Hoping to extend maritime reach, China lavishes aid on Pakistan town


Drazen Jorgic December 17, 2017

GWADAR, Pakistan (Reuters) – China is lavishing vast amounts of aid on a small Pakistani fishing town to win over locals and build a commercial deep-water port that the United States and India suspect may also one day serve the Chinese navy.

Beijing has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly-needed water infrastructure for Gwadar, a dusty town whose harbor juts out into the Arabian Sea, overlooking some of the world’s busiest oil and gas shipping lanes.

The grants include $230 million for a new international airport, one of the largest such disbursements China has made abroad, according to researchers and Pakistani officials.

The handouts for the Gwadar project is a departure from Beijing’s usual approach in other countries. China has traditionally derided Western-style aid in favor of infrastructure projects for which it normally provides loans through Chinese state-owned commercial and development banks.

“The concentration of grants is quite striking,” said Andrew Small, an author of a book on China-Pakistan relations and a Washington-based researcher at the German Marshall Fund think tank.

“China largely doesn’t do aid or grants, and when it has done them, they have tended to be modest.”

Pakistan has welcomed the aid with open hands. However, Beijing’s unusual largesse has also fueled suspicions in the United States and India that Gwadar is part of China’s future geostrategic plans to challenge U.S. naval dominance.

“It all suggests that Gwadar, for a lot of people in China, is not just a commercial proposition over the longer term,” Small said.

The Chinese Foreign Ministry did not respond to a request for comment from Reuters.

Beijing and Islamabad see Gwadar as the future jewel in the crown of the China-Pakistan Economic Corridor (CPEC), a flagship of Beijing’s Belt and Road initiative to build a new “Silk Road” of land and maritime trade routes across more than 60 countries in Asia, Europe and Africa.

The plan is to turn Gwadar into a trans-shipment hub and megaport to be built alongside special economic zones from which export-focused industries will ship goods worldwide. A web of energy pipelines, roads and rail links will connect Gwadar to China’s western regions.

Port trade is expected to grow from 1.2 million tonnes in 2018 to about 13 million tonnes by 2022, Pakistani officials say. At the harbor, three new cranes have been installed and dredging will next year deepen the port depth to 20 meters at five berths.
But the challenges are stark. Gwadar has no access to drinking water, power blackouts are common and separatist insurgents threaten attacks against Chinese projects in Gwadar and the rest of Baluchistan, a mineral-rich province that is still Pakistan’s poorest region.

Security is tight, with Chinese and other foreign visitors driven around in convoys of soldiers and armed police.

Beijing is also trying to overcome the distrust of outsiders evident in Baluchistan, where indigenous Baloch fear an influx of other ethnic groups and foreigners. Many residents say the pace of change is too slow.

“Local people are not completely satisfied,” said Essar Nori, a lawmaker for Gwadar, adding that the separatists were tapping into that dissatisfaction.

Pakistani officials are urging Gwadar residents to be patient, vowing to urgently build desalination plants and power stations.

CAUTIONARY TALE

China’s Gwadar project contrasts with similar efforts in Sri Lanka, where the village of Hambantota was transformed into a port complex – but was saddled with Chinese debt. (That is a lie. Sri Lanka is not saddled with Chinese debt for the port. On the contrary, the Chinese side is to pay Sri Lanka Port Authority USD973.658 millions for shares in the joint ventures that operate the port and the National Treasury of Sri Lanka has received 294 million dollars from the Chinese side as the initial 30% of the total amount that will be received. See my post “Lies, Fake News Cannot Stop China’s Belt and Road Win-win Cooperation” on December 12.)

Last week, Sri Lanka formally handed over operations to China on a 99-year lease in exchange for lighter debt repayments, a move that sparked street protests over what many Sri Lankans view as an erosion of sovereignty.

The Hambantota port, like Gwadar, is part of a network of harbors Beijing is developing in Asia and Africa that have spooked India, which fears being encircled by China’s growing naval power.

But Pakistani officials say comparisons to Hambantota are unfair because the Gwadar project has much less debt.

On top of the airport, Chinese handouts in Gwadar include $100 million to expand a hospital by 250 beds, $130 million towards upgrading water infrastructure, and $10 million for a technical and vocational college, according to Pakistani government documents and officials.

