China’s Globalization and the Belt and Road Initiative 9783030222888, 3030222888

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Edited by Jean A. Berlie

China’s Globalization and the Belt and Road Initiative

Politics and Development of Contemporary China Series Editors Kevin G. Cai University of Waterloo Renison University College Waterloo, ON, Canada Pan Guang Shanghai Center for International Studies Shanghai Academy of Social Sciences Shanghai, China Daniel C. Lynch School of International Relations University of Southern California Los Angeles, CA, USA

As China’s power grows, the search has begun in earnest for what superpower status will mean for the People’s Republic of China as a nation as well as the impact of its new-found influence on the Asia-Pacific region and the global international order at large. By providing a venue for exciting and ground-breaking titles, the aim of this series is to explore the domestic and international implications of China’s rise and transformation through a number of key areas including politics, development and foreign policy. The series will also give a strong voice to non-western perspectives on China’s rise in order to provide a forum that connects and compares the views of academics from both the east and west reflecting the truly international nature of the discipline. More information about this series at http://www.palgrave.com/gp/series/14541

Jean A. Berlie Editor

China’s Globalization and the Belt and Road Initiative

Editor Jean A. Berlie The Education University of Hong Kong Tai Po, Hong Kong

Politics and Development of Contemporary China ISBN 978-3-030-22288-8    ISBN 978-3-030-22289-5 (eBook) https://doi.org/10.1007/978-3-030-22289-5 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Acknowledgment

I thank particularly J. Neto Valente, C. Barthelemy and J.P. Bondil who inspired me to edit this book on globalization. Without them, this book would have not seen the light of day.

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Praise for China’s Globalization and the Belt and Road Initiative “Jean A. Berlie’s book “China’s Globalization and the Belt and Road Initiative” is about a particularly crucial topic for the future of the Planet: The OBOR (One Belt & One Road) is a Chinese global program launched in 2013 by President Xi Jinping, which includes the new land and maritime Silk Road. China is now an economic and political superpower and its Belt and Road managed to link more than 70 countries, encompasses more than 70% of the world’s population (4.4 billion) and will rapidly reach some 70% of the world’s GDP (US$ 25 trillion). This book proposes an exhaustive economico-political analysis with international implications. Xinjiang, Hong Kong, Malaysia, Indonesia, East Timor and Africa are studied in relation with the Belt and Road Initiative. We recall that the historical Silk Road was mainly concerned with trade and exchange as with the diffusion of Buddhism. This time, however it is more closely associated with the diffusion of the Chinese Communist Party’s social-capitalism than Western liberal-capitalism.” —Professor L. Vandermeersch, Former Director of the French EFEO “Based on a high coverage, this book offering a comprehensive analysis of the issues related on One Belt, One Road (OBOR) construction, included the infrastructure construction, transportation, energy, commerce, finance and its risk, cultural impact, globalization influence, etc. In the meantime, the analysis with many living cases, included the Hong Kong-Shenzhen-Macao Greater Bay Area, the issues of South China Sea, and OBOR practice in Asia, Africa and Europe, etc. This book brings us many new views on OBOR studies, it encouraged to understand the positive influence of OBOR, emphasized the importance of the harmony in the OBOR practices. It also discussed some sensitive issues like the difference of “old” and “new” globalizations related to the OBOR, and the replacement of China’s economic developmental model to the west in Africa, and so on. Anyway, depended on the new data, new view, new development, this book is an important and new one among hundreds of publications benefited the understanding of the background, actuality, risk and prospective of OBOR construction.” —Dr. Xiao Yun Zheng, Distinguished Professor of Hubei University, President of China Institute of Yangtze River Culture Studies

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Contents

1 Introduction  1 Jean A. Berlie 2 The New Silk Road 13 Jean A. Berlie 3 Xinjiang and Central Asia’s Pivot of History for the Belt and Road Initiative 41 Jean A. Berlie 4 Infrastructure and the Belt and Road Initiative 57 Manuel Benard 5 The Greater Bay Area and the Role of Hong Kong and Macau SARs in the Belt and Road Initiative 77 Jean A. Berlie and Steven Hung 6 China’s Development of Public Goods in the South China Sea Islands101 Zhang Mingliang 7 China’s Globalization and the Belt and Road Project: The Case of Indonesia and Malaysia123 Geoffrey C. Gunn ix

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8 Timor-Leste and the Australia Treaty on Maritime Borders and Implications for the Belt and Road Initiative139 Peter Murphy and Jean A. Berlie 9 Africa-China Relations in the Context of Belt and Road Initiative: Realizing African-Chinese Dreams for Common Development?157 Raymond Kwun-Sun Lau 10 A Chinese-African Cross Cultural Perspective on Dispute Settlement and the Belt and Road Initiative: Challenges and Risks Facing Chinese Investors179 Li Ke 11 Epilogue207 Jean A. Berlie Bibliography217 Index237

Notes on Contributors

Manuel  Benard is an expert on infrastructure and development. He worked for the United Nations, the African Development Bank and the European Central Bank. Jean A. Berlie  is a research fellow at the Education University of Hong Kong. His main research is on China and Southeast Asia. He wrote a dozen of books on China and Southeast Asia. Geoffrey  C.  Gunn  is emeritus professor, Nagasaki University/adjunct professor, Center for Macau Studies, University of Macau. He wrote some 20 books on history, Asia and in particular Southeast Asia. Steven Hung  is a lecturer at the Education University of Hong Kong. Li Ke  is a researcher at the Faculty of Law of the University of Macau. Raymond Kwun-Sun Lau  is a lecturer in the Department of History at the Hong Kong Baptist University. He holds a PhD in Political Science at the University of Queensland, Australia. Zhang Mingliang (张明亮) is a professor at the Institute of South East Asia Studies in Jinan University, in Guangzhou. He holds a PhD from Beijing University in 2004. His major works are centered on the South China Sea and Sino-Vietnamese ties, and he has authored two monographs and articles concerning the South China Sea. His books are entitled: Breaking the Deadlock in the South China Sea: What China Could Do

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NOTES ON CONTRIBUTORS

(超越僵局:中国在南海的选择), and America’s Involvement in the South China Sea: Backgrounds and Approaches (超越航线:美国在南海的追求). Both were published in Chinese in Hong Kong in 2011. Peter Murphy  is an Australian freelance journalist who wrote an article on Australia and East Timor for Palgrave Macmillan’s book (2017) East Timor’s Independence, Indonesia and ASEAN.

Abbreviations

ACBRI ACFTA AIIB ASEAN BIT BRI CICC CIETAC COC CPC DAB EBRD ECRL EU FDI FOCAC GBA HKIAC HKSAR IBRD ICJ ICSID JTM MoU MSAR MSR NYT

Australia-China Belt and Road Initiative ASEAN-China Free Trade Area Asian Infrastructure Investment Bank Association of Southeast Asian Nations Bilateral investment treaty Belt and Road Initiative China International Commercial Court China International Economic and Trade Arbitration Commission Code of Conduct in the South China Sea Communist Party of China Democratic Alliance of Betterment (Hong Kong) European Bank for Reconstruction and Development East Coast Rail Link European Union Foreign Direct Investment Forum on China-Africa Cooperation Greater Bay Area Hong Kong International Arbitration Center Hong Kong Special Administrative Region of China International Bank for Reconstruction and Development International Court of Justice International Centre for Settlement of Investment Disputes Jornal Tribuna de Macau (main Portuguese daily news of the MSAR) Memorandum of Understanding Macau Special Administrative Region of China Maritime Silk Road New York Times xiii

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ABBREVIATIONS

OBOR PCA PRC SCIA SCMP SCPRC SCS SRCIC T/T UN USA USIDFC

One Belt, One Road Permanent Court of Arbitration People’s Republic of China Shenzhen Court of International Arbitration South China Morning Post Supreme Court of the People’s Republic of China South China Sea Silk Road Chamber of International Commerce Transit time United Nations United States of America US International Development Finance Corporation

List of Figures

Fig. 2.1 November 15, 2018, the Hong Kong University’s conference Asia Global Dialogue: “The Global Multilateral Trade System from Asia” chaired by Victor K. Fung. Photo J. A. Berlie Fig. 8.1 Petroleum Minister of Timor-Leste, Alfredo Pires. NGO La’o Hamutuk, Dili

22 150

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List of Maps

Map 2.1 Chinese String, part of the Belt and Road Initiative. Source: Philippe Raggi 2019 Map 2.2 The Belt and Road Map 8.1 Timor-Leste maritime borders

14 15 144

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List of Tables

Table 5.1 Table 5.2 Table 5.3 Table 5.4

Hong Kong and Macau SARs, table of impacts: globalization, industrialization, economy, legal and political systems 80 Numbers of Hong Kong visitors and mainlanders visiting Hong Kong 89 Hong Kong residents who had worked in mainland China on age groups in 2013 and 2017 90 Main visitors to Hong Kong and Macau in 2016, 2017 and 201892

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CHAPTER 1

Introduction Jean A. Berlie

Abstract  This book concerns globalization and the Belt and Road, also called the modern Silk Road. The question of infrastructure is sometimes criticized by those who do not like the new Silk Road. Arbitration and English language are essential for the development of China’s globalization in the twenty-first century. The opportunities and risks of the Belt and Road Initiative (BRI) will be studied in this chapter. Keywords  Arbitration • ASEAN • Belt and Road Initiative (BRI) • Globalization • Opportunities • Risks • Silk Road

Foreword This book deals with China’s globalization in the twenty-first century and the modern Silk Road. It explains globalization with reference to the Belt and Road Initiative (BRI). Globalization “is the subject of a rapidly proliferating theoretical literature…” (Mittelman 2010: 3, 24). Although globalization studies try to theorize structural change, it would be wrong to either underestimate or exaggerate the achievements. The new Silk Road,

J. A. Berlie (*) The Education University of Hong Kong, Tai Po, Hong Kong © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_1

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called in 2013 One Belt, One Road (OBOR), is China’s project of the century. It is a challenge to explain what is the Belt and Road because it is changing, despite its global key purpose, and it has no clear definition in spite of the existence of memoranda signed by China and other states that are part of the Belt and Road project. Those who fear and think that China wants “to create a new world order” have to study more the positive aspect of the BRI, which is an important theme of my book. It is sure that globalization without risks does not exist. Western globalization and the Belt and Road Initiative are both not exempted of certain risks which are part of the present time world economy. Finance and investments in the twenty-first century always need a serious consideration of the risks involved. Does China’s Belt and Road need a new Chinese ethic to better succeed? The world is currently suffering severe economic and financial problems, so the modern Silk Road, with its long past history of more than two thousand years, needs initiative, creativity, international governance and ethic to give some hope and to try to end the US–China trade war. What explains this book? It contains various chapters on Central Asia, the pivot of Asia and the gate of the OBOR, infrastructure, the Greater Bay Area with Guangdong Province, Hong Kong and Macau SARs, the Maritime Silk Road (MSR), the South China Sea (SCS), the ASEAN countries including Indonesia and Malaysia, the dispute resolution Timor-­ Leste versus Australia secured by a Treaty on Maritime Boundary, and two chapters on the Belt and Road Initiative and Africa. Harmony, dispute resolution and arbitration give an actualized definition of dispute resolution in South Africa, and the epilogue concludes. The positive theme of this book is essential, and in all chapters a force of the Chinese globalization is pointed out, the Belt and Road Initiative is not linked with capitalist globalization. The objective of the book is the opportunities created by the Belt and Road Initiative, which exists in all the chapters. Some risks of China’s globalization should be mentioned. There are risks on the BRI as in all types of globalization, especially for the infrastructure projects that involve loans. In the introduction, in Chaps. 2 and 3, Berlie introduces and explains the Belt and Road Initiative and the New Silk Road which is a socialist globalization with Chinese characteristics and the entire book demonstrates it, we hope. So, a direct comparison of both Western and Chinese globalization is not so useful, but there are international rules and China is suggested to try to promote more international arbitration; this

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is one of the thesis of this book also developed in particular in Chaps. 10 and 11. Since April 2018, the Shenzhen Court of International Arbitration (SCIA) has been trying to be closer to the Hong Kong international arbitration. It is sure that an economic confrontation is unproductive to solve the question of the world’s economic weakness that the USA and China try to improve. Manuel Benard’s Chap. 4 on Infrastructure and the Belt and Road Initiative is a key chapter. China’s ambition to link globalization and infrastructure development in Asia and Africa is not always perfect. All countries should provide free market access to “all developing countries poorer and smaller than themselves.” Do China and the USA follow this advice in global governance? (Stiglitz and Charlton 2005; Glenn 2007: 211). The Maritime Silk Road is essential for China’s merchant navy growing everyday years. There was other important navy news, a Vietnamese tanker carrying gasoline cargo successfully reached North Korea (Reuters 2019) when Trump met Kim in Hanoi, on February 28, 2019. President Donald Trump prepared key talks on security and cooperation which finally failed in the Vietnamese capital. Elsewhere on the Belt and Road exist essential investments to boost the new Silk Road, and investment enhances infrastructure. This question of Foreign Direct Investments (FDIs) is essential and this book will stress this question. Manuel Benard knows the question of infrastructure from his long experience in Asia and Africa. Chapters 1 and 4 address the question of China’s huge investments on infrastructure. The giant Hong Kong–Zhuhai–Macau Bridge is an example in which Hong Kong has invested HK$120  billion so far. The mega bridge was opened to public on October 24, 2018, and this was officially announced by the three governments (Hong Kong, Macau and Zhuhai) five days before its opening. A more global role of the Hong Kong and Macau SARs will happen later, but slowly. Chapter 4 also considers the philosophy of infrastructure, sea, rail, road, air and pipeline transportation along the Belt and Road. It also addresses the important question of energy. The integration of two Special Administrative Regions with the new Greater Bay Area is not so easy. “The Chief Executive of Hong Kong, Carrie Lam, reassured the public on the safety of mega bridge … and area cities (are) urged to drop rivalry and cooperate” (SCMP, February 11 and 13, 2019). There is no limit to the ambition to develop infrastructure projects under the Belt and Road Initiative. The Liaoning Daily and South China Morning Post mentioned the project to link Dadong, Liaoning, and Pyongyang, the North Korea capital by rail and a new road. However,

