit from that? 27 Important to note the largest economic presence of China in Kyrgyzstan and Kazakhstan. In the latter, China is a major investor in Kazakhstan’s oil industry. On China investments in Central Asia, see Olcott (2006). The dimension of those investments already in 2006 gives us a notion of the relative importance of Afghanistan in the Chinese strategic calculus. On this issue, see also Weihman (2003).

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The information available about China’s financial contribution to aid and development varies significantly according to the source. That is obvious in the research carried out by Steven A. Zyck (2012), who tried to estimate the Chinese aid to Afghanistan from 2002 through 2010. He got quite discrepant figures varying from $58 million to $200 million. The Organization for Economic Cooperation and Development (OECD) estimated in that period the international contribution for aid and development in Afghanistan of $33.46 billion. Even if we consider the highest estimated contribution of China (i.e., $200 million), it amounted to approximately 0.60% of the total contributions,28 which is a very low figure: … $200 million spread across nine years amounts to approximately $22.2 million per year between 2002 and 2010. In comparison, research from the Centre for Global Development suggests that Chinese aid globally amounts to between $1.5 billion and $2 billion annually. Afghanistan’s share of total Chinese aid is, therefore, relatively minor at roughly 1.10% to 1.47%…. (Zyck 2012)

As Zyck pointed out, Chinese aid to Afghanistan was significantly less than aid provided to other developing countries, which reinforces the argument that Afghanistan was not a priority for Beijing, at least until that date. That was the situation in 2010, despite the important agreements celebrated by both countries in 2006 and early 2010. One year after Chinese President Xi Jinping announced BRI, in October 2014, during a visit of President Ashraf Ghani to Beijing, China pledged $327 million in aid to Afghanistan, which is an amount greater 28 Reports from the US Army War College’s Strategic Studies Institute (SSI), the Carnegie Endowment, the Associated Press (AP) and other sources indicate that China has been involved in a number of specific projects in Afghanistan, including: $5 million for humanitarian aid in February 2002; an irrigation initiative in Parwan Province; the re-building of hospitals in Kabul and Kandahar; the construction of the $25 million Jamhuriat Hospital in Kabul in 2010; the establishment of the Confucius Institute, at Kabul University in 2010; building of a national vocational training centre, highway development in Kunduz-Jalalabad, repair and reconstruction work of the Kabul-Jalalabad and Bamiyan-Samangan highway, and custom building in Torkham. China has provided training to more than 800 different officials of Afghanistan and to local Afghans in different departments. In addition, for at least five years, China has provided scholarships, approximately 30 per year, for Afghans wishing to attend Chinese universities. “Statistics show that China has trained over 2300 Afghans specializing in various fields since 2015, and the number of trainees is set to be at least 1000 this year [2015]. On top of that, China granted scholarships to over 150 Afghan students in 2017, and currently, there are 307 Afghan students studying in China” (Fengyuan 2019).

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than all the aid China has offered Afghanistan since 2002, eventually reflecting the upgrade of the Sino-Afghan relations to a “strategic and cooperative partnership” agreed in 2012.29 Even though, “this is an insignificant amount compared to the $110 billion support from the U.S. for economic reconstruction in Afghanistan since 2002” (Jayaram 2016).30 Although being that amount an undeniable evidence of the enhanced importance Afghanistan is playing in the strategic calculus of China, it does not allow us to extrapolate and establish a relationship with the BRI. Moreover, Afghanistan only signed the official BRI-related MoU with China (plus approximately 30 countries) in February 2016. As Ghiasy and Zhou (2017) remarked, “several of these MoUs have not yet been given much substance and BRI partner country follow-up and commitment has not always been notable”. In 2019, China has provided $10 million in aid to Afghanistan but for helping those affected by natural disasters (MENAFN 2019). 2. Bilateral China-Afghanistan trade In the period under scrutiny (2001–2017), the trade volume between China and Afghanistan consistently grew, especially in the last decade, although in a rather unbalanced manner. According to data gathered by the Observatory of Economic Complexity (OEC), in the above period, Afghanistan exported to China a total amount of $83.1 million (Fig. 20.1) and imported from China a total of $5.24 billion (Fig. 20.2). In 2017, Afghanistan exported to China an amount of only $2.86 million out of a total amount of $879 million of exports. China does not include the group of Afghan’s five top export destinations,31 but it is the fourth top exporter to Afghanistan selling an amount of $532 million, 29 These figures are very close to those advanced by a Carnegie Endowment for International Peace’s report authored by Huasheng (2015), who also acknowledged that “China’s economic support for Afghanistan has also increased significantly. Between 2001 and 2013, China provided Afghanistan with a total of approximately $240 million of aid”. “But in 2014 alone, China provided Afghanistan with $80 million of aid and pledged to provide an additional $240 million over the next three years” (Huasheng 2015). 30 To understand the real impact of foreign aid on the growth and development of the country and its implications for the overall performance of the country, see Fayez (2012). 31 The five top export destinations of Afghanistan are India ($411 million, 47%), Pakistan ($392 million, 45%), Germany ($8.9 million, 1%), Turkey ($8.74 million, 0.99%) and France (8.22 million, 0.94%).

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which corresponds nearly to 10% of the Afghanistan’s imports.32 As we can see in Fig. 20.2, there was in 2012 a spike in goods imported from China, which suffered significant variations from year to year, but without compromising an upward trend.

Fig. 20.1 Afghanistan’s exports to China (2001–2017) (Source OEC [https:// oec.world/en/visualize/stacked/hs92/export/afg/chn/show/2001.2017])

Fig. 20.2 Afghanistan’s imports from China (2001–2017) (Source OEC [https://oec.world/en/visualize/stacked/hs92/import/afg/chn/show/2001. 2017])

32 The five top imports of Afghanistan are Pakistan ($1.39 billion, 27%), India ($631 million, 12%), Kazakhstan (563 million, 11%), China ($532 million, 10%) and Turkey (120 million, 3.4%). According to the Chinese ministry of foreign affairs, the bilateral trade volume between the two countries reached $544 million in 2017, a figure slightly different from ours.

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This unbalanced trade relation might suffer a significant reduction in the time to come. In November 2018, the “Afghanistan-China Air Corridor” was opened to increase Afghanistan’s exports to China.33 Through this new air corridor, Afghanistan expects to export annually to China between $700 and $800 million worth of Afghanistan’s pine nuts satisfying the demand posed by the Chinese market (Hussainkhail 2018, Zia 2019). It is expected that the railway line linking Jiangsu (China) and Hairatan (Afghanistan) inaugurated in August 2016 will contribute to reduce the existing trade unbalance, although results are not discernible yet. The plans to intensify the bilateral trade between both countries also include the development of the Afghan optical-fibre national grid by Huawei and CTE (Zia 2019).34 3. Investment in natural resources. Afghanistan possesses vast deposits of minerals and hydrocarbons, which according to the Ministry of Mines and Petroleum (MoMP) are estimated in more than $1 trillion (MoMP 2019).35 China’s interest in Afghanistan’s natural resources was materialized through significant investments, namely two carried out by Chinese state-own enterprises: in May 2008, a 30-year lease contract of the Mes Aynak copper deposit in Logar Province was awarded to the Chinese Metallurgical Group Corporation (MCC)/Jiangxi Copper Company Limited (JCL) consortium for $3.4 billion, and in late December 2011, the China National Petroleum Corporation (CNPC) won the rights to drill three oil fields in the basin of the Amu Darya River, in northern Afghanistan (Sar-i-Pul and Faryab

33 In addition to the “Afghanistan-China Air Corridor”, Afghanistan has opened air corridors with India, Turkey, Kazakhstan, Saudi Arabia and Indonesia. Efforts are underway to extend air corridors to more countries. 34 According to Tanha (2017), China promised to spend $70 million on extending the fibre optic network from Kashgar to Badakhshan. For a detailed description of the Afghanistan and China Trade Relationship, see Tahiri (2017). 35 A team comprising US geologists and Pentagon analysts conducted an evaluation

of Afghanistan’s mineral resources and concluded that Afghanistan’s deposits of iron, copper, niobium and other minerals could be worth at least $1 trillion. But Afghan officials, “noting that 30 percent of the country had yet to be surveyed, estimated the actual worth to be three times that amount” (Ng 2010). On the oil and gas resources of Afghanistan, see Afghanistan Inter-ministerial Commission for Energy (2016).

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Provinces) for a period of 25 years, for $400 million.36 If executed, these two projects would contribute decisively to the development of the Afghan economy, but it was not the case. Like most of the Afghan deposits of minerals and hydrocarbons, those are located in areas not controlled by the government and where security is a problem. The Mes Aynak copper deposit is considered the second largest in the world and contains some 450 million metric tonnes of ore and worth at least $50 billion. It is an important asset to feed the hungry Chinese industry in raw materials. MCC offered Afghan authorities a very generous package of bonuses. Among other issues, it included an additional bonus of $808 million and the construction of a transnational railroad with two legs, one to the north (Afghan-Uzbek border) and other to the south (Afghan-Pakistani border) that would cost approximately $6 billion.37 So far, not much has been done in Mes Aynak. There are rumours that MCC wants to renegotiate the contracts and retreated from some pledged investments connected to the exploitation of the mine. Concerns over the precarious security situation38 and the discovery of an archaeological site in the mining area did not help the development of the project either.39 “The majority of the financial and employment benefits of natural resource exploitation will not be realized until both security and infrastructure are more fully established” (Zyck 2012, 7).40 The three oil fields in the basin of the Amu Darya River “are estimated to hold up to 87 million barrels of oil, a relatively small amount 36 This was a joint project with an Afghan firm (Watan Group) in the Qashqari, Bazaar Kami and Zamrudsai areas of Sar-i-Pul that would earn Afghanistan $7 billion over the next two decades and a half. 37 This transnational railway was supposed to have two legs: one, linking the mine to Kabul, and from there to the Afghan-Pakistani border crossing of Torkham; other, from Kabul to the border with Uzbekistan in the north. The feasibility study was launched in 2011. 38 The Taliban attacked the camp with the Chinese engineers’ advance team for the first time in 2008. The Chinese engineers and technicians abandoned temporarily the camp after repeated rocket attacks and a Taleban ambush which killed 15 Afghan policemen. 39 For a detailed and comprehensive analysis of the problems surrounding the Mes Aynak mines, see the article by Thomas Ruttig posted in the Afghanistan Analysts Network (11 July 2015), with the title “Copper and Peace: Afghanistan’s China dilemma”. Although a 4-year-old article, the situation in 2019 is not significantly different. For a point of the situation in 2018, see Marty (2018). 40 One illustration of this is the failure to rehabilitate a road from Kabul to Jalalabad by the Chinese private company Xinjiang Bexin due to difficult operating conditions.

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compared with larger fields in places such as Iran, which often contain billions or tens of billions of barrels” (Zyck 2012), but the Afghan petroleum deposits are much larger.41 As MCC in the Mes Aynak project, the CNPC also offered generous bonuses to the Afghan government. The plan included the construction of an oil refinery to increase Afghanistan’s refining capacity that has not progressed.42 China also tried to get the concession of the Hajigak Mine, the largest iron oxide deposit in Afghanistan, located near the Hajigak Pass. But, in November 2011, Kabul awarded four out of the five blocks to a consortium of Indian firms led by the Steel Authority of India Limited (SAIL) and one block to Canada’s Kilo Goldmines Patnaik.43 Still in the field of natural resources, China is also considering the possibility of investing in the unexplored Afghan marble industry.44 None of the Chinese investments in Afghanistan in the three mentioned fronts—aid financing, bilateral trade and natural resources—has an obvious connection with the BRI. On the one hand, the most important Chinese investments were planned much before the announcement of the BRI and conceived under a different rational and strategy; on the other hand, BRI is “focused on infrastructure development, outsourcing capacity, and market-building, and not on the extraction of natural resources” (Marty 2018). China’s economic cooperation with Afghanistan did not suffer any meaningful strategic change after 2013. The transnational railway starting in Mes Aynak whose construction has not yet begun was conceived to support the copper extraction. It is difficult to see it as an infrastructure serving the purposes of the BRI.45 41 For a view of the significant mineral and petroleum deposits in Afghanistan that have been awarded or are being tendered, see Global Witness (2012). 42 Afghanistan has only one small-scale oil refinery near the Afghanistan-Uzbekistan border and is very dependent on the expensive supplies coming from Pakistan, Iran and Central Asia republics. 43 Like China in Mes Aynak and in the oil fields in the basin of the Amu Darya River, six years after winning the tender to mine Hajigak, the Indian consortium and the Canada company are facing problems and the mining has not started (Jahanmal 2018). 44 Daniel (2015) elaborates lengthily on the potential of the Afghan stone industry and market conditions that make it a very attractive investment. 45 Like the service that runs from the Chinese city of Yiwu, in the Zhejiang Province, to Barking in London conceived within the framework of BRI that lasts an average of 18 days to run more than 12,000 kilometres. On this issue, see Crabtree (2017) and Hillman (2018). Today, freight services from China to Europe connect roughly 35

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Even the Jiangsu-Hairatan railway line inaugurated in 2016, that coincides almost entirely with the first most eastern part of the CCAWEC, must be understood as the maximization of an installed capacity, and not exactly a project conceived to serve the BRI.46 Afghanistan has a lot to benefit economically from BRI, the latter may stimulate and promote its regional integration, but Afghanistan will not be transformed into a hub of the BRI project. Afghan high dignitaries would like Afghanistan to be a key element of BRI, but it is difficult to fulfil that wish.