“We welcome this assistance as it’s changing the quality of life of the people of Gwadar for the better,” said Senator Mushahid Hussain Sayed, chairman of the parliamentary committee that oversees CPEC, including Gwadar.

China and Pakistan jointly choose which projects will be developed under the CPEC mechanism, Sayed added.

When China suggested a 7,000 meter runway for the new airport, Pakistan pushed for a 12,000 meter one that could accommodate planes as large as the Airbus 380 and be used for military purposes, according to Sajjad Baloch, a director of the Gwadar Development Authority.

The scale of Chinese grants is extraordinary, according to Brad Parks, executive director of AidData, a research lab at the U.S.-based William and Mary university that collected data on Chinese aid across 140 countries from 2000-2014.

Since 2014, Beijing has pledged over $800 million in grants and concessional loans for Gwadar, which has less than 100,000 people. In the 15 years before that, China gave about $2.4 billion in concessional loans and grants during this period across the whole of Pakistan, a nation of 207 million people.

“Gwadar is exceptional even by the standards of China’s past activities in Pakistan itself,” Parks said.

HEARTS AND MINDS

There are early signs China’s efforts to win hearts and minds are beginning to bear fruit in Gwadar.

“Baluchistan is backward and underdeveloped, but we are seeing development after China’s arrival,” said Salam Dashti, 45, a grocer whose two children attend the new Chinese-built primary school.

But there are major pitfalls ahead.

Tens of thousands of people living by the port will have to be relocated.

For now, they live in cramped single-story concrete houses corroded by sea water on a narrow peninsula, where barefoot fishermen offload their catch on newly-paved roads strewn with rubbish. Many of the fishermen say they fear they’ll lose their livelihoods once the port starts operating.

Indigenous residents’ fear of becoming a minority is inevitable with Gwadar’s population expected to jump more than 15-fold in coming decades. On the edge of town, mansions erected by land speculators are popping up alongside the sand dunes.

Analysts say China is aware that previous efforts to develop Gwadar port failed partly due to the security threat posed by Baloch separatists, so Beijing is trying to counter the insurgents’ narrative that China wants to exploit Baluchistan.

“That weighs heavily on the minds of the Chinese,” Parks added. “It’s almost certainly true that they are trying to safeguard their investments by getting more local buy-in.”

Chinese officials, meanwhile, are promoting the infrastructure development they are funding.

“Every day you can see new changes. It shows the sincerity of Chinese for development of Gwadar,” Fijian Zhao, the deputy chief of mission at the Chinese embassy in Islamabad, tweeted last month.

NAVAL FACILITY

For its investment in Gwadar, China will receive 91 percent of revenues until the port is returned to Pakistan in four decades’ time. The operator, China Overseas Ports Holding Company, will also be exempt from major taxes for more than 20 years.

Pakistan’s maritime affairs minister, Hasil Bizenjo, said the arrival of the Chinese in the region contrasted with the experience of the past two centuries, when Russia and Britain, and later the United States and the Soviet Union, vied for control of the warm water ports of the Persian Gulf.

“The Chinese have come very smoothly, they have reached the warm waters,” Bizenjo told Reuters. “What they are investing is less than a peanut for access to warm waters.”

When a U.S. Pentagon report in June suggested Gwadar could become a military base for China, a concern that India has also expressed, Beijing dismissed the idea.

“Talk that China is building a military base in Pakistan is pure guesswork,” said a Chinese Defence Ministry spokesman, Wu Sian.

Bizenjo and other Pakistani officials say Beijing has not asked to use Gwadar for naval purposes.

“This port, they will use it mostly for their commercial interests, but it depends on the next 20 years where the world goes,” Bizenjo said.

Additional reporting by Hassan Raza Syed in KARACHI and Asif Shahzad in ISLAMABAD:; Writing by Drazen Jorgic; Editing by Kay Johnson and Philip McClellan.

This blogger’s note: The port add no threat to India as India is already sandwiched by China and Pakistan, a port cannot add much to the existing threat of sandwiching), however the port may be militarized like the islands in the South China Sea if the US or India has conducted freedom of navigation operations near it to threaten Pakistan and China. That was why Bizenjo said, “it depends on the next 20 years where the world goes.

