OBOR and CPEC : News, Discussions & Updates
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Soviet Collapse Echoes in China’s Belt and Road
What causes empires to fall?
According to one influential view, it’s ultimately a question of investment. Great powers are the nations that best harness their economic potential to build up military strength. When they become overextended, the splurge of spending to sustain a strategic edge leaves more productive parts of the economy starved of capital, leading to inevitable decline.
That should be a worrying prospect for China, a would-be great power whose current phase of growth is associated with an increasingly aggressive military posture and a tsunami of capital spending in its strategic neighborhood.
People's Republic
China's labor force is forecast to decline in 2018 for the first time in five decades
Source: National Bureau of Statistics of China, Bloomberg Opinion calculations
Like the Soviet Union in the 1970s, China is coming to the end of a long labor-force boom, and hoping that an orgy of investment will keep the old magic going while stabilizing its fraying frontiers. The success or failure of its Belt and Road projects — and the still greater sums it’s spending domestically — will determine whether the nation achieves its dream of prosperity or succumbs to the same forces that doomed the U.S.S.R.
The conventional worry about the Belt and Road initiative — an open-ended framework for an estimated $1.5 trillion of infrastructure projects over the next decade across Southeast Asia, South Asia and Central Asia — is that it will doom the recipients of its largess to a future as indebted clients of Beijing.
A Billion Here, a Billion There
The bulk of major Belt and Road projects are in Malaysia, South Asia and Indochina
Source: Nomura Securities, AIIB, China-Pakistan Economic Corridor, news reports, Bloomberg Opinion calculations
Note: Indochina includes Myanmar, Thailand, Laos and Cambodia. We've broken Malaysia out separately and no projects in Vietnam are large enough to show on this chart.
Failed projects like Sri Lanka’s Hambantota port may indeed be a way for China to quietly extend its strategic power around the world. 1 But defaults on investments cause problems for creditors as well as debtors. The risk for President Xi Jinping is that the toll of all that misdirected spending gradually undermines the productivity growth on which China’s current might was built.
Consider some of the projects still on the drawing board. Think the $1.6 billion price tag Nomura Holdings Inc. has put on Hambantota looks excessive? Then check out Kyaukpyu in Myanmar, where Citic Group Corp. is leading the construction of a $9.6 billion deep-sea port and industrial zone to hook up with oil and gas pipelines built by China National Petroleum Corp.
There’s certainly a strategic logic here. China’s links to the western markets that consume its goods and the Middle Eastern countries it depends on for petroleum pass through a choke point in the straits of Singapore and Malacca, a worry for the country’s military planners. Building railways and pipelines to the Indian Ocean provides an alternative route west.
Put That in Your Pipe
Gas pipelines generally need to use at least half of their capacity to break even. The China-Myanmar pipeline has barely cracked one-third utilization since it opened in 2013
Source: China Customs General Administration, Bloomberg, Bloomberg Opinion calculations
Note: Complete trailing 12-month data starts in 2014, a year after the pipeline opened.
On the economics, however, the idea falls down. The gas pipeline to Kyaukpyu has barely run at one-third of capacity since it was inaugurated in 2013, and the parallel oil tube sat dry for years before the first cargo was loaded up last year — not a great return on the $2.5 billion spent building them. A 260,000 barrels-a-day processing plant at the end of the pipe in Kunming that’s about the size of the U.K.’s biggest oil refinery will be similarly underutilized unless more crude deliveries arrive at Kyaukpyu.
Or take the web of touted rail projects through central Asia which form a centerpiece of most maps of Belt and Road projects. As we’ve argued before, such plans misunderstand both the long history and basic economics of east-west trade, which has almost always been far more dependent on maritime transport via Southeast Asia, India and the Arabian Peninsula than on overland Silk Roads through the Eurasian steppe.
Go West, Young Man
Belt and Road projects off the Asian mainland in Indonesia, the Philippines and Sri Lanka constitute only a small portion of the total
Source: Nomura Securities; AIIB; China-Pakistan Economic Corridor; Bloomberg Opinion calculations
Note: There's no definitive accounting of Belt and Road projects, or which of the development belts identified projects belong to. We've attributed projects at the country level although (for instance), Myanmar's Kyaukpyu port could be considered part of the Maritime Silkroad rather than the China-Indochina belt.
The disadvantages of land transport are compounded these days by the existence of giant container ships capable of carrying almost $1 billion of cargo at a time, and the variety of different track gauges across Asia which require costly and time-consuming transfers.
The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year, according to China Railway Express Co. That’s about one third of what you’d get on a single mega-container ship, and there are hundreds of somewhat smaller vessels plying east-west routes. China’s top four ports alone process about the same value of cargo every three hours.
I Must Go Down to the Sea
The overwhelming majority of China's trade with Europe is by sea and air. Overland routes don't cut it
Source: Center for Strategic and International Studies
Note: 2016 data.
It’s worth considering all this misdirected spending in the context of the Soviet Union’s decline. Around the middle decades of the 20th century, Moscow presided over a China-style economic miracle that caused many in the West to fear they would be overtaken. In the 1950s, the Soviet economy grew faster than that of any other major country barring Japan.
There are many reasons this development path started to falter in the 1970s, including the rigidities of a planned economy, a plateau in industrial workforce numbers, and the vast sums dedicated to Cold War-era military spending. Still, it’s hard to tell the story of declining Soviet productivity without also considering its own Belt and Road initiative, the development of Siberia.
From the 1960s, Siberia sucked up about a third of the Soviet Union’s heavy-construction equipment despite hosting just a fraction of the country’s population, as Moscow pumped in capital to develop gas fields, coal mines, aluminum plants, and a duplicate of the Trans-Siberian railway several hundred kilometers to the north.
