MERICS Blog - European Voices on China en China is wary of energy transition undermining social stability <span>China is wary of energy transition undermining social stability</span> <span><span lang="" about="/en/user/306" typeof="schema:Person" property="schema:name" datatype="">komprakti</span></span> <span>Wed, 04/17/2019 - 13:37</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-04-18T12:00:00Z">2019-04-18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/nis-grunberg" hreflang="en">Nis Grünberg</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Slow progress towards slowing climate change is also a reflection of the immensity of the physical and social change that reshaping energy systems requires. China, the world’s largest source of carbon emissions, is a case in point: Chinese officials are especially wary of threats to social stability, energy transition included. </span></span></span></span></span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-04/190417_Coal_Power_Plant_Jiangsu_ImagineChina_pbu770200_13.jpg?itok=FEiUe8cU 325w, /sites/default/files/styles/max_650x650/public/2019-04/190417_Coal_Power_Plant_Jiangsu_ImagineChina_pbu770200_13.jpg?itok=5-1FTXb8 650w, /sites/default/files/styles/max_1300x1300/public/2019-04/190417_Coal_Power_Plant_Jiangsu_ImagineChina_pbu770200_13.jpg?itok=6OPg_EP7 1300w, /sites/default/files/styles/max_2600x2600/public/2019-04/190417_Coal_Power_Plant_Jiangsu_ImagineChina_pbu770200_13.jpg?itok=bAEMkKJe 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-04/190417_Coal_Power_Plant_Jiangsu_ImagineChina_pbu770200_13.jpg?itok=FEiUe8cU" alt="Coal power plant in Datong, Shanxi" title="A coal power plant in Datong, Shanxi province. Foto: ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>An active participant in the UN Climate Change Conferences and a signatory to the 2018 Paris Agreement, China has become </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>serious about curbing pollution</span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> and </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>climate change</span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>. Government reforms since 2016 have created more effective regulation through stricter environmental standards, harsher penalties, and even production caps and shutdowns in heavily polluting industries. </span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>And yet a </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>report</span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> by a Chinese public research center recently warned China’s “stated policy scenario cannot comply with the Paris agreement.” Its current trajectory would see it fail in its ambition to keep the rise in average temperature to below 2°C against pre-industrial levels. According to the <em>China Renewable </em>Energy Outlook 2018, the main problem is systemic reliance on coal. <span>The observation is alarming, because without success in China, tackling the global challenge remains elusive.</span></span></span></span></span></span></p> <h4>China has not yet reached "peak coal"</h4> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>A little over a year ago, experts assumed China had </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>reached “peak coal</span></span></a><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>”</span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>. But recent data show that, rather than declining, </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>coal</span></span></a><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> consumption rose slightly</span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> in 2018. According to </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Boom and Bust</span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>, a report on coal-power plant construction, and </span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Carbon Brief</span></span></a><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>,</span></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> a coal-power tracking website, also the construction of coal-fired power stations has been picking up again. Both trends were enough to raise questions about China’s declared goal of achieving a fast energy transition. </span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>It is tempting to view this as a symptom of Beijing’s ignorance, deceitfulness or laziness in all matters regarding climate change. But a more thorough reading would also see it as an expression of the limitations of central-government power. </span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Some have argued that implementing an energy transition would be easier in authoritarian systems like China than in democratic countries.</span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> But even policy made in all-powerful Beijing can only work if it finds support at lower levels; Beijing has to work with – and at times against - local interests or constraints. Policy and implementation are a perpetual compromise between the demands of politicians and experts - and the competence of local officials.  </span></span></span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>When local governments in northern China decided to meet implementation quotas on a “coal-to-gas” policy intended to cut pollution, a spike in gas consumption for heating quickly led to a shortage. Coupled with incomplete installation of both gas pipes and heating systems in some areas, and a ban on burning coal for heating private homes, this rocky implementation of central-government orders led to </span></span></span><span><span><span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>areas going for many weeks without heating</span></span></a></span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>. </span></span></span></p> <h4><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Pollution has worsened in structurally weak regions</span></span></span></span></span></h4> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Such problems were most noticeable in structurally weak regions, in particular the northern Chinese Provinces of Shaanxi, Shanxi, and Henan, the heartland of coal and heavy industry. Regardless of Beijing’s ambitions, pollution in parts of these regions has worsened in recent years. This bucking of the national trend shows the gap between Beijing’s aims and the regional administrations’ means. </span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Minister of Ecology and environment</span></span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>, Li Ganjie, has admitted</span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> that, despite progress, the situation remains grim. He has warned the hardest parts of tackling pollution has yet to come. Despite Beijing’s ambition, China’s goal of a swift energy transition is blocked by technical problems - and by the political rationale of “social stability first”. Energy transition is no done deal. </span></span></span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>Local officials often have to find a balance between Beijing’s ambitious targets, public pressure to clean up the environment, and socio-economic issues like employment. In areas dominated by mining, steelmaking and other heavy industries, officials have to enforce Beijing’s green growth policies, while also protecting local companies as important employers and taxpayers. </span></span></span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> </span></span></span></span></span></p> <h4><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Focus on social stability slows progress</span></span></span></span></span></h4> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The National People’s Congress in March acknowledged the need for social stability. Given slowing growth and the challenges of industrial restructuring, Premier Li Keqiang emphasized the importance of stable employment. A new “Jobs First” policy allows officials to award factories grace periods before implementing environmental standards. Intended to prevent disruptions such as a heating crisis, such moves are also an invitation for environmental foot-dragging at the local level. </span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Yet in other areas, officials enforce blanket bans on polluting industries, </span></span><a href=";mc_eid=990ede2b0f"><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>harming companies in </span></span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> forcing them to comply to environmental standards. This illustrates that poor local governance can cut both ways – and that Beijing is aware of the dangers of climate change and pollution. Still, Beijing knows energy transition can be painful for communities. Given the Xi administration’s focus on stability, perceptions of social risks will slow progress.</span></span></span></span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>But, as the Renewable Energy Outlook shows, more ambitious targets are both possible and necessary, especially for offsetting coal.  Beijing needs to up its game and tackle deficits at local level, for example, by aligning the incentives of officials with Beijing’s policy. The effects of pollution and global warming are felt at the local level, so the fight against them has to take place there, too.</span></span></span></p></div> </div> </div> Wed, 17 Apr 2019 11:37:53 +0000 komprakti 9141 at EU-China rail freight: Trade infrastructure investment or propaganda tool? <span>EU-China rail freight: Trade infrastructure investment or propaganda tool?</span> <span><span lang="" about="/en/user/306" typeof="schema:Person" property="schema:name" datatype="">komprakti</span></span> <span>Mon, 04/15/2019 - 12:00</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-04-15T12:00:00Z">2019-04-15</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/jacob-mardell" hreflang="en">Jacob Mardell</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>Subsidies are boosting rail freight along the New Silk Road, but it’s too soon to say if this expensive investment will pay off in the long run. <span>On his journey along the "Belt and Road", MERICS freelance researcher Jacob Mardell stopped in the Polish village Małaszewicze where the larger part of EU-China rail freight traffic passes through. </span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-04/190414_Yiwu-Britain_Train_ImagineChina_pbu614617_08.jpg?itok=brCuxOdq 325w, /sites/default/files/styles/max_650x650/public/2019-04/190414_Yiwu-Britain_Train_ImagineChina_pbu614617_08.jpg?itok=8arq9sSb 650w, /sites/default/files/styles/max_1300x1300/public/2019-04/190414_Yiwu-Britain_Train_ImagineChina_pbu614617_08.jpg?itok=tSNWiEKk 1300w, /sites/default/files/styles/max_2600x2600/public/2019-04/190414_Yiwu-Britain_Train_ImagineChina_pbu614617_08.jpg?itok=zKXzC2Qw 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-04/190414_Yiwu-Britain_Train_ImagineChina_pbu614617_08.jpg?itok=brCuxOdq" alt="The first direct freight train running from Britain to China arrives at Yiwu West Station in Yiwu city, east China&#039;s Zhejiang province, 29 April 2017. " title="The first direct freight train running from Britain to China arrives in Yiwu city on 29 April 2017. Image by ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>When the famous and <a href="">much vaunted</a> Yiwu-London freight train <a href="">arrived</a> in Barking, East London, fresh from its maiden voyage across the Eurasian continent, the implication was that the train itself had traveled all the way from China. In fact, the wagons had come from Duisburg, and before that, the containers had made an important stop at a small border village in Eastern Poland.</p> <p>On my journey East and before crossing the Belarus border, I stopped in this village, Małaszewicze, where I was shown around the local dry port facilities by Krzysztof Szarkowski, an accommodating intermodal manager at DHL Freight. The larger part of EU-China rail freight traffic passes through Małaszewicze, where containers must be transferred between the Soviet-standard 1,520 millimeter gauge tracks and the slightly narrower gauge used throughout most of Europe. This is done by hulking cranes that hover over parallel tracks and pluck containers from one track before setting them down onto adjacent wagons.