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Russia urges India to line up behind China’s Belt and Road initiative


Russian Foreign Minister Sergei Lavrov (L) Indian Foreign Minister Sushma Swaraj (C) and Chinese Foreign Minister Wang Yi shake hands before the start of their meeting in New Delhi, India, December 11, 2017. REUTERS/Adnan Abidi

Sanjeev Miglani December 11, 2017

NEW DELHI (Reuters) – Russia threw its weight behind China’s massive Belt and Road plan to build trade and transport links across Asia and beyond, suggesting to India on Monday that it find a way to work with Beijing on the signature project.

India is strongly opposed to an economic corridor that China is building in Pakistan that runs through disputed Kashmir as part of the Belt and Road initiative.

India was the only country that stayed away from a May summit hosted by Chinese President Xi Jinping to promote the plan to build railways, ports and power grids in a modern-day recreation of the Silk Road.

Russian Foreign Minister Sergei Lavrov said New Delhi should not let political problems deter it from joining the project, involving billions of dollars of investment, and benefiting from it.

Lavrov was speaking in the Indian capital after a three-way meeting with Chinese Foreign Minister Wang Yi and Indian Foreign Minister Sushma Swaraj at which, he said, India’s reservations over the Chinese project were discussed.

“I know India has problems, we discussed it today, with the concept of One Belt and One Road, but the specific problem in this regard should not make everything else conditional to resolving political issues,” he said.

Russia, all the countries in central Asia, and European nations had signed up to the Chinese project to boost economic cooperation, he said.

“Those are the facts,” he said. “India, I am 100 percent convinced, has enough very smart diplomats and politicians to find a way which would allow you to benefit from this process.”

The comments by Russia, India’s former Cold War ally, reflected the differences within the trilateral grouping formed 15 years ago to challenge U.S.-led dominance of global affairs.

But substantial differences between India and China, mainly over long-standing border disputes, have snuffed out prospects of any real cooperation among the three.

India, in addition, has drawn closer to the United States in recent years, buying weapons worth billions of dollars to replace its largely Soviet-origin military.

Swaraj said the three countries had very productive talks on economic issues and the fight against terrorism.

Editing by Clarence Fernandez

Source: Reuters “Russia urges India to line up behind China’s Belt and Road initiative”

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


Lies, Fake News Cannot Stop China’s Belt and Road Win-win Cooperation


In SubChina’s report titled “Debt-trap: Debt-trap diplomacy on the Belt and Road?” today, it quotes Indian author and commentator Brahma Chellaney’s tweet, “Debt-Trap Diplomacy: In a reminder of how Chinese loans are collateralized by strategically important physical assets, Sri Lanka today formally handed over the Hambantota port to China on a 99-year lease because it is simply not in a position to repay its onerous debt to Beijing.”

That is pure lie but SubChina regards it as worthwhile basis for its fake news to describe China’s Belt and Road diplomacy as debt trap.

There is no Belt and Road debt in the port project at all.

The Chinese investor China Merchant Port Holdings (SM Port) is a subsidiary of China Merchant Group listed on Hong Kong stock exchange with obligation to disclose its Hambantota Port transaction.

According to the Group’s public announcement titled “Potential Discloseable Transaction Concession Agreement in Relation to Hambantota Port, Sri Lanka”, the company is to pay SLPA (Sri Lanka Port Authority) USD973.658 millions for the acquisition of 85% of issued share capital of HIPG (Hambantota International Port Group) and 58% of issued share capital of HIPG (Hambantota International Port Services) at USD146.00 million.

Adaderana.lk says in its report “Hambantota port handed over to HIPG and HIPS” on December 9, 2017, “The National Treasury (of Sri Lanka) received 294 million dollars as the initial 30% of the total amount that will be received.”

With such huge amount of payments, the Chinese company has only obtained shares in Sri Lanka-Chinese joint ventures in charge of the port. The port assets belong to the joint ventures instead of China.