Hard Times
Productivity declines in oil, coal and steel in the 1970s and 1980s dragged down the performance of the entire Soviet economy
Source: Allen, Robert C., "The Rise and Decline of the Soviet Economy", 2001
“The development of Siberian natural resources was a vast sink for investment rubles,” as economist Robert C. Allen wrote in a 2001 paper, diverting spending from more attractive projects west of the Urals and eventually undermining the productivity of the economy as a whole. “The Soviet Union’s ‘abundant’ natural resources had become a curse,” he wrote. “Resource development swallowed up a large fraction of the investment budget for little increase in GDP.”
Could something similar happen in China? As with the U.S.S.R.’s strategic concerns about shoring up its eastern fringes, Beijing’s fears of separatism in its west have driven a surge in capital projects there in recent years, next to which Belt and Road projects look like merely the tip of the iceberg.
Crowding Out
The share of China's fixed capital formation going to its most-productive eastern regions has been in decline for a decade
Source: National Bureau of Statistics of China, Bloomberg, Bloomberg Opinion calculations
Western China accounted for about 19.5 percent of the country’s fixed capital formation in 2016, compared to 15.4 percent in its dynamic Tier One cities and Guangdong province. Less developed parts of central, northern and western China have swallowed up the bulk of fixed capital ever since 2007, according to official data.
That’s matched the end of China’s productivity miracle, too. Unit labor costs have outpaced productivity growth since 2008, meaning the economy has been growing less and less competitive over time, according to a report last month by the Conference Board, a research group. About 90 percent of China’s advantage over the U.S. in terms of unit labor costs in 2016 was explained by currency effects alone, economist Siqi Zhou wrote.
China’s anxiety about its western fringes has many troubling effects. Compared with the hundreds of thousands of Uighurs who’ve been sent to re-education camps and the millions more under constant surveillance in Xinjiang province, wasted capital on transport mega-projects may seem like a minor problem.
It’s not, though. In a country where reliable economic data is thin on the ground and the number of people in work is now in absolute decline, the toll of ill-conceived investments risks eating away at the foundations of growth.
China’s rise this century was driven by its embrace of world trade and the coastal provinces most exposed to it. In this retreat inland, it’s sowing the seeds of decline.
Its lease was handed to China for 99 years to relieve the debt burden that the country’s government took on from its builder, China Merchants Group.
https://www.bloomberg.com/view/arti...se-echoes-in-china-s-belt-and-road-investment
What causes empires to fall?
According to one influential view, it’s ultimately a question of investment. Great powers are the nations that best harness their economic potential to build up military strength. When they become overextended, the splurge of spending to sustain a strategic edge leaves more productive parts of the economy starved of capital, leading to inevitable decline.
That should be a worrying prospect for China, a would-be great power whose current phase of growth is associated with an increasingly aggressive military posture and a tsunami of capital spending in its strategic neighborhood.
People's Republic
China's labor force is forecast to decline in 2018 for the first time in five decades
Source: National Bureau of Statistics of China, Bloomberg Opinion calculations
Like the Soviet Union in the 1970s, China is coming to the end of a long labor-force boom, and hoping that an orgy of investment will keep the old magic going while stabilizing its fraying frontiers. The success or failure of its Belt and Road projects — and the still greater sums it’s spending domestically — will determine whether the nation achieves its dream of prosperity or succumbs to the same forces that doomed the U.S.S.R.
The conventional worry about the Belt and Road initiative — an open-ended framework for an estimated $1.5 trillion of infrastructure projects over the next decade across Southeast Asia, South Asia and Central Asia — is that it will doom the recipients of its largess to a future as indebted clients of Beijing.
A Billion Here, a Billion There
The bulk of major Belt and Road projects are in Malaysia, South Asia and Indochina
Source: Nomura Securities, AIIB, China-Pakistan Economic Corridor, news reports, Bloomberg Opinion calculations
Note: Indochina includes Myanmar, Thailand, Laos and Cambodia. We've broken Malaysia out separately and no projects in Vietnam are large enough to show on this chart.
Failed projects like Sri Lanka’s Hambantota port may indeed be a way for China to quietly extend its strategic power around the world. 1 But defaults on investments cause problems for creditors as well as debtors. The risk for President Xi Jinping is that the toll of all that misdirected spending gradually undermines the productivity growth on which China’s current might was built.
Consider some of the projects still on the drawing board. Think the $1.6 billion price tag Nomura Holdings Inc. has put on Hambantota looks excessive? Then check out Kyaukpyu in Myanmar, where Citic Group Corp. is leading the construction of a $9.6 billion deep-sea port and industrial zone to hook up with oil and gas pipelines built by China National Petroleum Corp.
There’s certainly a strategic logic here. China’s links to the western markets that consume its goods and the Middle Eastern countries it depends on for petroleum pass through a choke point in the straits of Singapore and Malacca, a worry for the country’s military planners. Building railways and pipelines to the Indian Ocean provides an alternative route west.
Put That in Your Pipe
Gas pipelines generally need to use at least half of their capacity to break even. The China-Myanmar pipeline has barely cracked one-third utilization since it opened in 2013
Source: China Customs General Administration, Bloomberg, Bloomberg Opinion calculations
Note: Complete trailing 12-month data starts in 2014, a year after the pipeline opened.
On the economics, however, the idea falls down. The gas pipeline to Kyaukpyu has barely run at one-third of capacity since it was inaugurated in 2013, and the parallel oil tube sat dry for years before the first cargo was loaded up last year — not a great return on the $2.5 billion spent building them. A 260,000 barrels-a-day processing plant at the end of the pipe in Kunming that’s about the size of the U.K.’s biggest oil refinery will be similarly underutilized unless more crude deliveries arrive at Kyaukpyu.
