From Economic Connection to Expansion, Belt and Road Enters 2nd Stage


Initially, China’s Belt and Road focused on connections to Europe and the Middle East through Russia, Central Asia and Pakistan for safety of China’s trade lifelines especially the access to oil and gas from the Middle East. Now railways connection to Europe has been established through Russia and Central Asia and there are bright prospects of access to Iran’s oil and gas through the China-Pakistan Economic Corridor and brighter now due to Trump’s isolated exit from the multilateral nuclear deal with Iran.

When connections have been ensured, China’s Belt and Road initiative has been turned into economic expansion abroad. That is typically reflected by China’s efforts for free trade areas (FTA) with and investment in Latin America, which have nothing to do whatever with China’s connections abroad, In fact Silk Road has never stretched to America.

China now have secure provision of oil and gas from Russia and Iran when the connections to Iran has been built through Pakistan. However, China’s investments in Libya and South Sudan in Africa and Venezuela to ensure oil supply from there are sad failures. China has learnt lessons not to make investments in countries without political stability unless the investments in the connections abroad are indispensable for China’s national security.

China has now invested heavily in building and fortifying its artificial islands in the South China Sea to extract oil and gas from its own marine areas. The West is unhappy, but just as Australian retired general Molan describes China has been so soundly established there, the West cannot dislodge China without a full-out war.

Now, China’s economic expansion abroad will be win-win investment that benefit both China and the countries it invests in.

According to Reuters’s report “China’s State Grid to invest $38 billion in Brazil power sector” today China’s state-owned Power company China State Grid Corp Ltd will “invest 140 billion reais ($38 billion) in Brazil over the next five years, including investments in transmission and generation, an executive said on Wednesday.”

That is really very good investment as power generation industry is a stable business with ensure profit. In addition, Brazil is quite a good destination of investment.

Comment by Chan Kai Yee on Reuters report, full text of which is reblogged below:

China’s State Grid to invest $38 billion in Brazil power sector

Jake Spring May 31, 2018

SAO PAULO (Reuters) – Power company China State Grid Corp Ltd [STGRD.UL] will invest 140 billion reais ($38 billion) in Brazil over the next five years, including investments in transmission and generation, an executive said on Wednesday.

Investment in the transmission segment alone will total more than 90 billion reais, Qu Yang, vice president of State Grid’s Brazilian unit, said at a conference in Sao Paulo.

Qu said the company had evaluated the potential for solar and wind power in Brazil, including in the northeastern states of Bahia and Rio Grande do Norte, and in the south of the country.

He said it could use ultra-high voltage transmission technology – which sends huge amount of power long distances with low losses – to connect remote areas that can generate large amounts of wind and solar to population centers in Rio de Janeiro, Sao Paulo and the rest of the Americas.

“I’ve talked to other big power generation companies and they’re all worried with the rise of wind power that they’ll generate more than they’ll use,” he said. “But we can install a (transmission line) that can send it where it needs to go. We could even send it all the way to the U.S.”

Reporting by Jake Spring; Editing by Lisa Shumaker and Peter Cooney


China’s power investment group seeks new Brazil targets after $2 billion deal


Luciano Costa May 16, 2018

SAO PAULO (Reuters) – China’s State Power Investment Corp is looking for new Brazilian acquisition targets, even after spending 7.2 billion reais ($2 billion) for a license to operate a hydroelectric plant in the country last September, a senior executive told Reuters.

“Brazil is one of the top regional priorities for the group’s expansion,” said Adriana Waltrick, the country head for SPIC, as the Chinese company is known.

SPIC, which operates in 41 countries and owns 120 gigawatts in capacity, aims to expand its capacity by 30 gigawatts worldwide through 2020. In Brazil, the Chinese group controls 2 gigawatts, including a hydroelectric plant in the center-western region of Brazil as well as two windfarms in the northeast.

SPIC may acquire companies or bid for licenses to build new capacity, Waltrick said in an interview on Tuesday.

The company already plans to build around 280 megawatts in new windfarms, although that will depend on its ability to win competitive tenders in which Brazil’s government offers generators power purchase agreements with distribution companies. The next power auction is scheduled for August.

Waltrick declined to comment on a potential bid for the Santo Antonio hydroelectric dam, in the northern state of Rondonia, which has been put up for sale by its owners, Companhia Energética de Minas Gerais, known as Cemig (CMIG4.SA), and Odebrecht SA.

SPIC’s largest Brazilian investment has been the acquisition of the 1.7-gigawatt Sao Simao hydroelectric plant for $2 billion. The Chinese group took over the plant management last week, after six months of operation supervised by its former owner, Cemig.

Waltrick said the company was considering potential investments to upgrade the hydroelectric plant, built in 1978, but did not elaborate on how much would be spent or potential suppliers.

($1 = 3.6529 reais)

Reporting by Luciano Costa; Writing by Tatiana Bautzer; Editing by Peter Cooney

Source: Reuters “China’s power investment group seeks new Brazil targets after $2 billion deal”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Chinese Navy Will Grow Stronger than the US, What for?