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China will not try to “push any infrastructure projects with North Korea while sanctions are still in place” (SCMP, September 15, 2018). Everything at present do not work so well because the trade conflict between the USA and China is not yet solved even if the discussions between the two countries seem to go smoothly. For example, on the GBA, the property market tries with some difficulty to promote essential Foreign Direct Investments (FDIs). The practical study of globalization continues in Chap. 5 written by Berlie and Steven Hung. It includes the Greater Bay Area and its new blueprint in February 2019, with the role of Hong Kong and Macau Special Administrative Regions linked to China’s Belt and Road Initiative. Zhang Mingliang is a qualified scholar to write Chap. 6 on “China’s Development of Public Goods in the South China Sea Islands.” Zhang’s thesis is that China could improve its position in the SCS by offering public services there. His first study on the question was his already published Beijing University Doctorate dissertation on China and the USA in the Paracel and Spratly Islands. The question of peace and harmony compels China and the USA to reconsider their ambitions in the South China Sea. Security and peace will remain a robust foundation for international political stability. The Belt and Road Initiative in the South China Sea needs time and patience. When China and ASEAN are concerned, careful international diplomacy is necessary, and the solution is unilateral, state by state. China has a long history of avoidance of conflict with Southeast Asian countries, so cooperation, exploration and joint exploitation of limited parts of the South China Sea, case by case, reef by reef, is a solution needing great joint Sino-Southeast Asian diplomacy. To maintain excellent relationships with ASEAN is essential for China. Geoffrey C.  Gunn, Emeritus Professor, Nagasaki University/Adjunct Professor at the Center for Macau Studies, University of Macau, is a well-­ known specialist of the Malay World, and he wrote Chap. 7 entitled: “China’s Globalization and the Belt and Road Project: The Case of Indonesia/Malaysia.” He knows well that China’s globalization is based on pre-eminent relations with ASEAN and the United Nations (UN), and the future will tell how the Southeast Asian countries will support the BRI. Among the leaders of ASEAN, the Prime Minister Mahathir Mohamad fully supports the Belt and Road Initiative. China’s main claim of full sovereignty over the Paracel and Spratly Islands is another question. The reader will be interested to compare Geoffrey Gunn’s view and Chap. 6 by Zhang Mingliang. As an introduction to Chap. 8 by Peter Murphy and

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Berlie, “The UN in the beginning had to rely on Australia and the Australian Defence Force to lead and send troops into what was then an Indonesian Province” understanding China’s interest in ASEAN and its will to develop the Belt and Road Initiative. China strongly supports the ASEAN candidacy of the newest country of the twenty-first century. China is also interested in Timor-Leste and Panama because both countries use the US dollar as their currency. Not yet fully implemented in August 2018, Timor-Leste’s recent Maritime Boundary Treaty with Australia signed on March 6, 2018, in New York, is also a very interesting example of international arbitration. This chapter examines this question and the Timorese strong will to establish a Liquefied Natural Gas plant in their country. This arbitration case lasted only seven months thanks to the successful Australian–Timorese discussions, mainly by emails exchanged by the Australian and Timorese teams in charge of the communication with the International Court of Justice in The Hague, the Netherlands. A treaty was finally signed in March 2018 as we know, and it is an excellent example of harmonious international negotiations for both countries, Timor-­Leste and Australia, but in 2020 the key question of the Liquefied Natural Gas plant will probably be resolved with difficulty. Raymond Kwun-Sun Lau, in his Chap. 9 entitled “Africa-China Relations in the Context of Belt and Road Initiative: Realizing AfricanChinese Dreams for Common Development?” examines the role of Africa in China’s BRI. It argues that China’s policy toward Africa under President Xi Jinping has been motivated by Beijing’s growing self-confidence and belief that it can offer a Chinese model of economic development as an alternative to the Western model. This chapter suggests that President Xi’s strong push for BRI in Africa has to be understood in the context of Beijing’s efforts to institutionalize and formalize its relations with Africa since the establishment of the Forum on China-Africa Cooperation (FOCAC) in 2000. Africa, in particular, continues to play an important role in defining China’s infrastructure development and President Xi’s vision of global development. Following the 19th Party Congress, Foreign Minister Wang Yi elaborated on the CPC’s approach to global leadership, stating that “China will actively explore a way of resolving hotspot issues with Chinese characteristics and play a bigger and more constructive role in upholding world stability” (Wang Yi 2018). There is also “a search for alternatives to capitalist globalization.” In this respect, the Belt and Road can be perceived as something different. An alternative to capitalist globalization is “socialist globalization”

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(Sklair 2004: 40, 48). Nevertheless, we cannot be sure that it defines the new Belt and Road with its own vision which does not include a definition of socialism or democracy, an intrinsic part of the capitalist Western globalization. This book does not answer this question. We will continue in a logic which tries to see if the BRI is sustainable. One of the main problems of the Belt and Road Initiative—it seems—is that the sustainability of this extraordinary type of globalization has not been studied objectively. More generally, the main question is peace and harmony promoted by international arbitration when necessary. Arbitration and negotiation are essential to secure harmony in the Belt and Road Initiative. Conflicts may occur along the modern Silk Road. Following a careful analysis of the China–South Africa Bilateral Investment Treaty (BIT), Li Ke’s Chap. 10 is entitled: “A Chinese-African Cross-Cultural Perspective on Dispute Settlement and Belt and Road Initiative: Challenges and risks facing Chinese investors.” China knows that dispute resolution and arbitration are important, but has not yet really accepted international arbitration. It is sure that contrary to “negotiation, mediation, inquiry and conciliation,” arbitration is followed by a “binding decision,” usually on the basis of international laws (Merrills 2005: 91). However, “mediation as a viable mode of resolving commercial disputes will not vanish so long as culture and tradition continue to strongly influence Chinese society and its commercial practices” (De Vera 2004: 193). In contrast to the former colonial powers or empires generally using a rather rigid agenda, modern China is not “colonial,” prefers soft power and has its own agenda on globalization. The Soviet Union criticized American imperialism in the twentieth century, but it is not appropriate to accuse China of imperialism in the twenty-first century. China and Africa are both part of the developing world. This book, with two chapters on Africa, helps in understanding that China remains big and powerful. China’s growing interest and engagement in Africa is a fact. The question of energy and Africa is also important. In Uganda, Chinese and American companies are in increasing competition; Chinese loans “promised immediate financing,” but American consortia finance projects “by selling shares to investors.” Uganda’s lakes are rich in oil and gas resources and energy officials “need the financing. The Chinese can do it” but, the “American proposal means less debt risk.” In 2013  in Beijing, Uganda President Yoweri Museveni signed and smiled as he “shook hands with Chinese executives.” We do not know what will happen there in 2019 “despite the fact that China might prevail, all major decisions end up before Mr Museveni.” Uganda

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“expects to finalise a $2.2 billion loan deal with China’s Exim bank … to pay for part of a railway line to connect Kenya’s Mombasa seaport with Kampal” (Reuters 2018; see Chap. 9 in this book). Hong Kong Special Administrative Region of China (SAR) can deal easily with China, because it is part of it and has a Basic Law, but Hong Kong can only indirectly deal with the USA. It is not direct because Hong Kong SAR’s foreign affairs are the realm of Beijing. Its British historical past before the year 1997 is very useful. An example of the global vision of Hong Kong is given by the DAB lawmaker Holden Chow who ‘met US State Department officials to discuss Hong Kong political and trade issues’ and Democrat Party’s former chairwoman Emily Lau, with ‘long-­ established ties with foreign politicians’ who also tries to reduce the risks for Hong Kong of ‘the dispute between the United States and China’ (SCMP, February 8, 2019). On June 28, 2018, in the Belt and Road Summit at the Hong Kong Convention Centre, for the third year, businessmen and government leaders discussed opportunities in infrastructure investment and financing, risk management and dispute resolution (Belt and Road Summit 2018). Five thousand participants attended this conference, including 70 distinguished speakers. The importance of dispute resolution along the Belt and Road was stressed. On the maritime Road of the OBOR, let us start with a simple network of ports which includes Fuzhou, Hanoi, Kuala Lumpur, Jakarta, Kolkata, Colombo, Nairobi, Djibouti and Athens. Although frequently mentioned by China, we are not yet sure that India will collaborate with the Belt and Road. Things are changing, and cooperation between China and India for the port of Chabahar in South Iran can change the international relations. According to the Hong Kong Consul General of Iran, Dr. Mehdi Fakheri (interview, on November 3, 2018), “China is not involved anymore with this strategic harbor.”

Positive and Negative Aspects, Including the Risks of the Belt and Road Initiative One of the main risks of the BRI is the question of infrastructure. The example of Sri Lanka for the case of the port and airport of Hambantota will be studied in the Chap. 4. The case of the port of Chaukpyu in Myanmar is more complicated and will not be studied in this book because it includes ethno-religious problems and the Muslims of the north-­western Rakhine State, called Rohingyas (Saito 2014: 26, 28, 36; Berlie 2008).

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The Chap. 2 and the epilogue mention the risks of the BRI mainly on infrastructure. This chapter also mentioned in 2017, the risks along the Pakistani corridor of the Belt and Road; Xi and Modi understood that they had to collaborate to stop the border conflict over the Doklam Plateau, and thereby a serious risk was solved. However, globalization and also the Belt and Road helped the world to progress through “travel, trade migration, spread of cultural influences, and dissemination of knowledge” (Patil and Gopal 2002: 295). Economic globalization and Belt and Road both produce intricate interchanges and continuities that are part of the positive contemporary development. For example, we have seen that the European Union (EU), which in 2015 celebrated its 40th anniversary, is now investing in Kazakhstan, China’s main partner in Central Asia. The European Bank for Reconstruction and Development (EBRD) has invested 8  billion Euros in Kazakhstan. China also is investing “over 10  billion dollars for Central and Eastern Europe.” For some scholars “China strategic market for EU can only increase,” so reciprocal trade and cooperation are inevitable (Djordjevic c.2016: 54, 61). Harmony is a particularly important theme in this book because it is related to dispute resolution. Without harmony, the Belt and Road cannot work properly. Harmony is a communication and public relations concept, and a part of China’s soft power push along the Silk Road. Harmony along the Belt and Road is essential, but the spiritual question should be considered. Numerous states exist along the Belt and Road and they have their own culture that China must respect. Harmony in early China “was a reflection of the cosmological order … Although drawing a border between two city states the sheer act of bordering made it a ritual space, where movement and actions took on a symbolic meaning” (Motoh 2018: 71). To have more countries accepting the modern Silk Road, China has to push harmony at its borders. However, there are risks in the Belt and Road Initiative as in all types of globalization, especially for the infrastructure projects that involve loans. In Beijing between June 18 and 20, 2018, Bolivia’s President Evo Morales positively responded and joined “the Belt and Road Initiative.” On September 14, 2018, in Beijing the President of Venezuela Nicolás Maduro asked for a new US$5 billion to President Xi Jiping and Premier Li Keqiang, but “still owes Beijing about US$20 billion.” It will be “gradually paid off with oil shipments.” Venezuela “signed a memorandum of understanding to cooperate on (the BRI) to boost trade links and infrastructure” (SCMP, September 15, 2018). After Legislative elections, Juan Guaidó is for the moment self-declared president. It is not yet possible to say if the USA and China will cooperate to find a solution.

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The Belt and Road Initiative Related to the Ancient Silk Road, Also Need International Arbitration for Its Development To have an idea of the impact of the BRI in Chinese, the number of new publications on the main topic—the Belt and Road—reach yearly 100 books or more and pamphlets. In English the number of publications on the Belt and Road and the maritime Silk Road is also impressive. “In 2016, the number of academic articles is a double to 2015. By July 2017, there are 40 academic articles related to ‘Belt and Road Initiative’. The sharp increase implies that ‘Belt and Road Initiative’ attracts certain attention in English academia” (Academic Articles n.d.). To return to the reality of the Belt and Road, the arbitrator Samuel C. C. Wong thought that the Belt and Road “cannot be bad for Hong Kong” (personal interview). It concerns the BRI because arbitration is an important question, for example, the China International Economic and Trade Arbitration Commission (CIETAC) of Hong Kong is the most important international Center of arbitration in South China. The first office of the CIETAC in Hong Kong SAR was established in September 2012. The Hong Kong International Arbitration Center (HKIAC), established in 1985, is totally independent and free from governmental interference. Hong Kong SAR has the ambition of being able to deal on arbitration with the different countries of the Belt and Road Initiative and to be the seat of arbitration (HK Arbitration 2017). Will the common language of the Belt and Road be English? We do not know yet how fast the Belt and Road will answer these legal questions; there is a will of the Chinese arbitrators to move ahead, but the Belt and Road authorities will decide. The Belt and Road has a global reach, accepted by more than 80 states and including Central Asia; Iran; Pakistan; Europe; Southeast Asia; South America, including Bolivia and Venezuela; and the Pacific, and is in need of international arbitration due to the many cultures and systems of law involved. The long history of the Silk Road will be overviewed in the next chapter.

References Academic Articles. n.d. Accessed April 10, 2019. https://china-trade-research. hktdc.com/business-news/article/The-Belt-and-Road-Initiative/ResearchTrend-of-Belt-and-Road-Initiative-in-English-Academic-Articles/obor/ en/1/1X000000/1X0ADSN1.htm.