Sri Lanka is heavily in debt when it concluded the above port agreement, but most of its USD25.3 billion debts in 2016 were borrowed by its former president Mahinda Rajapaksa for infrastructure projects mainly consisting of Colombo Lotus Tower, Magampura Mahinda Rajapaksa Port, Colombo Harbour South Container Terminal, Mattala Rajapaksa International Airport, Colombo – Katunayake Expressway, Mahinda Rajapaksa International Cricket Stadium. None of those projects are related to China’s 21st Century maritime Silk Road that began in September 2013, not long before the end of President Rajapaksa’s tenure on January 9, 2015 though 34% of Sri Lanka’s debts was borrowed from China.

As a matter of fact, instead of borrowing any loans from China, Sri Lanka receives USD964 million from China’s Belt and Road project to enable it to repay its debts borrowed for its expenditures not related to Belt and Road.

The above facts prove that SubChina’s description of Chins’s Belt and Road as debt-trap is pure lie and fake news.

True, China will stretch its influence to developing countries in Asia, eastern Europe and Africa through its Belt and Road initiative, but it has to be win-win cooperation to benefit those countries instead traps to harm their interests like colonialists did in the past. China is certainly not so stupid as to copy colonialists’ failures.

Sri Lanka will certainly be benefited from Hambantola Port developed by China. For now, the port will be second in importance to Singapore for trade through Indian Ocean, but if Thai political situation has stabilized, a canal across Kra Isthmus will certainly be built as the benefit of the shortcut for China, Japan and South Korea’s trade through Indian Ocean is too attractive to ignore. Then Hambantola will replace Singapore as the major shipping hub for the trade.

The benefits of the win-win cooperation in China’s Belt and Road initiative is too great for India and SubChina and other media to deny by lies and fake news.

Comment by Chan Kai Yee on SubChina’s report, full text of which can be viewed at http://supchina.com/2017/12/11/debt-trap-diplomacy-belt-road/?utm_source=SupChina&utm_campaign=64049b70ad-20171211-437+DebtTrapDiplomacy&utm_medium=email&utm_term=0_caef3ab334-64049b70ad-164862477.


China’s Maritime Silk Road Taken Shape in Indian Ocean


Abdulla Yameen Abdul Gayoom (left) shakes hands with Xi Jinping after signing deals at the Great Hall of the People in Beijing on Thursday. Photo: Reuters

China has already the rights over ports in Pakistan and Sri Lanka.

SCMP says in its report “China and Maldives sign free trade, maritime deals” yesterday that during Maldivian President Abdulla Yameen Abdul Gayoom’s China visit he signed deals to cooperate on a free-trade agreement and on Beijing’s maritime trade plan.

With close ties with Maldives and Pakistan and port in Sri Lanka, China’s 21st century maritime Silk Road has taken shape in Indian Ocean.

The report says that the deals are expected to aggravate India’s concerns over China’s influence in South Asia.

True, India may use all its financial resources to import US advanced weapons for its hegemony in Indian Ocean, but Silk Road is a road for peaceful trade that will benefit India in its trade with China, Japan, South Korea and Southeast Asia, especially with Iran for energy.

India cannot be benefited by military approaches. If it cuts China’s trade route through Indian Ocean, its trade route to the Middle East especially Iran will be cut by the iron brothers of Pakistan and China while its trade routes to Southeast Asia, Japan and South Korea will be cut by China.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be found at http://www.scmp.com/news/china/diplomacy-defence/article/2123389/china-and-maldives-sign-free-trade-maritime-deals


Japan, the Large Hole in America’s Quad to Contain China


Prime Minister Shinzo Abe said Japan was ready to work with China on its ambitious trade and infrastructure development plan. Photo: AFP

The failure of Obama’s pivot to Asia has caused the US to lose one of its long-term allies the Philippines so that US new President Trump has openly scrapped the economic arm of the pivot TPP and refrained to mention other parts of his predecessor’s pivot.

Trump’s Secretary of State Rex Tillerson has the wisdom to see that Chinese President’s Silk Road economic belt and 21st century maritime Silk Road (Belt and Road) is vital to China’s national security and Chinese President Xi Jinping’s 15- and 30-year goals of modernization and growth of national strength. He switched from the pivot to his Indo-Pacific strategy.

Tillerson first regards India as the most vital part of US Indo-Pacific strategy. He gave a speech for US-India alliance in Indo-Pacific titled “Defining Our Relationship with India for the Next Century” at Center for Strategic and International Studies (CSIS) on October 18. The alliance aims at containing China but Tillerson did not make it directly clear.