The Security Relations In this section, we analyse China-Afghanistan security cooperation and assess how it is linked (or not) to the facilitation of BRI. We conduct this exercise mainly through the lens of a conventional understanding of security, i.e., related mainly to the organized instruments for applying force—the military in first instance (Muller 2002, 369), acknowledging, however, other conceptualizations of security implicitly addressed in other sections of this article. Insecurity in Afghanistan affects China’s security in two important ways: it provides competing powers a reason to keep troops near its borders and facilitates the life of Islamic separatist movements operating in China. “Whereas China supports the fight against terrorism and worries about Islamic radicalism in Afghanistan affecting it, it is also wary of American military presence near its border” (Swanström and Cornell 2001). The war on terror against Al-Qaeda and later ISIS in Afghanistan and neighbouring countries gave United States a pretext to prolong its military presence in Afghanistan and an opportunity to develop military cooperation programmes with Central Asia countries. The pledges made by Washington that would withdraw its troops from Afghanistan after the stabilization of the country without defining a date were received with

Chinese cities with 34 European cities. The plan includes the construction of a “Silk Road high-speed railway” to provide a single line connecting the Chinese network, Central Asia and Iran. On this see Rogers (2015). 46 In September 2016, “the first-ever cargo train from China, after some two weeks of journey, has arrived in Hairatan port, some 300 km north of Kabul, in the northern Balkh province” (Ecns 2016). Some critic the merit of this initiative because trains arrived in Afghanistan full of Chinese goods and return to China almost empty.

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distrust by China. “Beijing responded to the post–9/11 growth of U.S. military presence in Central Asia by seeking and securing assurances from Washington that its presence was temporary and associated with ongoing operations in Afghanistan” (Lin 2005). China is very uncomfortable with the American presence in Central Asia.47 One significant part of “Chinese efforts in Afghanistan is aimed at restricting U.S. influence in the region” (Shams 2017). Being Afghanistan a main gate to Central Asia, China’s security interests in Afghanistan are closely connected with China’s security interests in Central Asia.48 In other words, “China has no choice but to view events in Central Asia as having potential direct security impact” (Olcott 2006).49 Despite these concerns, China was reluctant to take a military role in Afghanistan and to join ranks with ISAF fighting terrorism, but took preventive measures against eventual threats to its territory. “Since the American invasion of Afghanistan in October 2001, and even with the collapse of the Taliban regime, China has not withdrawn its military forces along the border with Afghanistan, or adjacent Tajikistan and Pakistan-held Kashmir” (Chung 2010). Common perceptions of NATO’s policies with regards to Central Asia— driven to a large extent by the U.S.—have helped cement some form of 47 China’s discomfort with American presence in Central Asia extends to the initiatives carried out by NATO under the framework of “Partnership for Peace”, the annual multilateral military exercises called “Steppe Eagle” carried out by soldiers from the United States, UK, Kazakhstan, Tajikistan, Uzbekistan and Turkey (U.S. Army Central 2019), and the Defence Education Enhancement Programme (DEEP) oriented to professional military education institutions. 48 In addition to the ground troops deployed in Afghanistan, the US Air Force operates four airports/airbases (Bagram Airfield, Herat International Airport, Mazar-i-Sharif Airport and Shindand Air Base). The United States ended up its presence in Manas (Kyrgyzstan) and Khanabad (Uzbekistan) air force bases, in 2014 and 2005, respectively, and made an unsuccessful attempt to deploy in the Ayni Air Force Base (Tajikistan). In a hearing before the US Senate, General Joseph Votel, the commander of US Central Command, complained on the breakdown of US-Kyrgyzstan military cooperation, after ending the presence in Manas, which was replaced by the Russian and Chinese. Bishkek has thrown its lot with Russia and China. Still according to Votel, “The Kyrgyz Republic has increasingly aligned its interests with Russia and China” (Kucera 2018). 49 Although this section is focused on security, we should bear in mind that security is only one element of China’s policy towards Central Asia neighbours. Other aspects also count. For a view of a relation established upon economic development and political stability arguments, see ICG (2013).

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strategic solidarity between China and Russia. Today, both states remain apprehensive about a U.S.-led attempt to dominate Central Asia. (Ong 2005, 427)50

Although very active in Central Asia, the American will of developing close cooperation with Central Asia states suffered a few setbacks. The most damaging for US aspirations of setting a foothold in Central Asia was the closure of Manas (Kyrgyzstan) and Khanabad (Uzbekistan) airbases, needed to support the US military operations in Afghanistan, and the unsuccessful attempt to lease Ayni Air Force Base (Tajikistan). This was the result of Moscow and Beijing discreet diplomacy pulling the strings behind the scene. Beijing is seriously concerned with the Islamic movements in Central Asia, which gained global visibility and protagonism, and with the influence they may exert on the Chinese Uighur Muslim community, encouraging its members to assume a more assertive posture against the central government. Beijing wants to create a belt of stable states around its borders and eliminate the Turkistan Islamic Party’s safe havens.51 China does not want Afghanistan transformed into a safe haven for those groups, as it was in the past during the Taliban regime when Uighurs were trained in camps run by Al-Qaeda. Beijing wants at all costs to avoid this happens again. Instability in Afghanistan facilitates the use of Afghan territory by militants to plot attacks on Chinese territory. Following the trend in the other two domains, China-Afghanistan security cooperation has increased in the last years. Two events contributed for that: the reduction of NATO footprint in Afghanistan when, in December 2014, ISAF was replaced by the non-combat “Resolute Support” mission; and the Islamic State announcement in 2015 that it was going to expand to the Khorasan region.52 These events triggered the increment of the cooperation between both countries, but did not mean

50 Some challenge this view. For instance, Hong (2013) argues that “Beijing has come to realize that the American counter-terrorism war is actually favourable to China, and it will have to play a more active role in the future of Afghanistan”. 51 The Turkistan Islamic Party (TIP) is an Islamic extremist organization founded by Uyghur jihadists in western China. Its strategic objective is to establish an independent state in Xinjiang (“East Turkestan”). 52 The Khorasan region historically encompasses parts of modern-day Iran, Central Asia, Afghanistan and Pakistan.

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that Beijing was eager to replace or take the role of the United States or NATO in Afghanistan. The Islamic State Khorasan (IS-K) is the Islamic State’s Central Asian province branch and emerged in the eastern Nangarhar Province of Afghanistan. “Despite initial scepticism about the group’s existence from analysts and government officials alike, IS-K has been responsible for nearly 100 attacks against civilians in Afghanistan and Pakistan, as well as roughly 250 clashes with the U.S., Afghan, and Pakistani security forces since January 2017” (CSIS 2018). In certain provinces, the IS-K turned into a challenger of the Taliban. “The Chinese government fears that ISIS has gained a foothold in Afghanistan’s Badakhshan province, on China’s border, and believes that the group is persuading a growing number of East Turkestan Islamic Movement (ETIM) supporters to gather there” (Stanzel 2018).53 Reacting to those developments, China took several measures. According to some media outlets, Beijing negotiated with the Afghan government the construction of a military base in Badakhshan Province, close to the Sino-Afghan border, in the remote Wakhan Corridor,54 but both Beijing and Kabul formally denied it, although, according to EurasiaNet.org (2018), some Afghan security officials have confirmed the original reports. This base would allegedly serve to train Afghan soldiers in the fight against terrorism, thus minimizing the effects of Kabul’s reduced presence in certain parts of the territory. In March 2016, China pledged around $70 million to support Afghan government’s counterterrorism initiatives. Four months later, “Afghanistan received its first batch of Chinese military equipment as part of Beijing’s commitment to provide millions of dollars of assistance to help Kabul fight terrorism” (Gul 2016).55 Also, in 2016 “Beijing unveiled plans to finance more outposts along Tajikistan’s border

53 The East Turkestan Islamic Movement (ETIM) is the former name of the Turkistan Islamic Party (TIP) or Turkistan Islamic Movement (TIM). 54 According to the Afghanistan Analysts Network “there is a proposal for a Chinesefinanced Afghan National Army mountain brigade that would also include a base. Both the Afghan and Chinese governments denied arguing that the proposal has not gone beyond the discussion phase and neither the location for a base nor the schedule for its construction have been agreed.” 55 Although not sending military troops to Afghanistan, China has provided limited training (compared with American’s) for Afghan police and mine-clearing teams.

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with Afghanistan” (Stratfor 2016). In early 2017, Sino-Afghan joint border patrols started patrolling the Wakhan Corridor, to prevent terrorists from entering China. Stanzel (2018) saw these patrols as “indicative of a broader shift in Chinese policy in the region”. This might not be the case, as border control cooperation has been a normal activity in the region for decades. Afghanistan celebrated with Tajikistan a programme of militarytechnical cooperation to strengthen cooperation of border forces on the border between Tajikistan and Afghanistan to fight terrorism, and Russia has been assisting Tajikistan in border control for many years. In December 2017, China and Afghanistan agreed to deepen and widen their security cooperation on counterterrorism, including border control; and in January 2018, the “Chinese embassy in Kabul announced that China would provide further military aid to Afghanistan to help build up the Afghan army’s capacity” (Stanzel 2018). To thwart the destabilizing effect that terrorist organizations can pose to regional and national security, in the latter case agitating the waters of Xinjiang’s Uighur separatism, as mentioned in the first section, China has heavily invested in diplomacy, bilaterally and multilaterally. Two initiatives deserve especial attention: the celebration of “Good Neighbour Policy” agreements with neighbouring countries, a priority of China’s foreign policy to Central Asia; and the judicious use of SCO to fight terrorism. China used SCO as a forum to induce Central Asia republics to isolate the Uighur movement. Concerning Afghanistan, the “Good Neighbourhood Policy” has been object of many interpretations, some more benign than others. Some consider it an instrument used by China to increase its economic, financial, security and diplomatic affairs influence in Afghanistan. Whatever is the interpretation, we can’t dismiss the security element included in the “Good Neighbourhood Policy”, and how this latter helped China gaining support and collaboration from Central Asia states to marginalize the Uighurs’ supporters and to curb their autonomic aspirations and armed opposition to Beijing.56 China used the SCO as an instrument to attract attention to Central Asia’s security and concomitantly Afghanistan’s. While contributing to fight insecurity in Central Asia, SCO was simultaneously concurring to 56 China has celebrated military cooperation programmes with Tajikistan, Kyrgyzstan and Uzbekistan aiming at deepening collaboration on defence and military education matters.

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improve China’s own security, i.e., reducing and/or eliminating the footprint of competing powers close to its borders and the autonomic aspirations in Xinjiang. The SCO has closely coordinated with Afghanistan the combat to the “three evil forces” (the combination of violent terrorism, ethno-national separatism and religious extremism), and the counternarcotic and economic cooperation. Practical cooperation has been carried out in the framework of the SCO Regional Anti-Terrorist Structure (RATS). This cooperation includes, among other aspects, anti-terrorism joint exercises with the participation of law enforcement agencies and armed forces. Like in the economic field, China’s security cooperation with Afghanistan did not suffer any meaningful strategic change after 2013. The reasons that led China to increase its security cooperation with Afghanistan are not associated with the BRI. The cooperative programmes agreed did not look at specifically the enhancement of Afghan capabilities to improve the protection of the CPEC. Border protection cooperation was oriented to the northern border, not southern, and in particular to its eastern segments to discourage the presence of Islamic militant groups and the use of Afghan territory to launch attacks against Chinese territory. We acknowledge that a stable Afghanistan has a positive impact on the security conditions along the corridors (CCAEC and CPEC) and facilitates tremendously the transit. But in terms of security, China’s major concerns are the neutralization of Uyghur Muslim separatism and the prolonged US military presence in Afghanistan and Central Asia. Beijing is trying at all cost to avoid that instability in Afghanistan spills over and spoils China’s economic plans for the wider region (Farmer 2018; Ghiasy 2017).57

57 Lest not forget that the major security challenge to CPEC resides in Pakistan, not in Afghanistan (Voice of Balochistan 2016). There are reports that China has agreed with Pakistan to build a military base in Pakistan to protect the CPEC, as well as several road and rail improvement projects, including a highway linking the cities of Karachi and Lahore, reconstruct the Karakoram highway, linking Hasan Abdal and the Chinese border, as well as the modernization of the main Karachi-Peshwar railway line by the end of 2019, for trains to travel up to 160 km/h. On this issue, see Connor (2017) and Rajagopalan (2018).