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Belt and Road Summit. June 28, 2018. Hong Kong. Accessed September 23, 2018. http://www.beltandroadsummit.hk/en/information_centre/programme.html. Berlie, Jean A. 2008. The Burmanization of Myanmar’s Muslims. Bangkok: White Lotus. De Vera, Carlos. 2004. Arbitrating Harmony: “MED-ARB” and the Confluence of Culture and Rule of Law in the Resolution of International Commercial Disputes in China. Columbia Journal of Asian Law 18 (1): 149–194. PDF. Djordjevic, Branislav. c.2016. The Current Situation and Prospect of Policy Coordination of the Belt and Road Between China and the EU. In China and Central and Eastern European Cooperation: The Belt and Road Initiative, ed. Huang Ping, 52–63. Berkshire, UK: Paths International Ltd. Glenn, John. 2007. Globalization: North-South Perspectives. London and New York: Routledge. Hong Kong (HK) Arbitration. 2017. Accessed September 6, 2018. http://chinatrade-research.hktdc.com/business-news/article/The-Belt-and-RoadInitiative/Case-study-Belt-and-Road-disputes-Choosing-Hong-Kong-as-theseat-of-arbitration/obor/en/1/1X000000/1X0AAU5D.htm. Merrills, J.G. 2005. Arbitration. In International Dispute Settlement, ed. J.G.  Merrills, 4th ed., 91–126. New  York: Cambridge University Press. First ed. 1984. Mittelman, James H. 2010. Hyperconflict: Globalization and Insecurity. Stanford: Stanford University Press. Motoh, Helena. 2018. Borders in Between: The Concept of Border(ing) in Early Chinese History. In Borders and Debordering: Topologies, Praxes, Hospitableness, ed. Tomaz Grusovnik et al., 61–73. Lanham, MD: Lexington Books. Patil, V.T., and D. Gopal. 2002. Politics of Globalisation. Delhi: Authorspress. Reuters. November 2, 2018. Accessed March 30, 2019. https://af.reuters.com/ article/topNews/idAFKCN1N71P5-OZATP. ———. February 28, 2019. Accessed March 13, 2019. https://in.reuters.com/ article/uk-northkorea-usa-oil-vietnam/vietnamese-tanker-bound-for-northkorea-with-gasoline-cargo-as-tr ump-kim-meet-in-hanoi-dataidUKKCN1QH0LM. Saito, Ayako. 2014. The Formation of the Concept of Myanmar Muslims as Indigenous Citizens: Their History and Current Situation In. The Journal of Sophia Asian Studies 32: 25–40. SCMP. February 8, 2019. Accessed February 8, 2019. https://www.scmp.com/ news/hong-kong/politics/article/2185302/politicians-both-sides-hongkongs-divide-reaching-out. Sklair, Leslie. 2004. The End of Capitalist Globalization. In Rethinking Globalism, ed. M.B.  Steger, 39–49. Lanham, Boulder, New  York, Toronto, Oxford: Rowman & Littlefield Publisher.

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Stiglitz, J., and A. Charlton. 2005. Fair Trade for All: How Trade Can Provide Development. Oxford: Oxford University Press. Wang Yi. 2018. Accessed February 18, 2019. http://lt.china-embassy.org/eng/ xwdt/t1541669.htm.

CHAPTER 2

The New Silk Road Jean A. Berlie

Abstract  The name Silk Road is ancient and continues to be very attractive with 2000 years of history. Globalization also has a long history but came into fashion late in the 1980s. The Western empires succeeded to develop trade and economic exchanges, culture and education, which were also part of the colonial discourse. At present globalization is much more global. For China, it is implicitly linked with the Belt and Road Initiative (BRI) which starts in Central Asia. China’s discourse on political economy, geopolitics and world trade occupy a very important space. Infrastructure development is essential to really establish the Belt and Road program, which was initiated in 2013. The Belt and Road Initiative (BRI) predicates modernity, multiculturalism, interdisciplinarity and the Internet strengthens it. International arbitration has to be developed to make the New Silk Road more global. Keywords  Africa • Arbitration • ASEAN • Belt and Road • Central Asia • Development • Globalization • Harmony • Infrastructure • Silk Road

J. A. Berlie (*) The Education University of Hong Kong, Tai Po, Hong Kong © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_2

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The Modern Silk Road in 2019 The new silk road of President Xi Jinping, called the Belt and Road Initiative (BRI) in 2017, does not come from a dream; it is based on ancient historical facts. At present, the Silk Road Chamber of International Commerce (SRCIC n.d.) “is mainly composed of national chambers of commerce of the Belt and Road countries, (it) is the first transnational business confederation. Currently SRCIC has 129 organizational members from 77 countries, including state-level and regional chambers of commerce and millions of affiliated enterprises. SRCIC serves as a bridge connecting enterprises and governments, providing a cooperative platform between business associations and SRCIC members. It is also a key voice in the promotion of Belt and Road construction.” Jordi Yang Zhijun (杨志俊) at Xi’an is a Division Director of the SRCIC since 2015 (Maps 2.1 and 2.2). 50˚

C h i n e s e

s t r i n g

o f

130˚

p e a r l s

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R u s s i a

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Georgia Armenia 40˚ Azerbaijan

Sea of Japan

Kazakhstan

Turkmenistan

Mongolia

(East Sea)

North Korea

Uzbekistan Beijing

Kyrgyzstan

South Korea

Yellow Sea

Tianjin Port

Tajikistan

Japan

Qingdao

30˚

Iran 30˚

C h i n a

Afghanistan

Shanghai

Pakistan

Fuzhou

Namhkam (Myanmar) Strategic Transportation Corridor

U.A.E. 20˚

East China Sea

Chittagong (Bangladesh) Port facilities

Oman

Nepal

Taiwan

Hainan island (PR China) Yulin Naval Base

Bhutan

20˚ Hong Kong

Bangladesh

a

India

Gwadar (Pakistan) Naval base and Maritime monitoring

Laos

Philippine Sea Philippines

Sittwe (Myanmar) Port facilities

10˚

South China Sea

Thailand

Coco Islands (Myanmar) Naval base and communication and interception device

Cambodia

10˚

Spratly Islands Strategic hydrocarbon potential

Vietnam

Gulf of Thailand

Mergui islands (Myanmar) Maritime monitoring

Andaman Sea

Sri Lanka 0˚

Paracels Islands Woody island airport

Myanmar

Bay of Bengal

Southern Thaïland Kra Canal

Brunei

Chinese maritime routes

0˚

Malaysia Chinese pearl

Malaysia Singapore

I 10˚

C Philippe Raggi 201970˚

n

d 0

i

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Borneo

Sumatra

Hambatota (Sri Lanka) Container terminal

n

475

O 950

80˚

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1 425

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I n d

Java Sea

1 900 Km 90˚

Celebes

Java 100˚

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Map 2.1  Chinese String, part of the Belt and Road Initiative. Source: Philippe Raggi 2019

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Map 2.2  The Belt and Road

The Greco-Roman trade with India started with Eudoxus of Cyzicus in 130  BCE.  Long ago, the ancient Silk Road had links with the Roman Empire. The Silk Road and globalization are “a continuing historic process” (Marsh 2008: 11). “It is right that the Silk Road should live in our memory and imagination as one of the greatest of all human pathways” (Chinese silk and Roman gold, ideas, religions, products and skills of all the people across Eurasia) (Franck and Brown 1986: 280). Kofi Annan observed, “Arguing against globalization is like arguing against the law of gravity” (Annan n.d.). The twenty-first century Belt and Road links Asia and the Pacific, but the limits of China’s globalization probably has to be re-defined by the Government of China after the recent American declaration of taxation of selected Chinese products. The important Chinese government blueprint on the Belt and Road published in 2015, was reprinted in April 2018 (not available after), and carefully mentioned the Association of Southeast Asian Nations (ASEAN) which has ten member states (Action Plan on the

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Belt and Road Initiative 2015). The importance of ASEAN for China is essential and studied as a show case. I defined China’s globalization, the maritime and land Silk Road in the introduction. This book is a multidisciplinary study. Trade from the Roman Empire started in c.  AD  90–130 (Thorley 1971). From the eighth century, Muslim merchants followed the back and forth movement of the caravans along the Silk Road and the maritime route of the monsoons. Without the perseverance of the first travelers and the resilience of the Bactrian camels, the crossing of the great deserts of Central Asia would have been impossible. In 1271, Marco Polo set out for China with his father and older brother. After a journey that led through Jerusalem and Mesopotamia and along the Silk Road, from Hormuz they traveled through the Afghan city of Balkh, the Pamir Mountains and the Tarim Basin. On this Belt Road he went not far from the famous Mongol Ilkhan Bazaar, Tabriz in northwestern Persia (now in Iran). From the Taklamakan Desert’s southern rim they managed to reach Khan-balik. At the court of Kubilai Khan in 1275, Marco Polo met the emperor of China in his summer court, north of Khan-balik, now Beijing. “Lord of Lords, whose name is Cublay, is such as I shall now tell you. He is of good stature, neither tall nor short, but of a middle height … the eyes black and fine, the nose well formed … The Emperor hath, by those four wives of his, twenty-two male children” (Polo 1993: I-356, 359). Kubilai Khan gave to the Polo expedition a golden tablet on which was inscribed the command to be given “everything needful in all the countries through which they should pass” (including horses, ships to cross oceans and escorts to protect them). Kubilai Khan won the historical Battle of Dali in Yunnan in 1252, so the emperor sent later the Polo family to visit Dali and its lake, Chengdu and Xi’an during around two years. Marco Polo returned by the maritime Silk Road from Zaitun, now Quanzhou, via Malacca, India and the Middle-East and reached Hormuz. He continued his travel by land to Constantinople, sailed to Venice and reached the end of his mythic travel in 1295. Following this ancient merchant route tradition, the Italian main bank, the Bank UniCredit, is now established in Hong Kong, Shanghai and Beijing. The other well-known early traveler to mention is a Moroccan, Ibn Battuta (1332–1347), who also reached the harbor of Zaitun (Quanzhou) and traveled Central and Southeast Asia. By sea, Zaitun was developed by the Arabs, had its golden period during the Song dynasty (960–1279 AD), eclipsed Guangzhou and became China’s largest port (Chau 1911; Cartier

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2001). In the sixteenth century, the Portuguese reached China by the Maritime Silk Road and the Pearl River Delta, now called “the Greater Bay Area (GBA).” The New Silk Road concept needs to be fully acceptable with the GBA. The seven travels of Admiral Zheng He (1405–1433) should be also noted as part of the maritime Silk Road toward Southeast Asia. Zheng He is the grandson and son of a Haji and he himself also did the pilgrimage to Mecca. Through his relationship with the long-distance Arab navigators of the monsoon winds from the Arab ports to Zaitun-Quanzhou port in Fujian, he became an extraordinary explorer and commander of a fleet of some 10,000 sailors. He should be remembered as the precursor of the historical modern maritime Silk Road and one of the initiators of the extraordinary relation of China with Southeast Asia. Admiral Zheng He is also the honorable precursor of the extraordinary present development of China’s navy. The Maritime Silk Road is particularly important to deal with Southeast East Asian nations (Yang 2017). A proof that Europe and China were linked very early is the establishment of Macau in the 1550s. Later, Macau was the first point of globalization, with its use of Mexican silver to buy silk in the seventeenth century and later. The Hong Kong and Macau Special Administrative Regions of China (SARs) and Zhuhai Special Economic Zone (SEZ) have opened the giant bridge to public traffic on October 24, 2018. Local, but also international, Hong Kong more than 20 years ago became in 1997 a part of China ruled by its Basic Law. The Hongkongese must finally accept the maritime and land Silk Road; will they embrace it? The “real challenge … is rather a global leadership deficit or vacuum in which both the United States and China cannot lead on their own while they do not want the other to lead” (Chan et al. 2012: 28). But more important: “China’s changing view of the multilateral dispute settlement could generate positive externalities for other areas of global and regional governance” (Li 2012: 88). In the twenty-first century, countries, companies and enterprises, will be pleased to have international arbitration or mediation along the Silk Road. It is useful to “solve (rationally and internationally) disputes which could sometimes lead to insecurity” (Mittelman 2010: 20–21). “Social and economic climate in Belt and Road jurisdictions will have an important bearing on the success of Belt and Road investments” (Grimmer and Charemi 2017). This also suggests that fair arbitration and mediation will contribute to promote the new Silk Road. The document mentioning the “Belt and Road” and signed by 34 lawyer associations that want to be part of the BRI exists in Hong Kong at the Hong Kong’s main lawyer association, the Law Society of Hong Kong.

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Toward Globalization Ancient Silk Road was not global and centered on trade, but the Belt and Road Initiative links now China to the Pacific to Asia, Central Asia, even Europe where Italy seems ready to be part and France follows, Africa, South America and all continents. The Encyclopaedia Britannica very simply defines globalization as an experience and a diffusion of commodities and ideas “standardized around the world.” We prefer to follow an Indian way to define globalization: Internationalization, liberalization, universalization, westernization or deterritorialization (Patil and Gopal 2002: 23). From a Chinese viewpoint, the concept globalization 全球化quanqiuhua is more complex and did not emerge in the 1980s, but lately in the 2000s. However, the adjective “global” 全球 was known earlier in Mandarin. One of the reasons for the late introduction of the concept “globalization” in Chinese is the isolation of the country during the Cultural Revolution, between 1966 and 1976. This book deals with China’s globalization in the twenty-first century, and the modern Silk Road. Hopkins (2002: 3) categorized two main ancient historical types called: archaic and proto forms of globalization. The current Chinese globalization enters in the modern category of this concept. “China in the 21st century bears partial similarities to the British Empire in the 19th century,” but “Although millions of Chinese have settled in Africa, Latin America, Southeast Asia and North America, they … did not claim sovereignty in these regions, while European armies and settlers did” (Toh 2017: 17). The spirit of Shanghai, “a place of radical change” (Guthrie 2009: 1) with former long contacts with Western culture and economy is favorable to steer China during its long travel of the Belt and Road, which is not yet finished. Books on globalization are numerous. An example is given with the four volumes: China and Globalization edited by Linda Yueh (2013, rep. 2014). President Xin Jinping launched the concept Belt and Road and the Chinese people have understood that the present time is a flow of trade, capital and people across the globe. The fashion for globalization and the Belt and Road developed also the interest to write on the Silk Road (Zou 2017). Guo Yemin (2018) wrote the maritime history of the West. Arabs in fact came first to India and China with the April–September monsoon winds and returned with the November–February monsoon. The Portuguese were the second to navigate so far and cannot be forgotten with their development of the trade of Goa, Malacca and Macau. The Middle-Eastern countries are now praised and promote the Belt and Road.