CSIS CEO John J. Hamre asked him at tend of his speech, “Would you – what do you see as being the example of predatory economics that we should be alert to ourselves, between us?”

Tillerson said in reply, “We have watched the activities and actions of others in the region, in particular China, and the financing mechanisms it brings to many of these countries, which result in saddling them with enormous levels of debt.”

He meant that China’s Belt and Road initiative is saddling many countries with enormous levels of debt. He is setting up US-India alliance to hinder China’s Belt and Road.

As China’s multibillion dollar Belt and Road project the China-Pakistan Economic Corridor has raised great concerns in India, and as the US has promised to help India modernize its military, India seems quite glad to be US ally in hindering China’s Belt and Road initiative.

Then the US has recovered the quad of the US, Japan, Australia and India as the core of its Indo-Pacific strategy to contain China especially to hinder China’s Belt and Road.

It seems the US may succeed as EU seems also unhappy with China’s Belt and Road. Among EU powers, only Italy’s prime minister attended China’s Belt and Road forum. However, EU powers has shown great interest in Belt and Road projects in Iran due to the profitable prospects of those projects. (See my post “Europe and China Compete for Belt and Road Projects in Iran” on Dec. 1.)

However, that does not affect Tillerson’s Indo-Pacific strategy as no EU members are members of the quad.

Now, SCMP says in its report “Japan ready to cooperate with China on global trade plan, Shinzo Abe says” yesterday, “Japanese Prime Minister Shinzo Abe on Monday expressed his intention to cooperate with Chinese President Xi Jinping’s pet cross-border infrastructure development project while stressing the need for open economic activity across Asia.”

It quotes Abe as saying during a reception at a two-day gathering in Tokyo involving Japanese and Chinese business executives, “I believe Japan will be able to cooperate well with China, which has been putting forward its one belt, one road initiative” in a free and open Indo-Pacific.

Japan wants to cooperate with China’s Belt and Road instead of containing China. After all, Asian market, especially Chinese market, is too important for Japan.

As a result, there is a large hole in Tillerson’s quod to contain China and hinder China’s Belt and Road.

The US failed to prevent EU powers from joining AIIB, but it has been able to keep Japan away from AIIB. Now, not only EU powers but also Japan want to join China’s Belt and Road.

It is not because the US lacks influence on those countries but because the Belt and Road is an attractive initiative to those countries.

The US simply has nothing to counter China’s political, diplomatic and financial innovations of AIIB and Belt and Road.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be found at http://www.scmp.com/news/china/diplomacy-defence/article/2122846/japan-ready-cooperate-china-global-trade-plan-shinzo.


US Indo-Pacific Quad Facilitates China’s Belt and Road


Obama’s pivot to Asia aimed at containing China but had the side effect of containing Russia. Before the pivot, the US had already been making hard efforts to reduce Russia’s influence in Eastern Europe and the Middle East; therefore, even though it was very clear that Obama was containing China especially creating trouble for China in the South China Sea, Russia felt threatened.

Seeing Russia’s predicament, China realized that due to the change in situation, it was possible for China to seek alliance with its long-term enemy Russia.

Now, China and Russia are de facto allies. Russia is now providing China with advanced weapons and cooperating with China in developing large airliners and heavy helicopters

Obama’s pivot has been a failure so that Trump has scrapped it, especially TPP the economic part of it.

Now, the US is wise in having quad to control both the Indian and Pacific Oceans. However, China sees the threat to its trade lifelines through the Oceans earlier and began earlier its Belt and Road initiative to establish alternative connections to Europe, the Middle East and further to Africa other than the connections through the Indian Ocean that may easily be cut by powerful US navy. For such connections, Russia, Central Asia and especially Pakistan are vital.

However, India as a key part of quad has long been Russia’s friend and major market of Russia’s export of weapons. According to mil.huanqiu.com’s report “Russia has been thoroughly kicked away? India’s new aircraft carrier will perhaps use F-18 carrier-based fighter jets”, as the US has promised India to help it develop aircraft carriers with better US technology, it is quite natural India will use US made carrier-based fighter jets.