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Conclusion Afghanistan is important for China, but the key reason for that is not the BRI. China did not assign to Afghanistan a relevant role in BRI, since the project was announced by President Xi Jinping. No meaningful deviations from the original plan were discernible in China’s strategy for Afghanistan after 2013. Afghanistan is playing a marginal and subsidiary role in the BRI. This unlikely changes in the future. Geography and security create problems difficult to overcome.58 But while the former is a permanent obstacle and is not going to change, the latter is temporary and may disappear, without, however, overshadowing the overwhelming importance of the former. If the west and northwest borders of Afghanistan are generally flat and facilitate communication and fast movement, the northeast and east borders dominated by the Hindu Kush mountain range are a tremendous obstacle.59 Afghanistan’s geography does not fit in the rational that prevailed in the conception of BRI. It was no accident that China designed two corridors relatively parallel to the borders of the country, one in the north and other in south, running in the northeast–southwest general direction.60 The political and diplomatic interaction between the two countries was materialized through the celebration of important agreements, such as the “Treaty of Friendship, Cooperation and Good Neighbourly Relations”, the “Agreement on Trade and Economic Cooperation” or the creation of the “China-Afghanistan Joint Economic and Trade Committee”, among others. We should not overestimate their reach and achievements. Similar agreements were signed with other Central Asia countries. Afghanistan

58 It might be deceiving to establish analogies between the 2 BC Silk Road and the current project. Camels and horses don’t move in the same spaces as high-speed trains and lorries. 59 The Hindu Kush stretches through Afghanistan from its centre to northern Pakistan, Tajikistan and China and has immense peaks above 4500 m of altitude with deep gorges, canyons and permanent snowfalls and blizzards. 60 Uzbekistan, Turkmenistan and Iran, in the north, and Pakistan in the south are the

fastest routes to transport goods from China to Europe. Pakistan is the fastest and the shortest way to reach Gwadar, a port city on the southwestern coast of Balochistan, on the shores of the Arabian Sea from China. On 13 November 2016, CPEC became partly operational when cargo from China arrived at the port of Gwadar and was shipped to Africa and West Asia. On this issue see Voice of Balochistan (2018).

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was not object of a special attention or treatment. They were celebrated before the announcement of BRI, were conceived under a different rational and were not updated to fill BRI new demands. Afghanistan can certainly benefit from BRI and the latter may help its economic development and regional integration, but Afghanistan will unlikely be either a hub or a key element of BRI, as Afghan high dignitaries would like Afghanistan to be. China has played and will play the economic card in Afghanistan, especially when it comes to natural resources, despite the frustrating results achieved so far due to the precarious security situation in the country. That explains why Beijing has avoided to implement the large-scale infrastructure projects agreed with Afghan authorities. The Afghan territory is also important for China as a route to transport gas and oil from Turkmenistan and the Caspian Sea to East Asia. It is the shortest and cheapest route. But these projects only can happen in stable environments. The would-be infrastructures to be built within the framework of these projects do not necessarily serve the key purposes of BRI. Security and economy are extremely linked to China’s strategic thinking. It is true that there exists a relation between security situation in Afghanistan and the smooth operation of the two corridors, but it is undeniable the existence of a much stronger and intimate relation between security and the viability of Chinese economic investments in the country. These latter seem to be a compelling reason to explain China’s engagement in peace talks after 2015 and its efforts to bring the Taleban to negotiations, in order to overcome the vulnerability caused by the US security disinvestment in Afghanistan. China is investing tremendously in Central Asia’s security to fight the “three evil forces” (the combination of terrorism, separatism and religious extremism) and to create benign conditions for economic development.61 Beijing is aware that security is a fundamental condition for the success of BRI. Thus, it is investing both bilaterally, signing military cooperation programmes with Central Asia countries, and multilaterally through the SCO.

61 Afghanistan and security for China still include two additional fronts without relation with BRI. One lengthily explained in this text (the US military presence in Afghanistan), and other connected with the China competition with India, which means allying with Pakistan and watching very closely India moves in Afghanistan. Beijing wants to make sure that Kabul does turn a Delhi’s proxy.

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We have not identified after 2013 either evidence of changes in China’s strategy or the inclusion of new projects in BRI Master Plan, in the three fields of study—political and diplomatic, economic and security— that promoted an enhanced role of Afghanistan in BRI. It is undeniable the steady and increasing involvement of China in Afghanistan since 2001 and later in 2014 when the United States ended the ISAF combat mission in Afghanistan. But explanations for that involvement diverge, and no consensus exists either in the academia or among practitioners. Some consider security motives (Stanzel 2018).62 Even among these, we find different approaches. Some underline Uighur separatism and others the US presence in the region (Casaca in Shams 2017), or the protection of the CPEC (Rao 2019; Ramachandran 2018). Some find mainly economic reasons (Downs 2012), others economic and security interests (Khan 2015; Mastrorocco 2015) and others emphasize the merit and advantages of Afghanistan’s integration in the BRI (Safi and Alizada 2018; Mudabber 2016; Zhenhong 2018; Jayaram 2016; Kalil 2017).63 The supporters of last strand go beyond the utility of BRI for the economic development of the country and argue that Afghanistan can be pivotal for BRI. Those explanations miss the essential of Chinese thinking and behaviour. Most of them provide partial answers to China’s engagement in Afghanistan. As convincingly demonstrated in this article, Afghanistan is just an element of the regional strategic calculus of China, and should not be studied in isolation, but in conjunction with other neighbouring states where China is acting in a similar manner, implementing a wise strategy inspired in defensive realism, where diplomacy works in profit of the whole to reinforce the national power, without separating or isolating a single element, walking side by side with strategy, economy and security.

62 The US scholar Barnett Rubin said at an event in Oslo that a “major reason for the China’s involvement in Afghanistan was its desire in identifying some common interest and potential cooperation with the U.S.” (Ruttig 2018). Barnett Rubin is not alone in this explanation, which is for us highly unlikely and illogical, if we take into consideration the reasons why China promoted the foundation of SCO or China’s approach to Central Asia security. 63 Others even more optimistic like Duarte (2018) consider “unthinkable that Afghanistan will not occupy, in the medium to long term, an increasingly important place within the BRI”. Kalil (2017) explained superbly the advantages of having Afghanistan in the project, but in some occasions exaggerated on the role that Afghanistan can play and on the added value it could bring to BRI.

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Acknowledgements We acknowledge that Afghanistan is a field of competition between China and India, but we are not going to study it because it has no direct relation with the two goals of this article.

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Ruttig, Thomas. 2016. In Search of a Peace Process: A ‘New’ HPC and an Ultimatum for the Taleban. Afghanistan Analysts Network. [online] Available at: https://www.afghanistan-analysts.org/in-search-of-a-peace-process-a-newhpc-and-an-ultimatum-for-the-taleban. Accessed 14 April 2019. Ruttig, Thomas. 2018. Climbing on China’s Priority List: Views on Afghanistan from Beijing. Afghanistan Analysts Network. [online] Available at: https://www.afghanistan-analysts.org/climbing-on-chinas-prioritylist-views-on-afghanistan-from-beijing. Accessed 14 April 2019. Safi, Mariam and Alizada, Bismellah. 2018. Integrating Afghanistan into the Belt and Road Initiative. Review, Analysis and Prospects. Friedrich Ebert Stiftung. [online] Available at: http://library.fes.de/pdf-files/bueros/kabul/ 15587.pdf. Accessed 15 July 2019. SCO. 2019. Press Release on the SCO Council of Foreign Ministers meeting. [online] Available at: http://eng.sectsco.org/news/20190522/543257. html. Accessed 20 June 2019. Shams, Shamil. 2017. What Does China Want to Achieve in Afghanistan? Deutsche Welle. [online] Available at: https://www.dw.com/en/what-doeschina-want-to-achieve-in-afghanistan/a-39406187. Accessed 19 April 2019. Shiping, Tang. 2008. From Offensive Realism to Defense Realism: A Social Evolutionary Interpretation of China’s Security Strategy. In Ross, Robert S., Feng, Zhu (Eds.). China’s Ascent. Power, Security, and the Future of International Politics. London: Cornell University Press. Souza, Shanthie. 2010. Karzai’s Balancing Act: Bringing ‘China’ In? Eurasia News. [online] Available at: https://www.eurasiareview.com/18052010karzais-balancing-act-bringing-china-in. Accessed 15 August 2019. Spegele, Brian and Hodge, Nathan. 2014. China Pledges $327 Million in Aid to Afghanistan. Wall Street Journal. [online] Available at: https://www.wsj.com/articles/china-pledges-327-million-in-aid-toafghanistan-1414566221. Accessed 14 April 2019. Stanzel, Angela. 2018. Fear and Loathing on the New Silk Road: Chinese Security in Afghanistan and Beyond. European Council on Foreign Relations. Policy Brief. [online] Available at: https://www.ecfr.eu/page/-/ECFR-264Chinese_Security_in_Afghanistan_2.pdf. Accessed 10 July 2019. Stratfor. 2016. China Strives to Secure Central Asia. [online] Available at: https://worldview.stratfor.com/article/china-strives-secure-centralasia. Accessed 19 April 2019. Swanström, Niklas and Cornell, Svante. 2001. China’s Trepidation in Afghanistan. CACI Analyst. Uppsala University Publications. Tahiri, Noor Rahman. 2017. Afghanistan and China Trade Relationship. Oruj University. Munich Personal RePEc Archive (MPRA). [online] Available at: https://mpra.ub.uni-muenchen.de/82098/1/MPRA_paper_82098. pdf. Accessed 29 April 2019.

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Tanha, Mohammad. 2017. China promises $90 Aid to Badakhshan. Pajhwok Afghan News. [online] Available at: https://www.pajhwok.com/en/2017/ 09/10/china-promises-90m-aid-badakhshan. Accessed 19 April 2019. Toniut, Ivo. 2019. Doing Business in Afghanistan & Neighboring Countries— Afghanistan to Decide on Aynak Copper Deposit Project Soon. [online] Available at: https://ivotoniut.blogspot.com/2019/05/afghanistan-to-decide-onaynak-copper.html. Accessed 1 August 2019. U.S. Army Central. 2019. Exercise Steppe Eagle. [online] Available at: https:// www.usarcent.army.mil/Steppe-Eagle. Accessed 10 August 2019. Voice of Balochistan. 2016. CPEC Takes a Step Forward as Violence Surges in Balochistan. [online] Available at: https://voiceofbalochistan.pk/opinionsand-articles/cpec/cpec-takes-step-forward-violence-surges-balochistan. Accessed 14 May 2019. Voice of Balochistan. 2018. CPEC Takes a Step Forward as Violence Surges in Balochistan. [online] Available at: https://voiceofbalochistan.pk/opinionsand-articles/cpec/cpec-takes-step-forward-violence-surges-balochistan/. Accessed 23 January 2020. Weihman, Ted. 2003. China Making Diplomatic Push in Central Asia. Eurasianet. [online] Available at: https://eurasianet.org/china-makingdiplomatic-push-in-central-asia. Accessed 21 April 2019. Xinhuanet. 2019. China, Russia, U.S. Reach Consensuses on Afghanistan Issue. [online] Available at: http://www.xinhuanet.com/english/2019-04/26/c_ 138011805.htm. Accessed 10 August 2019. Zhenhong, Qi. 2018. The Role of Afghanistan in China’s Belt and Road Initiative and China’s Policy on Afghanistan. Afghanistan Times. [online] Available at: http://www.afghanistantimes.af/the-role-of-afghanistan-in-chinasbelt-and-road-initiativeand-chinas-policy-on-afghanistan. Accessed 29 April 2019. Zhu, Ling. 2006. Joint Statement Between the People’s Republic of China and the Islamic Republic of Afghanistan. Zia, Hujjatullah. 2019. A Surge in China-Afghan Trade. China Daily. [online] Available at: http://www.chinadaily.com.cn/a/201902/14/ WS5c65346ba3106c65c34e9606.html. Accessed 12 June 2019. Zyck, Steven. 2012. The Role of China in Afghanistan’s Economic Development & Reconstruction. Civil-Military Fusion Centre. [online] Available at: https://reliefweb.int/sites/reliefweb.int/files/resources/Full_ Report_3590.pdf. Accessed 10 August 2019.