</p> <p>There are four intermodal terminals at Małaszewicze, capable of processing 984 containers a day. In recent years, this infrastructure has had to cope with a marked rise in traffic as the number of freight trains traveling between Europe and China has boomed. Since then, the story of the “<a href="">Europe-China Express</a>” has quickly become one of the more celebrated tales told about the New Silk Road, and the Chinese news agency, Xinhua, still excitedly <a href="">announces</a> each new rail service between China and Europe.</p> <h4>Fueled by subsidies</h4> <p>That is largely because the Europe-China rail connection works so well as a metonym for the wider Belt and Road Initiative (BRI). Rail captures the East-West connective essence of the New Silk Road and trains function as an easily recognizable symbol of cross-continental commerce. Rail cars take the place of camels, Sogdian silk merchants become logistics managers, and China’s President Xi Jinping’s mythology of the “<a href="">Silk Road Spirit</a>” finds convenient historical continuity. But rail freight between China and Europe is representative of the larger Belt and Road in more ways than one: both are ultimately fueled by Chinese public money—the BRI in the form of government-issued loans and rail in the form of subsidies.</p> <p>In fact, subsidies for the Europe-China connection come from a mixed bag of sources along the route, largely from Chinese cities, and provincial and central governments. They also vary from train to train and are not particularly transparent. Still, most industry experts use words like “substantial,” “significant,” or “huge” to describe them, with some calculating that subsidies cover up to 60 percent of the costs. This issue is frequently picked up by critics who use the subsidies’ existence to argue that “new” rail freight routes to Europe serve a largely <a href="">propagandistic</a> function and show the <a href="">relative irrelevance</a> of EU-China rail freight. One think tank even <a href="">suggested</a> that the subsidies might be considered an “advertising budget” for the BRI.</p> <p>With “China Railway Express” literally described as a brand by Chinese state development plans, there is little doubt that the subsidies are justified from a political point of view—by local governments competing to host the largest number of routes, and by Beijing, keen to boast about trade along the New Silk Road.</p> <p>But European governments are not simple co-conspirators in Chinese propaganda—they too have their own agenda. For example, when Yiwu Timex Industrial Investments Co <a href="">extended</a> their Chongqing-Duisburg route to London for a demonstration service in 2017, it was a British trade minister who boldly <a href="">exclaimed</a>:“This new rail link with China is another boost for global Britain, following the ancient Silk Road trade route to carry British products around the world.”</p> <h4>Part of the “Go West” strategy</h4> <p>I was told a similar story in Lodz—a post-industrial city in the heart of Poland that has remodeled itself as a regional logistics hub. According to Tomasz Kaminski, an academic focused on relations with China, cooperation on rail freight with the Chinese city of Chengdu required a “political umbrella” to get it off the ground. Following the collapse of its lifeblood textile industry in the 1990s, Lodz was in desperate need of rebranding. The then Marshal of the Lodzkie region, Witold Stępień, saw cooperation with Chengdu as the perfect opportunity to transform the image of the city and region and played an active part in pushing the partnership. As elsewhere on the New Silk Road, Chinese money helps fuel local political ambitions.</p> <p>The Lodz-Chengdu example also illustrates the solidly functional core of EU-China rail freight. The logic of a freight train from Yiwu, on China’s eastern seaboard, to an island nation in the North Atlantic is dubious, but Chengdu to Lodz makes sense. Before the BRI was even announced, a Polish logistics company called Hatrans had founded a joint-venture in China with a view to connecting Dell, in Lodz, with its supplier, Foxconn, in western China. Or, as Hatrans told me matter-of-factly, it was “driven by the need to satisfy customers who required fast transportation between Central China and Central Europe for the fraction of the cost of air freight.” Ronald Kleijwegt, mastermind of an even earlier route between Chongqing and Duisburg, tells me that the entire Europe-China rail freight phenomenon was essentially a product of China’s “<a href="">Go West</a>” strategy—Beijing’s plan to develop poor interior provinces that had missed out on the East’s manufacturing boom.</p> <h4>Uncertain long-term viability</h4> <p>In the short term, subsidies might look like a BRI advertising budget, but throwing money at infrastructure first and waiting for development—the “build it and they will come” approach—is a defining characteristic of Beijing’s thinking on the BRI. In the mid-term, fast freight at subsidized prices helps raise awareness of rail as a viable option for customers. In the long term, subsidized trains might just help facilitate the development of inland Chinese provinces and continental dry ports—a central goal of the BRI.</p> <p>Also, like many BRI projects, empty trains and the subsidies that enable them have the secondary function of incubating Chinese companies and making them globally competitive. David Smrkorvsky, head of rail at JUSDA (the supply chain management service platform of Foxconn), tells me that several Chinese logistics companies have become highly competitive in Europe due to subsidized trade. He also comments that not a few European companies are “doing unbelievably well for themselves” out of the same subsidies.</p> <p>The key question is whether EU-China rail freight has a life beyond subsidies. Ronald Kleijwegt tells me that even the Chinese government realizes that one cannot build a long-term structural solution on subsidies. Indeed, the government is ostensibly in the <a href="">process</a> of phasing them out. David Smrkorvsky of JUSDA is dubious that market costs have been reduced enough to compensate, but Kleijwegt thinks it can be done by further improving the balance of trade between East and West and by forcing through further efficiencies.</p> <p>The long-term viability of continued growth for the rails is uncertain, and critics are right to question the commercial rationale behind the growth in traffic, but they are wrong to put a purely propagandistic value on the phenomenon. Like the BRI as a whole, Europe-China rail freight was driven by a purely economic logic that was doubled down on by Chinese government spending and political will. Whether this expensive strategy will be successful in driving future development cannot be ruled out, but neither is it guaranteed.</p> <p><em>This blogpost was originally published <a href="">at the Berlin Policy Journal</a> on April 10, 2019.</em></p></div> </div> </div> Mon, 15 Apr 2019 10:00:02 +0000 komprakti 9116 at A Franco-German China policy: The road less traveled <span>A Franco-German China policy: The road less traveled</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Thu, 04/11/2019 - 15:02</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-04-12T12:00:00Z">2019-04-12</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><span><span><span><span><span>An interview with <a href="">Mikko Huotari</a> and <a href="">Mathieu Duchâtel</a></span></span></span></span></span></p> <p><span><span><strong><span><span><span>The French think tank Institut Montaigne and MERICS jointly organized a Franco-German workshop on "Promoting a European China policy." In this interview, Mathieu Duchâtel, Director of Institut Montaigne’s Asia Program, and Mikko Huotari, Deputy Director of MERICS, discuss differences and similarities of German and French policies towards China. What are the limits of a convergence on China policy, and can this be translated into a more united European approach?</span></span></span></strong></span></span></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-04/190411_Merkel_Macron_European_Council_2017_Image_Copyright_Europan_Union.jpg?itok=chsJO-wV 325w, /sites/default/files/styles/max_650x650/public/2019-04/190411_Merkel_Macron_European_Council_2017_Image_Copyright_Europan_Union.jpg?itok=h6JtjqOy 650w, /sites/default/files/styles/max_1300x1300/public/2019-04/190411_Merkel_Macron_European_Council_2017_Image_Copyright_Europan_Union.jpg?itok=qLZr7XNq 1300w, /sites/default/files/styles/max_2600x2600/public/2019-04/190411_Merkel_Macron_European_Council_2017_Image_Copyright_Europan_Union.jpg?itok=fwkdybJ8 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-04/190411_Merkel_Macron_European_Council_2017_Image_Copyright_Europan_Union.jpg?itok=chsJO-wV" alt="German Chancellor Angela Merkel and French President Emmanuel Macron" title="Image copyright: European Union" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><h4>What are the current priority issues on the China policy agenda of Germany and France? How have these priorities changed?</h4> <p><span><span><span><strong><span>Mathieu Duchâtel: </span></strong></span></span></span>The Gaullist moment of France’s China policy is clearly far behind us. Today, there are two priorities in France’s China policy. First, a rebalance in economic ties with our largest source of trade deficit (EUR 29.2 billion in 2018), and a country with which the lack of reciprocal market access and forced technology transfers are highly problematic from a French perspective. This goal will not be reached through bilateral commercial deals only, although they matter enormously for several strategic sectors of the French economy. What is needed is a rebalance at a systemic level and therefore, realistically, only the EU provides sufficient leverage. The game is partly about bargaining with China for greater market access and better protection of intellectual property rights, partly about internal change in Europe to build better protections against Chinese state capitalism and techno-nationalism.</p> <p>Second priority, France needs Chinese cooperation to preserve the multilateral system of global governance, currently under great pressure on multiple fronts. China provides rhetorical support for multilateralism, but there is a deep-rooted reluctance on the Chinese side to move beyond Beijing’s existing commitments, for example on the reform of the World Trade Organization. The track record is not entirely negative though. France values the important contribution of China in facilitating the conclusion of the Paris agreement and the negotiation of the Joint Comprehensive Plan of Action (JCPOA) with Iran. But, there is currently a stalemate across a wide spectrum of issues on the multilateral agenda.</p> <p>At the same time, France tends to see China as a problem rather than a solution when it comes to the future of the international order, leading to an upgrading of ties with other partners. France’s reluctance to give political endorsement to the Belt and Road Initiative, the regular French naval presence in the South China Sea, the emphasis on the Indo-Pacific narrative, and the development of defense relations with Australia, India and Japan should be seen in that light.<br /><br /><span><span><span><strong><span>Mikko Huotari: </span></strong></span></span></span>On the surface, there have been few changes in the priorities of Germany’s China policy during the past few years:</p> <ul><li>Deepening what is still largely seen as a beneficial bilateral economic partnership of two trading nations;</li> <li>Strengthening collaboration on a wider range of strategic issues and global challenges including climate;</li> <li>Developing a forward-looking positive agenda in new areas such as intelligent manufacturing or autonomous driving.</li> </ul><p>What has changed quite dramatically, however, over the past three years, are basic assumptions about China’s domestic reform trajectory and international ambitions. There is a growing recognition that core features of the Chinese system, a dictatorial and repressive Leninist party system, massive state interventions in the economy and an unlevel playing field for foreign companies (and civil-society actors) are highly persistent if not resurgent. Faced with ambitious Chinese industrial policies and a lack of progress in economic reforms measured against the targets that the CCP has set for itself, policymakers in Berlin are rebalancing their assessment of opportunities and challenges.<strong> </strong>They are also focusing more on ways to build leverage for achieving goals such as greater market access as well as on finding new tools to deal with market distortions and security implications related to Chinese economic practices.