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More important for this book, the world’s first point of globalization was Macau in the seventeenth century when this Portuguese harbor linked three continents: Asia, Europe and America. In the period from 1640 to roughly 1900, from the Pearl River Delta to Mexico back to Macau, the Portuguese did succeed to launch an innovative and pioneer global commerce linking faraway peoples and trading silk for silver (Flynn and Arturo 1996). Before the twenty-first century, China’s globalization was initiated by Deng Xiaoping who developed exponentially the economy and the Special Economic Zones of China between 1990 and 1997, and also opened China to Central Asia. And in 2013, Xi Jinping has been the architect of the most ambitious global geopolitical and trade policy initiative (Action Plan on the Belt and Road Initiative 2015): On land, the Initiative will focus on jointly building a new Eurasian Land bridge and developing China-Mongolia-Russia, China-Central Asia-West Asia and China-Indochina Peninsula economic corridors by taking advantage of international transport routes, relying on core cities along the Belt and Road and using key economic industrial parks as cooperation platforms. At sea, the Initiative will focus on jointly building smooth, secure and efficient transport routes connecting major sea ports along the Belt and Road […] there is a great potential and space for cooperation. They should promote policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds as their five major goals.

In 2014, Wang Yi, the Foreign Minister, said the initiative “One Belt One Road” was President Xi’s most important foreign policy. President Xi Jinping’s globalization of the twenty-first century, was initially called “One Belt, One Road” (OBOR)一带一路yidai yilu, and since mid-2017, it was re-named the Belt and Road Initiative (BRI) in English. “Initiative” was not translated in Chinese later, why? Some say that it is only a matter of translation. The concept remains unchanged and keeps only its four characters since 2013, so the numerous authors of a book entitled “One Belt, One Road” in Chinese ignore this question and do not add any other character. It is anyway a multicultural and interdisciplinary concept, and the Internet strengthens it. Globalization is interconnected via trade, culture and education as well as economic exchanges via air, land and sea transport routes. The former direct flow of goods of the Portuguese is a good historical example for the modern Greater Bay, being an early prelude to the current globalization trying to encompass trade, investment and information in

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the five continents. We will use the shorter term Silk Road which includes the Maritime and the Land Silk Road. China is currently developing its own globalization, “between economic and political domains” (Clark 1999: 3); many countries want to collaborate and be part of it. Silk Road is an ancient name that continues to be very attractive and has 2000 years of history. However, the ancient Silk Road was concerning China, Central Asia, India, the Arabian Peninsula, Egypt, Syria, Greece and the Roman Empire, and the New Silk Road global and involves much more than trade. The New Silk Road is the modern globalization, a totally global project. Just a part of the Belt and Road Initiative, the Sino-Portuguese Memorandum of Understanding (MoU), signed by the Presidents of China and Portugal, on December 5, 2018, also part of the Belt and Road, will be followed later by the other memoranda in the Lusophone World. It includes policy coordination, infrastructure, mobility and connectivity, cultural exchanges, tourism, cooperation, financial investment and trade (Macao 2019). India is a state among the 80 countries that do not want for the moment to be part of the Belt and Road. India’s trade deficit with China in 2017 was US$51 bn. “China and India together could be an enormous force for regional and global stability” (Bajpai et al. 2016: 213). In 2017, Xi and Modi understood that they had to collaborate to stop the border conflict over the Doklam Plateau. Following a recent remark of Christophe Jaffrelot, a French specialist of India and Pakistan, commentators noted that the Belt and Road “encircles India.” The soft power and globalization of China march on, and China’s most powerful tool is economic policy (O’Neill 2018: 60). However, at the end of November 2018, for the second time, China’s consulate in Karachi was attacked. The attack failed, but collateral damage occurred. “The area is at the heart of an ambitious Chinese project, the China Pakistan Economic Corridor (CPEC). The corridor is a string of huge investments by China in Pakistani infrastructure, which aim to link its western Xinjiang province with the Arabian Sea port of Gwadar in Balochistan, as part of the One Belt, One Road Initiative” (Karachi 2018). In the twentieth century we cannot forget the leading global role of the USA, but we are now in a coming Chinese time and we try to interpret it correctly. In the twenty-first century China is the second largest economic power since 2013 when it supplanted Japan. China is “our elder by more than thirty centuries” wrote one of the most original French authors of the nineteenth century, Pierre Loti (1911); the long history of China helps to

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understand what its current soft power and diplomacy is. We hope that the present international tension following the APEC and G20 summit in November 2018 will not last. In this tension between two superpowers, the leadership of China is backed by its ability to deal with soft power. Soft power “has become a new, and until recently, at least, surprisingly successful part of the Chinese foreign policy armory” (Beeson and Xu 2016: 173). Consequently, to secure harmony—a communication and public relations concept, and part of China’s soft power along the Silk Road—mediation, negotiation and international arbitration (Lat. arbitratus “Judgment by an arbitrator”) are essential for the success of the Belt and Road Initiative. However, China sometimes does not fully cooperate with international arbitration institutions as when it refused to accept the international court judgment: the Philippines versus China (2016). China claims full sovereignty on the Paracel and Spratly Islands (Xisha and Nansha Islands). Beijing claim is known as the nine-dash-line presented officially in response to a joint submission by Vietnam and Malaysia to the United Nations over their respective claims (Chan 2016: 189). However, at present, China is global, and hardworking Chinese live everywhere in the world. Nevertheless, as a permanent member of the United Nations Security Council, China has the right to designate one judge at the International Court of Justice (ICJ). The ICJ is “a court of and for the whole world” (Abi-Saab 1996: 3). Could we say that globalization needs a new legal order of the world including mediation and international arbitration? Global China is member of the World Trade Organization (WTO) and able to defend its international rights. China responded to the American trade war—mainly with an increased taxation on Chinese products in 2018—and we do not know if this conflict may trigger a new economic crisis: “Trade war intensifies as Beijing targets U$12 bn soybean imports produced in Trump heartland” and “Trump administration escalated its trade dispute with China (…) saying it would impose [new taxes] on roughly U$200  bn worth of Chinese fish, petroleum, chemicals, handbags, textiles” (Trade Conflict 2018). At the Hong Kong University on November 15, 2018, during the conference Asia Global Dialogue, “The Global Multilateral Trade System from Asia” was chaired by Victor K. Fung, vice-director of the Asia Global Institute (Fig. 2.1). The USA–China economic tension discussed during this Dialogue was confirmed by the South China Moring Post (November 17, 2018): “The two sides agree to anything” despite the G20 summit in Argentina, China has no alternative than improve “technology and innovation.” China is

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Fig. 2.1  November 15, 2018, the Hong Kong University’s conference Asia Global Dialogue: “The Global Multilateral Trade System from Asia” chaired by Victor K. Fung. Photo J. A. Berlie

global with the Belt and Road Initiative, but South China and the Greater Bay Area are also important to motivate Hong Kong to participate more and the Chief Executive of Hong Kong, Carrie Lam Cheng Yuet-ngor tries her best in February 2019 to convince the Hongkongese. We followed Professor Wang Gungwu who was the former Vice-Chancellor of the University of Hong Kong, and Director of East Asian Institute of the National University of Singapore from 1997 to 2008. Before Professor Wang studied the Pearl River Delta, now he mentions the Belt and Road. On November 12, 2018, at the University of Hong Kong, he presented without notes, a conference entitled “China’s South, changing perspectives.” The ASEAN was noted as an intrinsic part of the Belt and Road, with the clear mention of the Indian and Pacific Oceans. Professor Wang always wanted: “the best for China and the people in China”; and the “future developments to proceed without serious conflict” (SCMP, August 12, 2018; The China Quarterly No 136).

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The economic power of China is backed by its merchant fleet—the third largest of the world (see Chap. 4)—and its increasing number of new deep water harbors. Soft power and the globalized Confucius Institutes show that China has the non-declared ambition to link five continents and develop jointly trade, culture and education. In comparison, the Goethe Institute, the British Council and the Alliance Française are mainly educational institutions. However, English is the global language which replaced French after Napoleon’s defeat in 1815, but on the Belt and Road of the twenty-first century, Mandarin Chinese, or “Putonghua” 普通话, will have difficulty to replace English even if China’s Silk Road becomes the main global reference. The problem is not to have multilingual talents along the Belt and Road, but to use a common language to communicate and promote the Silk Road, no other language could replace at present English as a global language. The world’s most spoken language by total speakers are as follows: 1. English (1.121 billion) 2. Mandarin Chinese (1.107 billion) 3. Hindi/Urdu (697.4 million) 4. Spanish (512.9 million). So proposing English as the communication language along the Belt and Road seems logic. A board of the BRI in Beijing should probably decide, later, when? (Languages 2019). China cannot be alone to succeed. How do Asia, Europe and Africa accept China’s Silk Road at present? At the end of July 2018, President Xi Jinping traveled and developed the Belt and Road Initiative in Africa, particularly in Senegal—a very important country in West Africa—and South Africa. These two countries constitute a first step toward the future ­development of the new Silk Road toward South America. China and the Belt and Road in Africa include the Li group which has different branches “computer, food additives, construction, telecommunications, fiber optic equipment.” Mohan (2013) has pointed out that in Kano, Nigeria, “Chinese-owned factories have been the most resilient” and for the local workers “hard bread is better than none.” Africa, South America and also Hong Kong need harmony and appropriate guidelines. For the former Hong Kong Chief Executive, C.Y. Leung, “the Belt and Road is a long-­ term vision,” a very ambitious project of the twenty-first century (news. gov.hk. April 7, 2018). China’s trade, globalization and the “win-win”

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motto may succeed better if mediation and social welfare programs take into account the real interest of the African and South American people. Is it the case in the following case study? The 7th Summit of the Forum on China-Africa Cooperation (FOCAC) was held later, in September 3–4, 2018 in Beijing. To develop the Belt and Road in Africa, the Chinese pharmaceutical firm 3A, Yiyao Longdou 医药龙头 invited the African delegation of this Forum to visit Shanghai and this company. (Mingbao Hong Kong, June 9, 2018: A1)

It is possible to look back at ancient China which traditionally developed moral principles, while ethic comes from ancient Greece (Jullien and Marchaisse 2000: 414). Both the Greco Roman World and the Han-Tang Chinese World ended in comparable ways: “the first half, the political core—was first weakened by ideological conflicts and then succumbed to the invasions, whereas the other half was preserved.” On September 26, 2014, Zhang Lihua of Tsinghua University was invited by the Onassis Foundation under the patronage of the Hellenic Foundation for Culture which supports the new Silk Road and China’s soft power and investments in Greece (Trigkas 2014).

Infrastructure The Belt and Road Initiative aims at linking different geographical regions through infrastructure construction, transport corridors and bridging China with the rest of the world in varied ways physically, financially and socially. Developing transport corridors that deliver sustained economic, social and environmental benefits is a core goal of the Belt and Road Initiative (UNDP 2017). Since the year 2013, Chinese infrastructure investment in the Belt and Road countries has ballooned. Physical infrastructure, as the backbone of economic development supporting a slew of industries, is critical to the success of the new Silk Road. With China’s economy growing by 3 or 4 percent per year—not the 8 percent of the past—China’s ambitious programs are sometimes slowing down. Outspoken Chinese lawmaker Yin Zhongqing told the Post that “local government debt ballooned to at least 20 trillion yuan in the past three years, based on bank data and internal sources.” The cause is too much investment in infrastructure, but investment is necessary. Is it right? (SCMP, August 15, 2018).

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In 2016 China established the Asian Infrastructure Investment Bank (AIIB), centered in Beijing, a new multilateral development bank according to international standards (Campbell 2007: 25). Analysts said that if Trump (2017) backed US membership of the AIIB and endorsed China’s efforts to revive trade routes along the ancient Silk Road, it would be a big sign of goodwill from Washington to Beijing. Wang Huiyao, a director at the Centre for China and Globalization, a think tank in Beijing, is supporting the cooperation of the USA toward AIIB. It is not planned anymore by President Trump (Wang, November 2017). Tourism is also part of the concept of Belt and Road. The USA’s new Indo-Pacific Economic vision with Japan and Australia under the US International Development Finance Corporation (USIDFC) needs Senate approval to proceed. It is supported by the US Chamber of Commerce but is supposed to use an American Investment Fund that is in difficulty, so we must wait to see if USIDF works and is able to challenge the powerful and rather solid infrastructure development under China’s Belt and Road (2018). Elsewhere, Harsh V. Pant, professor of international relations at King’s College London said: “For Iran, Chabahar [harbor] is a significant project because it portrays Iran as not entirely isolated,” he said. From India’s perspective, Chabahar is crucial because of the access to Afghanistan and Central Asia. “The Chabahar port would accelerate post-war reconstruction while also bypassing Pakistan […] successful operation of Chabahar would bring Afghanistan and India closer, theoretically curtailing the influence of Pakistan and China” (Infrastructure: SCMP, July 31, 2018). On the Belt and Road China and India—not yet member—have tried to improve their international relations in 2018. Some important questions such as Pakistan and India relations are also related to the Belt and Road. Southeast Asia, also a main target of China’s Belt and Road, is economically active, and Chinese mass tourism is visible. Between 2017 and 2021, the Vientiane–Kunming rail link is under construction. The China– Laos Railway (420 km track) is said to be ready by January 2022. China’s possible tourism flow toward Laos could be re-oriented to more popular destinations such as Bali, Thailand, Singapore, Malaysia and Vietnam.

