I recently published this opinion piece on the Saker website, & it was republished in Russia Insider. I also wanted to share it here as well (with a few minor grammatical corrections). Apologies in advance if the pictures turn out blurry, please refer to one of the links above.
Not All Silk Roads Are Created Equal
The Trans-Caspian International Transport Route is unlikely to see high-volume PRC adoption in the near term due to insufficient business and geopolitical value prop
Several months ago, there were quite a fewnews/analysisreports lauding the Trans-Caspian International Transport Route (TITR) as a new path for trade along the Silk Road, which is being revitalized by China and its regional partners under the One Belt, One Road (OBOR) project. The TITR is highly attractive to Russia’s geopolitical rivals, such as Georgia and post-Maidan Ukraine (& no doubt the US too), for it is a potential Sino-European trade route across the Eurasian continent that completely bypasses Russian territory. However, there is little/no incentive for China to actively promote or use TITR for large-scale trade in the near future. To expand on this conclusion, this article will cover the following: the basic business value proposition of the land-based Eurasian Silk Road, an outline of the TITR path, a side-by-side comparison of a comparable route (Chongqing-Duisburg, also known as ‘Yuxinou’), and the geopolitical factor.
New research, based on China’s aid track record from 2000-2013, shows that much of what the western media propagates about China’s intentions & practices, when it comes to providing official development aid (ODA) to Africa, is simply NOT true. “Coincidentally”, this latest research published by AidData has garnered little (if any) attention in US mainstream media outlets.
Here are a few of its findings. Those who are interested in the details should check out this new report in its entirety.
African states that align with the PRC’s stances in the UN tend to receive more development assistance.
Internal political system is not a factor for ODA allocation; the PRC does NOT favor either authoritarian or democratic governments.
For China, humanitarian need is a stronger determinant of ODA destination than natural resource development opportunities, given that Chinese ODA is more focused on poorer African countries.
Chinese ODA does NOT favor countries with higher levels of corruption.
Recently, there has been no shortage of highly pessimisticcommentariespublished & republished, pointing out the supposed “follies” of Russia’s eastern pivot, by highlighting this year’s decline in Sino-Russian trade, China’s stock market volatility, and its supposed economic “weakness”. The conclusion implied by these articles is clear: “Russia’s economic pivot to China is failing, because increased economic cooperation has not mitigated Russia’s recent economic woes, or the effect of sanctions. China cannot save Russia, and the latter must continue depending on the West.”
This is essentially a straw-man conclusion. One thing should be plainly apparent through even a casual examination of Russia’s biggest recent commercial agreements with China: most of these arrangements with China were NEVER INTENDED to offset the impact of Russia’s current recession, but rather to position Russia’s economy for greater long-term diversification and upward mobility on the global economic value chain.
In April the Beijing Intermediate People’s Court dismissed another AMSC software copyright infringment case against Sinovel. AMSC made an appeal in May to the Beijing Higher People’s Court, requesting a revocation of the ruling as well as court support for its previous claims in the re-trial. Several weeks ago, Sinovel also announced that it has received a written notification from the Beijing Intermediate People’s Court informing it that AMSC had requested a change to the allegations it was making.
I want to share a GREAT analysis from the Valdai Club (see links below), outlining the opportunities for the PRC & Russia to jointly promote development and stability in Central Asia, by integrating the Silk Road Economic Belt (SREB) & Eurasian Union initiatives. I find it an insightful counter-narrative to the mainstream (mostly western) rhetoric of China & Russia “at each others’ throats” in a zero-sum competition for hegemony in Central Asia – such as this one. It illustrates the magnitude of the opportunity for collaboration, and recommends a framework for execution. To date, I think there is no better scholarship than this one, in terms of clearly articulating the Russian perspective on, and response to, the Chinese SREB project.