CHAPTER 21

Facing China in Eurasia: The Russian Perspective Sandra Dias Fernandes and Vera Ageeva

Introduction The twenty-first century is witnessing a historically unprecedented approximation between Russia and China, as illustrated by the meeting in Moscow between Putin and Xi JinPing in June 2019. While world powers were celebrating the 75th anniversary of the D-Day in Normandy, the two leaders met in the Kremlin to focus on the future instead of the past and to “open a new era” (Balmforth 2019). The strategic cooperation between the two countries had already initialled in 1997, turning Moscow into the first third party to sign such a document with Beijing. In 2001, bilateral cooperation was officially reinforced with the “Treaty of Good-Neighborliness and Friendly Cooperation between the People’s Republic of China and the Russian Federation”. Additionally, Russia’s

S. D. Fernandes (B) Research Centre in Political Science (CICP), University of Minho, Braga, Portugal e-mail: [email protected] V. Ageeva Higher School of Economics, St. Petersburg, Russia © The Author(s) 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3_21

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foreign policy had been operating a turn towards the East from 2008 onwards, and especially since 2014, in the face of deteriorated relations with Europe and contestation of the United States-led liberal order. It is symbolic that, since Xi Jinping has been in power, no other head of state has met with the President of Russia more often. The 2001 treaty already included a willingness to address the new global strategic balance. Nevertheless, this goal has been hampered by the relative growth in Chinese power compared to Russia, and increased competition in their common neighbourhood. Energy relations in Central Asia have highlighted both a change in the power balance and a boost in Chinese investments, although China implicitly seems to have accepted privileged Russian interests there. In this context, “the emerging shape of the Belt and Road Initiative (BRI) underlines China’s status as a dominant economic power” (Perovic and Zogg 2019). This chapter aims to analyse the Russian perspective on the greater involvement of China in the Eurasian space, namely under the Belt and Road Initiative (BRI). We argue that, despite a rhetoric of cooperation and peaceful relations, competition is operating in several areas. The analysis unpacks dynamics in the economic, military, political/diplomatic and cultural domains. Firstly, we articulate the growing importance of the notion of “Eurasia” in Russian external affairs and the significance of the turn towards the East. Secondly, we explore key features of RussianChinese relations. Finally, we identify elements of competition in the Eurasian space, looking particularly at Central Asia where both Moscow and Beijing project their interests.

The Russian “Turn to the East” This section of the chapter argues that the Russian turn to the East, undertaken recently by the Kremlin, has a complex prequel rooted in Russian modern history when Moscow sought its new international identity and place in global politics. Post-Soviet Russia was characterized by a greater openness to the West and a very profound belief in upcoming reunion with European countries, meaning also institutional approximation. During this period, Russian-European Union relations intensified significantly and in 1994 both sides elaborated and signed a historical document, the very first comprehensive agreement between Russia and the European Union (EU)— the Agreement on Partnership and Cooperation (APC). Shortly after, they

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established an institutional framework for regular high-level meetings, including meetings of heads of the European council and European Commission and the president of the Russian Federation. Cooperation actively developed in various domains, including trade, investment, culture and education. Undoubtedly, the EU was the first priority for Russia during this period (Fernandes 2014). However, the European orientation of Moscow does not mean that the idea of the turn to the East is a new one for Russian foreign policy. It was Leonid Brejnev the first to suggest that the Soviet Union should seek to rebuild its connections with China. In the history of modern Russia, Evgenyi Primakov (Minister of Foreign affairs and Prime Minister) was subsequently a strong advocate for diversification of Russian strategic partners and a broader cooperation with Asian countries, including China. Nevertheless, experts agree that, since the early stages, Russia’s turn to the East was closely connected to the deterioration of relations with the West and a presentiment of an upcoming economic rise in China and other Eastern Asia countries. Initially, fostering partnership with China was meaningful for Russia also because of perspectives of economic cooperation with Russian Far East regions, which remained very underdeveloped. The Kremlin was looking forward to joint economic and infrastructure projects in Siberia with Beijing. At this stage, Russia and China had different goals in Siberia, which remained underpopulated and underdeveloped while bordering with overpopulated and fast developing Chinese regions. Fears over alleged Chinese expansion in Siberia were always very strong in both Russian elites and society. Nonetheless, out of geopolitical necessity, Russia continued to pursue its Chinese strategy. Gradually throughout the years 2000s, the European orientation of the Russian foreign policy changed. Since the 2000s, Russian political elite had become disillusioned with the West and overrelying on the partnership with European states and the US. In 2008, one could witness the last spark of Russian pro-European foreign policy course during the first years of Dmitry Medvedev presidency (2008–2012). The revised version of the Russian foreign policy concept of 2008 presents the brightest example. Compared with previous and following documents, the 2008 concept looks very open and optimistic towards Europe and the West in general. Probably, the 2008 version is the most open and friendly to the Western partners of Russia in modern Russia history. This document declares that:

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the main objective of the Russian foreign policy on the European track is to create a truly open, democratic system of regional collective security and cooperation ensuring the unity of the Euro-Atlantic region, from Vancouver to Vladivostok, in such a way as not to allow its new fragmentation and reproduction of bloc-based approaches which still persist in the European architecture that took shape during the Cold War period. (Foreign policy concept… 2008)

Following this idea, in 2009, the Kremlin elaborated and brought to the table of negotiations with European partners a comprehensive European security treaty. Although the so-called “Medvedev proposal” did not evolve beyond a mere brainstorming exercise, it demonstrated the Russian willingness to be more impactful in the European security governance (Fernandes 2012). Simultaneously, another tendency was forming and gaining influence in Russian foreign policy. Political developments in Russian “near abroad” took a different turn for the Kremlin when a wave of colour revolutions across post-Soviet countries provoked profound fears inside Russian political elites. The latter considered these revolutions not only a threat for Russian dominance in this region, but also a danger for Russian internal stability (Naumov 2016). Revolution of Roses in 2003 in Georgia, Orange revolution in 2004 in Ukraine, Tulip revolution in Kyrgyzstan in 2005 and revolution attempts in Belarus, Armenia and Moldova between 2006 and 2009, were perceived by Moscow purely as Western projects aiming to seize control over Russian “natural zone of influence”. Thus, gradually, an idea of a hidden hybrid war led by the West against Russia started to dominate the minds of Kremlin officials (Filimonov 2016). Putin’s Munich speech in 2007 is commonly considered the turning point of Russia’s new assertiveness and alienation from the West. He spoke at the annual conference on security where he articulated a revisited Russian position on international affairs and claimed for a rightful place for Russia on world arena. It was the first time Russia dared to oppose the current world order and asserted itself as a powerful international actor. During this speech, Putin opened a new page in Russian foreign policy: he declared that Russia would no longer rely on the partnership with the West (conceived in a broader sense) and from then onwards would pursue an independent and multidirectional foreign policy. This move was a reactive one in response to an alleged aggressive (but secret) Western policy in Russian near abroad and the new round of Russian containment

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(Lavrov 2007). This reactivity characterizes and defines Russian foreign policy until today. However, by that time, it did not mean a deliberate turn of Russia to the East. The turning point in the reorientation of Russian foreign policy to the East should be placed in the period of 2008–2014. During this period, Russia entered a profound conflict with European and American political elites and, arguably, this state-of-play did not leave room for any manoeuvre in world politics, except the turn to the East. The year 2008 brought major disagreements between Russia and the West. In February 2008, Kosovo’s proclaimed independency—supported by a majority of European countries—was not recognized by Serbia and Russia. Six months later, as result of the Russian-Georgian war, Abkhazia and Southern Ossetia proclaimed their independence, supported by Russia together with Nicaragua, Venezuela and Syria. An armed conflict and newly drawn borders provoked a very negative reaction in Europe and overseas. Moscow demonstrated that it was capable and ready to defend its interests in its perceived zone of influence. The country expected European partners to agree with its ambitions or to accept at least that, in its zone of influence, Russia had the right to act independently. Although a special report issued by a group of European experts a year later acknowledged Georgian responsibility on the outbreak of war (Independent International Fact-Finding Mission on the Conflict in Georgia 2009), it blamed Russia for a disproportional reaction and massive use of force. The short suspension of the dialogue with Russia in Euro-Atlantic structures did not lead to a fundamental split between Moscow and the West, but it left traces in memories of both sides. Since then, new positions, concerning the relations between Russia and the European Union, started to prevail in Russian political elites. Gradually, the Kremlin had been losing hope about an equal partnership with the West and even about the possibility of stable and trustful cooperation. It was after the 2008 failure of the Russian media campaign over the conflict in Georgia that the Kremlin launched a full-scale program of Russian soft power, which nowadays is seen as a successful, yet aggressive, Russian foreign policy tool (Zeleneva, Ageeva 2017, p. 181). The major split with the West and a definitive turn to the East happened a few years later when the Crimean crisis burst out in 2014. Annexation of the Crimean peninsula and support of separatist republics in Eastern Ukraine crossed the red line in Russian relationship with the West.

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The EU, together with American allies, introduced unprecedented measures since the end of Cold War in order to “punish” and contain Russia. Soon, Russia found itself in almost complete isolation. Sergey Karaganov, an influential advisor to the Kremlin, stated in January 2016: By 2015 almost everyone in Russian political elite accepted that confrontation with the West is not accidental and will last for a long time; that Russia will have to live in another reality, very different from that naïve dreamers about integration with Europe have imagined -- even though they remained committed to Russian independent and sovereign stance. These dreamers dominated in Russian politics up to 2000s. (Karaganov 2016)

Under these circumstances, Moscow appears to have been pushed towards a reorientation of its foreign policy to the East. Already in May 2014, Putin made an official visit to Shanghai to sign the deal over a new gas supply to China, named “Force of Siberia”. The preparation of this deal started long before the Ukrainian crisis, but it took many efforts from both sides to overcome contradictions, and eventually the Russian side was eager to have this deal for whatever price—the conditions of the deal as well as the final gas price for China remain secret until today (Kitaj nabiraet …). Respective institutional arrangements in the Russian government were undertaken: vice-prime minister Igor Shuvalov was appointed responsible for cooperation with China, and a new position of vice-minister of Economics, responsible for China, was created. Official documents reflected this significant turn in Russian foreign policy. In the 1990’s and until the 2010’s, mostly European and American partners (after the countries of the Commonwealth of Independent States—CIS) were listed as main partners in Russian foreign policy documents. Throughout Russian foreign policy concepts issued in 1993, 2000, 2008 and even 2013, China was not even in the top-10 of Russian regional priorities, lagging behind the CIS, Europe and the United States. Moreover, for a long time, in Russian official documents there was not even a separate paragraph on Sino-Russian cooperation. China was mentioned in the context of the changing world order and emergence of a new pole in international relations together with other Asian major economies or within international informal forums such as the BRICS and RIC (Russia-India-China). Only in 2016, was China referred as a

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Russian strategic partner for the first time. Nevertheless, as it was the case for previous concepts, China was not among the first ten Russian priorities, which basically remained the same, and were as follow: CIS, Eurasian partners, Europe and the US. Thus, Russian official documents entrenched Moscow’s turn to the West as an official and deliberate policy that still lays grounds for further deepening and enlargement of Sino-Russian cooperation in economic, military and cultural spheres.

Russian-Chinese Relations We noted above that the European orientation of the Russian Federation’s external policy has been the one that most characterizes the country’s positioning, both due to existing economic interdependencies and the importance of the continent in the country’s perception of its security environment and threats. Once Moscow started to question this orientation from 2008 onwards, the BRICS forum emerged as a diplomatic tool to enact contestation of the liberal order, ahead of what is now labelled the “illiberal turn” (Ikenberry 2018). We discuss below the main features of Russia’s relationship with China, namely in the BRICS context, and how the Kremlin equates the added-value of these relations. The above-mentioned Eurasian Union has implications beyond the Russian assertion of a more competitive stance in sharing hegemony with the EU on the European continent. From an international systemic perspective, the EAU is a response to the consequences of neoliberal globalization, which has not brought the expected dividends in CIS countries. In this sense, “the Project of the Eurasian Union (…) is part of a more general movement in world politics towards regionalization. Possible developments are discussed in terms of three scenarios: isolation from the world economy, the stepping stone to further integration into the world economy; and a more autonomous counterpoint within the world economy. The third variety would only be possible with current stronger links to the BRICS countries and the Shanghai cooperative organization” (Lane 2014). Russia is a big country like the other BRICS, with the exception of South Africa. Despite a concomitant political will to change the domination of rich countries in world balance (especially Euro-American domination), Russian performance and the relations that the Kremlin develops with each BRIC country have remarkable distinctive features. In 2012,