Harmony Along the Belt and Road Western countries are interested to secure harmony. This clearly shows that arbitration and mediation are essential for the future of the Silk Road. In November–December 2017, the global firm White & Case LLP,

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founded in New  York in 1901, interviewed 922 respondents from 30 countries and 42 cities: “London was selected as the most preferred seat (for arbitration) in all regions” (2018 IA: 10). However, “arbitration (is) conducted everywhere” (2018 IA: 14). For the Belt and Road Initiative, China’s “Officials have said the courts, to be based on the judiciary, arbitration and mediation agencies of the Supreme Court of the People’s Republic of China in Beijing, will follow international rules and will invite legal experts from outside China to participate” (Guardian, July 30, 2018). We do not know how China will finally deal with this important question, but one thing is clear, the Silk Road needs rigorous definitions, linked concepts, realism and arbitration when necessary. Many talented Chinese arbitrators trained in the USA returned to their country, mainly to Shanghai. Some of them served in international courts of justice, and many are arbitrators trained in the USA. To create harmony international arbitration is useful around China. Dr. Wu Shicun of the Hainan Provincial Party Committee proposed to develop an international legal system and arbitration in Hainan. It will take time, but there are hopes. This gives official new hope after the visit of Xi Jinping for the 30th anniversary of Hainan Province, which became “the name card of China.” On April 13, 2018, the island of Hainan became a pilot free trade zone. Is it a sign that arbitration will be also promoted? Hainan is now a part of the Belt and Road Initiative. In reality, to create the modern Silk Road, the support of many countries will be needed.

Support for the Silk Road: Its Legal Development and Arbitration The Silk Road essentially came into being from the first century BCE, following efforts by China to consolidate a road to the Western world and India. Our theme supports the positive importance of the Belt and Road Initiative. The Maritime Silk Road is ancient, but needs the support of Southeast Asia and India to succeed. China is an active member of the ASEAN Regional Forum (ARF). ASEAN should intensify the role of the ARF with China, Japan, the Democratic People’s Republic of Korea and the Republic of Korea, Russia and the USA (Pitsuwan, May 19, 2017). I had the honor to interview the former ASEAN Secretary-General Surin Pitsuwan (2008–2012) at the ICAS10 (International Convention of Asia Scholars) in Chiang Mai on July 20, 2017. He noted the lack of eco-

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nomic commitments by the states promoting development policies. He also supported Timor-Leste’s ASEAN candidacy, but was unable to predict when it will be effective. Dr. Pitsuwan further stated that globalization is essential during his talk on the occasion of the 50th anniversary of ASEAN. He said “ASEAN needs to expedite negotiations and boost intra-­ ASEAN trade, […] and encourage developed countries to support technology transfer, as well as research and development in the region.” Long ago, as early as March 22, 2002 Dr. Pitsuwan was part of the ILO World Commission on Globalization meeting in Geneva. In 2008, he presented Globalizing Asia or Asian Globalization? In 2017, few month before his death, at the 50th Anniversary of ASEAN he developed the theme of globalization, insisting on infrastructure in particular: “ASEAN has benefited greatly from the waves of globalisation in the form of open trade, free flows of investment, relocation of manufacturing, effective transfer of technology, and human resource development” and “China now is the world’s second-largest economy and all ASEAN countries have become dependent on its market” (Pitsuwan 2017: 140–141). The harbor of Kyaukpyu in Myanmar’s Rakhine State is a case in point, a challenge on the Maritime Silk Road. It was the residence of peaceful citizens without identity, the Arakanese Muslims. China, the world leader in infrastructure, promotes Kyaukpyu but cannot intervene directly. The world will be more global, this is sure, but it is difficult to forecast when the Silk Road will really succeed. However, the Memorandum signed by the presidents of China and Portugal is auspicious. It paved the way to include Europe at the end of March 2019, with the particular travel of President Xi Jinping in Italy, France and Monaco forecasting that the Belt and Road Initiative will have a particular relation with Europe, in spite of some rumors being less positive. President Xi likes to walk in the steps of Deng Xiaoping, who favored Nice, and President Macron invited him for a dinner at the Villa Kerylos in Beaulieu-sur-Mer, near Nice. There is almost a continuous corridor of the Belt and Road joining the Pacific, Asia with its center in Beijing, and even Europe after the signatures of China and Italy. If Taiwan is fully authorized to freely invest and be part of the Greater Bay Area, de facto Taiwan and mainland China, will become economically closer. The development of the globalization process, with the China factor cannot overshadow the extraordinary diversity of the social, state and religious questions. Traditions or cynically modernist factors, regardless of their rationalizations, constantly feed the flow of capital. China may

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finally accept international arbitration, and then India will probably join the Silk Road network. Successful Chinese companies will make the Silk Road and BRI more prosperous as demonstrated by Alibaba Company owned by Jack Ma (马云) and Tencent. “Economic future in China is really global technology”, similar to America. “Alibaba’s e-commerce sites—Taobao, Tencent and Tmall—are the most profitable online marketplaces in the world”. Shenzhen is powering ahead with Huawei, Tencent and ZTE (a Chinese multinational telecommunications equipment company). On the Belt and Road, Simpfendorfer praised the global companies: Alibaba, Walmart and Carrefour. Nothing is sure, Tencent (teamed up with Lego), the world’s largest video game business by revenue has lost US$190 bn “since January [2018]” after a mainland China “Government decision to suspend licenses for new video games” (SCMP, September 13, 2018). Why is international arbitration useful for such successful companies? Nowadays international arbitration is essential even if China prefers mediation (De Vera 2004). However, every country has its own arbitration system, and China always prefers the arbitration of the Supreme Court of the People’s Republic of China 中华人民共和国最高人民法院 (Zhonghua Remin Gongheguo Zuì Gao Renmin Fayuan). More international legal involvement by China seems really needed. In October 2016, Wuhan Arbitration Commission declared the establishment of an OBOR Arbitration Court and designated Liu Jianqin as its president (Wuhan 2016). In April 2018, the Shenzhen Court of International Arbitration (SCIA), and in particular its president, Liu Xiaochun, clearly declared their will to develop international arbitration using Hong Kong as an international legal platform. In China, this is positive toward a dynamic evolution of international arbitration, but we are not sure that China will really accept international arbitration. Changes introduced recently in this field “should be welcomed,” but “the solutions seem to be rather incomplete” (China 2017, Monika Prusinowska). However, there is also a recognized traditional Chinese way to solve commercial disputes by mediation (De Vera 2004). This spirit of conciliation, peace and international harmony was useful to solve the question of maritime borders of East Timor versus Australia and will continue to be useful also along the Silk Road. China soft power and excellent relationship with the ASEAN are essential for the success of the Silk Road in Asia. “It is difficult to foresee how China’s globalization will end” (van de Ven 2002: 189). “China is a key player … of global free trade … this possibility can become reality is whether China

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can eventually transform its developmental model” (Hung 2009: 1, 199). “On June 29, 2018, the Supreme Court of the People’s Republic of China (SCPRC) officially launched its First and Second Commercial Courts, the China International Commercial Court (CICC), in Shenzhen and Xi’an respectively to handle a wide range of international commercial disputes” (Clydeco 2018). Ik Wei Chong, is the director of Clyde and Co in Shanghai and Singapore; this company deals with shipping, insurance, international trade and energy, and focuses on disputes and investment connected with China and the Asia Pacific. Companies such as Clyde and Co are favorable for the future evolution of the Belt and Road. Finally, we are not sure yet that the Supreme Court of the People’s Republic of China is ready to directly deal with this question of dispute resolution. Dispute resolution and infrastructure investment of China along the Belt and Road in Central Asia and Eastern Europe depends upon “Mutual trust and unconditional devotion” to China but also from its partners (Djordjevic c.2016: 61). On April 21, 2018, Shenzhen Court of International Arbitration (SCIA), in a Seminar on arbitration, showed great respect for the International Bar Association (IBA), which uses rules on the taking of evidence in international arbitration (IBA Guidelines 2014). The panelists that day discussed some provisions that lawyers who practice civil law are unfamiliar with, as well as the significance of those rules. On what issues should lawyers in the civil law system pay attention to? A general affirmation emerged that the IBA Guidelines apply to both commercial and investment arbitration, but uncertainty may appear for the generalization of these rules to investment arbitration. The total number of lawyers gives an idea of the development of the profession and the evolution of arbitration in China. We do have the following figures: in Hong Kong in March 2018, there are 9367 solicitors. In Shenzhen there were 2000 lawyers and 75 important firms (SCIA). Guangdong had a total of 29,138 lawyers and 2502 law firms. In 1988 China had about 2000 lawyers. This number now exceeds 230,000, being a ratio of about 1:6000 of the population. In comparison, the ratio in the USA is of the order of 1:250. Many Chinese lawyers recognize the importance of the International Bar Association (IBA), established in London in 1947, and are ready to follow the General Principles of legal professions.

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ASEAN ASEAN, essential in this book, is an important association among the 80 countries part of the Belt and Road’s network, as geographic studies concerning China’s export trade flows to Belt and Road from 2007 to 2016: “The results showed that a Belt and Road country had greater trade flows from China when it had smaller geographic, factor endowment, and cultural distance and greater institutional distance from China” (Fu 2018). Evidently, communication “infrastructures in the Belt and Road countries should be improved” and an institutional system “should be strengthened to improve the facilitation and transparency of trade cooperation.” China is the Center, the first-circle includes: Russia, Turkey, Indonesia, Saudi Arabia, Poland, Iran, the United Arab Emirates, Singapore, Malaysia, Thailand (the author is inclined to consider Kazakhstan to be part of the first circle instead of the second circle). India is not part of the Belt and Road. We will insist on ASEAN. On September 12, 2018, Vice-Premier Han Zheng was the main guest of the important 15th China–ASEAN Expo in Nanning, Guangxi, and he mentioned that China wants to upgrade the ASEAN–China Free Trade Area (ACFTA). Hang Hongyi, vice-president of China Communications and Transportation Association mentioned “infrastructure renovation and consumption upgrades” in the Belt and Road in ASEAN countries. China has 4000 companies established in ASEAN countries (China Daily, Hong Kong, September 13, 2018). The ASEAN way is essential and characterized by consensual forms of cooperation where conflicts within the member nations are largely left for them to solve with limited criticism or interference from the others. There are stable political conditions in the region since the end of the last century. Mutual criticism has been regarded as improper and threatening the stability of the organization. Consequently, serious rivalries are rare. To maintain an excellent relationship with ASEAN is essential for China. For example, China and Malaysia have agreed to increase their trade volumes (China-Malaysia 2018); Indonesia also benefited of an equivalent good trade balance. ASEAN certainly is part of the maritime Belt and Road. ASEAN is a priority for China, which supports East Timor (Murphy 2018: 91–112). Joining ASEAN as a member state constitutes the best option for Timor-Leste’s future, but despite the strong support of the former President Ramos-Horta, the Timorese ask questions about this candidacy. One of the arguments is that if Timor-Leste joins ASEAN, the

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Timorese will be in concurrence in Dili with more qualified ASEAN nation’s citizens. On October 30, 2018, it was significant at the Macau City University of Macau’s Conference of East Timor Studies where the Timorese present, including the Consul of Timor-Leste, resident in Macau, and representative of ministries from Dili did not agree to find a consensus to support this essential candidacy for the future of the country. East Timor’s membership as the 11th member of ASEAN would also be positive for the Belt and Road that depends mainly upon the will of Singapore, and one ASEAN member alone can veto. In August 2016 Asia Pacific Star published an article entitled “S’pore won’t block Timor-­ Leste’s bid to join ASEAN,” but nothing is certain. However, positively President Joko Jokowi Widodo supports the ASEAN candidacy of Timor-­ Leste. The President of Indonesia visited Dili, on January 26, 2016, a landmark visit for the reconciliation of the two countries and for the promotion of peace in the world. China played an active role at the last ASEAN Regional Forum in April 2017, in Dili. Even if heads of state went to Timor-Leste, this Forum was the first important ASEAN event which took place in the country. Malaysia’s Prime Minister Mahathir Mohamad also wants to stay in good relationship with China, and he visited China in August 2018 after his election and met President Xi Jinping and Prime Minister Li Keqiang. As mentioned by Gunn, in fact Mahathir was the unique ASEAN leader to send a strong message to China, but finally he said during his visit to Beijing: “There is much to be gained by strengthening the relationship between the two nations.”

ASEAN and the South China Sea The South China Sea is part of the Belt and Road Initiative. The question of the South China remains important, and in a time of economic tension we hope that disputes will slow down to finally be solved by a real Code of Conduct accepted by China and ASEAN. China and Singapore want to find an appropriate Code of Conduct (COC) in the South China Sea initiated in 1997. This is the first step to promote Peace. During the mandate of the ex-Prime Minister Aristide Briand, six terms Foreign Minister from 1913 to 1931, China and France were never in conflict over the Paracel Islands. For Joseph Beauvais, the French consul in Canton, who advised Briand, the priority was not the Paracel but Yunnan and good Sino-French relationship along the French railway track between Kunming and Hanoi (research in the Diplomatic Archives of the Ministry of Foreign Affairs, La

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Courneuve, France). Above that, Briand promoted a humanization of politics also called the peace spirit of Briand. The South China Sea (SCS) dispute probably “sits at the top of Asia’s security agenda.” One of the priorities of this book is dispute resolution along the Belt and Road. Certainly there is a growing competition over maritime resources. The statistics on shipping movements are relevant for the maritime Belt and Road and the SCS: “more than 100,000 vessels transit through the Straits of Malacca, Sunda and Lombok-Makassar every year”. So far for the foreseeable future, along the Belt and Road and SCS, China’s behavior will be a “combination of non-confrontation and assertiveness” (Li Mingjiang 2012: 67). “Modern international law [certainly] imposed new ideas about boundaries” (Hayton 2014: 30). China’s non-confrontation continues to be part of the soft power philosophy along the modern Silk Road, after its establishment in 2013. Elina Noor rightfully mentioned that China prefers to resolve disputes using bilateral discussions, but Malaysia “has not specified its preference for a bilateral or multilateral mechanism, often citing both as an option.” With such ASEAN countries as Brunei and Malaysia dispute resolution is easier. Malaysia tries political and diplomatic solutions more than legal option to deal with China. This is certainly an idea to consider. Along the Belt and Road, it is possible to discuss the question of negotiation, mediation and arbitration. However, for the SCS disputes China’s bilateral way continues to be important, but the implantation of international arbitration and negotiation cannot be discussed. With China relations, Malaysia prefers to use “a relatively low-key approach to handling the South China Sea … deliberate long term strategy”. This was demonstrated during Malaysia’s ASEAN chairmanship in 2015. Malaysia realized the adoption of the Kuala Lumpur Declaration on the Establishment of the ASEAN Community and also the Kuala Lumpur Declaration on ASEAN 2025. Prime Minister Mahathir Mohamad, elected in May 2018, could not neglect his Malay Malaysian electorate. According to the Diplomat (September 12, 2018): “Kuala Lumpur also disagreed with China’s policy toward its diaspora”: We have to see, since 1974 no clash happened with Malaysia. Prime Minister Mahathir in other words will continue the previously friendly Malaysia–China relations. Sustainable infrastructure investment can protect the environment and increase resilience while helping to generate employment and Malaysia has particularly significant solar energy potential, but its solar plants remain mostly small-­scale with less than