Or take the web of touted rail projects through central Asia which form a centerpiece of most maps of Belt and Road projects. As we’ve argued before, such plans misunderstand both the long history and basic economics of east-west trade, which has almost always been far more dependent on maritime transport via Southeast Asia, India and the Arabian Peninsula than on overland Silk Roads through the Eurasian steppe.
Go West, Young Man
Belt and Road projects off the Asian mainland in Indonesia, the Philippines and Sri Lanka constitute only a small portion of the total
Source: Nomura Securities; AIIB; China-Pakistan Economic Corridor; Bloomberg Opinion calculations
Note: There's no definitive accounting of Belt and Road projects, or which of the development belts identified projects belong to. We've attributed projects at the country level although (for instance), Myanmar's Kyaukpyu port could be considered part of the Maritime Silkroad rather than the China-Indochina belt.
The disadvantages of land transport are compounded these days by the existence of giant container ships capable of carrying almost $1 billion of cargo at a time, and the variety of different track gauges across Asia which require costly and time-consuming transfers.
The value of freight between Europe and Yiwu, a much-touted overland rail hub near Shanghai, came to 2.27 billion yuan ($330 million) in the first four months of this year, according to China Railway Express Co. That’s about one third of what you’d get on a single mega-container ship, and there are hundreds of somewhat smaller vessels plying east-west routes. China’s top four ports alone process about the same value of cargo every three hours.
I Must Go Down to the Sea
The overwhelming majority of China's trade with Europe is by sea and air. Overland routes don't cut it
Source: Center for Strategic and International Studies
Note: 2016 data.
It’s worth considering all this misdirected spending in the context of the Soviet Union’s decline. Around the middle decades of the 20th century, Moscow presided over a China-style economic miracle that caused many in the West to fear they would be overtaken. In the 1950s, the Soviet economy grew faster than that of any other major country barring Japan.
There are many reasons this development path started to falter in the 1970s, including the rigidities of a planned economy, a plateau in industrial workforce numbers, and the vast sums dedicated to Cold War-era military spending. Still, it’s hard to tell the story of declining Soviet productivity without also considering its own Belt and Road initiative, the development of Siberia.
From the 1960s, Siberia sucked up about a third of the Soviet Union’s heavy-construction equipment despite hosting just a fraction of the country’s population, as Moscow pumped in capital to develop gas fields, coal mines, aluminum plants, and a duplicate of the Trans-Siberian railway several hundred kilometers to the north.
Hard Times
Productivity declines in oil, coal and steel in the 1970s and 1980s dragged down the performance of the entire Soviet economy
Source: Allen, Robert C., "The Rise and Decline of the Soviet Economy", 2001
“The development of Siberian natural resources was a vast sink for investment rubles,” as economist Robert C. Allen wrote in a 2001 paper, diverting spending from more attractive projects west of the Urals and eventually undermining the productivity of the economy as a whole. “The Soviet Union’s ‘abundant’ natural resources had become a curse,” he wrote. “Resource development swallowed up a large fraction of the investment budget for little increase in GDP.”
Could something similar happen in China? As with the U.S.S.R.’s strategic concerns about shoring up its eastern fringes, Beijing’s fears of separatism in its west have driven a surge in capital projects there in recent years, next to which Belt and Road projects look like merely the tip of the iceberg.
Crowding Out
The share of China's fixed capital formation going to its most-productive eastern regions has been in decline for a decade
Source: National Bureau of Statistics of China, Bloomberg, Bloomberg Opinion calculations
Western China accounted for about 19.5 percent of the country’s fixed capital formation in 2016, compared to 15.4 percent in its dynamic Tier One cities and Guangdong province. Less developed parts of central, northern and western China have swallowed up the bulk of fixed capital ever since 2007, according to official data.
That’s matched the end of China’s productivity miracle, too. Unit labor costs have outpaced productivity growth since 2008, meaning the economy has been growing less and less competitive over time, according to a report last month by the Conference Board, a research group. About 90 percent of China’s advantage over the U.S. in terms of unit labor costs in 2016 was explained by currency effects alone, economist Siqi Zhou wrote.
China’s anxiety about its western fringes has many troubling effects. Compared with the hundreds of thousands of Uighurs who’ve been sent to re-education camps and the millions more under constant surveillance in Xinjiang province, wasted capital on transport mega-projects may seem like a minor problem.
It’s not, though. In a country where reliable economic data is thin on the ground and the number of people in work is now in absolute decline, the toll of ill-conceived investments risks eating away at the foundations of growth.
China’s rise this century was driven by its embrace of world trade and the coastal provinces most exposed to it. In this retreat inland, it’s sowing the seeds of decline.
Its lease was handed to China for 99 years to relieve the debt burden that the country’s government took on from its builder, China Merchants Group.
https://www.bloomberg.com/view/arti...se-echoes-in-china-s-belt-and-road-investment
Malaysian PM Mahathir Mohamad to scrap China backed $22 billion projects
Malaysian Prime Minister Mahathir Mohamad confirmed during a visit to Beijing today that three China backed projects totalling $22 billion will be cancelled until his country can find a way to pay its debts.
The projects include a railway connecting Malaysia's east coast to southern Thailand and Kuala Lumpur, and two gas pipelines.
"I explained to (the Chinese leaders) why we can't have the ECRL (East Coast Rail Link)," Mahathir told Malaysian reporters at the end of his five-day visit.
"It's about borrowing too much money, which we cannot afford, we cannot repay, and also because we don't need those projects for Malaysia at this moment... our problem now is how to solve our financial deficit." Mahathir is trying to reduce Malaysia's national debt, which has ballooned to some $250 billion.