The conclusion of a 30-year, 38 BCM/year Sino-Russian gas deal has gotten considerable attention in the media recently. Not surprisingly, much of the coverage – especially in the western media – was emotionally charged, given that Putin’s visit to China & the deal signing coincided with the unfolding crisis in Ukraine. There was no shortage of rhetoric about Putin “making Russia a resource appendage of China” for “good PR”, as if being a resource appendage of the West is so much better. The tirade of rhetoric against this deal reminds me of the type of propaganda we saw when China started boosting trade and investment in Africa. This post will address some of the biggest misconceptions being propagated in the western (& even Russian) mainstream media, and seek to draw conclusions based on facts, rather than anti-Chinese xenophobia. This is a lengthy post, so for those who are not interested in the details, the bold text will give you an adequate summary. Continue reading 5 Popular Misconceptions about the Sino-Russian Gas Deal→
I have long maintained that boycotts rarely work well as a tool of political protest. Even when mobilized as a collective national action like a trade embargo, history has not shown much effectiveness in causing political change, other than merely increasing bitterness (like the Embargo against Cuba).
Against a much larger target, with even broader scope, such as “boycott China”, the sheer size of lunacy of such a proposition is immediately apparent. Chinese economy is not pinned down in a few special economic sectors, it’s large and diverse, and most importantly international. It produces final products and components and material. It’s not merely economical for businesses, it’s necessity of businesses to buy Chinese products.
But even more interestingly, the increase in the internet economy has shown that it’s not just companies like Walmart that dictates the improbability of “boycott China”, it’s increasingly the end user purchasers who are making it impossible to “boycott China”.
Time recently published an article titled “How a Starbucks Latte Shows China Doesn’t Understand Capitalism” on the attention the Chinese government appears to be bringing to the practice of foreign companies overcharging Chinese consumers. According to Time, the government in doing this shows it doesn’t understand capitalism, ought to back off, and let the market reach a proper price.
The article asserts:
The bottom line is this: Companies will price their products based on what the consumer is willing to pay. That’s nothing illicit. It’s simple supply and demand. If Starbucks lattes were truly overpriced in China, the Chinese wouldn’t be buying as many of them, and the American firm would not have been able to build a successful network of over 1,000 shops in the country.
If foreign companies are engaged in illegal practices, then they should be stopped. But meddling in the pricing decisions of independent private companies is another thing altogether. China’s leaders persistently promise to make the Chinese economy more market-oriented, liberalized and fair. Premier Li Keqiang recently committed the government to “steadfastly pursuing reform and opening-up with priority given to the stimulation of the market.” Interfering with the prices private firms charge Chinese consumers suggests that China’s officials believe that they should make economic decisions, not free markets. Continue reading Opinion: Is It Time Magazine that doesn’t understand Capitalism or China?→
One of the main reasons I wanted to contribute to the success of this blog is my desire to dispel ideological myths and dogma that exists in western discourse, and if I’m lucky, reach out to a few people in my age group back in China. One of the myths, against which I voiced skepticism in “Rethinking the Freedom-Innovation Nexus” is the supposed causal link between political freedom and scientific innovation.
I wanted to follow up on this with a McKinsey discussion on the Chinese model of innovation. I think this is podcast yields useful insights on the current state and characteristics of modern day Chinese innovation at the enterprise level.
A couple of highlights:
– Chinese companies embrace change and adaptation at a faster pace relative to their other Asian counterparts at a similar stage of development in their respective countries.
– Chinese companies are more willing to import talent from abroad, China’s ‘richness of talent’ comes in part from returnees who received education and worked in the west, as well as state funding of world-class academic research institutions.
Huawei might need the Chinese media’s help in doing some defamation against Cisco before that American protectionism truly drops. It’s hard to imagine any other way. Huawei’s Chen Lifan is asking for ideas!