<br />  </p> <h4>Does this translate into a common China policy agenda? What are the limits of Franco-German convergence on China policy?</h4> <p><span><span><span><strong><span>Mathieu Duchâtel: </span></strong></span></span></span>France and Germany speak a common language on China. The two countries have similar assessments of domestic governance trends under <a href="">Xi Jinping</a> and the same understanding of the highly geopolitical goal that underpins Chinese foreign policy – become a <em>"global leader in terms of comprehensive national strength and international influence by 2050"</em>, as underlined by Xi during the 19th Party Congress.</p> <p>The two countries work well within the EU framework to respond to some of the challenges posed by China’s competition.The conclusion earlier this year of an EU-wide investment screening mechanism is a concrete outcome of a joint Franco-German effort to create a political momentum in Europe for better regulation of incoming foreign investment, to avoid unwanted technology transfers, political influence or excessive leverage. This would have been unthinkable only three years ago.</p> <p>But there are also several challenging areas where a Franco-German engine is almost entirely lacking. First, Europe has yet to come to terms with the emergence of China as a high-tech powerhouse and an innovative digital economy.</p> <p>At the minimum, this needs a much more ambitious effort to support European research and development. Second, there is no common Franco-German response to the transformation of China into a more interventionist foreign policy actor, an actor for which military options are in the policy toolbox. And third, France and Germany are neither sufficiently ambitious, nor sufficiently European in how they approach systemic competition with China when it comes to influence in third countries, despite the fact that this is the long-term strategic game.<br /><br /><span><span><span><strong><span>Mikko Huotari: </span></strong></span></span></span>Seen from Berlin, Germany and France have collaborated quite successfully on several critical policy issues in relation to China over the past few years. This includes coordination between Paris and Berlin (and Rome) on issues such as the "Market Economy Status" of China and ensuing reforms of the EU’s trade defense instruments as well as the recently formalized EU investment screening framework. Support by the German and French government was also essential for the more assertive and critical "repositioning" of the European Commission on China last month.</p> <p>Limits of this convergence are quite obvious: The profiles of their respective economic relationship with China but also their global affectedness in relation to strategic issues remain different and policy priorities will diverge accordingly (for instance on arms control and Africa). Paris and Berlin will also have different preferences on whether a Berlin-conditioned empowerment of Brussels’ institutions or a French-German avantgarde should guide this European China policy as well as on the role of transatlantic coordination in this. Finally, Berlin and Paris simply have a long way to go in overcoming limitations to China policy coordination beyond their respective ministries of foreign affairs and, the less pronounced, economic affairs.<br />  </p> <h4>What did France’s initiative to invite Chancellor Merkel and EU Commission President Juncker to Paris during Xi Jinping’s state visit achieve?</h4> <p><span><span><span><strong><span>Mathieu Duchâtel: </span></strong></span></span></span>The French initiative sent a powerful signal of European unity to China. On the positive side, it ensured that Xi Jinping would be in direct interaction with a set of European priorities clearly articulated around the concept of reciprocity: the conclusion of a bilateral investment treaty as a means to rebalance the investment relationship, change in the dynamics of technology transfers between Europe and China, access to public procurement markets in China, the willingness to work together in infrastructure projects overseas but without lowering European environment and corporate social responsibility standards, a clear request to contribute more to the reduction of carbon emissions. It also underlined the EU message that China is now seen as a "systemic rival" in Europe. The term is a response to China’s active ideological and systemic competition with the two main features of the European model, market economy and liberal democracy. This ideological competition is striking when one looks at Xi Jinping’s speeches and to pretend that it does not exist is not an option – clarity of language is therefore a welcome development. However, there is a risk that the echo of this message will be short-lived and what has been a demonstration of strength will be interpreted as a sign of weakness if Germany does not reciprocate.<br /><br /><span><span><span><strong><span>Mikko Huotari: </span></strong></span></span></span>At a minimum, the invitation to Paris was successful in signaling that a European China policy requires extraordinary measures. In that regard, the invitation can be seen in conjunction with plans to do a full-fledged EU-27-member state meeting with China under the auspices of the German Council presidency in 2020. The joint joined-up approach in Paris also helped to convey a few critical messages to the Chinese counterparts:</p> <ol><li>Key EU members are reassessing the balance of opportunities and challenges in their China relationship ("becoming less <em>naïve</em>").</li> <li>It is not easy to divide "Europe’s core" on China-policy issues.</li> <li>Paris and Berlin back the new Commission line with clearer requests vis-à-vis China and demand some "homework" to deal with persistent market distortions.</li> </ol><p>It is less clear whether with the focus on multilateralism and a comparatively cooperative tone in public statements, the meeting was also meant to signal to Washington that the EU and China can and will work together, despite US push-back. More suspicious voices in Berlin would even argue that the invitation served to avoid the impression that Macron was mainly in for special deals with China and wanted to avoid spoiling the newly emerging European agenda. Most importantly, the meeting has created distrust in other member states that France and Germany might push for a new European China policy agenda that does primarily reflect their individual interests.</p> <p><em><span><span><span>This blog post was originally published by <strong><a href="">Institut Montaigne</a></strong>, a Paris-based think tank dedicated to public policy in France and Europe.</span></span></span></em></p></div> </div> </div> Thu, 11 Apr 2019 13:02:47 +0000 h.seidl 9111 at China meets tougher EU at annual summit <span>China meets tougher EU at annual summit</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Thu, 04/04/2019 - 10:53</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-04-04T12:00:00Z">2019-04-04</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p>Rebecca Arcesati</p> <p><strong><span><span><span><span>When EU and Chinese leaders meet in Brussels next week at their annual summit, the EU needs to present a united front. That looks like a tall order, and it remains to be seen whether the EU will be able to put its relations with China on a more equal and principled footing.</span></span></span></span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-04/190404_Tusk_Li_2017_European%20Council%20President_via_flickr.jpg?itok=5EpsOjBQ 325w, /sites/default/files/styles/max_650x650/public/2019-04/190404_Tusk_Li_2017_European%20Council%20President_via_flickr.jpg?itok=oUK7Xue7 650w, /sites/default/files/styles/max_1300x1300/public/2019-04/190404_Tusk_Li_2017_European%20Council%20President_via_flickr.jpg?itok=uYScWo10 1300w, /sites/default/files/styles/max_2600x2600/public/2019-04/190404_Tusk_Li_2017_European%20Council%20President_via_flickr.jpg?itok=ARvoIQsN 2048w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-04/190404_Tusk_Li_2017_European%20Council%20President_via_flickr.jpg?itok=5EpsOjBQ" alt="China&#039;s Premier Li Keqiang and European Council President Donald Tusk at the EU-China Summit 2017" title="China&#039;s Premier Li Keqiang and European Council President Donald Tusk at the EU-China Summit 2017. European Council President via flickr (CC BY-NC-ND 2.0) " typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span>The atmosphere around this year’s EU-China summit is dramatically different from previous years: in a balancing act, the EU has developed a new realism and a much keener awareness of both the opportunities and challenges presented by China. Frustrated with China’s market-distorting practices and predatory technological acquisitions, Brussels wants to push Beijing to curb industrial subsidies, </span><a href=""><span>open up</span></a><span> its market and commit to signing an ambitious bilateral agreement on investments by 2020. </span></span></span></span></p> <p><span><span><span><span>While the need to rebalance trade and investment relations will top the summit’s agenda, other key issues will also be discussed, including cybersecurity, climate change and potential synergies within the EU-China connectivity platforms. There are also hopes that human rights will not be </span><a href=""><span>sidelined</span></a><span> again.</span></span></span></span></p> <p><span><span><span><span>But it remains to be seen whether the EU will be able to present a united front and put its relations with China on a more equal and principled footing - both at the summit and, even more importantly, in its aftermath. While the EU arrives better prepared than ever to confront China on key issues, Xi Jinping’s European tour has made abundantly clear that Beijing still profits from the profound divisions that exist between member states.</span></span></span></span></p> <h4><span><span><span><span>EU demands set the tone for this year’s summit</span></span></span></span></h4> <p><span><span><span><span>With Brexit and a European election looming, the current EU Commission has become more assertive on China. In a remarkably blunt </span><a href=""><span>strategy paper</span></a><span> published in March, it labelled China “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.” </span></span></span></span></p> <p><span><span><span><span>This represents </span><a href=""><span>a sea change</span></a><span> in the EU’s assessment of China’s – and its own – capabilities. Rather than imitating the US’ zero-sum approach, the paper acknowledges that China is an indispensable partner but also an aspirant leading power which needs to shoulder greater responsibilities. </span></span></span></span></p> <p><span><span><span><span>The ten-point action plan will frame the summit’s discussions, from fair competition, market access and WTO reform to the security of 5G networks – the Commission </span><a href=""><span>laid out</span></a><span> its recommendations last week. But what is most relevant is that the strategy also focuses on defensive policy changes to strengthen the EU from within, calling for a smarter use of Europe’s industrial, competition, public procurement and trade policy tools to address China’s state-induced economic distortions and boost Europe’s competitiveness.</span></span></span></span></p> <h4><span><span><span><span>China wants European integration but benefits from fragmentation</span></span></span></span></h4> <p><span><span><span><span>China, on the other hand, maintains an ambivalent position toward Europe. While it wants European integration to access the single market, balance against the US and demonstrate its own commitment to multilateralism, the reality is that Beijing also benefits from EU divisions. Xi’s visit to Italy was a big success for his leadership, as a G7 country </span><a href=""><span>endorsed</span></a><span> his chief geopolitical initiative, undermining Brussels’ efforts to devise a common European approach to the Belt and Road Initiative (BRI).</span></span></span></span></p> <p><span><span><span><span>Italian populists have already bent to China’s economic clout by abstaining from a </span><a href=""><span>vote</span></a><span> to introduce an EU-wide investment screening framework aimed at protecting the security of Europe’s critical assets. Italy is not alone. </span><span>Portugal, for instance, recently warned against European protectionism over Chinese investment. </span><span>Similar departures from a commonly agreed European line are weakening the bloc.