After meeting Premier Li Keqiang yesterday, Mahathir said he believed China would help Malaysia resolve its fiscal problems.
The Malaysian leader also warned against "a new version of colonialism happening because poor countries are unable to compete with rich countries just in terms of open free trade".
The USD 20 billion rail project was contracted with China's largest engineering firm, China Communications Construction Company, and mostly financed by a loan from the Export-Import Bank of China.
Malaysia's finance ministry said in July that 88 percent of the cost of two gas pipeline projects costing 9.4 billion ringgit ($2.32 billion) had been paid to the Chinese contractor despite only 13 per cent of the work being completed.
One pipeline is in Malaysia's Sabah state on Borneo island and the other runs from Malacca in peninsular Malaysia to the northern state of Kedah.
In May Mahathir shelved separate plans to build a high-speed railway between Singapore and Malaysia which had been agreed several years ago, saying it was too costly.
Despite the threat to revise China-linked contracts, Mahathir sought to strengthen business ties with Beijing during the trip. China is the top trading partner of Malaysia, which is home to a substantial ethnic Chinese minority.
Relations were warm under the previous government of Prime Minister Najib Razak, and Chinese investment in the country surged as Beijing signed deals for major infrastructure and construction projects.
But critics said there was often a lack of transparency and the terms, such as interest rates on loans, were unfavourable to Malaysia, fuelling suspicions about Najib's real motives.
Najib and his cronies are accused of plundering billions of dollars from a sovereign wealth fund, 1MDB. Najib, who has been charged over the scandal, denies any wrongdoing.
Malaysian PM Mahathir Mohamad to scrap China backed $22 billion projects
Malaysian Prime Minister Mahathir Mohamad confirmed during a visit to Beijing today that three China backed projects totalling $22 billion will be cancelled until his country can find a way to pay its debts.
The projects include a railway connecting Malaysia's east coast to southern Thailand and Kuala Lumpur, and two gas pipelines.
"I explained to (the Chinese leaders) why we can't have the ECRL (East Coast Rail Link)," Mahathir told Malaysian reporters at the end of his five-day visit.
"It's about borrowing too much money, which we cannot afford, we cannot repay, and also because we don't need those projects for Malaysia at this moment... our problem now is how to solve our financial deficit." Mahathir is trying to reduce Malaysia's national debt, which has ballooned to some $250 billion.
After meeting Premier Li Keqiang yesterday, Mahathir said he believed China would help Malaysia resolve its fiscal problems.
The Malaysian leader also warned against "a new version of colonialism happening because poor countries are unable to compete with rich countries just in terms of open free trade".
The USD 20 billion rail project was contracted with China's largest engineering firm, China Communications Construction Company, and mostly financed by a loan from the Export-Import Bank of China.
Malaysia's finance ministry said in July that 88 percent of the cost of two gas pipeline projects costing 9.4 billion ringgit ($2.32 billion) had been paid to the Chinese contractor despite only 13 per cent of the work being completed.
One pipeline is in Malaysia's Sabah state on Borneo island and the other runs from Malacca in peninsular Malaysia to the northern state of Kedah.
In May Mahathir shelved separate plans to build a high-speed railway between Singapore and Malaysia which had been agreed several years ago, saying it was too costly.
Despite the threat to revise China-linked contracts, Mahathir sought to strengthen business ties with Beijing during the trip. China is the top trading partner of Malaysia, which is home to a substantial ethnic Chinese minority.
Relations were warm under the previous government of Prime Minister Najib Razak, and Chinese investment in the country surged as Beijing signed deals for major infrastructure and construction projects.
But critics said there was often a lack of transparency and the terms, such as interest rates on loans, were unfavourable to Malaysia, fuelling suspicions about Najib's real motives.
Najib and his cronies are accused of plundering billions of dollars from a sovereign wealth fund, 1MDB. Najib, who has been charged over the scandal, denies any wrongdoing.
Malaysian PM Mahathir Mohamad to scrap China backed $22 billion projects
This is not the first time that shoddy work has halted the project(s). About ten years back Chinese supplied 90 rail freight haul locomotives to Pakistan. These locomotives refused to work. Chinese had to take these back for a huge amount of extra work.
The point is that Chinese are in a rush to complete the work order and overlook the details. They assume that everything is alright. That may be true in dollar store items but absolutely not acceptable in industrial goods.
Not at all. PA & Fauji Foundation stands to lose a fortune. Who'd compensate them for this loss? The US or the IMF?
When I said Pakistanis I meant the public opinion(PO) will be against China and we all know who controls the PO in Pakistani. Pak is already bankrupt, I don't think faujis are getting anything from this deal any more.
China has filled many pockets for cpec projects in Pak, the one who got the money will be looking to leave Pak, the 'new govt & fauji' combo will be looking at other source of income, may be USA, as I don't think China will be willing to pay the faujis any more. A new public opinion will be created if China doesn't come up with another plan to keep cpec alive.
Chinese think they have upper hand "Buying Pakistan", while they don't know that the people with whom they have signed the cpec contract are very much willing to "Sell Pakistan".
Thats why CPEC is "Win-Win" for both sides.
Sri Lanka reverses $300m China housing deal as PM visits India
Sri Lanka has reversed a decision to award a $300m housing deal to China in favour of a joint venture with an Indian company, the government said, ahead of a visit by its prime minister to New Delhi.
Prime Minister Ranil Wickremesinghe will meet his counterpart Narendra Modi for talks on Saturday in India's capital. The two countries have long-standing ties, partly because of cultural and ethnic links between Tamils, most of whom live in southern India and Sri Lanka's north and east.