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the group represented 18% of world GDP, 40% of the world population, 15% of world trade and 40% of monetary reserves. They have originated 30% of world growth since the acronym was created in 2001. None of the BRICS is considered a rich country because of its GDP per capita, much lower than the triad countries and average. Russia’s complementarity with China and India lies in its capacity in raw materials, energy and agriculture (as in Brazil and South Africa) (La Documentation Française 2012). The only BRIC with which Russia has borders is China. The SinoRussian relationship can be summed up as “pragmatism” and “asymmetry”, with the continuation of historical territorial disputes to detriment of Beijing (Vaz-Pinto 2014). The Treaty of 2001, above-mentioned, contains an ambition for global strategic balance. It was signed in the context of the US withdrawal from the Anti-Ballistic Missile Treaty (ABM Treaty of 1972), contested by Moscow and Beijing. The year that marks the divergence of course between the two countries is 1979. As China began its economic opening to the world, the former USSR invaded Afghanistan. This mismatch of ten years with the Russian opening informs of China’s relative advancement (ibid.). With regard to China and Southeast Asia, the Russian Far East has a particular role, as evidenced by the 2010 agreement on cooperation, between the Far East and Eastern Siberia regions with North-East China, valid until 2018. For Gras and Shvedov (2010), Moscow’s goal is to link the Far East to Asian growth. In Russian eyes, BRI trade corridors would be an instrument for development. A 2016 memorandum of understanding between the two countries points to strengthening production and infrastructure in this region (Perovic and Zogg 2019). One of the main items of the bilateral agenda is the energy issue as result of the Russian guidelines, and of China’s willingness to diversify and fulfil its appetite for energy resources. In this regard, Vaz-Pinto (2014) highlights the PRC’s doubts about Russia’s ability to fulfil contracts, both technically and politically, because Russia is perceived as using energy as a political weapon. Overall, Moscow is not seen as a stable and reliable partner (Eder 2014). As we mentioned earlier, in May 2014, Moscow and Beijing finalized a gas deal initialled ten years before. Moscow would supply 38 billion m3 from 2018 onwards, against the 161.5 billion m3 towards Europe. The deal is still not enough to end Russia’s reliance on

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the European market, but it may pave the way for a strategic reorientation. Although energy is the only business sector where China has significantly invested in Russia, it is well below the share of BRI investments in Kazakhstan (Zogg 2019). In the 2000s, all BRICS experienced an increase in their per capita GDP, with Russia taking the lead, closely followed by Brazil, above the world average. China and India remained below the world average. South Africa has evolved differently, with little increase and well below the world average. However, Russia’s growth rate was quite lower than that of China and India, with about 4% in 2011, like Brazil. Although Russia has recorded higher inflation rates than the other BRICS, it has had the second best performance in terms of unemployment rate and poverty rate. It stands out favourably on literacy rates and human development index. It also stands out positively in terms of public debt, which represented 12% of GDP in 2011, a much lower figure than its counterparts. However, it has been the only BRIC with negative population growth. In terms of trade balance, Russia and China clearly differentiate from the others with an advantageous position from Beijing. Russia’s intra-BRICS trade had the following characteristics in 2011: 85% with China, 8% with India, 7% with Brazil and 0% with South Africa. China has an overwhelming weight in intra-BRICS trade, but the country maintains a more balanced trade relationship with the others, with about 30% of trade with all but Pretoria (only 16%) (Mathur and Dasgupta 2013, pp. 9–10). The most recent efforts, notably since the fourth BRICS Summit in New Delhi in March 2012, focus on increasing trade and expanding areas of cooperation. There is still much scope for coordinating their positions in multilateral fora, in particular in the World Trade Organisation (WTO). In Russia’s relations with the BRICS, the geopolitical dimension of the ties created with China and the mixed relations of cooperation and competition stand out. Today’s relations in Eurasia resurrect the idea of the “big game”, which refers to the competition in Central Asia between Tsarist Russia and the British Empire in the late nineteenth century. There is currently a greater number of actors involved in the competition for control of this strategic zone. Faced with the uncertainty caused by the collapse of the USSR (new borders and former Soviet republics in Central Asia), the Russian-Chinese response was a cooperation policy that led to the creation of the Shanghai Five group in 1996. There was concern about halting the diminishing Sino-Russian influence in the

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region in favour of the US. This explains the intensification of cooperation between the two powers with the establishment of the Shanghai Cooperation Organization (SCO) in 2001 and the refusal to grant the US an observer status. Despite the membership of four Central Asian countries, the SCO is dominated by Moscow and Beijing, both pursuing different objectives. From the Kremlin’s point of view, the organisation is comparable to the Collective Security Treaty Organization (CSTO) created under the Russian aegis in 1992 and relaunched in 2002. Both organizations serve Moscow’s three central goals in Central Asia: to be a hub of power in the region (CIS), maintain pro-Russian regimes and limit both US and Chinese influence in the area. Frost (2009) considers that the Kremlin has been successful in asserting itself as the representative of the Central Asian and Southern Caucasus countries in dialogues with China on security issues. However, should the SCO assume a larger role in this area, Moscow could lose influence over Beijing. The Russian military exercises in Central Asia (CSTO) and its membership in the SCO not only reveal prestige but also present a unique front against Washington. Maintaining its leadership in the CSTO and the primacy of the security focus of its relation with China in Eurasia has been able to ensure Moscow a fragile political balance with China. Strong in its position as the second largest weapon exporter in the world (Sipri 2019), the Kremlin has managed to impose itself particularly in the aeronautical field by selling the Sukhoi 30 fighter jet to China and India in particular. Although the sustainability of a military modernization that consumes 20% of public spending is questionable, Putin launched the country into a considerable effort by 2020 (The Economist 2014). It is about reforming, modernizing and professionalizing the armed forces and weapon systems that still follow the model of Soviet industry and organization. Until 2005, China was the main Russian weapon market. India is now the main buyer to Russia, because of Beijing’s autonomy in this field (Les Echos 2014). Accompanying this trend is a 24% increase in Indo-Russian trade in 2012 (Upadhyay 2013) and Russian support for India’s entry into SCO.

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Competition Over Central Asian Countries Since the 1990s, Russia and China undertook successive steps to create an institutional framework for cooperation in Eurasia. The Shanghai Cooperation Organization (SCO) was initially designed as a joint platform for cooperation in multiple areas. Yet, this organization has not contributed to the resolution of existing tensions between Russia and China in the region, as each country pursued its own interests and no joint comprehensive action was undertaken (Kolegova 2015, p. 118). Russia has been insisting on security arrangements and military cooperation, while China has expressed a clear indifference towards this aspect of cooperation. In the economic sphere, by contrast, China has been expanding in Central Asian markets engendering fears among SCO members. The Eurasian Economic Union (EAEU), launched in 2015, is one of most successful Russian-led projects in post-Soviet space. Recently the EAEU has signed an agreement on cooperation with China designed to enhance economic cooperation between EAEU members and the Eastern neighbour. However, due to serious malfunctioning of the EAEU, all external contacts of the union barely go beyond official political declarations. From the general perspective, over the past 20 years, China has been investing more in bilateral economic cooperation with Central Asian countries than in multilateral initiatives. The extent of Central Asian countries debts to China is self-explanatory: 30% of GDP in Kirgis case, 15% in Tajik and 5% in Uzbek cases (Horn, Reinhart and Trebesch 2019, p. 16). Besides a very slow progress in Russian-Chinese relations and institutional weaknesses of joint regional initiatives, there are regions where Moscow and China are blatant competitors, such as Africa and Eurasia. For Russia, Eurasia is a region of outmost importance, the so called “near abroad” has been a priority for the Kremlin since the collapse of Soviet Union, and economic, political and military reasons explain Russian stance. Initially, Russia undertook many efforts to retain former Soviet Union republics in its orbit. The CIS was the first initiative designed to unite former Soviet republics. In Russia, it was called an “orderly divorce”—no economic or political cooperation was organized under the aegis of this organization. Later on, experts called it “a false start” for Eurasian integration, which was launched in the 2000s as mentioned above. The new project was aimed at countries that were more involved in economic cooperation with Russia and more motivated to deepen their ties with Moscow. By 2015, Russia had brought together

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four countries (Armenia, Belorussia, Kazakhstan and Kyrgyzstan) to form the Eurasian Economic Union. In fact, Central Asia has been, since the beginning of the twenty-first century, the focal point of Sino-Russian attention. As in relations with the EU, the energy relationship between the two countries is paramount, and the countries of this region are instrumental. If Beijing has invested in a “strategic partnership” with Moscow and accepted compromises (notably using the OCX) vis-à-vis the Russian stance, which looks to Central Asia as a sphere of influence (a part of its “near neighbourhood”), this trend is unlikely to last as its economic domination grows. This scenario clashes with the Russian vision of a Kremlin-led Eurasian Union (see above) and is sustained, according to Eder (2014), by two emerging factors. On the one hand, the US withdrawal from Afghanistan removed the political cement of the common struggle against US domination in the region. On the other hand, the remaining Chinese dependence on resources located in Russian soil is already diminishing, due to the various energy projects that materialized with Kyrgyzstan, Kazakhstan and Tajikistan. Therefore, there are foreshadows of a geopolitical turning point in Central Asia to the detriment of Moscow. Eder (2014) compares this scenario with the Kremlin’s negative perception of the EU’s growing involvement in its neighbourhood (Belarus and Ukraine), and predicts Russia’s disproportionate reactions. However, China’s marginalization of Russia as a trading and energy partner from Central Asian countries is seen as a course already being taken. The dimension of soft power also demonstrates how Russia and Chinese efforts have been significant yet concurrent in Central Asia. Russia included soft power instruments in its foreign policy toolkit in late 2000s just after an impressive media failure during the Russian-Georgian conflict, as mentioned before. Back in August 2008, Georgian vision of conflict completely dominated in foreign media and audiences and Russia found itself voiceless in the international arena. During the past ten years, the Kremlin elaborated its own soft power strategy and undertook significant institutional efforts to implement it. Cultural and educational institutions (network of Russian centres of culture and science; Russian world foundation centres; Gorchakov foundation) together with international media (Russia Today, lately RT) formed core elements of Russian soft power strategy (Zeleneva and Ageeva 2017). Since its early stages, Russian soft power strategy placed special emphasis on Central Asia countries in order to hold former fellow republics in

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Russian orbit (Ageeva 2016, p. 13). Russia established a large network of Russian centres of science and culture (RCSC) and Russian world foundation centres: six in Tajikistan, five in Kirgizstan, four in Kazakhstan and one in Uzbekistan. The Gorchakov foundation has been organizing events for experts, young leaders and politicians from Central Asia on regular basis (School on Central Asia, annually since 2012; Security Academy, joint project with CSTO; Russian-Tajik youth forum, etc.). Russian foreign media are strongly represented in Central Asia. The TV broadcast Russia Today, launched in 2005, has been broadcasting in Russian language in all Central Asian republics including Turkmenistan. A new internet-media “Sputnik”, founded in 2014, has been offering news and analytical articles in all Central Asian languages (except Turkmen and Georgian, although Abkhaz and Ossetian language are presented). Besides these media, regular Russian TV channels continue to be popular in Central Asia as audiences still value Russian entertainment content (series, TV-shows, movies, etc.). The Russian media presence reinforces large dominance of the Russian language in the region: 80% of population in Kazakhstan, 50% in Uzbekistan, 48% in Kirgizstan, and 20% in Tajikistan are Russian-speaking. In all Central Asian countries, the Russian language is granted an official status that allows for its use in documents, state institutions and education. In Kazakhstan and Kirgizstan, it has status of official state language, and in Uzbekistan and Tajikistan, Russian is an “interlanguage”. The Russian government has also been supporting education in Russian in the region. iI Kazakhstan today, there are 4077 schools where classes are taught in Russian, 739 in Uzbekistan, 350 in Kirgizstan, 29 in Tajikistan (Starchak 2010, p. 61). Russian universities provide students from Central Asia with budget places for higher education and with modest stipends: 36% of all foreign students in Russia come from Kazakhstan and 11% from Uzbekistan (Molodov 2017, p. 95). However, there are also negative tendencies for Russian language in Central Asia: for example, in 2016 Kazakhstan switched from Cyrillic to Latin alphabet and encouraged the learning of English in schools (Russia Today 2018). The Chinese language can also become a competitor to Russian in the nearest future. Expansion of Chinese culture and language has been an important part of Beijing soft power in the region. Chinese soft power emerged simultaneously with the Russian one, and was widely criticized as was the Russian approach. Hu Tsingtao was the first Chinese leader who initiated the elaboration of Chinese soft power back in 2003. In 2007

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during the 17th Congress of the Communist party, a new strategy on cultural soft power was adopted. Its main goal was to increase international influence of China. In 2011, the Chinese government published a new document on soft power that foresaw the spreading of a positive image of China as a country which implemented successful economic reforms and had become an open and friendly country. As Russia, China also used an institutional approach to soft power (Lebedeva 2014, p. 51) and opened a large network of Confucius Institutes across the world. Today, they amount to 516 centres and 1076 classes in 146 countries. Their number in Central Asia is already comparable with Russian cultural centres: 16 RCSCs and Russian world centres, and already 13 Confucius centres operate in Central Asia (5 in Kazakhstan, 4 in Kirgizstan, 2 in Uzbekistan and 2 in Tajikistan). Confucius institutes organize cultural and scientific events and provide opportunities to learn Chinese. Under the auspices of these institutions, numerous foundations operate in the region. They provide scholarships for postgraduate courses in China for professionals from Central Asia. 2000 Chinese teachers come to Central Asia annually to teach Chinese in Confucius Institutes and other organizations (Izimov 2014). As a result, the number of Central Asian students learning Chinese is increasing. In 2006, there were 400 students learning Chinese in Bishkek State University, in 2017 they were already 700. Moreover, with financial support from Beijing in Bishkek, a new school with advanced Chinese learning was inaugurated in 2017. Chinese higher education is becoming more popular among Central Asian youth. In 2017, about 13,200 Kazakh students were studying in China, about 11,000 Kirgiz students, 5000 Uzbek students and few hundreds of Tajik students. Over the past ten years, the number of Kazakh students who went to study in China increased by 10 (Shustov 2018). Meanwhile, Chinese soft power is facing a greater challenge in Central Asia in the form of sinophobia. There are strong fears shared by elites and by broader audiences about potential Chinese expansion in the region. In 2016, massive protests set Kazakhstan in turmoil as Kazakhs opposed to suggested amendments in the National Land Code which, if adopted, would have allowed Chinese businessmen to extend the lease of Kazakh territories. Similar perceptions started to penetrate Tajik society after Dushanbe decided to cede 1500 km2 of disputed territories in 2011 (Zamon 2017).