</span></span></span></span></p> <p><span><span><span><span>The EU should expect Beijing to continue cultivating ties with individual member states and accession countries while simultaneously offering assurances and concessions at the EU level.  Premier Li Keqiang may have issued an </span><a href=""><span>assurance</span></a><span> that any trade deal with Washington would not undermine Europe’s interests,  and Xi </span><a href=""><span>stressed</span></a><span> his country’s support of European integration, but Europeans should know by now that they cannot take China’s commitments at face value. The </span><a href=""><span>rushed adoption</span></a><span> of its new foreign investment law and </span><a href=""><span>pledges</span></a><span> to curb subsidies to domestic industry resemble symbolic concessions rather than meaningful policy changes. </span></span></span></span></p> <p><span><span><span><span>While Beijing may have downplayed the ‘16+1’ framework – its cooperation format with Central and Eastern European countries – after it was criticized for dividing the EU and failing to deliver on hefty investment promises, there is no indication that its interests in the region have diminished. The fact that Greece will likely be </span><a href=""><span>invited</span></a><span> to join the summit in Croatia on April 11-13 suggests that the ‘16+1’ may not be dead just yet. </span></span></span></span></p> <h4><span><span><span><span>Europe needs a European-wide China strategy that lives up to its name</span></span></span></span></h4> <p><span><span><span><span>Given the current state of play, the EU must focus now on translating its newly found assertiveness into action. This will require a </span><a href=""><span>Europeanization</span></a><span> of its China strategy well beyond Paris and Berlin. Emmanuel Macron’s invitation to Angela Merkel and Jean-Claude Juncker to join him for his recent meeting with Xi will have sent a strong message to Beijing, but it is not enough for larger member states to show a united front in the absence of an EU-wide concert.</span></span></span></span></p> <p><span><span><span><span>Chinese state media continue to </span><a href=""><span>highlight</span></a><span> the opportunities China presents to “marginalized” economies in Southern Europe; France, Germany and the EU Commission must realize that such narratives still have traction. Suggestions such as EU Commissioner Günther Oettinger’s idea of a European veto over any Chinese infrastructure investment in the EU will hardly be well received by sovereigntist governments like Italy’s. Likewise, the Franco-German </span><a href=";v=2"><span>plan</span></a><span> for a European industrial policy, where China is the elephant in the room, fails to acknowledge the sharp divide between different European regions when it comes to innovation and the fourth industrial revolution.</span></span></span></span></p> <p><span><span><span><span>Brussels’ awakening to China’s growing power and influence is a very positive development. But larger member states must get more troubled economies on board. The Commission’s strategy rightly calls for the rapid implementation of financial support instruments for accession and neighboring countries. Beyond the rhetoric, only actions like these can assure a truly European China policy. </span></span></span></span></p> <p><em>Rebecca Arcesati is an intern in the Foreign Relations program at MERICS. She holds a double Master’s degree in China Studies from the University of Turin and Yenching Academy of Peking University.</em></p></div> </div> </div> Thu, 04 Apr 2019 08:53:38 +0000 h.seidl 9056 at Exploring the physical reality of the "Belt and Road" <span>Exploring the physical reality of the &quot;Belt and Road&quot;</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Tue, 04/02/2019 - 11:14</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-04-02T12:00:00Z">2019-04-02</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/jacob-mardell" hreflang="en">Jacob Mardell</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>MERICS expert Jacob Mardell has embarked on a journey to investigate how China’s Belt and Road Initiative is being implemented on the ground. His travels are taking him all the way from Brussels to Beijing.</strong></p> <p> </p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-04/JM_OntheNewSilkRoad1_cut.jpg?itok=Bwu4LnFL 325w, /sites/default/files/styles/max_650x650/public/2019-04/JM_OntheNewSilkRoad1_cut.jpg?itok=hB5sbry1 650w, /sites/default/files/styles/max_1300x1300/public/2019-04/JM_OntheNewSilkRoad1_cut.jpg?itok=TQWByTUY 1000w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-04/JM_OntheNewSilkRoad1_cut.jpg?itok=Bwu4LnFL" alt="Travelling along the New Silk Road. Source: Jacob Mardell." title="Travelling along the New Silk Road. Source: Jacob Mardell." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>With China’s hugely ambitious Belt and Road Initiative (BRI), the Eurasian supercontinent is being rebuilt. To really see how this is having an impact on the ground, I’m following the path of this New Silk Road. The idea is to explore, on a country-by-country basis, the way BRI is being implemented right now.</p> <p>It’s been a full six years since the inception of this development strategy that spans from Europe all the way to China itself. The BRI, which has been <a href="">written</a> into the constitution of the Chinese Communist Party (CCP), has emerged as a defining foreign policy concept of the presidency of Xi Jinping.</p> <p>It has prompted <a href="">condemnation</a> from Washington and has divided Europe between those countries that officially endorse the initiative, including most recently Italy, and those that see it as an opaque venture launched by a country the European Commission now <a href="">considers</a> a “systemic rival.” The BRI has also been responsible for countless op-eds accusing Beijing of “<a href="">debt trap diplomacy</a>,” along with a deluge of articles outlining the strategic motivations behind what is variously described as a <a href="">USD 900 billion</a>, <a href="">USD 1 trillion</a>, and even <a href="">USD 8 trillion</a> initiative.</p> <h4>Local fabric</h4> <p>And yet, for an initiative so politically important, so vast in scope, and so frequently discussed, there is comparatively little consideration of the physical reality of the BRI and how it translates into action, into roads, bridges, or ports. BRI is a global initiative, but as a program that seeks to forge connectivity through infrastructure, its fabric is inevitably local. That’s why I’m traveling overland from Europe to Asia, investigating the local impact of Chinese-built infrastructure, and considering BRI through the prism of the individual countries.</p> <p>The idea is to see how the BRI, a concept so large and amorphous, manifests on the ground. While a handful of official policy <a href="">documents</a> outline the initiative’s scope, these are vast and imprecise, with individual projects left unspecified. Official documents and statements also elaborate on sectors and types of envisaged cooperation, but these range from energy transmission to tourism, essentially covering every sphere of possible human endeavor.</p> <h4>Utopian character</h4> <p>The clearest picture to emerge from these documents is that of the Belt and Road’s aspirational, almost utopian character. It is about ushering in a new era of common development and enhanced connectivity, and with Chinese help forging a “community of common human destiny.” The ideological element of the BRI is frequently overlooked, but it is ever present and not to be dismissed lightly.</p> <p>Of course, there are also non-altruistic forces at work behind the BRI. As well as forging a community of common destiny, it is more immediately about dealing with overcapacity and surplus capital at home—throwing a lifeline to the state-owned enterprises that ballooned during the boom years of China’s investment-led growth. Supported by <a href="">various</a> mechanisms of the Chinese state, many of these <a href="">companies</a> are also being helped to dominate their respective sectors as global champions.</p> <p>The success of Chinese companies in dredging, shipping, and the running of ports provides a solid case study of how the BRI works as something like a global industrial policy. In tandem with this effort to support Chinese companies, the BRI is also about the gradual internationalization of the renminbi and the promotion of Chinese <a href="">industrial</a>, <a href="">cyber</a>, and <a href="">legal</a> standards.</p> <p>Sometimes the BRI also involves a genuine attempt to <a href="">develop</a> overseas markets and industries with the aim of integrating countries into Beijing’s economic sphere, for example, <a href="">encouraging</a> Pakistan to help fulfill China’s agricultural needs through the BRI’s flagship China-Pakistan Economic Corridor.</p> <p>BRI has a political and strategic dimension too, as some projects help Beijing secure access to resources and lines of communication. And, like any development program, it is also about seeking the goodwill of neighbors and projecting a positive international image.</p> <h4>Many aims, one slogan</h4> <p>It is, in other words, an economic-cum-foreign policy concept that kills several birds with one slogan. Some observers have pointed out that many of these processes have been in play since the early 2000s.</p> <p>This is true. The BRI is essentially the merger of these ambitions under a single brand name—one that has a bigger budget and is tied to the identity of a newly powerful China. This new brand comes equipped with a fledgling ideological framework, promoting Chinese development and the “community of common destiny” as an <a href="">alternative</a> to paternalistic development aid from the West. That BRI is a concept, or Chinese brand, is clear when one considers the official list of <a href=";cur_page=5">129 BRI countries</a> (130 now, counting Italy). What unites them is not their geography or receipt of Chinese investment, but that they have endorsed the BRI or signed an Memorandum of Understanding with China on the initiative.</p> <h4>Identifying the BRI on the ground</h4> <p>In the absence of an official list of projects, identifying the BRI on the ground can only be done through the top-down process of considering the policy documents and guiding principles behind the initiative. That is part of the reason the debate about the BRI is dominated by the bird’s eye perspective. Even the process of identifying BRI projects can be controversial. Making the conceptual leap between global the BRI and the local BRI is even harder.</p> <p>Making this leap is, however, necessary. Without considering the effects of the BRI on a country-by-country basis, it is impossible to assess the merits, dangers, and success of the initiative as a whole.</p> <p>Although it seeks cooperation with the BRI through its own infrastructure initiatives, Brussels is nervous about China’s growing influence on the Eurasian continent—in Central Asia, in Eastern Partnership countries, in the Balkans, and even within the EU itself. But Brussels cannot hope to compete, or even know if and when it needs to, without understanding what the governments along the Belt and Road want from China and how the BRI is playing out in their respective countries.</p> <p>Over the next several months, I will be writing dispatches from along the Belt and Road. I’ll be talking to experts and policymakers in BRI countries and visiting projects, seeking to better understand these countries’ relations with China and reporting on the successes, failures, and peculiarities of BRI projects all the way from Brussels to Beijing.</p> <p><em>This blogpost was originally published <a href="">at the Berlin Policy Journal</a> on March 27, 2019.</em></p></div> </div> </div> Tue, 02 Apr 2019 09:14:45 +0000 jheller 9041 at Ageing China seeks opportunity abroad <span>Ageing China seeks opportunity abroad</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Mon, 03/25/2019 - 16:08</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-03-25T12:00:00Z">2019-03-25</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/lauren-johnston" hreflang="en">Lauren A. Johnston</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span><span>In March, Italy signed an agreement pledging its support for China’s trans-continental Belt and Road Initiative. Rome hopes Chinese companies will invest in the country’s ageing infrastructure, while critics worry about China’s perceived geopolitical ambitions. However, Beijing's push has to be seen in a larger context:  an important driver of its outbound ambitions is the interaction of economic and demographic change at home. Faced with an ageing society, China is looking for investment opportunities in countries with younger populations along the BRI.