In April, state-run China Railway Beijing Engineering Group Co Ltd won a tender worth more than $300m to build 40,000 houses in Jaffna in Sri Lanka's north, with China's Exim bank to provide funding.
But the project was halted after residents demanded brick houses, saying they preferred their traditional type of dwelling instead of the concrete structures the Chinese firm had planned.
On Wednesday, government spokesman Rajitha Senaratne said the cabinet had approved a new proposal for 28,000 houses worth 35.8bn rupees ($210m) to be built by Indian firm ND Enterprises and two Sri Lankan firms in the north and east.
The planned homes are part of a total requirement of 65,000, he added.
Construction has helped China expand its role as an international power [Stringer/Reuters]
"The rest of the houses will be given to firms which are ready to build them at lower prices," Senaratne told reporters in Colombo, the Sri Lankan capital, adding that China could also be considered in future for the remaining housing projects.
In Beijing on Thursday, foreign ministry spokesman Lu Kang told a regular news briefing that China's cooperation with Sri Lanka was derived from consultations on an equal footing and he hoped that cooperation would be viewed objectively.
Critics have said a big Chinese port project and related infrastructure in Sri Lanka's south have been dragging the country of 21 million people deep into debt.
India has built 44,000 houses in the country's north in the first phase of reconstruction after a 26-year-war with Tamil Tiger rebels and plans to rebuild Palaly airport and Kankesanthurai harbour, both heavily damaged in the conflict.
But in recent years, China has swept in, building ports, power plants and highways as part of Beijing's String of Pearls strategy to build a network of friendly ports across Asia.
India has long considered Sri Lanka, just off its southern coast, as part of its sphere of influence and sought to push back against China's expanding maritime presence.
Sri Lanka has reversed a decision to award a $300m housing deal to China in favour of a joint venture with an Indian company, the government said, ahead of a visit by its prime minister to New Delhi.
Prime Minister Ranil Wickremesinghe will meet his counterpart Narendra Modi for talks on Saturday in India's capital. The two countries have long-standing ties, partly because of cultural and ethnic links between Tamils, most of whom live in southern India and Sri Lanka's north and east.
In April, state-run China Railway Beijing Engineering Group Co Ltd won a tender worth more than $300m to build 40,000 houses in Jaffna in Sri Lanka's north, with China's Exim bank to provide funding.
But the project was halted after residents demanded brick houses, saying they preferred their traditional type of dwelling instead of the concrete structures the Chinese firm had planned.
On Wednesday, government spokesman Rajitha Senaratne said the cabinet had approved a new proposal for 28,000 houses worth 35.8bn rupees ($210m) to be built by Indian firm ND Enterprises and two Sri Lankan firms in the north and east.
The planned homes are part of a total requirement of 65,000, he added.
Construction has helped China expand its role as an international power [Stringer/Reuters]
"The rest of the houses will be given to firms which are ready to build them at lower prices," Senaratne told reporters in Colombo, the Sri Lankan capital, adding that China could also be considered in future for the remaining housing projects.
In Beijing on Thursday, foreign ministry spokesman Lu Kang told a regular news briefing that China's cooperation with Sri Lanka was derived from consultations on an equal footing and he hoped that cooperation would be viewed objectively.
Critics have said a big Chinese port project and related infrastructure in Sri Lanka's south have been dragging the country of 21 million people deep into debt.
India has built 44,000 houses in the country's north in the first phase of reconstruction after a 26-year-war with Tamil Tiger rebels and plans to rebuild Palaly airport and Kankesanthurai harbour, both heavily damaged in the conflict.
But in recent years, China has swept in, building ports, power plants and highways as part of Beijing's String of Pearls strategy to build a network of friendly ports across Asia.
India has long considered Sri Lanka, just off its southern coast, as part of its sphere of influence and sought to push back against China's expanding maritime presence.
IMF concerned over CPEC energy deals implications
ISLAMABAD: Pakistan on Thursday briefed the International Monetary Fund (IMF) on energy and infrastructure projects deals signed under the China-Pakistan Economic Corridor (CPEC) amid the fund’s concerns over implications of the energy contracts on the fiscal framework.
The IMF team met with officials of the Ministry of Planning and Power Division during the second day of talks, as a $9 billion discrepancy surfaced between the figures quoted by Islamabad and Beijing on account of cost of ongoing and completed projects.
The cost of 22 ongoing and completed projects shown by the Chinese Embassy is $9 billion lower than what the Planning Ministry claims. The discrepancy of $9 billion may carry serious implications in making accurate projections related to future CPEC related outflows, said sources in the Ministry of Finance.
ISLAMABAD: Pakistan on Thursday briefed the International Monetary Fund (IMF) on energy and infrastructure projects deals signed under the China-Pakistan Economic Corridor (CPEC) amid the fund’s concerns over implications of the energy contracts on the fiscal framework.
The IMF team met with officials of the Ministry of Planning and Power Division during the second day of talks, as a $9 billion discrepancy surfaced between the figures quoted by Islamabad and Beijing on account of cost of ongoing and completed projects.
The cost of 22 ongoing and completed projects shown by the Chinese Embassy is $9 billion lower than what the Planning Ministry claims. The discrepancy of $9 billion may carry serious implications in making accurate projections related to future CPEC related outflows, said sources in the Ministry of Finance.
A less scrutinized component of Belt and Road is the central role Pakistan plays in China’s Beidou satellite navigation system. Pakistan is the only other country that has been granted access to the system’s military service, allowing more precise guidance for missiles, ships and aircraft.
The cooperation is meant to be a blueprint for Beidou’s expansion to other Belt and Road nations, however, ostensibly ending its clients’ reliance on the American military-run GPS network that Chinese officials fear is monitored and manipulated by the United States.