In its article “How Does China’s Navy Compare to America’s?”. Newsweek quotes Admiral Phil Davidson, a nominee to lead U.S. Pacific Command and current head of the Navy’s Fleet Forces Command on the East Coast, as saying at the Senate Armed Services Committee hearing that China “is no longer a rising power but an arrived great power and peer competitor.”

According to retired Rear Admiral Terence Edward McKnight, projecting force is more difficult than fighting close to home, so that Newsweek says, “It may already be too late to challenge China in its home waters. For all its protests, the U.S. has been unable to stop or slow the construction of artificial islands in the sea, which have effectively fortified China’s disputed claims.”

Such fast development of Chinese Navy to safeguard its rights and interests it has claimed for centuries in the South China Sea is indispensable for China and in fact nothing to do for the US, but why does China compete with the US in the development of navy?

If it wants to protect its trade lifelines through the oceans, I said in my book “Space Era Strategy” that development of aerospace bombers is quite enough.

Why shall China have a navy stronger than the US?

Chinese President Xi Jinping’s Belt and Road initiative for China’s economic expansion in the world makes that necessary as China has to protect its growing interests abroad. Historically, Silk Road only provided China with connections with Europe and the Middle East but Xi’s Silk Road now will stretch to the entire world including South America. (See my post “China’s Economic Expansion Welcome in Latin America” yesterday.)

Due to such economic expansion, China needs a navy stronger than the US to protect its interests all over the world as the US will challenge China in the high seas with its navy. Due to the Thucydides Trap mentality, the US will not allow China to grow stronger than it. Certainly it is possible that the US may not fall into the trap, but China has to be prepared. If its navy has grown much stronger than the US, the US simply dare not challenge China.

Comment by Chan Kai Yee on Newsweek’s article, full text of which can be viewed at http://www.newsweek.com/how-does-chinas-navy-compare-us-897209.


China’s Third Round of Peaceful Economic Expansion


In my post “China’s Second Round of Economic Expansion” yesterday, I regard overseas Chinese’ economic successes in Southeast Asia as China’s first round of peaceful economic expansion. From that perspective, I regard Chinese President Xi Jinping’s Silk Road economic belt and 21st century Silk Road initiative (Belt and Road) as China’s second round of economic expansion. However, whether China or Xi Jinping regards the initiative as China’s peaceful economic expansion is another question. I only make my judgment from the potential outcome of the initiative.

If China succeeds in building infrastructures to enable a country’s economic growth, Chinese people with financial resources will certainly go there to exploit the opportunities provided by the infrastructures. Through win-win cooperation, they will make local people as well as themselves rich but they shall not use their economic strength to control the politics of that country. They shall observe the law and respect the political system, culture, norms and customs there.

However, if local people discriminate or even oppress the Chinese there ungratefully out of jealousy the Chinese will have the support of their motherland.

China’s defense white paper says that China develops its navy to protect its interests abroad. If there is a repetition of massacre of overseas Chinese like what happened in Indonesia and Malaysia in the past, China shall certainly send its troops to protect the overseas Chinese there.

Even if Chinese people cannot go to the country or are not successful there, China will still obtain peaceful economic expansion as its trade with that country will grow as the country will have achieved economic growth due to the infrastructures.

The practice of a country wants win-win cooperation to benefit itself as well as others when it becomes a superpower seems quite not understandable for some of my readers. They misinterpret my view that China shall not export its political system as non involvement or non intervention.

They seem to believe that when a country has become a superpower, it shall involve or intervene in other countries’ politics or be world police. Some are so obsessed with military approaches that even regard economic cooperation as non involvement. They believe economic involvement to help other countries lift their people out of poverty is non involvement and only military involvement is involvement.

However, it is natural that they do not understand me as what I hope a superpower shall do is unprecedented.

However unprecedented, I believe China will go its own way to benefit itself while benefiting others.

Therefore, from what China is doing and has been advocating, I believe that there will be China’s third and fourth rounds of peaceful economic expansion in the future.

We see that while China is carrying out its Belt and Road projects, it is conducting research and development of the technologies to turn its deserts into farmland and habitable areas. China has 1.28 million square km deserts. Its economy will expand greatly if it masters the technologies to transform its deserts.

It costs billions of dollars to obtain such technologies. However, such costs is but a fraction of what the US has spent in conquering Iraq and Afghanistan, but the US still cannot keep the land it occupied for some time as US land.

The irony is that in spite of the huge costs, the US will be satisfied to withdraw safely its troops from there.

Even if the US were able to take both of them, the US still would have to spend billions of dollars to transform their land as Iraq consists mostly of desert while Afghanistan, barren mountains. It is simply not worthwhile for the US to spend more than $1 trillion to take the two countries. Besides, the US has to spend more to keep its influence there though unable to take them as US territories.

The 1.24 million square km deserts are China’s own. China only needs to incur the costs of transformation with no need of military spending to keep them.

As one third of the land on earth is desert, if China has mastered the technologies to transform desert, it will be much welcome by countries with deserts for win-win cooperation in transforming deserts and thus be greatly benefited.