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100 MW of capacity installed to date. “This contributes less than 1 percent of Malaysia’s total electricity supply. Large-scale solar plants could be developed to satisfy up to 20  percent of the country’s current electricity needs.” China’s and Vietnam’s negotiation on “joint development areas” in the South China Sea is innovative and constructive. “At present, Sino-Vietnam relations are at a crucial stage of improvement and development.” On April 1, 2018, China’s Foreign Minister Wang Yi after an in-depth exchange of views with Vietnam Foreign Minister Pham Binh Minh both agreed that China and Vietnam “should promote China-Vietnam relations for long-term and steady development of China-Vietnam friendship”. In Hanoi, during the World Economic Forum on ASEAN of September 11–13, 2018, Vice-Premier Hu Chunhua met Vietnam’s Prime Minister Nguyen Xuan Phuc who mentioned that Vietnam supports the Belt and Road Initiative and “comprehensive strategic cooperation with China.” China and Vietnam are “willing to set up synergy of development strategies with ASEAN countries” (China Daily, September 13, 2018: 12). In particular before June 2018, the North Korean threat seemed to have reduced the possibility of serious conflict in the SCS. In theory, the Briand’s peace spirit may also play a role to avoid a serious confrontation between China and Vietnam in the SCS.  A joint humanitarian Sino-­ Vietnamese exploitation of the resources of one island or a reef in South China Sea may later be considered to start with. It was proposed by Professor Junwu Pan at the University of Xi’an (interviewed by email, in 2016 and 2017). This laborious type of joint exploration and production of reserves (oil and gas) is not really on the agenda of China and ASEAN yet. However, in the SCS, the “claimant countries must set aside their sovereignty claims and work together in developing an effective regime for cooperative management”. And last but not the least, SCS’s living resources and marine environment have to be preserved and managed by a legal regime for cooperation. So far China and Vietnam have agreed to provide a list of cooperative projects. ASEAN and China have more contact. The Declaration on the Code of Conduct (COC) of Parties in the SCS, if it is proceeded stepby-­step, may “exercise self-restraint and avoid any complicated or escalatory action” between the parties. “It had taken a decade and a half just to agree on the types of elements that were to be included on the Code of Conduct” (O’Neill 2018: 167). This Declaration of the Code of

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Parties in the SCS was signed and happened on May 18, 2017  in Guiyang, China, on the 14th ASEAN-China’ Senior Officials’ Meeting. In December 2016, after a long interview with Monique ChemillierGendreau (2000), the French specialist of the SCS, it remains that bilateral relations are the most important. Following Sino-Vietnamese incidents in particular in 2014, on September 10, 2016, the Vietnamese Prime Minister Nguyen Xuan Phuc embarked on his first visit to China since the June election. Two years later, on July 7, 2018, Huang Kunming, member of the Political Bureau of the Communist Party of China (CPC) Central Committee met the Prime Minister of Vietnam, General Secretary of the Communist Party of Vietnam (CPV), Nguyen Phu Trong in Hanoi. Both enhance exchanges of governance experiences and expansion of cooperation. This was a first step before the ASEAN World Economic Forum in Hanoi, in September 2018, as we know the Sino-Vietnamese relations improved. Yet, in the South China Sea, prudence and bilateral relations seem to be a sine qua non condition of success. “The order in China is jointly conceived and felt as cosmic, social, political, moral and religious” (Gernet 1994: 44); this is extraordinary, and at present can it solve one of the problems of the Belt and Road Initiative? The Silk Road will benefit from strong support of international arbitration in Shanghai at the Shanghai International Arbitration Centre (SHIAC), and even will finally deal with Hong Kong International Arbitration Centre or Hong Kong Mediation and Arbitration Centre. Qualified arbitrators exist in Hong Kong Special Administrative Region of China, but they need more power.

Final Words President Xi Jinping is the architect of the current globalization of China, still very important in Central Asia. The main point is the Chinese characteristic of the globalization. The president of China seems to have the sincere will to develop the Belt and Road Initiative. The American McKinsey Global Institute also supports China having a global vision: “China has expressed its desire to lead on international issues, and now the world will be watching” (McKinsey 2017: 15). The guidelines are: “Educate and equip workforces for labor market adjustments. Prioritize investing in human capital. Prepare the next generation to work with technology; make

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lifelong learning available. Provide better retraining. Upgrade the skills of a vast workforce. Take advantage of size and diversity to experiment; share best practices … Globalize higher education. Develop and attract world’s top … global innovation; bring research capacity to shared global challenges. Expand the digital economy. Bring the entire world online. Encourage SMEs to capture export growth using global digital platforms … Bring digital infrastructure and devices to other developing nations. Support SMEs in going digital … Lead global innovation in frontier areas such as artificial intelligence … Build infrastructure needed to boost productivity and improve quality of life. Develop solid cross border investment principles for infrastructure projects. Share expertise, provide needed capital for global infrastructure projects in both developing and developed economies. Commit to principles of better global governance” (McKinsey 2017: 16). “If China embraces a leadership role … transparency and accountability, it will go toward encouraging a wave of investment and bolstering the world’s confidence in the future of globalization.” (ibid.: 21).

The project of the Belt and Road Initiative in Central Asia, more than the full support of Kazakhstan and Turkmenistan, needs the support of Russia and Europe. African nations also have yet to fully accept this Silk Road. US Admiral Mahan as early as c.1900 grasped the fundamental geopolitical realities of Central Asia and the “immense latent force” of China. In The Problem of Asia, Mahan also urged statesmen to “glance at the map” of Asia and note “the vast, uninterrupted mass of (Russia)” (Diplomat 2014). Nowadays in Central Asia and elsewhere, some 80 countries are said to have signed the Belt and Road mega-project which needs arbitration along the road. International arbitration in China under the legal system of the Supreme Court of the People’s Republic of China is partially possible at present but needs international negotiations and consequently the will to progress (Kerr and Wiseman 2018: 221). “The peaceful settlement of international disputes is the most critical issue of our time,” and starts, as said Sir Robert Jennings, with “wise management, rather than settlement of disputes” (Lowe and Fitzmaurice 1996: 628). China’s main economic challenges are the uncertainties of the “global economy of the 21st century” and a diminution of its 8 percent economic growth rate (So 2010: 232); this may play a negative role for the development of the Belt and Road. However, China has still the advantage of high savings rates, as explained by a Chinese scholar, S.  H. Hu of the City University of Hong Kong. History speaks for itself. China’s “tenacity

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which, without any first-class military achievement, has enabled the Chinese people to maintain itself (sic) for 4,000 years, while the rest of the world of antiquity has collapsed, seems to be going to count for something” (Hedin 1938: 309).

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Murphy, Peter. 2018. East Timor and Its Giant Southern Neighbor. In East Timor Independence, Indonesia and ASEAN, ed. J.A. Berlie, 61–90. New York: Palgrave Macmillan. O’Neill, Daniel C. 2018. Dividing ASEAN and Conquering South China Sea: China’s Financial Power Projection. Hong Kong: HKU Press. Patil, V.T., and D. Gopal. 2002. Politics of Globalisation. Delhi: Authors Press. Pitsuwan, Surin. May 19, 2017. Accessed April 18, 2018. www.mfa.go.thai/en/ news3/6886/78224-The-50th-Anniversary-of-ASEAN-Special-Lecture-Seri. html. Polo. 1993. The Travels of Marco Polo. The Complete Yule-Cordier Edition. 2 vols. New York: Dover. Shenzhen Court of International Arbitration (SCIA). April 21, 2018. Its President Liu Xiaochun Is Favorable to the Promotion of International Arbitration and Cooperation with Hong Kong. Arbitration Programme. Topics Included: How to Draft an Arbitration Clause: IBA Guidelines for Drafting International Arbitration Clauses etc…. So, Alvin Y. 2010. Globalization in China: From Neoliberal Capitalism to State Development in East Asia. In Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, ed. Berch Berberoglu, 133–154. New  York: Palgrave Macmillan. SRCIC. n.d. Accessed March 25, 2019. http://www.srcic.com/srcic-profile/. Toh Han Shih. 2017. Is China an Empire? In World Scientific, January. Accessed April 4, 2019. http://asianreviewofbooks.com/content/is-china-an-empireby-toh-han-shih/. Trade Conflict. 2018. Accessed July 11, 2018. https://www.theguardian.com/ world/2018/apr/04/china-retaliates-to-trump-tariffs-with-new-levies-on-usproducts; https://www.nytimes.com/2018/07/10/us/politics/trump-chinatrade-war.htm. Trigkas, Vasilis. 2014. China’s Silk Road: A Deus Ex-Machina for Greece? Beijing: Tsinghua University. Trump. November 10, 2017. Accessed November 27, 2017. www.scmp.com/ news/china/diplomacy-defence/article/2044829/us-op. Turkmenistan-Foreign Relations. n.d. “Positive Neutrality” and “Open Doors”. Accessed August 13, 2018. https://www.globalsecurity.org/military/world/ centralasia/turkmen-forrel.htm. UNDP. 2017. Promoting the Sustainable Development of Transport and Economic Corridors Under the Belt and Road Initiative. PDF. Van de Ven, Hans. 2002. The Onrush of Modern Globalization in China. In Globalization in World History, ed. A.G. Hopkins, 167–193. London: Pimlico. This article and Hopkins’ book are based mainly on the “archaic” globalization before the year 2000, my book deals mainly with modern globalization since 2013.

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Wang Weiguang. 2017. Belt and Road Initiative: Exploring a New Mode of Globalization (yidaiyilu: xinxing quanqiuhua de changzheng). Beijing: China Academy of Social Sciences Press. Wuhan Arbitration Center. 2016. Accessed April 28, 2018. www.chinagoabroad. com/en/article/21685. Yang Danzhi. 2017. Situations in Southeast Asia and Constructing Maritime Silk Road. In China’s Belt and Road Initiatives and Its Neighboring Diplomacy, ed. Zhang Jie. London: World Scientific. Yueh Linda. 2013, Rep. 2014. China and Globalization. 4 vols. London: Routledge. Zou Ying. 2017. Yidai yilu: Hezuo gongyingde Zhongguofangan 一带一路: 合作共 赢的中国方案 (OBOR The Silk Road Economic Belt and the 21st-Century Maritime Silk Road). Taibei: Knowledge House & Walnut Tree Publishing.

CHAPTER 3

Xinjiang and Central Asia’s Pivot of History for the Belt and Road Initiative Jean A. Berlie

Abstract  The re-emergence of Central Asia in world history imposes a new consideration of Xinjiang, the gate of the Belt and Road Initiative (BRI). For Xinjiang also, the Belt and Road Initiative constitutes China’s greatest project for the twenty-first century. Xinjiang is a pivot of the new history of Central Asia, and through it the new Silk Road is able to reach far away countries. The history, society, economy and geopolitics along the ancient Silk Road provide a perspective to understand the Belt and Road Initiative in Central Asia. Keywords  Development • History • Kazakhstan • Mongol • Overseas Chinese • Pivot • Uyghur • Xinjiang

The Pivot of Asia Central Asia is a pivot of history, civilizations and languages: Sinitic, Arab, Indic, Persian, Turkic and Slavic. This chapter deals with history, geography, society, economy and geopolitics along the Silk Road, which are

J. A. Berlie (*) The Education University of Hong Kong, Tai Po, Hong Kong © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_3

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essential to describe the complex and modern Belt and Road Initiative (BRI). The Belt and Road Initiative starts from Central Asia, its historical origin, and this point is unfortunately not always mentioned in the numerous books in Chinese on the Belt and Road that have been published since 2013. Our approach is multidisciplinary and will begin with Xinjiang. Many travelers from Beijing mention Dunhuang, Turfan, Hami and Yining, the main gate to Kazakhstan, the key state of Central Asia on the Belt and Road. The traveler Younghusband (1896), named Xinjiang and Mongolia “the Heart of the Continent [Asia]” and Roberts (2004) coined the “Land of the Borderlands,” but we prefer the classic “Pivot of Asia” mentioned first by Mackinder (1904) and Owen Lattimore (1975 [1950]). The Pivot of Asia concerns “the future rather than the present,” and it will bring success to the Belt and Road Initiative conceived as “the geographical pivot of history” which will influence other contemporary studies on Central Asia. We should consider two concepts, the pivot of Asia and “the equilibrium between land power and sea power” (Venier 2004: 330, 335–336), this equilibrium will auspiciously continue on the Maritime Silk Road as well as on land on the BRI. Xinjiang is the “most important link” on the Belt and Road Initiative more now than ever in the past (Clarke and Mackerras 2009: 11). We can say that Xinjiang and Central Asia continue to be a pivot of history. The ancient Silk Road was divided in the northern route via the cities of Hami, Turfan, Karashahr, Kucha, Aksu, Tumshuk, Kashgar and Samarkand. The Southern route led via Miran, Keriya, Khotan, and Yarkand to Herat and Kabul (Yaldiz 2005: 42). Future travelers, impressed by the historical continuity of two thousand years of the Silk Road, will start their journey from Yining, near the border of Kazakhstan, or at the ancient city of Kashgar toward Kyrgyzstan first and Kazakhstan to follow the Belt and Road. For Marco Polo, Kashgar had “beautiful gardens and vineyards … from which many merchants go forth about the world on trading journeys.”