China’s ‘Belt and Road’ Plan in Pakistan Takes a Military Turn
The cooperation is meant to be a blueprint for Beidou’s expansion to other Belt and Road nations, however, ostensibly ending its clients’ reliance on the American military-run GPS network that Chinese officials fear is monitored and manipulated by the United States.
China’s ‘Belt and Road’ Plan in Pakistan Takes a Military Turn
China Deploys Troops Near India-Pak Border to Safeguard CPEC Projects
China has deployed a contingent of the People's Liberation Army (PLA) to the Thar region of Sindh province in Pakistan which is about 90 kilometres away from Pakistan's international border with India. Indian television channel Zee News quoteda senior intelligence officer saying that Indian forces had noticed the movement of Chinese troops close to the border.
"The Border Security Force (of India) deployed at the India-Pakistan border has also noticed the movement of Chinese troops close to the border. It seems that due to the opposition of Chinese projects by locals in Sindh and Balochistan provinces, China has deployed its PLA," the intelligence officer told Zee News.
Pakistan has deployed around 17,000 soldiers to protect the 3000-kilometre-long corridor. Moreover, Pakistan's Chief of Army Staff General Qamar Javed Bajwa during a visit to China last year had sought to assure Beijing that optimum security would be provided to the project. However, dissatisfied over Pakistan's inability to deal with protests by locals, China decided to take the matter on its own hands.
A former Indian Army official is of the view that the development is, however, a matter of concern to India.
"Officially, the deployment of troops by China is to protect their own citizens working in Pakistan in various projects and also to secure the safety of the CPEC from local people. But unofficially, it is the commencement of a military base in the interiors of the country (Pakistan). It could also be perceived to be a sort of restriction on India in case it attempts a military option against Pakistan. Although India would never go this deep inside Pakistan, but in the long run, the Chinese PLA could also be deployed much closer to our border. Finally, it signals the growing proximity between China and Pakistan and interdependence. No nation in its right senses would permit such a deployment," Major General (Retired) Harsha Kakar told Sputnik.
"In fact, China is eyeing a military base in Pakistan in the long run. China has not invested for the betterment of Pakistan but for its own national interest. But the army and air force bases are major security concerns for India," Major General Kakar added.
Pakistan breaks ground for China-funded New Gwadar Int'l Airport
Pakistan broke ground for the construction of the China-funded New Gwadar International Airport on Friday, which would link Pakistan's fast-rising southwest Gwadar port city with the rest of the world.
According to the Ministry of Planning, Development and Reform, the 230 million-U.S. dollar project fully funded by the Chinese government under the China-Pakistan Economic Corridor (CPEC) would be completed in a period of three years, which is located in Gurandani area, some 26 km northeast of Gwadar city of Balochistan province.
The construction of the new airport would be managed by the China Airport Construction Group and it would be capable of handling a combination of ATR 72, Airbus A-380, Boeing B-737 and Boeing B-747 for domestic and international routes.
Covering an area of 18 square km, the new airport would be the second largest airport in Pakistan.
During the ceremony, the Chinese and Pakistani sides also signed the memorandum of understanding regarding a vocational training institute and a friendship hospital.
PAKISTAN DIVERTS CPEC CORRIDOR FUNDS; CHINA TIES UNDER PRESSURE
A controversy has erupted over the China-Pakistan Economic Corridor (CPEC) ahead of the second Belt and Road Initiative (BRI) summit in Beijing following allegations that the Pakistani government has diverted Rs 2,400 crore (around $171.6 million) meant for joint infrastructure development projects with China under BRI to other projects.
China had given the money as part of the $62-billion infrastructure funding to build the CPEC. However, Pakistan’s planning and development ministry issued an order diverting Rs 2,400 crore to projects to be identified by local legislators under the United Nations’ Sustainable Development Goals programme, according to sources.
The move could be part of Prime Minister Imran Khan’s party Pakistan Tehreek-e-Insaf ’s efforts to appease its lawmakers by allowing them to make decisions on development projects, said one person.
“The government committed theft by spending Rs 2,400 crore out of Rs 2,700 crore meant for BRI on other development projects,” Opposition leader Maulana Fazl-ur-Rehman was quoted by local media.
Baloch Liberation Army attacks Chinese assets for 3rd time since Aug 2018
Jeeyand Baloch, a spokesperson for BLA in a statement noted,“BLA fighters attacked the convoy of Chinese engineers-consists of 22 vehicles, with a remote control bomb in front of Hamdard university in Karachi city. The attack resulted in killing of several Chines engineers and workers”.
“This attack is the continuity of the BLA’s policy of not allowing any force including China, to plunder the Baloch wealth in Balochistan. Our fighters had carried out deadly attacks on Chinese interests and engineers in the past and series of such attacks will continue with intensification until China terminates the nexus with Pakistan, regarding Baloch land” he added.
China has deployed a contingent of the People's Liberation Army (PLA) to the Thar region of Sindh province in Pakistan which is about 90 kilometres away from Pakistan's international border with India. Indian television channel Zee News quoteda senior intelligence officer saying that Indian forces had noticed the movement of Chinese troops close to the border.
"The Border Security Force (of India) deployed at the India-Pakistan border has also noticed the movement of Chinese troops close to the border. It seems that due to the opposition of Chinese projects by locals in Sindh and Balochistan provinces, China has deployed its PLA," the intelligence officer told Zee News.
Pakistan has deployed around 17,000 soldiers to protect the 3000-kilometre-long corridor. Moreover, Pakistan's Chief of Army Staff General Qamar Javed Bajwa during a visit to China last year had sought to assure Beijing that optimum security would be provided to the project. However, dissatisfied over Pakistan's inability to deal with protests by locals, China decided to take the matter on its own hands.