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Conclusion The Chinese vector in Russian foreign policy became significant since the 2000s, especially after Russia lost hope for equal dialogue and partnership with the West. Five years have passed since the Kremlin made its pivot move to the East. What are the results of Russian-Chinese cooperation? Did the momentum go beyond official declaration about the strategic importance of China to Russia? Russian experts tend to be sceptical about a breakthrough in Russian-Chinese relations. Trade, investment and infrastructure projects have not increased significantly over the past years, even under the auspices of the BRI. This is partly explained by Russian weak economic growth, tough investment climate and historical flaws in bureaucracy and corruption. Energy is a bulk in Russian relations with Beijing because of China’s hunger for natural resources. In this relationship, Central Asia has taken a core place since the beginning of the twenty-first century, to detriment of Moscow’s role in this portion of the “near abroad”. China has been working on a “strategic partnership” with the Kremlin, and may be willing to cede its dominance in the region as a nod to Russia’s sphere of influence. Nonetheless, Beijing’s efforts to cool tensions, namely by advancing its claims through the SCO, will likely fade away. Firstly, the geopolitical view to balance against the US and contest the liberal order is difficult to materialize for two countries that perceive themselves as great powers. Secondly, China’s current dependency on Russian gas and minerals is bound to falter, as Beijing’s energy projects with Kyrgyzstan, Kazakhstan and Tajikistan materialize. In fact, China is not expected to withdraw from the region, despite Moscow’s claims of a Russian-led Eurasian Union. In the long term, a geopolitical shift is very likely to occur in favour of Beijing. As a result, isolation or confrontation in Europe does not appear to be the best choice for the Kremlin at a time when its future in Asia is under threat by China’s growing role, and the country’s tenuous position across the Eurasian landmass. Although China is open to collaboration with Russia, especially in the Russian Far East, it is not the priority for Beijing. China and its BRI are interested in economic projects, but Beijing is reluctant to firm any political commitment in relations with Russia. The Chinese position could be phrased the following way: “China and Russia are close partners, but not allies”.

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Index

A Afghanistan-China Air Corridor, 503 Afghanistan Contact Group, 498 Africa, xxiii, 14, 17, 51, 58, 60, 86, 113, 115, 150, 155–158, 162– 164, 168–170, 190, 219–222, 249, 262, 263, 267, 285, 286, 344–346, 348, 357, 375, 399, 440, 512, 533 Agreement, xvii, xx, xxii, 24, 34, 36, 48, 62, 65, 111, 136, 151, 153, 164, 166, 168, 170, 174, 183, 186, 192, 193, 218, 220, 230, 243, 246, 247, 250, 291, 293, 294, 296, 297, 299–304, 312, 319, 321, 329–331, 346, 351, 358, 366, 370, 380–382, 399, 414, 422, 424, 477, 492–494, 500, 510, 512, 524, 530, 533 Agricultural Bank of China, 119, 122, 124, 180 Alibaba, 73 American System of Economics, 321

Amu Darya, 503–505 Angola Mode, 158, 163, 169 Asia, xvi, xxi, xxiii, 36, 53, 58, 60, 67, 86, 89, 99, 111–113, 115, 122, 126–128, 133, 135, 138, 156, 168, 174, 219, 221, 222, 243, 249, 264, 267, 269, 285, 286, 290, 291, 326, 375, 393, 399, 429, 440, 441, 461, 467, 469–471, 473, 474, 476, 484, 537 Asian Development Bank (ADB), 15, 97, 98, 100, 122, 133, 134, 136–139, 164, 170, 180, 187, 481 Asian Infrastructure Investment Bank (AIIB), xii, 15, 99, 104, 125, 126, 136, 138, 139, 164, 167, 170, 183, 185–187, 243, 250, 267, 272, 286, 315, 373, 374, 399, 428, 445 Association of German Chambers of Industry and Commerce

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 F. J. B. S. Leandro and P. A. B. Duarte (eds.), The Belt and Road Initiative, https://doi.org/10.1007/978-981-15-2564-3

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542

INDEX

(Deutsche Industrie- und Handelskammertag, DIHK), 451 Association of Southeast Asian Nations (ASEAN), 39, 40, 77, 113, 149, 207, 212, 268, 269, 285, 375 Asymmetry, 245, 251, 368, 384, 530 Azores, xx, 383, 385, 390, 403, 404 Azores archipelago, 383, 405 B Bachrach, Peter, 14 Bank of China, 100, 122, 124, 180, 380, 381, 397 Baratz, Morton, 14 Beijing Consensus, 15, 104, 260, 267, 274, 377 Beja, xx, 378 Belt and Road Forum for International Cooperation in Beijing in May 2017, 165, 166 Belt and Road Initiative (BRI), vii, xi, xxxi, xxxiii, xxxv, xxxvii, xxxix, 4, 6, 7, 10, 13, 14, 18, 23, 30, 32, 45, 53, 62, 64, 65, 76, 86, 87, 96, 101, 111, 113, 115, 117, 118, 122, 127, 128, 133, 149, 151, 165, 167, 170, 173, 174, 177, 192, 205, 218, 239, 241, 244, 246, 248, 249, 255, 283–292, 295, 296, 300–302, 305, 310, 313–316, 319, 320, 322, 325, 364, 412, 433, 437, 489, 490, 524 Bering Strait tunnel, 332, 333 Bilateral Investment Treaty (BIT), 303, 305 Biodiversity, xvii, 97, 133, 174, 177, 190, 192 BOC Macao, 382 Borders, xx, xxii, 56, 75, 87, 93, 95, 182, 191, 192, 244, 248–250, 267, 331, 336, 338, 363–379,

382–386, 460, 462, 465–467, 475, 480, 482, 493, 504–512, 527, 530, 531 Bottom-up pressure, 434 Bourdieu, Pierre, 18, 257, 270, 271 BRI cooperation documents, 218, 223, 224, 226 BRICS, xxiii, 15, 34, 71, 99, 259, 323, 374, 428, 528–531 BRI development model and norms, 228 Budapest-Belgrade Railway, xix, 285, 310 C Capacities, 3, 8, 11, 30, 70, 88–90, 92, 97, 101, 121, 125, 127, 128, 130, 136–138, 150, 164, 167, 170, 177, 179, 180, 185, 191, 242–244, 249, 264, 329, 393, 397, 401, 402, 420, 462, 479, 484, 505, 506, 510, 530 Capacity enhancement, 95–97 Carr, E.H., 56, 57 CELAC-China Forum, 116 Central American railroad, 331 Central and Eastern European Countries (CEEC), xxi, 126, 127, 272, 314, 411–413, 416, 417, 419–427, 429 Central and Eastern Europe (CEE), xiii, xxi, 290, 303, 411, 416, 419–427 Central Asia/Central Asian Countries, xix, xxii, 17, 38, 39, 61, 86, 97, 120, 130, 149, 240, 249, 285, 286, 346, 352, 434, 460, 461, 463–467, 469, 471, 473, 476– 480, 482, 484, 491–494, 498, 499, 505–514, 524, 532–536 Central Bioceanic Railway Corridor (CBRC), 328, 338

INDEX

21st Century Maritime Silk Road (MSRI), 39, 87, 113, 115, 151, 173, 174, 239, 249, 256, 266, 270, 285, 288, 292, 376, 385, 402, 478 China, vii, viii, xi, xii, xiv–xxiii, xxx, xxxi, xxxiii–xxxix, 3–6, 12–19, 25–39, 41, 45, 48–54, 56–63, 65–69, 71–79, 86–89, 91, 95, 97, 98, 101, 103–105, 112–114, 117–133, 135, 136, 138–140, 149–154, 157–160, 163–170, 174, 177–179, 181–185, 188, 191–193, 203–208, 210, 216– 218, 220, 222–230, 233, 234, 240–251, 256–270, 272–275, 283, 285, 288, 290, 291, 301, 305, 311, 314, 316, 323, 326, 336, 343, 346, 358, 364, 373, 377, 382, 393, 404, 412, 416, 420, 426, 440, 442, 467, 473, 481, 482, 491, 493, 501, 510, 525, 528, 530–534, 536, 537 China-Africa Development Fund (CADFund), 158, 169, 345 China-Central Asia-West Economic Corridor (CCAWEC), 489, 491, 499, 506 China Construction Bank, 119, 124, 180 China cooperation, xxii, 490 China Development Bank (CDB), 100, 119, 122–125, 129, 158, 164, 170, 180, 183, 184, 311, 350 China National Petroleum Corporation (CNPC), 159, 489, 503, 505 China-Pakistan Economic Corridor (CPEC), 57, 75, 114, 115, 175, 179, 489, 491, 496, 499, 511, 512, 514

543

China Railway Construction Corp. (CRCC), 74, 336 China Railway Express (CRE), 247, 312 China’s State Council, 120, 121, 130, 131, 179 China-US Geopolitics, 393 Chinese diplomacy, 30, 31, 33, 62, 346, 478 Chinese discourse, 12, 32, 34, 38, 413 Chinese dream, 4, 7, 10, 18, 33, 36, 64, 71, 78, 241, 474 Chinese economy, 52, 112, 129, 153, 161, 169, 443, 471, 482 Chinese Finance Ministry, 136, 167 Chinese investment in Portugal, 396–398 Chinese investments in Africa, 348 Chinese language, xvii, 65, 217, 233, 348, 351, 535 Chinese partnerships, xvii, 205–207, 217, 223, 227–234, 377 Chinese partnerships with Portuguesespeaking countries, 225, 227 Chinese partnership with India, 204, 208, 209, 213, 216 Chinese partnership with Russia, 14, 204, 208, 209, 213, 216, 229, 525, 537 Chinese State-Owned Banks (STOB), 119, 123–126, 130, 131, 134, 180, 184, 313 Chinese State-Owned Enterprises (STOE), 119, 123, 125, 128, 130, 131, 133, 134, 153 Chinese State-Own-Enterprises (SOEs), 75, 158, 159 City Football Group (CFG), 74 Climate change, xvii, 93, 122, 136, 174, 181, 184, 192, 194, 245, 266, 414, 415, 445

544

INDEX

Co-bordering, 364, 371–373 Collective Security Treaty Organization (CSTO), 532, 535 Common commercial policy, 292–296, 307, 312 Commonwealth of Independent States (CIS), 475, 528, 529, 532, 533 Communities of Security Practice, 271 Community of Human Destiny, 423 Competence, 67, 265, 284, 285, 292, 295, 296, 298, 300, 301, 304, 306, 307, 315 Competition, xviii, 13, 31, 66, 70, 248, 256, 270, 274, 275, 291, 293, 294, 316, 364, 386, 393, 402, 404, 414, 423, 424, 434, 444, 450, 467, 491, 513, 515, 524, 531 Comprehensive strategic cooperative partnership, 214, 220, 221, 226 Conceptual gaps, 259, 260 Connectivity, xii, xiii, xv, xvi, xix, xxi, 13, 36, 37, 54, 87, 96, 98, 102, 111–113, 126, 127, 136, 137, 139, 151, 154, 162, 167, 168, 206, 231, 244–246, 249, 264, 266, 268–270, 272, 290, 295, 301, 322, 324, 365, 375, 376, 384, 402, 412, 416, 417, 420, 421, 425, 427, 429, 476, 496 Connectivity Platform for EU-China Cooperation, 290, 301, 316 16+1 Cooperation, xxi, 412, 413, 416, 417, 419, 421–425, 427 Cooperation between China and Central and Eastern European Countries (17+1), 314, 412 Cooperative partnership, 153, 168, 212, 214–217, 221, 226, 227, 489, 493, 494, 501 Cooper, Hal, 95, 333 Copper, 503–505