</span></span></span></span></span></span></strong><strong><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span> </span></span></span></span></span></strong></p> <p> </p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-03/190326_pbu651079_01_ImagineChina.jpg?itok=SX8K_IwQ 325w, /sites/default/files/styles/max_650x650/public/2019-03/190326_pbu651079_01_ImagineChina.jpg?itok=17nBabk_ 650w, /sites/default/files/styles/max_1300x1300/public/2019-03/190326_pbu651079_01_ImagineChina.jpg?itok=6BO0lmYd 1300w, /sites/default/files/styles/max_2600x2600/public/2019-03/190326_pbu651079_01_ImagineChina.jpg?itok=Gx0ql1we 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-03/190326_pbu651079_01_ImagineChina.jpg?itok=SX8K_IwQ" alt="Ageing China" title="China&#039;s focus is now on providing for the needs of a growing number of pensioners and ensuring appropriate jobs are available for young people. Source: ImagineChina." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Since launching its “reform and opening” agenda in 1979, China has re-shaped the world economy. For the first three decades, China’s industrialization was driven by a low-wage demographic dividend. Falling birth and mortality rates boosted the working-age population share and kept wages low. Chinese leaders took full advantage, and the export of low-cost manufactured goods led to an industrialization revolution.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">But that boom was always going to be temporary. As powerful as China’s leaders may be, even they cannot make China’s population structure youthful again overnight or undo the effect of rising education levels on wages. The first signs that the flow of low-wage migrant workers into manufacturing hubs was beginning to slow came in 2003 – and China’s working-age population share has been falling steadily for about a decade now. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Adding to these supply-side pressures on the labor market, demand for China’s exports never quite recovered from the shock of the global financial crisis of 2008, which itself coincided with a peaking workforce in many Western economies. Compounding this double challenge was over-investment: China’s mostly state-owned steel mills and selective other industry-intensive sectors now have spare production capacity. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">These pressures have shifted the attention of China’s leaders away from low-wage industrialization. Their focus is now on providing for the needs of a growing number of pensioners and ensuring appropriate jobs are available for young people. Not only are there fewer new labor-market entrants than forty years ago, they also have different skills and often top-quality university degrees. In principle, they should prove more productive – they will have to be, just to maintain output as the working-age population share continues to fall. But the transition to such higher-skilled jobs can be fraught. </span></span></span></span></span></span></p> <p><strong>Demographic pressure drives China's outbound engagement within BRI</strong></p> <p><span><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">These pressures help explain why China is encouraging Chinese companies to invest in labor-saving technology and innovative sectors at home and, crucially, in infrastructure and selective manufacturing industries abroad. The latter is in principle good news for any developing country that offers an investor-friendly business environment and a population structure that promises a demographic dividend – much as did China four decades ago. </span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">It happens that many countries around the shores of the Indian Ocean - Bangladesh, India, Indonesia, Tanzania - are, compared to other regions, relatively well positioned to <a href=""> take advantage of China’s new interest in investing abroad. </a></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Many of these countries host key ports that also serve land-locked neighbors. And Indian Ocean countries are also home to more than two billion people, mostly young. It is the world’s youngest region, one in which newly paved roads and newly built bridges would boost economic output and demand. </span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The logic of President Xi’s Belt and Road Initiative has <a href="">stirred debate since its launch in Kazakhstan and Indonesia in 2013</a>. In Indonesia, strategically important to both the Indian and Pacific Oceans, he spoke of a “Maritime Silk Road of the twenty-first century”. But beyond China’s history in the region, economic demography surely plays a role: Rapid population ageing across East Asia makes Indian Ocean countries a strategically located reservoir of low-wage workers - and a potentially vast emerging consumer market.</span></span></span></span></p> <p><strong>Countries are looking at the <span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">demographic-dividend window that China </span></span></span></span></span>already profited from</strong></p> <p><span><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Some of the region’s largest economies – including India, soon to become the world’s most populous country - are looking at the kind of demographic-dividend window that China started profiting from in the 1980s. These countries, like China before them, will best make sure they also profit should foreign investors reap the dividends of investment and economic growth. To do so, they will need to develop policies and institutions according to their own conditions to deal with and profit from rapid economic change. </span></span></span></span></span></p> <p><span><span><span><a href=""><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">With China already investing in infrastructure and selective industries in a growing number of these countries</span></a><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">, economic rivalry with Western industrialized countries grouped in the Organization for Economic Development (OECD) is nascent. But the Indian Ocean region has started a nascent process of greater intra- and inter-regional cooperation through the Indian Ocean Rim Association (IORA). </span></span></span></span></p> <p><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In addition to China, IORA dialogue partners include Egypt, France, Germany, Japan, the UK, and the USA. China’s interest in the Indian Ocean, now under the umbrella of the Belt and Road Initiative, is influenced by changes in its economic demography and development level. China’s demographics-related logic in the intended belts and roads might broadly be something for other countries also experiencing rapid population ageing to respond to as well, in their own style. Italy is among them.</span></span></span></span></p> <p> </p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Readers having enjoyed this blog can find further information here:</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Johnston, L.A. (forthcoming 2019). The Economic Demography Transition: Is China’s ‘not rich, first old’ circumstance a barrier to growth? Australian Economic Review (to be published in 2019 volume)</span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">Johnston, L.A. (2019) <a href="">An economic demography explanation for China’s ‘Maritime Silk Road’ interest in Indian Ocean countries</a>. <em>Journal of the Indian Ocean Region</em>, 15:1, 97-112, DOI: 10.1080/19480881.2019.1569326</span></span></span></span></p></div> </div> </div> Mon, 25 Mar 2019 15:08:16 +0000 jheller 9021 at Shanghai’s new tech board might perform better than previous attempts <span>Shanghai’s new tech board might perform better than previous attempts</span> <span><span lang="" about="/en/user/646" typeof="schema:Person" property="schema:name" datatype="">jheller</span></span> <span>Mon, 03/18/2019 - 15:23</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-03-18T12:00:00Z">2019-03-18</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/maximilian-karnfelt" hreflang="en">Maximilian Kärnfelt</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>The Shanghai Stock Exchange will establish an innovation and technology equity board to turn stock market gains into technological innovation. Previous tech boards have underperformed the market for years. But increased foreign investment and bank lending to the private sector as well as an improved listing process give reason to be optimistic.</span></span></span></span></span></strong></p> <p> </p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-03/171024_Economic_graph_64455090_ml.jpg?itok=CvaYYa-b 325w, /sites/default/files/styles/max_650x650/public/2019-03/171024_Economic_graph_64455090_ml.jpg?itok=3m5a2aiC 650w, /sites/default/files/styles/max_1300x1300/public/2019-03/171024_Economic_graph_64455090_ml.jpg?itok=KGcTkyok 1300w, /sites/default/files/styles/max_2600x2600/public/2019-03/171024_Economic_graph_64455090_ml.jpg?itok=uvIQACLX 1678w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-03/171024_Economic_graph_64455090_ml.jpg?itok=CvaYYa-b" alt="Image" title="Tech boards have underperformed the market for years. A new board is supposed to change that. Source: 123rf." typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>President Xi Jinping announced in November 2018 that the Shanghai Stock Exchange will establish an innovation and technology equity board. No exact launch date appears to have been provided to the public. The new board represents a renewed attempt to turn stock markets into a catalyst for technological innovation. By improving smaller companies’ access to capital, the new board is intended to help put capital into the hands of companies who have promising new business models or technology.</p> <p>Whether the tech board can help to effectively accomplish this goal is far from certain. Other tech boards previously launched have been underperforming the market for years. Characteristics of the market are unfavorable for the shares of smaller idiosyncratic firms, but recent developments address some of these problems. There is reason to be optimistic about the new board.</p> <p><strong>The new board could address several government goals at once</strong></p> <p>Recent documents related to the Made in China 2025 industrial upgrading plan highlight innovative businesses’ role in the future of the Chinese economy. Providing these companies with enough financial support and sharing their profits with the domestic market is becoming a policy priority. According to some reports China now has more unicorns than the US. But more favorable conditions outside the country often lead to these companies choosing to list abroad or in Hong Kong where most Chinese cannot benefit from their success.</p> <p>The Chinese government likely hopes the board will also attract existing tech giants to list their shares there. Attempts to bring the shares of Chinese tech companies listed abroad such as Alibaba and Xiaomi home to the domestic market have been unsuccessful. A <a href="">report</a> co-authored by CICC states that the board is expected to attract a larger number of overseas stocks. As CICC is majority government owned the report’s predictions might give a window to the government’s hopes for the board.</p> <p>Beijing has drafted special rules designed to make the board an attractive place for companies to list. The rules clearly favour start-ups. It allows companies which have not yet become profitable to list; the listing process will be faster; companies with weighted voting rights will be accepted (this corporate structure typically puts more power in the hands of founders); and more price movements are to be tolerated. Additionally, the launch of the board will likely be covered closely and favourably by the state media. This should lead to large amounts of capital being raised in the first round of IPOs.</p> <p><strong>Past attempts at using equity markets to spur innovation might give an idea of the new board's life cycle</strong></p> <p>Shenzhen’s ChiNext tech board which was launched in 2010 had similar goals as the new tech board. Initially, ChiNext performed extremely well, between 2010 and 2015 the value of the index quadrupled. It then crashed and stabilized at a lower level. In recent years it has underperformed the market. The amount of capital raised has been declining, and the number of IPOs has likewise fallen.