China stories part 2

(Part 1)

Today I want to discuss a podcast on the One Belt One Read initiative (1B1R).

1B1R is China’s signature international policy, made up of hundreds of billions in loans to mostly developing countries in Eurasia to build infrastructure and other projects (for a quick refresher, this piece in The Guardian).

The discussion made two really valuable points that I’ve not heard enough in the mainstream discussion on China:

Is 1B1R just cynical debt diplomacy?

There is a popular narrative in the West that 1B1R is just a vehicle for Chinese debt diplomacy. According to this script, China makes poor countries billions in unaffordable loans to build strategic infrastructure. When the country can’t repay, China uses the debt as leverage for political concessions or to seize control of vital infrastructure.

The prototypical example is the port of Hambantota in Sri Lanka. Seven years after construction began, struggling to make repayments, Sri Lanka leased the port to China for 99 years. Hambantota features as a cautionary tale in every story on 1B1R, and has been referenced by Vice-President Mike Pence.

Instead of accepting this story at face value, the book’s author actually went to Sri Lanka and talked to politicians there. It turns out they like China. The Chinese are good to do business with, move quickly, and are willing to offer loans without the intrusive conditionality that comes with World Bank or IMF loans.

Claims of debt diplomacy have always had a tinge of hysteria. Research last year showed that China often has to accept painful debt write-downs and asset seizures are very rare.

Nor are all criticisms of Chinese investment particularly admirable. Take this piece in The Guardian on Hambantota, which printed the following without comment:

Does 1B1R have a geopolitical dimension? Of course. Is this unusual for a country of China’s size? No. Might developing countries benefit from having two superpowers to play off each other? You bet.

For context, US military bases worldwide:

What does Chinese empire actually mean?

The author also argued we should understand 1B1R as an “attempt to rebrand the Chinese empire so it can compete more effectively with the US.”

But what does Chinese empire mean? Should we just imagine European colonialism with a Chinese flag?

For the author the answer is a firm no. Instead, he argues contemporary Chinese international politics, like 1B1R, is an attempt to recreate itself in its own historical image. This means understanding the Tributary System, how Chinese foreign relations were organised for the two millennia prior to the 19th century.

Its an argument similar to the one made by David Kang in his landmark work:

Its an intriguing line of argument, one that privileges China’s historical experience and argues that international relations is not governed by the set of ‘universal’ laws scholars have derived from the experience of early-modern Europe and Ancient Greece.

Its difficult not to approach it with some sympathy given China’s track record for upsetting economic and political conventions.

Merry Christmas

Is Eurasia overblown?

I recently finished The Silk Roads (which I’ve discussed before here, here, and here) and I have some doubts about the book’s claim that the Eurasian landmass, especially central Asia, is crucial to future geopolitics.

One of the book’s main theses is that the region is about to regain its lost physical and geopolitical importance. Originally, the region’s position, linking China and the Mediterranean, allowed it to flourish. The discovery of America, new sea routes, and European military aggression led to decline. Fast forward to today, and the re-emergence of China, the One Belt One Road Initiative, and the discovery of rich natural resource deposits in Central Asia supposedly mean regional renewal.

I’m skeptical for a few reasons. First, freight. The book acknowledges that the rise of safer, more efficient maritime routes undermined the region’s economic importance (and tax revenue), but then fails to acknowledge the fact that this has not materially changed: maritime freight still dwarfs rail and road freight.

The following chart OECD data on rail and sea freight for twenty-foot equivalent units (basically a container).


Unsurprisingly, countries with sea access rely on maritime freight, but this is also true for Silk-Road esque countries like Turkey, or Germany, which hosts the terminus of the new rail freight line from China. The countries where both types are comparable are usually European, and even there the graph does not do it justice – Estonia’s sea freight volume is three times larger than rail, Latvia’s eight, Bulgaria’s ten.

The same data, but showing growth in rail over time. Nowhere except Germany has seen much growth.

Sea over time. Take note of the Y axis. Remember this only captures container transport, so doesn’t include the enormous volumes of raw materials.

Second, the geography of supply and demand. Central Asia’s importance makes sense in a world where the Mediterranean and China are the two poles between which most trade flows. Europe today is a stable source of consumption and production, but is unlikely to be a dynamic source of future growth. Fast growing East-Asian economies, India, and Indonesia all circumvent the region. As does the global superpower. Africa is unlikely to feature in this transcontinental network given its narrow land connection to Eurasia and under developed rail network.

One area where the book’s prediction might prove true is energy. A third of cargo miles hauled by shippers comes from moving fossil fuels. A transition to green energy might reduce the importance of maritime trade. To this we could add the growing forces of nationalism weighing on global trade more generally.

The issue is that these forces also undermine any new Silk Road. One area where the region is increasingly important is in the transport of oil and gas through pipelines. These would be comparatively less important in the event of a green transition.

I’d love to hear from those who disagree.

*This is not a new view by any means, Mackinder called the region “the heartland” in 1904.