Counter-terrorism, 496, 508–510 Culture/cultural, xi–xiii, xxiii, 6, 10, 11, 13, 16, 24, 29, 32, 33, 36–38, 48, 55, 62–66, 68, 71, 75–78, 98, 112, 155, 159, 204, 206, 211, 229, 232, 233, 258–260, 264, 338, 347, 348, 350, 351, 355, 357, 363–366, 368–370, 372, 377, 378, 386, 394, 395, 400, 412, 420, 424, 426, 433, 441, 451, 460, 461, 465, 466, 473–476, 482, 484, 496, 524, 525, 529, 534–536

D Dahl, Robert, 11 Darien Gap, 332 De-bordering, xx, 364, 369–378, 382, 384–386 Defensive realism, 492, 514 Different types of Chinese partnerships, 213 Digeser, Peter, 16 Dimensions of power, xiv, 4, 11 Diplomacy, 13, 29, 31, 36, 37, 66, 68, 69, 154, 157, 216, 220, 248, 347, 352, 405, 441, 471, 508, 510, 514 Direct investment, 241, 284, 292, 294, 295, 301–303, 305, 307, 310, 345, 380, 396 Direct utility, 95–97 Dominance, 92, 351, 356, 377, 413, 417, 418, 427, 461, 463, 465, 466, 471, 473, 475, 526, 535, 537 Dunning Eclectic Paradigm (1980; 1988), 161

INDEX

E East Turkestan Islamic Movement (ETIM), 489, 495, 509 Economic Backwardness Theory, 161 Electricidade de Portugal (EDP), 380, 381, 390, 394, 396, 397, 399 Energy, 87, 122, 137, 151, 158, 163, 174, 177–179, 181, 183, 186, 187, 189, 190, 192, 206, 212, 233, 240, 267, 270, 286, 309, 313, 324, 329, 347, 381, 390, 392, 396–398, 401, 402, 444, 445, 464–467, 474, 476, 478–481, 503, 524, 530, 531, 534, 537 Environment, xvii, 8, 47, 58, 87, 95, 96, 98, 101, 165, 174, 177–181, 189, 192–194, 206, 244, 257, 262, 266, 268, 270, 293, 329, 333, 343, 346, 354, 380, 394, 436, 451, 452, 513, 529 Environmental Impact Assessment (EIA), 137, 178, 192 Environmental policy, 174 EU-China—A strategic outlook, 291, 445, 451 EU-China trade relations, 275, 503 EU Global Strategy (EUGS), 256, 264 Eurasia, xiii, 30, 31, 34, 38, 150, 290, 375, 379, 460, 462, 463, 465, 467, 474, 475, 477, 479, 484, 524, 531–533 Eurasian Economic Union (EAEU), xxiii, 232, 533, 534 Euro-Atlantic, 389, 392, 404, 527 Europe, xviii, xxi–xxiii, 36, 58, 60, 86, 88, 97, 98, 113–115, 127, 149, 150, 156, 157, 165, 170, 174, 194, 219, 221, 222, 224, 240, 241, 245–251, 261, 265, 275, 283, 286, 287, 290, 311,

545

316, 346, 349, 352, 357, 370, 378, 382, 383, 390–394, 397, 398, 402, 405, 418, 422, 424, 425, 434, 438, 439, 441, 443, 445, 447, 461, 463, 466, 469, 473–476, 478, 479, 483–485, 505, 512, 524, 525, 527–529, 537 European Commission, 193, 245, 246, 251, 256, 258, 261, 264, 269, 270, 290, 291, 293, 301, 306, 312, 315, 391, 392, 445, 525 European Court of Justice (ECJ), 284, 293–303, 306, 307, 312, 314, 315 European Maritime Security Strategy (EUMSS), 265, 269 European Union (EU), xiii, xviii, xx, 34, 51, 54, 58, 60, 86, 119, 211, 241, 243, 244, 249, 250, 264, 265, 292, 314, 364, 365, 370, 371, 376, 389, 391, 393, 400, 423, 435, 438, 439, 444–446, 449–452, 466, 474, 478, 524, 527 European Union-China Relations, 246, 256, 258, 269, 270 European Union-China Strategic Partnership, 258 EU Strategy on Connecting Europe and Asia, 269, 272 Exclusive competence, 284, 292–295, 297–300, 303, 304, 307, 312 Export, 4, 12, 14, 17, 112, 127, 151, 153, 163, 183, 184, 229, 247, 251, 261, 286, 293, 329, 380, 391, 393, 395, 399, 421, 443, 462, 463, 465, 470, 477, 479, 482–484, 493, 494, 501–503 Export-Import Bank of China, 122–125, 129, 132, 180, 311

546

INDEX

External action, 7, 284, 293, 294, 300, 301, 304, 316 F Federal Association of German Industry (Bundesverband der Deutschen Industrie, BDI), 449 Federal government, 436, 446–448, 450–452 FIFA, 66, 67, 72–74 Five Principles of Peaceful Coexistence, 62, 73, 77, 258 Football, xv, 63, 64, 66–68, 72–79, 386 Foreign Direct Investment (FDI), 101, 128, 153, 160, 161, 163, 164, 169, 241, 285, 288, 293, 306–310, 323, 346, 365, 380, 397, 446, 447, 466, 471, 472, 479, 483 Foreign trade, 390, 463, 466, 476, 483 Fossil Fuels, 183, 186, 187 Fosun, 75, 381, 396, 397 Free Trade Agreement (FTA), 36, 243, 293, 299, 312, 365, 369, 370, 477 G Geoeconomics, xx, 102, 348 Geopolitical dominance, 88 Geopolitics, xii, xiv–xvi, 13, 35, 62, 73, 78, 363 German-Chinese cooperation, xxi, 434, 444, 451 German foreign policy, 434, 435, 438, 439 German foreign policy strategy Globalisierung gestalten - Partnerschaften ausbauen Verantwortung teilen, 439

Ghani, Ashraf, 495, 500 Global economic governance, xxi, 242, 412, 413, 415, 416, 427 Globalization, 28, 30, 46, 49, 50, 53, 55, 70, 77, 93, 167, 168, 242–244, 250, 251, 350, 353, 365, 377, 412, 413, 415–417, 434, 439, 440, 463, 529 Global narrative, xiv Golden triangle, 433 Good Neighbourly Relations, 492, 512 Good Neighbour Policy, 492, 510 Grand strategy, xiv, 4, 5, 7–11, 13, 16, 18, 19, 89, 470, 474 Great Urban Project, 352 Green finance, 134, 177 Gulf of Aden, 262, 263, 265 H Habitus, 257, 270, 271, 273, 274 Hajigak, 505 Hamilton, Alexander, 321 Heart of Asia, 494 Hydrocarbon, 401, 484, 491, 503, 504 I Ibero-American Integration, 327 Identity, xiv, xviii, xxiii, 5, 16–18, 29, 256, 261, 264, 271, 274, 275, 349, 364, 366, 367, 370, 378, 413, 415, 417, 418, 426–429, 460, 461, 465, 466, 469, 475, 524 Implementation, xii, xix, xx, xxii, 5, 6, 8, 9, 11, 14, 19, 65, 69, 98, 124, 128, 131, 135–138, 140, 150, 160, 165–168, 170, 206, 218, 225, 227, 231–233, 246, 248, 249, 256, 260, 269, 275, 284,

INDEX

313, 345, 364, 370, 373, 403, 420, 426, 442, 444, 448, 490, 491, 493 Import, 12, 151, 158, 247, 261, 268, 395, 421, 443, 462, 463, 484, 502 Indirect investment, 187, 294 Industrial and Commercial Bank of China (ICBC), 119, 124, 180, 397 Industrial sector, 240, 248, 452 Influence, xi, xiv, xv, xxii, xxiii, 4, 9, 13–16, 30, 34, 46, 57, 58, 69, 70, 73, 76, 79, 102, 104, 112, 118, 119, 123, 138, 139, 233, 241, 249, 250, 267, 350, 358, 377, 385, 392–394, 401, 422, 428, 434, 435, 445, 447, 451, 475, 485, 491, 498, 507, 508, 510, 526, 527, 531, 532, 534, 536, 537 Infrastructure and productivity, 169, 329, 390, 530 Initiative for the Integration of Regional Infrastructure in South America (IIRSA), 327 Institutional perspective, 92 Inter-American Development Bank (IADB), 126, 321, 323, 325 Inter-Continental Railway Commission, 326 International agreement, 34, 62, 86, 297–303, 312, 314 International communication, xiv, 27–29, 35–38, 40, 41, 212 International connectivity, xxi, 256, 413 International Monetary Fund (IMF), 46, 91, 97, 101, 130, 133, 134, 136, 137, 155, 165, 166, 170, 244, 324, 445, 467, 497

547

International political economy (IPE), 89, 90, 104 International Practices, 257, 270 International Production Cooperation, 150, 151, 162, 168 International Public Goods (IPG), xiii, xvi, 86–95, 97–100, 102, 104 International Relations (IR), 11, 24, 26, 28–32, 37, 41, 55, 64, 76, 89, 93, 154, 204, 213, 257, 285, 320, 374, 413, 414, 416–418, 426–428, 434, 435, 449, 462, 475, 476, 497, 528 Investment agreement, 248, 284, 291, 301–305 Investment(s), xvii, xviii, xx, 18, 26, 30, 48, 50, 51, 54, 73, 74, 96, 98–100, 103, 104, 119, 122, 124, 125, 130, 131, 137, 150, 153, 154, 157–165, 168–170, 174, 177–180, 182–186, 190, 206, 228, 241, 244–246, 249, 251, 267, 268, 284, 285, 291, 292, 294, 295, 302, 305, 307–310, 315, 334, 336, 337, 344–350, 354, 355, 357–359, 384, 390–399, 401, 403, 405, 415, 417, 420, 423–425, 440, 442, 443, 445–450, 471, 481–483, 491, 499, 503–505, 513, 525, 531, 537 Investment screening, 308, 310, 450 Islamic radicalism, 506 Istanbul Process, 494

J Japanese Bank for International Co-operation (JBIC), 138 Japanese International Co-operation Agency (JICA), 138 Jiangsu-Hairatan, 503, 506

548

INDEX

K Kazakhstan, 26, 28, 38, 40, 61, 113, 114, 120, 175, 184, 208, 209, 214, 219, 221, 230, 232, 285, 287, 463, 465, 474, 475, 477, 479, 491, 499, 502, 503, 507, 531, 534–537 Khorasan, 508 Kindleberger Trap, 415 Kyrgyzstan, 16, 175, 208, 209, 214, 219, 221, 232, 474, 477, 480, 493, 499, 507, 508, 510, 526, 534, 537 L LaRouche, Lyndon H. (Jr), 321, 327 Leixões, xx, 378 Liberal theory of international relations, 434 Links between Chinese partnerships and BRI, xvii, 223, 232 Logistic hubs, xvii, 160, 398 M Maritime actorness, 256, 261 Maritime cooperation, xviii, xix, 257, 261, 266, 272, 380 Maritime multilateralism, 256, 264, 273 Maritime security, xviii, 255–257, 261–266, 268–275 Maritime Silk Road (MSR), xix, 32, 35, 39, 76, 113, 116, 120, 240, 285, 325, 330, 332, 354, 364, 375, 390, 401, 491 Maritime transport, 298–300 Marshall Plan, 46, 54, 88, 89, 122, 474 Meiggs, Henry, 326 Member States, xix, xxii, 31, 99, 154, 183, 193, 241, 247, 248,

250, 251, 268, 272, 273, 283, 284, 287, 292, 294, 296–310, 313–316, 325, 378, 423, 425, 427, 445, 485, 498 Memorandum of Understanding (MoU), 101, 116, 121, 136, 137, 139, 164, 170, 218, 220, 225, 226, 231, 246, 247, 268, 287, 292, 311, 325, 330, 334, 351, 357, 380, 381, 402–404, 490, 497, 530 Mengshu, Wang, 333 Mes Aynak, 503–505 Middle-Income Trap, 150 Military-technical cooperation, 510 Mistrust, xix, 248, 272, 275, 418 Multicentric world, 435 Multilateralism, xii, xviii, 13, 154, 242, 245, 249, 258, 259, 265, 365, 376, 393, 428, 492 Mutún steel complex, 329 N Narrative, xiii, xiv, 5, 10, 16, 27, 28, 35, 267, 272, 363, 365–368, 383, 384, 394, 437, 482 National Centre For Rural Development (NCRD), 152 19th National Congress of China Communist Party, 151 National security, 41, 131, 305, 307, 403, 427, 448, 510 Natural Resources, xvii, 97, 137, 155, 184, 190, 222, 260, 329, 351, 391, 401, 460, 481, 491, 493, 499, 503–505, 513, 537 Near abroad, 526, 533, 537 Negotiation(s), 132, 158, 163, 246, 248, 269, 275, 300, 301, 303–305, 337, 355, 392, 415, 493, 495, 497, 499, 513, 526 Neighbourhood diplomacy, 492