Moreover, the area of sea is even greater. China has about 3 million square km in the South China Sea left down by Chinese ancestors as China’s precious legacy. The US tried to deprive China of the legacy by forcing it to accept the arbitration award from the International Court of Arbitration at the Hague claiming it is an award based on international law. Some media even tried to make people believe that the arbitration court is a UN organization but the UN denied that as soon as the said court issued its ruling.

If the court were a UN organization, the winner of the arbitration the Philippines would be able to ask the UN Security Council for enforcement. That is the usual practice when a country has obtained a verdict from UN’s World Court of Justice. Since the International Court of Arbitration at the Hague is not a UN agency, the Philippines certainly cannot ask the UN to do anything to help it.

Without UN legal support, the US could but send two aircraft carrier battle groups to threaten China into accepting the award, but China responded with its determination to fight a war to protect its rights and interests. The US, being unwilling to fight for the Philippines’ interests, had to withdraw its aircraft carriers.

China is now free to conduct sea-bottom mining and extract the energy resources from the deep sea bottom in the South China Sea. It has been developing the technology and equipment to do so, which it can use to conduct win-win sea-bottom mining and energy exploitation with other countries. Especially, China is conducting research and development of the technology to exploit fire ice from under ocean floor. China has already succeeded in test exploitation of fire ice from deep sea floor in the South China Sea. With further research and development, China will master the technology to conduct win-win cooperation with other countries in not only sea-bottom mining and oil and gas exploitation but even fire ice exploitation.

It may even obtain permission from the UN to conduct sea-bottom mining and exploit fire ice under international waters. It certainly has to share with the UN or the countries nearby for the benefits from such exploitation. However, it will certainly be the major beneficiary.

We can see China’s intention of peaceful economic expansion in that respect from its efforts to establish good relations with Pacific and Indian Ocean island states. (See my post “China’s Maritime Silk Road through the Pacific to South America” on June 15.) The 200 nautical-mile exclusive economic zones of those countries are quite enough for China to cooperate with them in sea-bottom mining and energy exploitation.

I only can foresee the economic expansion in transforming deserts and exploiting sea-bottom resources. There may certainly be other kinds of the expansion I cannot foresee. However, China’s third peaceful economic expansion through win-win cooperation in transforming deserts and exploiting sea-bottom resources alone will enable China to become much richer than any other countries in the world.

Economic expansion through win-win cooperation will be the order of the day.

Article by Chan Kai Yee.


Europe and China Compete for Belt and Road Projects in Iran


The US and pro-US media are unhappy about China’s Belt and Road initiative and even regard it as China’s attempt to replace the US as world leader. The media exaggerate the difficulties of the initiative by stressing in their reports China’s failures in its hydropower projects in Nepal and Pakistan.

EU seems also not interested in Belt and Road projects. Of all the major powers in EU, only Italy attended with its prime minister, the other three Germany, France and the UK only sent their ministers to attend China’s 2017 Belt and Road forum.

However, according to Reuters’ report “China pushing billions into Iranian economy as Western firms stall” yesterday, EU enterprises are very much interested in Belt and Road projects in Iran as due to Iran’s economic strength, the projects are profitable. The problems are the difficulties for them to obtain funds from banks due to the prospects of US sanctions.

Chinese banks and financial institutions are more than willing to provide funds as the projects are important for China’s land connection to the Middle East and Europe through Pakistan.

Reuters says in the report, “Valerio de Molli, head of Italian think tank European House Ambrosetti, reckons China now accounts for more than double the EU’s share of Iran’s total trade.”

Try your luck elsewhere EU enterprises, there are lots of other profitable Belt and Road projects that the US cannot stop. For example, Japan has got the project to build a high speed railway in India. Japan regards that as a success to hinder China’s Belt and Road initiative. It forgets that China invite others to join it in the initiative and that the railway will be a part of China’s plan for the connection to Myanmar, Bangladesh and India. China wants to be friend with India and regards such connection as a part of its Belt and Road initiative.

China is certainly willing to have EU enterprises take profitable Belt and Road projects so that it can focus its financial resources on more difficult projects. After all, China will be benefited by the projects indirectly though unable to be profited by them directly.

In my post “China’s Second Round of Peaceful Economic Expansion”, I regard the Belt and Road initiative as China’s second round of peaceful economic expansion. I will describe the third and fourth rounds that I have sensed from what China is doing now. I can safely predict that through such economic expansion, China will be stronger by far than the US as the US is, instead, borrowing money to focus on military expansion.

It is time for the US to revert its focus to the expansion of its economy. It now has the advantages of having an economy much larger than China’s. However, there is no time to lose for the US now as China is able to keep its fast economic growth with the help of its external peaceful economic expansion so that its economy will soon surpass the US.

World leadership? Can a country be a world leader without the largest prosperous economy? The US is perhaps obsessed with military dominance but it seems to forget that one needs economic support for military dominance.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-iran-nuclear-china/china-pushing-billions-into-iranian-economy-as-western-firms-stall-idUSKBN1DU225.