However, Russia has developed and made 45 Mig-29K worth $2.2 billion specially for India’s new aircraft carrier. India’s participation in US quad will cause Russia to lose its major weapon market to the US. It will push Russia further closer to China and remove all possible obstacles to Belt and Road in Central Asia.

Central Asia countries were previously parts of the Soviet Union. Russia wants to establish an Eurasia Union to keep them as its satellite states or at least in Russia’s sphere of influence. China’s Belt and Road projects in Central Asia may very likely replace Russia’ influence with China’s. China needs to make great efforts to convince Russia that the projects are but economic with no political effect. However, it is impossible to separate economics from politics.

China and Russia has had an agreement to find a way accommodate Belt and Road with Eurasia Union without much progress. Fortunately, the US comes to their assistance. It resumes the quad of US, India, Japan and Australia with the obvious intention to contain China. US Secretary of State made that very clear in his speech at the Centre for Strategic and International Studies on October 18. In spite of that, Russia has been upset in losing India, its major weapon buyer.

Moreover, US arming India gravely scares Pakistan and thus further strengthened Pakistan’s iron brotherhood with China. As a result, the US has made it much easier for the two iron brothers to overcome their disagreements to China’s vital project of China-Pakistan Economic Corridor.

Comment by Chan Kai Yee on mil.huanqiu.com’s report “Russia has been thoroughly kicked away? India’s new aircraft carrier will perhaps use F-18 carrier-based fighter jets”, full text of which in Chinese can be viewed at http://mil.huanqiu.com/world/2017-11/11388949.html.


China’s Belt and Road Remains Successful despite Some Disagreements


SubChina says in its report “China and Pakistan negotiate Belt and Road disagreements” yesterday that according to Pakistan’s Power Secretary Younus Naseem Khokar, ongoing energy projects accounting for 72 percent of China’s $50 billion-plus investment package in the country have been making “very smooth” progress.

The scrapping of the previously-agreed hydroelectric power project is regarded as a great setback of China’s Belt and Road initiative, but SubChina says in its report, “The bottom line: Pakistan remains optimistic on China’s Belt and Road projects in the country, striking a contrast with how this investment is perceived in media outside of Pakistan.”

It mentions the agreement among relevant parties on the commencement of the first phase of a special economic zones (SEZ) in Pakistan for the petrochemical, steel, textile, leather processing, and machinery industries.

The report says that Pakistan’s Federal Minister for Interior and Planning, Development and Reforms, Ahsan Iqbal, is confident that the SEZs and other projects would ensure transfer of technology, knowledge and skills to Pakistan.

The energy projects and the SEZs are the major parts of the China-Pakistan Economic Corridor (CPEC) linking China with the Middle East, especially Iran.

The US is restoring the quad of US, India, Japan and Australia to contain China in Indo-Pacific, but by winning over India, the US has pushed Russia and Pakistan closer to China as I will elaborate in my next post.

What about the quad of China, Russia, Iran and Pakistan that US quad is forcing those four to form?

The Indian Ocean seems vital to China’s trade with the Middle East, Europe and Africa so that the US forms the quad to be able to cut China’s trade lifelines through the ocean. However, with the CPEC, China has an important alternative land route through Pakistan without going through the Indian Ocean.

In addition, do not forget that as the Arctic Ocean is melting due to global warming, China will soon have a shortcut to Europe through the Arctic Ocean completely under Russian control.

Obviously, US new Indo-Pacific strategy cannot contain China. On the contrary, it helps China overcome Russia’s opposition to its projects in Central Asia and strengthen the iron brotherhood between Pakistan and China to ensure the success of CPEC.

If the US really wants to contain China, it has to win over Russia and Pakistan instead of India. Trump tried to have détente with Russia quite early, but he has been opposed by US Congress and media.

Pakistan was for quite a long time US ally, but the US has never respected it as perhaps the US regards itself as the rider and its allies as horses. Now, Pakistan and the Philippines have refused to be America’s horses. Will India become America’s horse?

I believe that Indian Prime Minister Modi, a very shrewd politician, will not pull chestnuts out of the fire for the US.

Comment by Chan Kai Yee on SubChina’s report, full text of which can be viewed at http://supchina.com/2017/11/21/china-pakistan-negotiate-belt-road-disagreements/