</p> <a href="/sites/default/files/inline-images/MK_Blog_ChiNext_graph.png"><img alt="Graph" data-entity-type="file" data-entity-uuid="dc5e988c-c5fa-4d39-b60f-ff30c8368471" height="75%" src="/sites/default/files/inline-images/MK_Blog_ChiNext_graph.png" width="75%" class="align-center" /></a> <p>ChiNext’s initial performance looked very much like a bubble, a common phenomenon in China’s financial markets (see a MERICS blog on the topic <a href="">here</a>). Once stock prices left bubble territory performance deteriorated. ChiNext has underperformed the Shanghai Stock Exchange since 2017. There is more than one likely reason why this is the case.</p> <p>One problem faced by the kind of smaller firms which might list on a tech board is poor access to credit as state banks generally prefer lending to SOEs. This problem has been covered extensively (for example by me <a href="">here</a>). </p> <p>A lesser known problem is <em>Stock Price Synchronicity, </em>when stock prices move together. This phenomenon, caused primarily by a lack of reliable firm-specific information, is common in emerging markets. The most cited scientific <a href="">study</a> on the topic found that 80 percent of Chinese stocks move together in a given week (compared to 56 percent in the US).</p> <p>This following example illustrates how this phenomenon can distort the market, and hurt the performance of companies with unique business models:</p> <p>Imagine a skilled investor who is considering buying shares in a company which is developing industrial robots. Despite being very different from most listed companies the share price of this company will, because of stock price synchronicity, often move in a similar way. The investor would, however, still bear the risk of losing his entire investment. This could happen if, for example, it was discovered that company’s robots did not work, causing it to go out of business. While the returns are distorted, the risk of losing everything is the same. Under these circumstances the investor might decide to buy into a fund which tracks the market instead. The returns on his investment would often be similar, but without the risk of losing the whole investment.</p> <p>Scale this example up to the whole market, and it becomes clear how stock price synchronicity can cause investors to systematically avoid risky stocks, contributing to them underperforming the market.</p> <p><strong>Reasons for optimism</strong></p> <p>Several developments make it likely the new board will perform better than ChiNext:</p> <p>Firstly, as mentioned in the first part of this piece, new rules will improve the listing process.</p> <p>Secondly, increasing foreign investment can help address stock price synchronicity. <a href="">Research</a> shows that the stock price of companies with large degrees of foreign ownership is more closely related to fundamentals and less driven by the market.  This is likely because foreign ownership leads to a greater number of independent analysts covering the stock. China’s inclusion into the MSCI index and the establishment of the stock connect programs are examples of recent changes which will attract more foreign investment.</p> <p>Finally, the government is pressuring banks to lend more to the private sector, this should also help the performance of stocks on the new board.</p> <p>It would be surprising if Shanghai’s New Tech Board did not at least have a good start. Chinese investors have limited investment options, so the new board will be welcomed. Additionally, the government is guaranteed to lend a hand with promotion. At the very least a few impressive companies should make the board their home. However, there is a large risk that an initial stampede of investors could cause stock price overvaluations and subsequent crashes.</p> <p><em>This text was first published by the <a href="">China Economic Review</a>.</em></p></div> </div> </div> Mon, 18 Mar 2019 14:23:21 +0000 jheller 8961 at In arms control, China needs to stop free-riding <span>In arms control, China needs to stop free-riding</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Mon, 02/25/2019 - 10:31</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-02-25T12:00:00Z">2019-02-25</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/hanns-w-maull" hreflang="en">Hanns W. Maull</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong><span><span><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>According to the most recent estimates, </span></span></span></span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>China now has the second largest defense budget behind the United States. If Beijing refuses to engage in arms control, it takes a free ride and behaves as irresponsibly as Russia and the United States </span></span>did by just walking away <span><span>from the INF treaty.</span></span></span></span></span></span></strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-02/190216_Yang_Jiechi_at_MSC_2019_Image_MSC_Balk.jpg?itok=5CNHtjhb 325w, /sites/default/files/styles/max_650x650/public/2019-02/190216_Yang_Jiechi_at_MSC_2019_Image_MSC_Balk.jpg?itok=eq_CnlR6 650w, /sites/default/files/styles/max_1300x1300/public/2019-02/190216_Yang_Jiechi_at_MSC_2019_Image_MSC_Balk.jpg?itok=TY3O3Ci0 1300w, /sites/default/files/styles/max_2600x2600/public/2019-02/190216_Yang_Jiechi_at_MSC_2019_Image_MSC_Balk.jpg?itok=qX_X2zS8 2000w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-02/190216_Yang_Jiechi_at_MSC_2019_Image_MSC_Balk.jpg?itok=5CNHtjhb" alt="China&#039;s State Councilor Yang Jiechi at the Munich Security Conference 2019" title="At the Munich Security Conference, China’s State Councilor Yang Jiechi rejected the idea of a multilateral arms control treaty. Image by MSC / Balk" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>Few countries have benefitted more from the liberal international trade order than China. After opening up to foreign investment and joining the World Trade Organization on Dec. 11, 2001, China’s merchandise exports multiplied by a factor of nine. Together with the United States and Germany, China has become one of the top three trading powers; in 2017, it was again the world’s largest. Yet China did not so much play by the rules of that order as to use them: as a cover to promote its own rise, pursuing a state-inspired, state-led strategy – mercantilism, rather than free enterprise. </span></span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>China’s rapidly growing missile forces have long troubled not only the US</span></span></span></strong></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>Something similar has been happening with regard to international security. Here, too, China has pursued its own strategy under the cover of international agreements. China’s objective has been to become a major military power, able to challenge even the United States, at least in East Asia. The international agreement that China was free to exploit - because it was not bound by it - was the bilateral Intermediate Nuclear Forces (INF) treaty that the United States and the Soviet Union concluded in 1987. Both recently walked away from the treaty (officially, it is suspended but few would bet on its survival after the six months grace period has elapsed), which outlawed the deployment of land-based intermediate range missiles with a range between 500 and 5,500 kilometres - precisely the category of weapons systems that China in recent years has been developing and deploying by the hundreds and even by the thousands, arming them with conventional rather than nuclear warheads. This massive arms build-up, conducted on the back of a (so far) rapidly growing economy and hence rather painless for China, threatens to undermine the regional security order and hence stability in East Asia – and globally.</span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>China’s rapidly growing missile forces have long troubled not only the United States, but also Russia. As early as 2005, Moscow suggested to Washington to jointly abrogate the INF treaty, as it no longer reflected the new strategic environment. In 2007, the two governments proposed new, multilateral arms control negotiations to the UN General Assembly to address the proliferation of missile technology and the build-up in China and other countries, but Beijing promptly turned down the suggestion. Moscow then proceeded on its own, developing and deploying its new 9M729 missiles (known in the West as SSC-8), in breach of its INF treaty obligations.   </span></span></span></span></span></span></p> <p><span><span><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span><a href="">For the United States, China’s military build-up challenges its strategic dominance in East Asia</a></span></span></span></span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>. China’s DF-21D long-range, high-precision “carrier killer” missiles threaten US aircraft carriers and thus push them away from East Asia. Its other missiles target the whole gamut of America’s forward military infrastructure in East Asia, such as its bases, its aircraft and its ships in Japan. An elaborate <span><span><a href="">war game simulation conducted on behalf of the US Navy</a></span></span> found that, by using about </span></span></span><span><span><span>20 percent of its short-range ballistic missiles, 25 percent of its medium-range ballistic missiles, and up to 95 per cent of its ground-launched cruise missiles inventory, China could within minutes destroy all major US headquarters in Japan, almost all US ships in port, nearly every runway at US airbases, and more than 200 aircraft that were trapped on those cratered runways.</span></span></span></span></span></span></p> <p><span><span><span><strong><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>China now has the second largest defense budget behind the US</span></span></span></strong></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>German Chancellor <span><span><a href="">Angela Merkel therefore got it right when she appealed  to  China to join efforts to contain a new arms race at the Munich Security Conference in mid-February</a></span></span>. She was <span><span><a href="">rebuked immediately, however, by Yang Jiechi</a></span></span>, China’s State Councillor, who claimed that China’s military build-up was purely defensive and should therefore be of no concern to any other country. This is disingenuous: <span><span><a href="">according to the most recent figures and estimates  by the London-based International Institute for Strategic Studies (IISS</a>)</span></span>, China now has the second largest defense budget behind the United States – and China’s fire power is largely concentrated in one critical region, East Asia. </span></span></span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>Moreover, it is not so much the figures as <span><span><a href="">the trends that matter:</a></span></span> in the year 2000, US defense expenditure was nine times that of China, in 2010, this was down to less than six times, and in 2017 to less than three times. Even more telling is  the comparison of  Japan’s and China’s defense spending</span></span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">: Starting from similar levels in 2000, China spent five times as much as Japan in 2017. </span></span></span></span></p> <p><span><span><span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>If China refuses to engage in arms control, it takes a free ride and behaves as irresponsibly as Russia and the United States </span></span></span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB">did by just walking away </span><span lang="EN-GB" xml:lang="EN-GB" xml:lang="EN-GB"><span><span>from the INF treaty. Collectively, these three great powers are about to bring back the dangers of annihilation the world faced during the Cold War. Their search for unilateral military advantages through superior technologies and ever larger quantities of ever faster, more precise and destructive weapons systems will make the world a much more dangerous place - for all of us. It took the two superpowers, America and the Soviet Union, many years to understand that simple truth, and even longer to draw the conclusions and start destroying nuclear weapons and missiles. Their present leaders have forgotten, and China’s leadership seems unable to understand what it means to be a responsible great power. </span></span></span></span></span></span></p></div> </div> </div> Mon, 25 Feb 2019 09:31:57 +0000 h.seidl 8901 at China’s space program is about more than soft power <span>China’s space program is about more than soft power</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Wed, 02/20/2019 - 10:53</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-02-21T12:00:00Z">2019-02-21</time> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p>By Rebecca Arcesati</p> <p><strong>The historic moon landing of China’s Chang'e 4 marks a symbolic victory for the emerging space power. But lack of transparency along with concerns about dual-use plans and surveillance undermine China’s efforts to persuade the world of its peaceful rise. For Europe, Beijing can be a selective partner on space matters at best.</strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-02/190222_TV%20screen%20shot_lunar%20probe_Chang_e_4_ImagineChina_bjl591940.jpg?itok=ffr4ePir 325w, /sites/default/files/styles/max_650x650/public/2019-02/190222_TV%20screen%20shot_lunar%20probe_Chang_e_4_ImagineChina_bjl591940.jpg?itok=tF6-MFAe 650w, /sites/default/files/styles/max_1300x1300/public/2019-02/190222_TV%20screen%20shot_lunar%20probe_Chang_e_4_ImagineChina_bjl591940.jpg?itok=kLRnFUy9 1300w, /sites/default/files/styles/max_2600x2600/public/2019-02/190222_TV%20screen%20shot_lunar%20probe_Chang_e_4_ImagineChina_bjl591940.jpg?itok=WBichafB 2600w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-02/190222_TV%20screen%20shot_lunar%20probe_Chang_e_4_ImagineChina_bjl591940.jpg?itok=ffr4ePir" alt="TV screen shot of China&#039;s robotic lunar probe Chang&#039;e-4 landing on the far side of the moon on January 3, 2019." title="TV screen shot of China&#039;s robotic lunar probe Chang&#039;e-4 landing on the far side of the moon on January 3, 2019. Image by ImagineChina" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>NASA administrator Jim Brindestine called it “an impressive accomplishment.” On January 3, the China National Space Administration (CNSA) successfully landed the probe Chang’e 4 on the unexplored side of the moon. A remarkable scientific success, the landing also <a href="">sparked</a> concerns in Washington that China may use the remote lunar dark side to conceal anti-satellite weapons.</p> <p>Establishing China for the first time as an emerging space power in global public view, Chang’e 4 is only the tip of the iceberg of Beijing’s long-nurtured <a href="">space ambitions</a>. Later in 2019, a follow-up mission will bring samples of lunar soil back to Earth. A lunar research <a href="">base</a> “shared by multiple countries” and the world’s first probe to Mars are in the pipeline. In 2018, China <a href="">launched</a> more space rockets than any other country. The indigenous technological base is <a href="">improving</a> steadily, narrowing the gap with established space powers.  </p> <p>China has also made notable progress in satellite applications, including earth observation and imagery, communications and broadcasting, and navigation and positioning. After president Xi Jinping opened the space industry to private players in 2014, a host of <a href="">new space startups</a> are competing with state-owned aerospace giants. By 2020, China’s commercial space sector will be worth an estimated <a href="">120 billion USD</a>. </p> <p>In line with the core message of the <a href="">2016 White Paper</a> on Space Activities, China has been eager to present itself as a peaceful and trustworthy space power opposed to arms races in outer space and committed to multilateralism. Such a narrative appeals to developing countries lacking autonomous space capabilities. It also seems to <a href="">persuade</a> the European Space Agency (ESA.  </p> <p>For now, China downplays more controversial aspects of its space program, such as the interest in space mining and military applications. However, the Chinese government has been rather open about the fact that it sees space policy as a tool for strengthening its “comprehensive national power” (综合国力), gaining international prestige and soft power while also advancing its commercial and geostrategic interests. “The space dream is part of the dream to make China stronger,” Xi <a href="">said</a> in 2013 shortly after taking power. The vision is for China to become the <a href="">global leader</a> in space technology by 2045. </p> <p>Mindful of how Beijing <a href="">extracted</a> critical dual-use technology from the Galileo satellite navigation program, Europe must exercise caution when cooperating with China in space. </p> <p><strong>Lunar silkworms and low-cost satellites </strong></p> <p>China’s space program is, on paper, a peaceful endeavor to advance mankind’s progress, from insight into the origins of the universe to the potential of future human colonization of the moon. Equipped with scientific payloads from the Netherlands, Germany, Sweden and other countries, the Chang'e 4 mission hit headlines for sending silkworms, cotton and potato seeds to the moon’s dark side.  </p> <p>Central to China’s space rhetoric is an emphasis on international collaboration. As the United States banned taikonauts from working with NASA and, consequently, with the International Space Station (ISS), China pushed back by pledging to <a href="">open</a> its own space station scheduled for 2022 to all UN member states. In Asia, China has backed the creation of a new regional institution, the <a href="">Asia Pacific Space Cooperation Organization (APSCO)</a>. </p> <p>The primary focus of China’s space outreach on earth is in the developing world. Besides tapping into a multibillion market, China seeks to cement ties with selected countries through space diplomacy. Beijing has <a href="">sold</a> low-cost commercial satellites to several countries, such as Brazil, Nigeria and Pakistan, and offered a dozen others money, training and technology to launch their own. In <a href="">Venezuela</a>, some 145 million USD in space assistance was granted in exchange for natural resources.  </p> <p>Satellite launches are also <a href="">part</a> of the Belt and Road Initiative (BRI). The rhetoric of a “<a href="">Spatial Information Corridor</a>” emphasizes benign applications such as prevention of natural disasters and emergency rescue: last year, the Chinese Academy of Sciences (CAS) launched its <a href="">Big Earth Data</a> initiative (the Digital Belt and Road, or DBAR), which uses remote sensing for sustainable development. And by 2020, China’s indigenous network of 35 BeiDou navigation and positioning satellites will provide services to 60-plus BRI countries, challenging American GPS and Europe’s Galileo. If the Chinese military makes no secret of BeiDou’s <a href="">role</a> in upgrading its guidance and surveillance capabilities, the government instead underlines digital connectivity.  </p> <p><strong>Lack of transparency fuels mistrust</strong></p> <p>The Chinese government is much less vocal on other crucial aspects of its space ambitions (including budgetary ones), raising legitimate international concerns that undermine China’s desire to be perceived as a reliable spacefaring nation. The outdated 1967 Outer Space Treaty has <a href="">gaps</a> when it comes to regulating, say, asteroid mining. Chinese engineers are working on ways to <a href="">capture</a> small asteroids as well as to <a href="">harvest</a> natural resources in orbit. The moon’s minerals, including rare earth metals and Helium-3 (which can be used for nuclear fusion), also <a href="">attract</a> an energy-hungry Beijing. </p> <p>Last year, China signed an <a href="">MoU</a> on space cooperation with Luxembourg, a country which codified a law giving companies the rights to material they mine in space (the United States passed a similar bill). The 2016 White Paper is remarkably silent on space mining, but as Chinese legislators formulate an <a href="">overdue legal framework</a> for space activities, it will be interesting to see how they address questions of territorial sovereignty and resource appropriation. Given Beijing’s track record in some earthly arenas, such as the South China Sea and the Antarctica, international trust might be hard to secure. </p> <p>Besides being rich in natural resources, outer space is seen as a strategic domain for China’s national security and defense, as clearly <a href="">stated</a> in the 2015 Military Strategy; it is also one where China aims at <a href="">dominance</a>. Xi Jinping established the PLA’s Strategic Support Force (PLASSF) in 2015 to support joint combat operations in space and integrate them with electronic warfare and cyber capabilities. Last year, a US Department of Defense <a href="">report</a> warned that China would step up the militarization of space through the development of counterspace capabilities. In December, Boeing <a href="">canceled</a> a controversial satellite order, which had secretly been backed by  financing from a PLA-linked entity in order to bypass US export control laws.     </p> <p>China’s lack of transparency over its ambitions of civil-military integration (军民融合) undermines its own efforts to boost its soft power through space exploration. It may also fuel self-fulfilling prophecies of a new space race: largely in response to China’s moves, US President Donald Trump <a href="">signed</a> a directive on February 19 to set up the previously planned military Space Force.</p> <p>Several developments motivate US concerns. In 2007, China conducted a <a href="">test</a> which destroyed one of its satellites, raising fears over a potential weaponization of space. In addition, a <a href="">network</a> of at least eight Chinese satellite ground stations scattered around the world is facing growing scrutiny.  In 2017, the launch of a project to set up a potential ground station in Nuuk, Greenland was reportedly <a href="">orchestrated</a> to conceal its military component. Now researchers <a href="">warn</a> against the potential use of a Chinese satellite station in Northern Sweden for intelligence collection, casting doubts over the proclaimed civilian nature of China’s remote sensing program.  </p> <p>Amid growing anxieties over the BRI’s lack of transparency, space cooperation with developing countries also raises scrutiny. Satellites are the channel through which countries access information. They are also vulnerable to cyber hacks. Just as the digital infrastructure funded and built by China facilitates government-led surveillance, censorship and espionage in some <a href="">cases</a>, a space-based Silk Road may well <a href="">increase China’s influence</a> over those countries.  </p> <p><strong>For Europe, China can only be a selective partner in space </strong></p> <p>The ESA has long been keen to work with China, particularly on scientific missions for which pooling resources is key to success. Last year, the European space industry <a href="">expressed wariness</a> of the Trump administration’s vision of US dominance in space. At first glance, with its rhetoric of cooperation and peaceful development, Beijing may appear like an ideal partner. ESA director general Jan Woerner <a href="">told</a> Xinhua News that the agency welcomed more cooperation with China. Aside from <a href="">human spaceflight</a> and lunar research, China and European countries collaborate on a variety of projects, from <a href="">earthquake early warning</a> to <a href="">oceanography</a>.  </p> <p>But despite the undisputed scientific benefits of such cooperation initiatives, Beijing is far from being a reliable partner in space. The opaque role of the military in the country’s space program, coupled with China’s behavior in similarly uncertain legal spaces on earth, calls for a cautious approach in Europe. If Washington’s zero-sum posture fueled greater competition and mistrust with China, a soft approach may underestimate very real risks, such as the transfer of dual-use space technology to the PLA. Europe should limit cooperation efforts to shared scientific goals, for instance space debris mitigation. At the same time, it must use this opportunity to demand greater transparency from China. </p> <p><em>Rebecca Arcesati is an intern in the Foreign Relations program at MERICS. She holds a double Master’s degree in China Studies from the University of Turin and Yenching Academy of Peking University.