A former Indian Army official is of the view that the development is, however, a matter of concern to India.
"Officially, the deployment of troops by China is to protect their own citizens working in Pakistan in various projects and also to secure the safety of the CPEC from local people. But unofficially, it is the commencement of a military base in the interiors of the country (Pakistan). It could also be perceived to be a sort of restriction on India in case it attempts a military option against Pakistan. Although India would never go this deep inside Pakistan, but in the long run, the Chinese PLA could also be deployed much closer to our border. Finally, it signals the growing proximity between China and Pakistan and interdependence. No nation in its right senses would permit such a deployment," Major General (Retired) Harsha Kakar told Sputnik.
"In fact, China is eyeing a military base in Pakistan in the long run. China has not invested for the betterment of Pakistan but for its own national interest. But the army and air force bases are major security concerns for India," Major General Kakar added.
Pakistan breaks ground for China-funded New Gwadar Int'l Airport
Pakistan broke ground for the construction of the China-funded New Gwadar International Airport on Friday, which would link Pakistan's fast-rising southwest Gwadar port city with the rest of the world.
According to the Ministry of Planning, Development and Reform, the 230 million-U.S. dollar project fully funded by the Chinese government under the China-Pakistan Economic Corridor (CPEC) would be completed in a period of three years, which is located in Gurandani area, some 26 km northeast of Gwadar city of Balochistan province.
The construction of the new airport would be managed by the China Airport Construction Group and it would be capable of handling a combination of ATR 72, Airbus A-380, Boeing B-737 and Boeing B-747 for domestic and international routes.
Covering an area of 18 square km, the new airport would be the second largest airport in Pakistan.
During the ceremony, the Chinese and Pakistani sides also signed the memorandum of understanding regarding a vocational training institute and a friendship hospital.
PAKISTAN DIVERTS CPEC CORRIDOR FUNDS; CHINA TIES UNDER PRESSURE
A controversy has erupted over the China-Pakistan Economic Corridor (CPEC) ahead of the second Belt and Road Initiative (BRI) summit in Beijing following allegations that the Pakistani government has diverted Rs 2,400 crore (around $171.6 million) meant for joint infrastructure development projects with China under BRI to other projects.
China had given the money as part of the $62-billion infrastructure funding to build the CPEC. However, Pakistan’s planning and development ministry issued an order diverting Rs 2,400 crore to projects to be identified by local legislators under the United Nations’ Sustainable Development Goals programme, according to sources.
The move could be part of Prime Minister Imran Khan’s party Pakistan Tehreek-e-Insaf ’s efforts to appease its lawmakers by allowing them to make decisions on development projects, said one person.
“The government committed theft by spending Rs 2,400 crore out of Rs 2,700 crore meant for BRI on other development projects,” Opposition leader Maulana Fazl-ur-Rehman was quoted by local media.
Baloch Liberation Army attacks Chinese assets for 3rd time since Aug 2018
Jeeyand Baloch, a spokesperson for BLA in a statement noted,“BLA fighters attacked the convoy of Chinese engineers-consists of 22 vehicles, with a remote control bomb in front of Hamdard university in Karachi city. The attack resulted in killing of several Chines engineers and workers”.
“This attack is the continuity of the BLA’s policy of not allowing any force including China, to plunder the Baloch wealth in Balochistan. Our fighters had carried out deadly attacks on Chinese interests and engineers in the past and series of such attacks will continue with intensification until China terminates the nexus with Pakistan, regarding Baloch land” he added.
Construction company of #CPEC route attacked by #Baloch freedom fighters. Machinery burnt and destroyed by #Sarmachars 3 workers of arrested then released.
China pledges to address debt worries over Belt and Road
China is seeking more international and private financing for its $1tn Belt and Road Initiative, as it tries to counter concerns that its infrastructure building programme can create debt traps for host countries. Yi Gang, China’s central bank governor, said that the country would work to address the ability of states to service their borrowing.
“We need to objectively assess developing countries’ debt problems” Mr Yi told an audience of finance professionals that included IMF chief Christine Lagarde, at the Belt and Road Forum. “We need to consider a country’s complete debt-servicing capabilities,” he added. China is hosting dozens of nations at a forum to showcase President Xi Jinping’s signature foreign policy initiative this week. I think there’s a huge role for the UK and its related financial services sectors Catherine McGuinness, City of London New financing criteria from the finance ministry and the People’s Bank of China are intended to attract foreign investment partners by alleviating some of their concerns over the ability of host countries to service their debt. China is now supposed to take into account a country’s total debt load and local currency financing ability and offer more transparency when lending.
Ms Lagarde called China’s new debt sustainability framework a “welcome step”. Traditional financial centres in Europe and Asia are lining up to get a share of the new funding opportunities. “I think there’s a huge role for the UK and its related financial services sectors,” said Catherine McGuinness, chair of the policy and resource committee for the City of London. Switzerland’s president will sign a memorandum of understanding to finance China’s projects in third countries during his visit to Beijing this week, said Daniela Stoffel, state secretary for international finance at the Swiss finance department. Carrie Lam, chief executive of Hong Kong, said the territory’s banks are eager to lend to BRI projects.
The involvement of well-developed financial centres could alleviate growing concerns about the ability of Chinese banks and infrastructure companies to generate a return on their investment. Many countries have found it difficult to pay for BRI projects after the initial flush of investment recedes. “You are lending hundreds of billions, are you doing enough due diligence? Because it’s Chinese money that is at stake,” remarked Harinder Kohli, founding director of the Emerging Markets Forum, a non-profit organisation that has studied Chinese lending overseas. “I think both the finance ministry and PBoC are beginning to focus on these issues.”