The Silk Road and the Mongols In Central Asia, Turkic languages date back to 3000  BC.  Southern Xinjiang was loosely controlled by the Western Han Dynasty around 100  BC.  After this dynasty, Xinjiang was called Xiyu, so in the Chinese chronicles from the third century BC and the eighth century AD the region west of Yumen Pass in Central Asia was referred to as Xiyu. Uyghur

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chiefs later recovered their autonomy. In 751 the Tang dynasty lost the Battle of Talas against the Arab Abbasid Califate (Clarke 2011: 16; Soucek 2000: 68). However, the powerful Tang dynasty, and the Five Dynasties between 907 and 960, recovered the Han supremacy and influence over the Uyghur domain. Genghis (Chinggis) Khan, the greatest conqueror in world history (reign 1206–1227), was from Central Asia. He was able to fight on two fronts simultaneously and to conquer Russia in winter with his unbeatable archer horsemen associating speed with mobility and massed artillery barrages. His Mongol successors, between 1271 and 1368, managed to conquer Central Asia and Xinjiang. For the Belt and Road, the Mongol economic and cultural model of “free flow of ideas, peoples, goods and technologies” across an immense space (Kalra 2018: 1, 25, 119, 131) is still a reference at present. “The Chinggis era in world history was a major step towards Eurasian integration and expanded the world … in North Africa and Southern Arabia.” This is also the aim of the Belt and Road Initiative at present, “a political system … cultural habits and flexibility” (Di Cosmo 2009: 4, 121–122; Fu et al. 2018). The unique flexible style of Mongol leadership “was allowed even in the economic sphere and led to phenomenal successes” (Kalra ibid.: 119, 131). The Mongols unified different peoples and let them have a part of the economic power. At present Central Asia—Kazakhstan is doing that—mediate and negotiate and so balance the power of Russia and China. The Mongols between the thirteenth and fourteenth century were ruling and harmoniously controlling an immense space between the present-day Turkey and Vladivostok that never again was unified along the Silk Road. This is a model of globalization of peoples, goods and ideas which existed for more than a century among China, Central Asia and Russia. For Kalra (2018: 122), the Belt and Road Initiative points to “a recommencement of interactions which enjoyed prominence under the Mongols (with economic prosperity and cultural diversity.)” The Yuan Dynasty (1271–1368), the biggest ever empire of China—the most extended in the world’s history—followed the ancient Mongol tradition along the Silk Road and promoted “cultural exchanges with the Belt and Road countries to reduce the cultural distance between China and countries along the route” (ibid.). In 1273 Kublai Khan issued paper banknotes called chao (钞). This was a big innovation in the banking and monetary system. Paper currency helped increase the empire’s trade with the rest of the world and its overall wealth. It was also facilitated because in faraway parts of the huge empire trade was indi-

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rectly under non-Mongol and non-Chinese economic control. This also developed the economy and the prosperity of the empire. Could we consider it for the construction of the present Belt and Road? The Chinese Qing dynasty occupied Xinjiang, and Anglo-Russian Rivalry over Xinjiang occurred between 1800 and 1917. “In 1801 the Russians under Tsar Paul had made active preparations for an invasion of India.” In 1881 the St. Petersburg Treaty returned to China an affluent of the Ili River, the Tekes River Valley and the strategic Muzart Pass. In 1884 Xinjiang (Xiyu西域) became a Chinese Province. In January 1949 Chiang Kai Shek returned to Xinjiang to negotiate a new Sino-Soviet treaty, and the Russians maintained “their air service between Komul and the Soviet Frontier.” From 1884 to 1933 Xinjiang was dominated by “an old-­ fashioned feudal bureaucracy” (Lattimore 1975: 25, 39, 51, 102). One of the first motor car expeditions, from Nanjing to Hotan (Hetian 和田) (1933–1935), was led by Sven Hedin.

PRC Reforms in Xinjiang In October 1949 China’s new historical chapter began, and the government sent many more Han Chinese to settle and develop Xinjiang. After the Cultural Revolution (1966–1976), Deng Xiaoping came to power and implemented its “reforms and opening policies” Gaige Kaifang 改革开放. In Xinjiang, large-scale movement of Han population followed; it was supported by Beijing-government investment. This facilitated integration with Central Asian economies. After 40 years of almost complete isolation, one of the most important economic facts in Xinjiang’s modern history was its opening in 1987. Economic flows have increased since the opening of China. The renewal of trade with Central Asia was a prelude of the present Belt and Road Initiative. The period of reforms all over China followed, between 1991 and 1995. Since 1994, the regional states (Kazakhstan, Turkmenistan, Kyrgyzstan and Uzbekistan) have joined the NATO Partnership for Peace Program that could lead to further theoretical isolation of Russia not confirmed. Russian language is the main language of communication in Central Asia; in March 2019 President Putin and Madam Dariga Nazarbayeva spoke directly in Russian when she became the main leader of the Parliament of Kazakhstan. Although a conflict of interest between China and the Central Asian countries exists in the oil sector, China’s links with Central Asia have constantly progressed since those nations became independent. After the year 2002 a

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new period began in Central Asia with the establishment of China’s ­political, economic and infrastructural links with Kazakhstan, Kyrgyzstan and Turkmenistan. The gas pipeline to China began shipping a limited quantity of gas in 2009. Turkmenistan declared “positive neutrality” and “open doors” (Turkmenistan-Foreign Relations). Beijing’s approach to Central Asia is “strategic in nature and informed by an acute understanding of the region’s geopolitical importance” (Clarke 2011: 170). Especially in Kazakhstan the overseas Chinese, well integrated, play a remarkable role. September 2013 paved the way for Xi Jinping’s Silk Road in Xinjiang after his visit to Kazakhstan and later travel around the world in the twenty-­first century to promote his new globalization program. China’s strategy further achieved “the extension of modern infrastructure” throughout Central Asia and the “double integration of Xinjiang with China proper and Central Asia” (Clarke 2008: 21, 175). Clarke confines Central Asia to “the five post-Soviet states”: Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan and Tajikistan. We include Russia which continues to play an important role in Central Asia; China needs allies to develop its new Silk Road. On October 5, 2011, President Putin launched the concept of “Eurasian Union” to unite Russia, Mongolia and the five countries of Central Asia. This union includes customs privileges (Fan 2016: 84).

Development of the Belt and Road in Central Asia The legendary Silk Road starts in Xinjiang Uyghur Autonomous Region which is essential to reach Kazakhstan and Central Asia. This part of the book tries to associate the global and the local, which is extremely important for the development of the Belt and Road Initiative: “The growing extensity, intensity and velocity of global interactions is associated with a deepening enmeshment of the local and global … creating a collective awareness of the world as a shared social space” (McGrew 2005). “Nowhere in the world the influence of geography on people (is) more dramatic than in Inner Asia” (Lattimore 1975: 152). The Tian Shan Mountains extend from the Autonomous Region of Xinjiang from west to east. In the south, the arid Tarim Basin occupies with oases two thirds of Xinjiang and Zungaria (or Jungaria) in the north. Established on October 1, 1955, the Uyghur Autonomous Region, or Xinjiang, occupies 1.66 million square kilometers in the People’s Republic of China. Two thirds of the total area is uninhabitable. About 1.8  percent of the area is arable

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lands, 34  percent in pasture and 2  percent only in forest. Xinjiang is bordered by six states: Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, ­ Afghanistan, India (Jammu and Kashmir Region), and three regions and provinces of China: Tibet, Qinghai and Gansu. The Silk Road really starts in Xinjiang where I traveled not continuously between 1992 and 2014. Three important geographic characteristics of Xinjiang are still existing: its isolation, “the chronic shortage of water” and frequent earthquakes (Dillon 2004: 6–7). In 2017 earthquakes rocked the region on May 8–9, and August 10, and in 2018 on January 21, April 5, May 28 and August 1. In the last decade, Xinjiang has become less isolated because China invests in infrastructure. Demography allows us to understand better Xinjiang population, its evolution and strong change between 1953 and 1990 (Toops 2004: 246, 257): In 1953 the Uyghur population was 3,640,000 (74.7  percent) while Han were 299,000 (6 percent) and in 1990 Uyghurs were 7,195,000 (47.5 percent) versus 5,696,000 Han Chinese (37.6 percent). In 1998, these figures were more significant in Urumqi, the capital, which is a Chinese city: the Han were 1,391,896 (76  percent) and the Uyghur 263,000 (15  percent) (Gladney 1990). In Asia, so many states, except India, are named part of the land and maritime Belt and Road. For China, among these countries Kazakhstan is really the main partner in Central Asia; a rich country where Chinese, Russian and European interest converge. Kazakhstan is the largest and the richest economy in Central Asian region, without counting Russia. In 2011, “with over U$180 bn GDP (in 2017 US$160  bn) and over U$13  k per capita GDP level Kazakhstan enjoys the undeniable heavyweight status among Central Asian countries” (Kazakhstan 2012: 6). Turkmenistan is the second-largest cotton and natural gas producer in the region after Russia; in 2012 its GDP was over US$35 bn and in 2017 over US$42 bn.

Economy and Geopolitics In the twenty-first century, “the Chinese economy and Chinese firms will increasingly be central players in the global economic system” (Guthrie 2009: 309), but the idea for Chinese to travel far on land and discover the outside world was first born in Xinjiang. “Since they declared their independence from the Soviet Union in late 1991, the five new Central Asian nation-states have kept Chinese foreign policy decision-makers busy— probably busier than they initially imagined” (Cabestan 2010: 25). There

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is also little doubt that, as far as Central Asia is concerned, security must be considered, but at present the development of the economy is important to promote the Belt and Road. Calla Wiemer, an advisor of the Asian Development Bank on China and Central Asia, has stated that oil and gas reserves “have provided a platform for the development of Xinjiang under the PRC.” Ten years ahead she forecast China’s globalization, the booming infrastructure development and Kazakhstan’s “more orderly market economy.” She also predicted the importance of Xinjiang and the modern Silk Road having “the potential to serve as a two-way conduit linking China and Europe, and even the Middle East. Yining is closer to Warsaw, Poland (4,500 km), than it is to Tokyo, Japan (4,900 km). Trade routes through Central Asia would not only give Xinjiang better access to European markets … provide trade services for the movement of goods between Europe and all of China” (Wiemer 2004: 163, 189). “China began to implement the strategy of developing its west in 1999 … operating agriculture on an industrial basis and improving modern husbandry” are part of the transformation of Xinjiang. By 2010, it became “China’s biggest base for cotton and grape, and petrochemical industry was upgraded” (Li 2005: 294–297). However, “the reliance on economic modernization and development as an instrument to neutralize ethnic minority dissatisfaction fails to account for the fact the ideology of ‘developmentalism’ that has engulfed Xinjiang has contributed to political, economic and cultural marginalization of the Uyghur” (Clarke 2011: 154; Berlie 2004). President Nursultan Nazarbayev in November 2014 announced a robust domestic stimulus policy titled Nurly Zhol (Bright Path) that will drive the economy. Oil and gas in Kazakhstan have attracted Chinese companies, acquisitions and access to oil fields. Kazakhstan recently increased gas supplies to China. Kazakh gas is exported to China and follows “agreements reached by the heads of states and … the two government programs of Kazakhstan and China.” Nurly Zhol and One Belt One Road are economically linked (Kazakh-1 2018). China associates Nurly Zhol with its own project, but we do not know yet after the designation of the new President Tokayev how the economic and political relations of the two countries will evolve, but China will continue to be powerful, Xinjiang remains the main gate toward Central Asia. “The new Zadarya solar power plant will add 14 MW of solar capacity to Kazakhstan’s energy mix, bringing the total amount of existing and planned renewable energy to 365  MW” (Kazakh-3 2018). “The European Bank for Reconstruction

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and Development (EBRD) is also investing 1 billion Euros for such ­project out of a total investment of 8  billion Euros according to Surbhi Jain” (Kazakh-4 n.d.). The European Union is also interested to participate, and on August 15, 2018, a new US investment body was based in Tokyo, Hong Kong and Melbourne called Heitman Asia-Pacific, but Kazakhstan is not mentioned (Asia-Pacific Fund n.d.). The Agence France Presse has mentioned Paul Biya, who has been leading Cameroon for 36 years, and Hun Sen, who has been the PM of Cambodia for 34  years, but the President of Kazakhstan is also a long-serving world leader. In 2019, stability remains essential in Kazakhstan—the most important partner of China along the Belt and Road in Central Asia. President Nursultan A. Nazarbayev (b. 1940) has been ruling Kazakhstan since 1989. Assuming Nazarbayev stays in good health in 2019, “nothing indicates cardinal changes in the political structure or how Kazakhstan is governed and the eventually inevitable transition of power. In the meantime, the regime will remain vulnerable” (Kazakh-2 2018). On March 19, 2019, Nazarbayev has wisely resigned; he is the last powerful leader of the “fifteen Soviet republics when the USSR collapsed in 1991” (SCMP, March 21, 2019). On the following day, March 20, Kassym-Jomart Tokayev, former president of the Parliament “was sworn as” the president of Kazakhstan for two consecutive years, 2019 and 2020, “promising to seek Nursultan Nazarbayev’s opinion on key issues.” Nazarbayev, who served for nearly 30 years as leader of the oil-rich nation, will hold the formal title Leader of the Nation. Meanwhile, Nazarbayev’s “eldest daughter has been elected speaker of the upper house of parliament …” Dariga Nazarbayeva’s promotion “raises her profile as a potential successor” (BBC, March 20, 2019). Turkmenistan supplies nearly “40 percent of China’s total gas import via a central Asia-China trunk-line and shipments by tankers of super-­chilled Turkmenistan liquefied natural gas” (Turkmenistan’s Gas 2017). Although there is a decline in supply, Turkmenistan is still China’s largest gas partner. June Park (2012: 138, 153–154) noted that China uses “diplomatic tools,” to avoid crisis and diplomatic Chinese soft power is also part of the Belt and Road (Beeson and Xu 2016). About Central Asia and Xinjiang, Clarke and Mackerras (2009: 22) made three points: Central Asia is essential to an understanding of world history and now the Belt and Road Initiative; it was gradually ‘removed’ from the world history by the expansion of civilizations on its periphery. “The Soviet collapse has resulted in the re-emergence of Central Asia … in world history and politics.” Russia, China and even the US are the main players. Russia is the main player in Central Asia

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and China with Belt and Road may strengthen its second position in the region. On March 19, 1996, the CCP Central Committee’s Document 7, asked to local authorities in Xinjiang, “to take firmer action to stop the burgeoning threat of ethnic separatism and conflict.” This is precisely the kind of news on Xinjiang, Pivot of Asia, not to develop for the good future of the Belt and Road. Concerning Xinjiang and geopolitics it is also not useful to publicize the activities of the Shanghai Five grouping which began in 1996 in Shanghai, and later the Shanghai Cooperation Organization was created in 2001. The first grouping consists of China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. The Shanghai Cooperation Organization (SCO), or Shanghai Pact, is a Eurasian political, economic and security alliance, the creation of which was announced on June 15, 2001, in Shanghai, China, by the leaders of China, Kazakhstan, Kyrgyzstan and Russia.