</em></p></div> </div> </div> Wed, 20 Feb 2019 09:53:54 +0000 h.seidl 8871 at Traveling 60,000 kilometers across China’s Belt and Road <span>Traveling 60,000 kilometers across China’s Belt and Road</span> <span><span lang="" about="/en/user/286" typeof="schema:Person" property="schema:name" datatype="">h.seidl</span></span> <span>Tue, 02/12/2019 - 13:21</span> <div class="layout layout--onecol"> <div class="layout__region layout__region--content"> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field--item"><time datetime="2019-02-12T12:00:00Z">2019-02-12</time> </div> <div class="field field--name-field-authors field--type-entity-reference field--label-hidden field--items"> <a href="/en/team/jacob-mardell" hreflang="en">Jacob Mardell</a> </div> <div class="field field--name-field-announcement-text field--type-text-long field--label-hidden field--item"><p><strong>The China Road Project team plans to traverse the Eurasian supercontinent, from London to Jakarta and back again, investigating the infrastructure projects that make up China’s Belt and Road Initiative (BRI). By gathering data on projects and interviewing stakeholders, the project aims to shine a light on what is a much talked about, but little understood initiative. It also seeks to tell the stories of those whose lives are being transformed by the new roads, railroads, ports, and power stations along the BRI. </strong></p></div> <div class="field field--name-field-main-image field--type-image field--label-hidden field--item"> <img srcset="/sites/default/files/styles/max_325x325/public/2019-02/190212_Bar_Boljare_Highway_Montenegro_BRI_Image_by_123rf_89311699_m.jpg?itok=kjuWtIUy 325w, /sites/default/files/styles/max_650x650/public/2019-02/190212_Bar_Boljare_Highway_Montenegro_BRI_Image_by_123rf_89311699_m.jpg?itok=AtABg34W 650w, /sites/default/files/styles/max_1300x1300/public/2019-02/190212_Bar_Boljare_Highway_Montenegro_BRI_Image_by_123rf_89311699_m.jpg?itok=KAKA7Ep_ 1300w, /sites/default/files/styles/max_2600x2600/public/2019-02/190212_Bar_Boljare_Highway_Montenegro_BRI_Image_by_123rf_89311699_m.jpg?itok=YD0uPMla 2509w" sizes="(min-width: 1290px) 1290px, 100vw" src="/sites/default/files/styles/max_325x325/public/2019-02/190212_Bar_Boljare_Highway_Montenegro_BRI_Image_by_123rf_89311699_m.jpg?itok=kjuWtIUy" alt="The Bar-Boljare Highway linking Montenegro’s Adriatic coast to Serbia is built with a Chinese loan. The ambitious project has added fuel to the debate about debt risks associated with the BRI. " title="The Bar-Boljare Highway linking Montenegro’s Adriatic coast to Serbia is built with a Chinese loan. The ambitious project has added fuel to the debate about debt risks associated with the BRI. Image by Ivan Kuznetsov via 123rf" typeof="foaf:Image" class="img-responsive" /> </div> <div class="field field--name-body field--type-text-with-summary field--label-hidden field--item"><p>There has been plenty of ink spilled on the subject of China’s Belt and Road Initiative (BRI) over the past few years. Yet amid this torrent of op-eds there is a dearth of information on the actual ports, railroads, power stations, and other infrastructure that make up the Belt and Road. </p> <p>Whether you think it's all about “<a href="">inclusive globalization</a>,” or believe that Beijing’s predatory lending habits are creating “<a href="">debt traps</a>” for developing countries, many analyses rest on an incredibly <a href="">small body of data</a>. </p> <p>BRI projects are difficult to research in offices far from where the action is taking place. In contrast with infrastructure projects funded by multilateral development institutions like the <a href="">World Bank</a>, they often lack detailed documentation. Whereas hundreds of pages accompany even the smallest World Bank project, thorough research on the relatively well defined <a href="">China Pakistan Economic Corridor (CPEC)</a> - BRI’s flagship corridor - turns up only a handful of official documents. </p> <p>By travelling 60,000 kilometers along the Belt and Road, The China Road Project will help to close the knowledge gap created by this lack of information. While on the road, I will share my findings and analyses on the MERICS Blog. I’ll also be providing an on-the-ground angle to MERICS’ Belt and Road Tracker - fact-checking data and following up leads on “zombie projects” that have disappeared from the spotlight of media attention. </p> <p><strong>Plotting my journey along the Belt and Road </strong></p> <p>The BRI brand has been liberally applied to almost every field of human endeavor - from <a href="">bodybuilding competitions</a> to <a href="">outer space</a> - but the meat and bones of the BRI is hard infrastructure and the soft connectivity that facilitates its use. Power stations, railroads, highways, even fiber optic cables and business parks - these are the tangible aspects of the BRI. </p> <p>Yet, you won’t find a definitive list of BRI projects, nor official criteria for what is and isn’t the BRI. Instead, delineating BRI projects involves making a judgement call as to which projects best represent the ambitions and characteristics of the Belt and Road as a whole.  </p> <p>The Belt and Road is a foreign policy concept - one that seeks China-led development in order to achieve (ideally mutual) economic prosperity and what Beijing calls a “<a href="">community of common destiny</a>.” On the ground, the BRI is implemented by Chinese money and Chinese companies. Many big BRI projects are <a href="">facilitated</a> by loans from Chinese policy banks like the Export-Import Bank of China (EXIM) and carried out by <a href="">Chinese companies and state-owned enterprises</a>. </p> <p>The China Road Project roughly follows the logic behind the MERICS’ Belt and Road Tracker - defining the Belt and Road with reference to the policy goals and rhetoric associated with the initiative. Armed with this list of projects, most of which involve Chinese state financing and companies, I will chart a route that takes me out of Western Europe, down the Adriatic Coast into the Balkans and Greece, across Turkey and the Caspian Sea into Central Asia, China, and eventually Southeast Asia. </p> <p>In rhetoric, the BRI extends as far as Latin America, but it is fundamentally a Eurasian vision. The glory of the ancient pan-Eurasian Silk Road is fundamental to the BRI narrative This is made most explicit in writings by Chinese academics on the BRI. <a href="">Ming Hao</a>, for instance, describes the BRI as facilitating the rejuvenation of ancient continental civilizations in relation to the modern maritime powers of Europe and the United States. </p> <p>Connectivity is the central pillar of the BRI story - specifically connectivity with China. I seek to test the connective sinews that constitute the BRI by approaching Beijing from the West, along the overland “belt” portion of the initiative, before returning to Europe by cargo ship, along the maritime “road” portion through Southeast Asia and across the Indian Ocean. </p> <p><strong>Europe </strong></p> <p>Europe’s role in the Belt and Road is complicated. Developed European economies are not as desperate for infrastructure as some of the developing countries that the BRI aims to transform. Stringent EU rules governing infrastructure finance and implementation, such as procurement practices, <a href="">preclude Beijing</a> from going about business as it does elsewhere in the world. There is also the reality of geopolitical competition (or at least strategic wariness) between the EU and China that further complicates the relationship, and many European leaders have <a href="">voiced apprehension</a> regarding the Sino-centric nature of Beijing’s Belt and Road plans. </p> <p>On the other hand, Western Europe is the terminus of the <a href="">much-hyped trains</a> traversing the rejuvenated “New Silk Road.” For China, it is a fantastic potential market, and it boasts an ecosystem rich with potential acquisition targets for Chinese companies - already it receives a <a href="">sizable bulk</a> of Chinese overseas investment.  </p> <p>In Europe’s southeast, countries are <a href="">more open</a> to the idea of greenfield investment in infrastructure from China. Montenegro, for example, which belongs to China’s <a href="">controversial 16+1 grouping</a> of Central Eastern European countries, is already receiving <a href="">more financial help</a> for infrastructure projects from Beijing than from the EU. (It is worth noting however, that infrastructure financing from Brussels still dwarfs funds from Beijing in all EU member states.) </p> <p><strong>Central Asia </strong></p> <p>My journey will proceed through the Balkans and Greece, entering Asia at the historical juncture between the two continents: Istanbul. I will drive the length of Turkey, investigating Chinese investments and hoping to discover more about the dynamic relationship between these two <a href="">curiously aligned powers</a>. From the Caucasus I will take the <a href="">trans-Caspian route</a> into Kazakhstan to begin the Central Asian leg of my journey. </p> <p>In absolute terms, BRI investment in this sparsely populated ocean of land is not terribly significant. Central Asia is, however, key to the idea behind the BRI - of leading the left-behind into a new stage of development spurred by connectivity with China. It’s also the heart of the ancient Silk Road, a mixing palette of Russian and Chinese influence, and it was here, in Kazakhstan, where <a href="">Xi Jinping first unveiled</a> the overland portion of his Belt and Road plans. </p> <p>I will snake across Central Asia visiting each country in the region barring Turkmenistan, whose arduous visa regime makes it prohibitively expensive to traverse. In Almaty, I will reluctantly drop off my vehicle since strict regulations in China make it nearly impossible to complete my trip to Beijing by car. Instead, I will take a combination of buses, trains, and hired drivers to continue my pilgrimage. My journey across the historic silk route will continue through the ancient capital of Xi’an to China’s present-day capital and Belt and Road headquarters, Beijing, and finally on to the vaunted Chinese <a href="">tech mecca of Shenzhen</a>. </p> <p><strong>South and Southeast Asia </strong></p> <p>My journey in Southeast Asia is organized around the official China-Indochina Peninsula and Bangladesh-China-India-Myanmar <a href="">Economic Corridors</a>. From Myanmar to Singapore, economic and political contexts vary, and each country in the region has its own complex relationship with China. That’s why this leg of my journey promises to be the longest and most diverse.  </p> <p>This is also the area of the world in which I expect to see the largest Chinese presence, particularly when it comes to e-commerce agreements and the futuristic sounding “<a href="">Digital Silk Road</a>.”</p> <p>The final leg of my journey will be spent on cargo ships. I will return to Europe via <a href="">the Maritime Silk Road</a> across some of the world’s busiest shipping lanes, and I aim to make port calls along the way. Sri Lanka, Pakistan, Djibouti, and Ethiopia are on the agenda. </p> <p>Of course, with a trip like this, flexibility is a must. Political restrictions in places like Myanmar change rapidly, and new projects are constantly being launched, some of which might end up more attractive than projects on the original to-do list. Throughout the journey, I expect to encounter a significant number of externalities beyond my control as well as new leads that shouldn’t be ignored. Ultimately, I believe that equipping myself with as much knowledge as possible, a good provisory plan, and an openness to change is the best way to plot the trip. </p> <p>Whichever way the road map is ultimately drawn, the most important item to bear in mind will be my project aims. As stated on the “mission” page of <a href="">my website,</a> my objectives are two-fold. First, I want to shine a light on an under researched foreign policy concept, one which I believe might define the 21st century in much the same way that the United States’ blueprint for the post-WWII order defined the 20th. By providing original data on projects, I hope to can help journalists, researchers, and decision-makers better understand this defining movement. </p> <p>I also want to bring the Belt and Road into focus, by tracking not only the physical processes of development, but by exploring the human dimensions of these changes - by telling the story of those individuals whose lives are being transformed by the roads, railroads, and power stations crisscrossing our Eurasian supercontinent. </p> <p><em>This blogpost is an adaptation <a href="">of a previous article,</a> published October 11, 2018 on the website of Reconnecting Asia, a project by CSIS. Jacob Mardell, Freelance Researcher at MERICS, will start his trip along the "Belt and Road" in March.</em></p></div> </div> </div> Tue, 12 Feb 2019 12:21:20 +0000 h.seidl 8831 at