The issue of lossmaking BRI projects is sensitive in China, with the country’s development banks acting as the biggest lenders. About a quarter of official BRI projects have been funded by the Export-Import Bank of China, with China Development Bank the second-biggest lender. Ex-Im Bank is trying to improve its risk assessment capability, after historically relying on whether the Chinese foreign ministry classified a government as “friendly”.
The editorial board BRI-inclined Europeans need a keen eye for detail Ahead of the forum, Beijing moved to resolve some of the disputes related to BRI projects that threatened to harm the reputation of the initiative.
Malaysia negotiated a RM22.5bn ($5.4bn) reduction in the bill for its East Coast Railway project, and granted a Chinese state-owned business a 50 per cent stake in operating the line. Kuala Lumpur would have faced a $5bn penalty for cancelling the project altogether. Ethiopia, which has been struggling to pay for a $4bn Chinese-built light rail line from the capital Addis Ababa to neighbouring Djibouti, has also entered a debt restructuring process, according to a tweet from the office of prime minister Abiy Ahmed. “Debt itself is not necessarily the problem,” said KV Kamath, head of the New Development Bank, a multilateral lender backed by China, Russia, India, Brazil and South Africa. He cited instead the quality of the projects involved, and called for more local currency financing. “We have a mismatch between so many projects crying out for resources and too much money chasing too few bankable projects,” said Jin Liqun, president of the Asian Infrastructure Investment Bank, another multilateral lender.
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China is seeking more international and private financing for its $1tn Belt and Road Initiative, as it tries to counter concerns that its infrastructure building programme can create debt traps for host countries. Yi Gang, China’s central bank governor, said that the country would work to address the ability of states to service their borrowing.
“We need to objectively assess developing countries’ debt problems” Mr Yi told an audience of finance professionals that included IMF chief Christine Lagarde, at the Belt and Road Forum. “We need to consider a country’s complete debt-servicing capabilities,” he added. China is hosting dozens of nations at a forum to showcase President Xi Jinping’s signature foreign policy initiative this week. I think there’s a huge role for the UK and its related financial services sectors Catherine McGuinness, City of London New financing criteria from the finance ministry and the People’s Bank of China are intended to attract foreign investment partners by alleviating some of their concerns over the ability of host countries to service their debt. China is now supposed to take into account a country’s total debt load and local currency financing ability and offer more transparency when lending.
Ms Lagarde called China’s new debt sustainability framework a “welcome step”. Traditional financial centres in Europe and Asia are lining up to get a share of the new funding opportunities. “I think there’s a huge role for the UK and its related financial services sectors,” said Catherine McGuinness, chair of the policy and resource committee for the City of London. Switzerland’s president will sign a memorandum of understanding to finance China’s projects in third countries during his visit to Beijing this week, said Daniela Stoffel, state secretary for international finance at the Swiss finance department. Carrie Lam, chief executive of Hong Kong, said the territory’s banks are eager to lend to BRI projects.
The involvement of well-developed financial centres could alleviate growing concerns about the ability of Chinese banks and infrastructure companies to generate a return on their investment. Many countries have found it difficult to pay for BRI projects after the initial flush of investment recedes. “You are lending hundreds of billions, are you doing enough due diligence? Because it’s Chinese money that is at stake,” remarked Harinder Kohli, founding director of the Emerging Markets Forum, a non-profit organisation that has studied Chinese lending overseas. “I think both the finance ministry and PBoC are beginning to focus on these issues.”
The issue of lossmaking BRI projects is sensitive in China, with the country’s development banks acting as the biggest lenders. About a quarter of official BRI projects have been funded by the Export-Import Bank of China, with China Development Bank the second-biggest lender. Ex-Im Bank is trying to improve its risk assessment capability, after historically relying on whether the Chinese foreign ministry classified a government as “friendly”.
The editorial board BRI-inclined Europeans need a keen eye for detail Ahead of the forum, Beijing moved to resolve some of the disputes related to BRI projects that threatened to harm the reputation of the initiative.
Malaysia negotiated a RM22.5bn ($5.4bn) reduction in the bill for its East Coast Railway project, and granted a Chinese state-owned business a 50 per cent stake in operating the line. Kuala Lumpur would have faced a $5bn penalty for cancelling the project altogether. Ethiopia, which has been struggling to pay for a $4bn Chinese-built light rail line from the capital Addis Ababa to neighbouring Djibouti, has also entered a debt restructuring process, according to a tweet from the office of prime minister Abiy Ahmed. “Debt itself is not necessarily the problem,” said KV Kamath, head of the New Development Bank, a multilateral lender backed by China, Russia, India, Brazil and South Africa. He cited instead the quality of the projects involved, and called for more local currency financing. “We have a mismatch between so many projects crying out for resources and too much money chasing too few bankable projects,” said Jin Liqun, president of the Asian Infrastructure Investment Bank, another multilateral lender.
Subscribe to read | Financial Times
Payback Time
Business Standard (@bsindia) Tweeted:
Pak and China agree to set a new direction to $ 60 bn #CPEC for future cooperation by largely shifting away from infra projects and scouting for copper, gold, oil and gas sectors
Pakistan, China to expand CPEC scope to copper, gold, oil and gas sectors ( )
Business Standard (@bsindia) Tweeted:
Pak and China agree to set a new direction to $ 60 bn #CPEC for future cooperation by largely shifting away from infra projects and scouting for copper, gold, oil and gas sectors
Pakistan, China to expand CPEC scope to copper, gold, oil and gas sectors ( )
Hahaha so the Chinese will loot
Pakistani mineral resources in return for paybacks lol