Instead of Cisco, Apple is an ideal target. For one, its user base is much larger than Cisco’s. Samsung’s phones with Android are better in my personal opinion, so iPhones are not indispensable. Apple’s customer service is probably above average in China relative to all the other companies. Certainly, there are legitimate grievances, but I wouldn’t consider them egregious. Also, remember, the Chinese media criticisms were targeting a basket of foreign firms. China is merely playing catch-up in this protectionism game others have been playing these last few years. In this kind of ugliness, everyone should remember who started first.
In light of President Xi’s latest visit to Russia, it would be appropriate to provide a nuanced perspective to the current state of Sino-Russian relations. It is understandably difficult for the western media to deliver this kind of nuance; this difficulty stems not only from western biases against both Russia and China that obstructs objective analysis, but also the complications inherent in bilateral relations. For the sake of brevity, I will make just two observations which is inadequately emphasized in modern-day discourse on the Sino-Russian bilateral relationship – incentives for cooperation and Russia’s true value as a “comprehensive” strategic partner. Continue reading A proper perspective on Sino-Russian relations→
I recently had to write an essay about energy trends affecting China, so I thought I’d share here as well, with a few details modified:
While China has actively expanded its use of renewable energy and fostered innovation in the clean-tech space, planning on the renewables development and deployment front has been suboptimal in the face of present realities. To advance China’s twin goals of modernization and security in the energy space, China should place greater emphasis on renewable capacity utilization rather than capacity expansion in the next five years. China should also find ways to increase the proportion of non-maritime energy imports in its overall import portfolio. Continue reading Chinese Energy Strategy in the Next Five Years→
Now that the U.S. House of Representative investigative report by Chairman Mike Rogers and Ranking Member C.A. Dutch Ruppersberger of the Permanent Select Committee on Intelligence regarding Huawei and ZTE is out, there is a lot of chatter in the U.S. media. I thought Paula Dwyer of Bloomberg summarized this whole affair the best:
What the report lacks is evidence. It also smacks of protectionism, despite denials by the committee chairman, Michigan Republican Mike Rogers, that he is invoking national security to shield U.S. telecoms equipment companies from Chinese competition.
American politicians and media love to blame China for ‘stealing’ jobs. Following is a pie chart showing Apple’s profits and percentage contributions from its global supply chain. Blaming China is like blaming one’s gardener for his financial woes. This chart is a true pie in the face to those who have so clouded reality in the American public discourse about trade with China. The true tragedy here is that China is polluting her environment at such alarming rates on behalf of companies like Apple. What Apple is getting away with is not shown – a wedge is yet to be made representing environmental damages done.
Last week, the WTO handed China a setback in its ruling over its appeal over export controls (herein the Ruling) covering “[c]rtain forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous, and zinc.”
A WTO appeals panel has upheld a ruling against China restricting exports of nine types of raw materials. The ruling, completely unreasonable to Chinese, will threaten China’s resource preservation and environmental protection efforts.
China has generally been following WTO regulations and rulings. But it should find the best balance between applying WTO rules and protecting its national interests. Getting approval from the West is not our top concern.
(On January 5, 2012, I sat down with Shaun Rein, founder and Managing Director of the China Market Research Group, to talk about China. He gave us his insights into major events of 2011. In this hour-long interview, we touched on many topics: pollution, CNN and Christian Bale’s recent run-in with Chinese police, food safety, Weibo, and so on.)
YinYang:2011 was another eventful year for China. Just when her bullet train seems unstoppable, a fatal collision left the whole country in doubt. China achieved space docking, something only the U.S. and Russia have managed. Then there was Tiger Mom.