INDEX

Neo-liberal perspective, 91, 92 New Development Bank (NDB), 15, 125, 126, 136, 139, 183, 323, 428 New Normal, xviii, 150, 245, 424 New Silk Road, 12, 17, 33, 241, 244, 246, 248, 331, 336, 337, 346, 352, 404, 433, 445, 452, 484 Non-performing loans (NPL), 129 Non-state actors, xxi, 69, 415, 434–436, 438, 449, 452 Norm entrepreneur, 417 North Atlantic Treaty Organization (NATO), 89, 243, 269, 382, 383, 385, 391, 423, 439, 462, 463, 469, 470, 475, 490, 494, 507–509 Nye, Joseph, 16, 17, 55, 56, 64, 70, 71, 377, 415, 434, 473

O Official Development Assistance (ODA), 138, 155, 157–159, 163, 169 One Belt One Road (OBOR), xxi, xxii, 15, 62, 86–89, 95–104, 149, 239, 240, 285, 295, 344, 346, 349, 352, 354, 357–359, 405, 459, 474, 490, 494, 496, 497, 499 Operation Atalanta, 263, 265 Operation Juarez, 327 Operation Sophia, 265 Organization for Economic Cooperation and Development (OECD), 135, 138, 140, 151, 155, 183, 249, 490, 500 Ottoman Empire, 460, 461, 469, 470

549

P Panama Canal, xxi, 268, 331, 338, 378, 379, 385 Peace, 33, 38, 61, 62, 87, 95, 97, 152, 154, 157, 168, 205, 216, 228, 242, 263, 265, 347, 384, 416, 490, 495, 497, 499, 504, 513 People-to-people, xii, xv, 57, 64–66, 112, 113, 206, 231, 233, 292, 376, 412, 416, 421, 426 Piracy/Anti or Counter Piracy, 256, 261–263, 274 Piraeus, 240, 247, 305, 310, 385 Platform, xvii, 38, 86, 137, 150, 152, 158, 160, 167, 177, 186, 206, 246, 250, 258, 260, 268, 331, 344, 346, 347, 349, 358, 381, 383, 384, 393, 401, 403, 411, 414, 420–424, 533 Political discourse, 25–27, 37, 38, 41, 62, 365, 437, 446 Politics, xv, xxiii, 5, 26, 30, 37, 63, 68, 70, 73, 92, 233, 244, 333, 366, 368, 378, 383, 417, 426, 438, 444, 451, 452, 470, 524, 527–529 Port of Piraeus, 54, 247, 305, 379, 392, 393 Port of Sines, xx, 378, 379, 385, 390, 401, 402, 405 Portugal, xx, 30, 121, 208, 209, 214, 219, 221, 226, 247, 287, 338, 364, 365, 373, 378–383, 385, 386, 389–392, 395–405 Portuguese Continental Shelf, Sea Economy, 400, 405 Portuguese maritime sector, 390 Portuguese-speaking Countries (PSC), 225, 226, 349–351, 357, 358, 381, 382, 398, 399 Post-soviet space, 533

550

INDEX

Power, xiv, xvii, xviii, xx, xxii, xxiv, 4, 6–19, 29–31, 34, 46, 47, 50, 53, 55–57, 59, 62, 63, 66, 67, 69–71, 73, 78, 79, 85, 86, 90–94, 97, 98, 104, 114, 120, 123, 126, 153, 164, 174, 179, 182–187, 189, 190, 216, 241, 244, 248–250, 256, 262, 265, 267, 271, 272, 275, 284, 285, 296, 299, 319–322, 324, 328, 334, 335, 349, 358, 366, 367, 369, 370, 372, 374, 378, 383–385, 391–394, 396, 404, 413, 415, 417, 418, 421–423, 427, 428, 435, 438–440, 447, 452, 462–466, 471, 473–478, 481, 495, 497, 506, 511, 514, 524, 532, 537 Practice theory, 257, 270, 273 President Xi Jinping/President Xi, xi, 3, 4, 10, 23, 26, 28, 30, 35, 37–40, 61, 62, 64, 71, 72, 74, 77, 78, 95, 111–118, 123, 125, 149, 165, 166, 170, 173, 174, 177, 189, 205, 207, 213, 216, 222, 232, 234, 239, 241, 243, 245, 285, 319, 320, 323–325, 328, 331, 336, 346, 352, 380, 383, 390, 394, 395, 402, 403, 416, 428, 433, 441, 442, 444, 494, 500, 512, 524 Public diplomacy, xv, 27, 37, 68, 69, 71, 72, 78, 426, 427 Public good, xxi, 13, 89, 91–93, 95–98, 412–418, 427–429

Q Quadrilateral Coordination Group (QCG), 490, 497 R Railroad, xix, 86, 311, 326–329, 334, 479, 482, 504 Railroad transport, 191, 296, 483 Railway, 74, 75, 87, 97, 101, 111, 118, 131, 132, 153, 159, 163, 164, 174, 190, 191, 267, 287, 311, 323, 326, 328, 331–333, 376, 378, 385, 398, 471, 474, 478, 479, 503–506 Realist perspective, 11, 91 Re-bordering, 364, 370, 371, 373, 378 Reciprocity, xvii, 6, 37, 233, 245, 350, 413, 417, 418, 427, 428 Regionalization, xii, 369, 434, 470, 529 Renminbi (RMB), 118, 120, 121, 125, 139, 243, 286, 381, 382 Rimland, xiv, 13, 14, 462 Risk reduction, 95–97, 101 Russia, xiii, xxiii, 9, 14, 31, 34, 39, 51, 52, 72, 77, 116, 122, 175, 191, 204, 208, 209, 213, 214, 216, 219, 221, 228, 232, 287, 325, 332, 333, 346, 425, 440, 463–467, 470, 474–476, 478, 479, 493, 497, 507, 508, 510, 523–537 Russian Foreign Policy, xxiii, 525–528, 537 Russian language, 535

Public goods deficit, 86, 97 Public policy, 62, 67, 68, 70, 76, 78, 306, 307, 448 Public procurement, xix, 136, 284, 285, 312–315, 401

S Safeguard Policies, 179 Schiller Institute, 327, 333 Scientific discourse, 23, 25, 26, 28

INDEX

Separatism, 493, 499, 510, 511, 513, 514 SEZ Economic Development Model, 161, 169 Shanghai Cooperation Organization (SCO), xxii, xxiii, 15, 30, 31, 34, 39, 40, 99, 490, 497, 498, 510, 511, 513, 514, 532, 533, 537 Shared competence, 292, 295–297, 299, 315 Silk Road, xxiii, 14, 15, 28, 32, 35, 38, 39, 61, 62, 65, 86, 88, 96, 99, 114, 116, 117, 134, 149–151, 174, 239, 240, 285, 352, 377, 402, 464, 467, 471, 473, 479, 512 Silk Road Fund (SRF), xvi, 15, 88, 99, 100, 122–125, 131, 136, 164, 170, 183, 267, 290, 311 Sincere cooperation, 299, 301, 315 Sines, xx, 378, 379, 385, 400, 402 Sino-African relations, 344, 346 Sino-European relations, 249 Soccer, 77 Socialism with Chinese characteristics, 15, 17, 118, 376, 377 Soft power, xv, 4, 12, 16, 30, 35, 37, 46–48, 55–58, 64, 66, 70–72, 78, 79, 154, 157, 260, 377, 386, 394, 452, 471, 473, 475, 477, 478, 527, 534–536 Southeast Asia/Southeast Asian Countries, 114, 115, 120, 130, 286, 352, 530 Sport diplomacy, 69, 72 Sports industry, xv, 62, 63, 68, 73, 76, 78 Sports tourism, xv, 76–79 Statecraft, 9, 10 State-owned enterprise, 75, 119, 183, 305, 310

551

Strategic Environmental Assessment (SEAs), xvii, 178, 192, 193 Strategic partnership (SP), xx, 39, 204, 207, 210, 212–215, 219, 221, 223, 225, 226, 230, 231, 244, 255, 256, 258–261, 274, 275, 351, 359, 397, 441, 494, 534, 537 Strategy, xii, xv, xix, 4, 12–16, 27, 28, 30, 33, 36, 38, 39, 45, 47, 50, 58, 59, 62, 63, 67, 69, 72, 73, 97, 98, 103, 104, 113, 117, 152, 168, 185, 204, 224, 231, 232, 246, 250, 268–270, 272–274, 291, 300, 305, 338, 344, 352, 354, 357, 398, 403, 420, 421, 423, 429, 434, 440, 441, 445, 446, 448, 450, 462, 465, 466, 474, 476, 492, 505, 512, 514, 525, 534, 536 Structural power, 88, 89 Summer World Economic Forum in Davos, 151 Sustainable development, 136, 151, 157, 162, 168, 174, 177, 242, 259, 291, 293, 294, 324 Sustainable Development Objectives (SDO), 157, 167, 170 T Tajikistan, 103, 114, 120, 132, 175, 208, 209, 214, 219, 221, 232, 474, 475, 477, 491, 507, 508, 510, 512, 534–537 Taliban, 490, 492, 495–497, 499, 504, 507–509 Terrorism, 85, 462, 493, 498, 506, 507, 509–511, 513 Third-country Market Cooperation, 150, 162, 168 Trade/tradings, xii, xiii, xv–xviii, xxi, 31, 33, 36, 38, 46, 48, 50–54,

552

INDEX

58, 62, 64, 73, 77, 78, 85, 90, 96–105, 111, 113, 117, 120, 121, 127, 128, 130, 131, 134, 137, 139, 140, 149, 150, 153, 154, 156, 158, 159, 162, 168, 174, 191, 194, 206, 212, 231, 239, 240, 243–245, 249–251, 255, 258, 260, 261, 265, 267, 270, 283, 284, 286, 288, 289, 292–295, 301, 315, 323, 324, 326, 330, 334, 335, 344–346, 349–353, 365, 369, 375, 377, 380, 381, 391, 395, 396, 401, 405, 412, 414–416, 419–421, 423, 424, 435, 442–444, 449, 463, 467, 469–471, 473, 474, 476, 478–480, 482, 483, 485, 490, 493, 498, 501, 503, 525, 530–532, 534, 537 Transactional power, 11 Transcontinental railroad, 326, 328 Trans-European Networks, 310 Trans-European Transport Network (TEN-T), 246, 250, 269, 288, 310 Trans-Pacific Partnership (TPP), 48, 51, 53, 54, 60, 243, 477 Transport, 96, 122, 155, 169, 179, 181, 183, 192, 248, 249, 262, 270, 289, 292, 295, 296, 298, 309, 315, 327, 331, 390, 401, 463, 474, 476, 480, 512, 513 Treaty of Good-Neighborliness and Friendly Cooperation between the People’s Republic of China and the Russian Federation, 523 Trilateral Cooperation, xx, 381, 399 Triple helix model, 436, 451 Turkey, xiii, xxii, 59, 113, 114, 122, 136, 175, 208, 215, 219, 222, 223, 459–463, 465–467, 469, 470, 473–485, 491, 502, 503

Turkish economy, 462, 463, 466, 467, 485 Turkish foreign policy, 462, 484 Turkish history, 461, 466, 467 Turkistan Islamic Party (TIP), 490, 508, 509 Turn to the East, xxiii, 524, 525, 527

U Uighur, 495, 496, 508, 510, 514 United States (US), xv, xx, xxii, 11, 15, 16, 32–34, 45–53, 55, 57, 58, 60, 68, 69, 86, 89–91, 97–99, 103, 104, 116, 120, 122, 124, 126, 127, 134, 138, 140, 155, 169, 203, 204, 213, 228, 242, 244, 245, 247, 260, 262, 268, 269, 285, 310, 320–322, 326, 330, 332–338, 348, 349, 354, 374, 376, 377, 382, 383, 385, 390–392, 404, 405, 413, 415, 422, 425, 427, 439, 440, 442, 450, 461–465, 467, 470, 471, 473, 475–478, 480, 484, 490, 491, 494, 495, 497–501, 503, 506–509, 511, 513, 514, 524, 525, 528–530, 532, 534, 537

W Wanda, 74 Watan Group, 504 West, xviii, 14, 15, 28, 29, 54, 56, 57, 154, 204, 239, 268, 376, 377, 382, 385, 412, 413, 415, 422, 424, 425, 427, 460–462, 466, 469, 470, 478, 480, 512, 524–527, 529, 537 Words used in Chinese partnerships, 211

INDEX

World Bank, 15, 46, 87, 97, 99, 116, 127, 132–134, 151, 155, 163, 164, 170, 180, 181, 187, 243, 289, 311, 315, 322, 323, 374, 440, 445 World order, 11, 17, 41, 46, 58, 86, 88, 89, 91, 103–105, 320, 321,

553

374, 377, 461–463, 471, 526, 528 World Wildlife Fund (WWF), 191, 332 X Xinjiang, xxii, 113, 114, 152, 267, 495, 496, 508, 510