I have invited a real China expert to weigh in on these events and other events that mattered to China. What were the Chinese narratives? How did the Chinese feel about them? I couldn’t have found a better person to do this with. Continue reading A conversation with Shaun Rein on China→
With Obama meeting other East Asian countries in Hawaii these few days, the “American re-engagement with Asia” story is all of a sudden in vogue again. This new way of thinking actually started with President Obama’s promise couple of years ago to double America’s exports in the not too distant future. The goal itself is worthy and is an excellent way to channel America’s energy. Unfortunately, the simple gist of that U.S. ‘re-engagement’ has instead been couched by the U.S. media into some sort of militaristic furtherance, with a suspicious eye casted at China. Such ploy is to dramatize and sell ads (and, sure, by politicians to garner votes). I am happy that the Obama administration still publicly reaffirms the idea that a richer China bodes well for American exporters, because that is the simple truth. Ask Intel, Apple, GM, and Caterpillar. Continue reading America feeling missing out in Asia→
By 2020, China’s FTA with ASEAN nations will get another big boost; a 3,900km high-speed railway system linking China’s Kunming through Laos, Thailand, and Malaysia down to Singapore becomes operational and construction has already started. See my hand-drawing in the regional map below to get a sense of scope of this project. China’s trade with the ASEAN countries has sky-rocked to $292.78 billion in 2010, the year the FTA went into effect. ASEAN countries exports to China at $154.56 billion already dwarfed the U.S.’. Continue reading Kunming-Singapore High Speed Railway construction starts→
Should China levy environmental tax on exports? Before offering my thoughts on that question, I’d like to share some news first.
China has announced spending 4 trillion yuan ($601 billion) over the next decade in water projects, mainly to tackle over-exploitation, usage efficiency, and pollution. The country plans to cap water consumption at 670 billion cubic meters, and according to this other recent report, China is now short about 40 billion cubic meters annually.
Chinese scientists made breakthrough at the No.404 Factory of China National Nuclear Corp in the Gobi desert in remote Gansu province, enabling the re-use of spent uranium and increasing the efficiency of nuclear fuel by 60 folds. China’s existing supply of uranium throughout China was estimated to last for 70 years. With this technology, China now forecasts the supply lasting 3,000 years.
Russian President Vladimir Putin and Chinese Premier Wen Jiabao has just jointly announced in St. Petersburg to no longer use the U.S. dollar in their two country’s bilateral trade. China Daily reported the news, headlining, “China, Russia quit dollar.” This is a reaction to the yet another round of printing by the Fed ($600 billion in fact).
“Quantitative easing” are new fancy words the U.S. government use to describe printing money out of thin air. (Would you be surprised if the U.S. media do not refer to this as “currency manipulation”?) At the recent G20 Summit, world leaders were upset at the U.S. for being so irresponsible as the USD is the reserve currency for the world. If Russia and China successfully execute on this arrangement in the coming years, I think other countries could follow suit.
In my prior post, “The 2010 USCC Annual Report is ‘truthless, prejudicial’,” I ranted about the 2010 USCC Annual Report and reiterated Chinese Foreign Ministry call that the report was “truthless” and “prejudicial.” Some of you expressed privately that I should address the report seriously, especially, as this is an “official” position taken by a branch of the U.S. government.
Some of you also responded, since the U.S. is not interested in addressing the systemic problems locally and rather blame foreigners (China especially in this report), then let the U.S. march forward with her madness. In the long run, it will only result in America’s decline. Let it be, so the argument goes.
the Economist recently interviewed Michael Spence (Professor of Economics, Stern School of Business, New York University, and Senior Fellow, the Hoover Institution, Stanford University), and I thought his comments about China, the U.S., and the growth dynamics between the developing countries and the developed countries were rather interesting.
He talks about economics without the politics. It’s almost “weird” to find this type of discussion in America nowadays. He said that China is laying the ground work for transitioning into a more advanced economy over the next decade. He also said that the developing countries will maintain their growth even if the developed countries continue to limp along; the developing economies are no longer as dependent on the developed countries as was a decade ago. Elsewhere, I’ve read him articulating the U.S. has been consuming more than it produces for about a decade now and the U.S. will have to settle into a lower consumption “norm” when it re-emerges. Continue reading Michael Spence on China, U.S., and growth of the developing vs. developed economies in coming decades→