Uyghur Diaspora For the Belt and Road Initiative the main important diaspora is Han Chinese. From Xinjiang toward Central Asia, the main land and railway track starts in Xinjiang, even if the center of the Belt and Road is Beijing, the capital of China. At the border of Ili the Kazakh minority and the Uyghur are important also, and their diaspora are useful along the modern land Silk Road. The Uyghur diaspora is powerful and may positively participate and cooperate with the modern Silk Road if it is well discussed. When a trade and economic flow is successful, all traders and merchants follow it. An example is given by the popular Uyghur novelist Ziya Samedi. Educated in Soviet Union, he “was the symbolic head of the Uyghurs in exile.” Isa Yusuf Alptekin was the venerated patriarch of the Uyghur diaspora who died in Istanbul at the age of 94. Tyler (2004) mentioned that millions of Uyghurs left China and went as far as Sweden and Australia. These Uyghurs of the diaspora send remittances to their families in Xinjiang, which is also part of the modern Silk Road, a complex global system. The Belt and Road Initiative is finding its way, which shows a long process of international economic exchanges and diplomacy. “It is important for the Uyghur diaspora to establish links with the international community” and also to develop of the Belt and Road itself (Mukherjee 2010: 432). During the Cultural Revolution of China (1966–1976) the Chinese border was sealed between Xinjiang and Kazakhstan. After 1983, China and the Soviet Union allowed cross-border visits, but only in 1994 were Chinese Kazakhs of the diaspora settled in the newly independent

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Kazakhstan (ibid.: 227–228). At that time Ziya Samedi returned to Kazakhstan, his country of origin, and died few years later in 2000, but people keep his name among the names of the past famous Uyghurs. This close relation between Kazakhstan and China is favorable to the Belt and Road. To give an accurate description country by country of the Uyghur diaspora in Central Asia, nobody is more qualified than Ablet Kamalov, born in Xinjiang. • Kazakhstan conducts “friendly relations with its contiguous neighbors of which two, Russia and China” (BTI 2018) and has the largest group of Uyghur in Central Asia: 210,300 in 1999 and 246,777 in 2014 (Statistical Yearbook of Kazakhstan, Almaty, in Russian). The country population reaches 18  million in 2018. Uyghurs live in Almaty oblast: “Chilik or Shekek, Embedkshi and Panikov districts” (Kamalov 2009: 121–123). The Kazakh government support Uyghur education in most of the 64 secondary schools and cultural institutions, Uyghur teacher training at Abai University, and Almaty and Uyghur Teacher College in Jarkent-Panfilov. The Uyghur newspaper is called Uyghur Avazi (Uyghur Voice) and there is more than one hour of television and radio programs in Turkic language per week. Uyghur in Kazakhstan are active in education and cultural activities. They express loyalty to the Kazakh government (Sadovskaya 2018: 165). The capital Astana has been renamed Nursultan and maintains official partnerships with Beijing and Nice, France. • Kyrgyzstan’s population is 6  million in 2018, and 1  percent or 46,700 were Uyghur in 1999 (one percent of the total population). Uyghurs live mostly in the north of the country in Chu (more than 14,000) and more than 13,000 live in the capital city of Bishkek. More than 10,000 Uyghurs who came in the wave of migration from Kashgar and Kulja (Yining) live in the south of the country, mainly in Osh oblast (Kamalov ibid.: 122). • In Uzbekistan Uyghurs live in Ferghana Valley and Tashkent. The process of Uzbekization in Ferghana was strong during the Soviet period. This acculturation was easier because Uyghurs and Uzbeks come from the same Qarluq (Karluq) Turkic linguistic family. As in Kyrgyzstan, tertiary education is only possible in the national language, which is evidently Uzbek for Uzbekistan (ibid.: 122). In 1989 the Uyghur population in the country was 23,000 with around 40  percent living in Andijan oblast. “President Islam Karimov,

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­ ro-­China,” openly “declared that there is no Uyghur population in p Uzbekistan” (ibid.: 123). • Turkmenistan has the smaller number of Uyghurs in Central Asia and they are very isolated. In Bairan-Ali live half of the Turkmenistan’s Uyghurs, around 700 of them. It is likely that the Uyghur language will disappear in Turkmenistan (ibid.: 123). • Tajikistan has a small Uyghur population in the capital Dushanbe where a Uyghur cultural association exists. To initialize the Belt and Road, in Xinjiang and Central Asia, we must understand that: “Xinjiang is therefore clearly linked in Beijing’s perception, to its ability to successfully pursue its strategy of ‘peaceful rise’ or great enterprise of national resurgence.” The question is securing China’s ‘Silk Road’ to great power status (Clarke 2011: 171–177). Kazakhstan is a strategic partner of China. Xinjiang is China’s gate, but China’s main economic Central Asian partner continues to be Kazakhstan. Migration and trade between China and Kazakhstan have a long history. Han Chinese overseas Chinese arrived in Kazakhstan in the early 1960s and are 300,000 (Sadovskaya 2018: 158, 170). They are reliable and faithfully support of the Belt and Road Initiative in Kazakhstan. Some of them are fluent in Russian and Kazakh. Russian is the key language in Kazakhstan and all the Chinese overseas, since their migration long ago, know that the main local language allow them to enter in the business community, reach the heart of the local citizens and understand their local culture, so useful. In Central Asia the Mongols have “created a unique moment in world history in the 13th and 14th centuries (and) ruled … over roughly two thirds of the Old World and profoundly impacting regions (sic) beyond its reach, the Mongol Empire and its policies has created a remarkable mobility throughout Eurasia, with people, ideas” (Biran 2018: 136). We are now in the twenty-first century which is very different from the past. The Belt and Road is part of the twenty-first century modernity—Internet and digital communication.

Conclusion Xinjiang and Central Asia are the Silk Road’s pivot of history, and actually Russia and China are secured centers of power. In Central Asia, Xinjiang enjoys a geographically strategic position and gives China access to oil and gas resources to fuel China’s economic development to establish the mod-

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ern and innovative Belt and Road Initiative. Kazakhstan remains the key Central Asian economic partner of China; the two countries are really interdependent since 1991 with the end of the Soviet system, and Xinjiang plays a capital role. An important group came from Xinjiang—the educated Uyghurs and Kazakhs who are now permanent residents in Kazakhstan and are convinced to support the Belt and Road. On the Internet, in this group 41 percent uses Uyghur Arabic script, 18 percent writes blogs and emails in English, 7 percent writes in French and only 1 percent writes in Chinese (Reyhan 2012: 12). They may have links with Turkey and like to watch TV from Istanbul, easy listening for them. To develop the Belt and Road they are useful, but fragile as supporters, contrarily to the 300,000 overseas Chinese in Kazakhstan, who are essential to develop the Belt and Road because they are very well integrated, and ready to develop Central Asia’s three facets of trade: economy, politics and military affairs. Overseas Chinese play the most important economic and cultural role. For infrastructure, China’s injection of capital is undeniable, geopolitical and really efficient for the development of the region. The United Nations Development Fund for Central Asia (UNDP-CA) noted, “Chinese investments bring needed capital and technological knowledge, trade credits and investment capital” (McMillan 2009: 95, 111). Stability is essential in Xinjiang. China wants excellent political, economic and communication relations, and invests in infrastructure, in particular, in the Central Asian States. Chinese scholars quoted by Clarke (2011: 176) define China’s present regionalism as “open, functional, interest-based cooperation among contiguous states” opposed to the European Union which is closed and influenced by “liberal democratic values.” Beijing insists on “peaceful rise.” Clarke arguably believes that China is “in a stronger position in (Xinjiang and Central Asia) than at any time in the history.” Xinjiang is still a Gate of the Silk Road, the large Chinese majority in the capital Urumqi know that Xinjiang is their new home. Many Han Chinese and their descendants will continue to live in Xinjiang, Xinjiang is rich. The Belt and Road is not constantly quoted in Xinjiang, but this chapter centered on Central Asia shows a positive point: the excellent relationship of China with Kazakhstan. It is a fact in this part of the world, for the opportunities and development created by the modern Silk Road in Central Asia. Xinjiang is a pivot of the new history of Central Asia, and through it the new Silk Road is able to reach far away countries.

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The leitmotiv of the Belt and Road “win-win” is too vague for Kazakhstan and all the countries which signed their acceptance to be part of the BRI. Is it better to mention a flexible administration and diplomacy respecting the laws, cultures and people along the BRI?

References Asia-Pacific Fund. n.d. Accessed February 11, 2019. https://www.pehub. com/2018/07/heitman-wraps-up-asia-pacific-fund-at-338-mln/#. Beeson, Mark, and Shaomin Xu. 2016. Leadership with Chinese Characteristics: What Role for Soft Power. In Global and Regional Leadership of BICS Countries, ed. Stephen Kingah and Cintia Quiliconi, 169–188. Heidelberg/New York: Springer. Berlie, Jean A. 2004. Uyghurs in Xinjiang…. In Islam in China. Hui and Uyghurs Between Modernization and Sinicization. Bangkok: White Lotus. Biran, Michal. 2018. Mobility, Empire and Cross-Cultural Contacts in Mongol Eurasia (MONGOL), 135–154. Accessed March 26, 2019. http://medievalworlds.net/0xc1aa5576_0x003a16e8.pdf. BTI (Bertelsmann Sifting’s Transformation Index). 2018. Kazakhstan. Accessed August 4, 2018. https://www.bti-project.org/en/reports/country-reports/ detail/itc/KAZ/. Cabestan, Jean-Pierre. 2010. Central Asia-China Relations and Their Relative Weight in Chinese Foreign Policy. In China and India in Central Asia a New “Great Game”, ed. Marlène Laruelle, Jean-François Huchet, et  al., 25–40. New York: Palgrave Macmillan. Clarke, Michael E. 2011. Xinjiang and China’s Rise in Central Asia—A History. London: Routledge. Clarke, Michael, and Colin Mackerras, eds. 2009. China, Xinjiang and Central Asia: History, Transition and Cross Border Interaction into the 21st Century. New  York: Routledge. Accessed August 6, 2018. https://www.fairphone. com/en/2017/06/07/on-site-visit-to-cobalt-mines-in-congo-april-2017/. Di Cosmo, Nicola. 2009. The Qing and Inner Asia: 1636–1800. In The Cambridge History of Inner Asia: The Chinggisid Age, ed. Nicola Di Cosmo, Allen J. Frank, and Peter B. Golden, 333–362. Cambridge: Cambridge University Press. Dillon, Michael. 2004. Xinjiang—China’s Muslim Far Northwest. London: RoutledgeCurzon. Fan, Lijun. 2016. Construction of Russia’s “Eurasian Union” and “Economic Corridor Among China Mongolia, and Russia”. In China’s Belt and Road Initiatives and Its Neighboring Diplomacy, ed. Zhang Jie. London: World Scientific.

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Fu, Xiu-Mei, Han-Xue Chen, and Zhen-Kai Xue. May 2018. Construction of the Belt and Road Trade Cooperation Network from the Multi-Distances Perspective. Sustainability 10 (5). Authors at Ocean University of China, Qingdao. Accessed August 11, 2018. http://www.mdpi.com/2071-1050/10/5/1439/htm. Gladney, Dru. 1990. The Ethnogenesis of the Uighur. Central Asian Survey 9 (1): 1–28. Guthrie, Doug. 2009. China and Globalization: The Social, Economic and Political Transformation of Chinese Society. Rev. ed. London: Routledge. Kalra, Prajakti. 2018. The Silk Road and the Political Economy of the Mongol Empire. London: Routledge. Accessed August 11, 2018. https://www.historyextra. com/period/medieval/the-brutal-brilliance-of-genghis-khan/. See also: “The Qing and Inner Asia: 1636–1800.” In The Cambridge History of Inner Asia: The Chinggisid Age, ed. Nicola Di Cosmo, Allen J. Frank, and Peter B. Golden, 333–362. Cambridge: Cambridge University Press, 2009. Kamalov, Ablet. 2009. Uyghurs in the Central Asian Republics: Past and Present. In China, Xinjiang and Central Asia: History, Transition and Cross Border Interaction into the 21st Century, ed. M. Clarke and C. Mackerras, 115–132. New York: Routledge. Kazakh-1. 2018. Accessed June 12, 2018. https://www.azernews.az/region/ 125507.html. Kazakh-2. 2018. Accessed August 10, 2018. https://freedomhouse.org/report/ nations-transit/2018/kazakhstan. Kazakh-3. 2018. Special Energy Issue on Kazakhstan, Netherlands Embassy. January. Kazakh-4. n.d. Accessed August 15, 2018. https://frontera.net/news/nurlyzhol-kazakhstans-own-belt-road-initiative-takes-hold/. Kazakhstan. 2012. Accessed September 10, 2018. http://www.ucentralasia.org/ Content/Downloads/UCA-IPPA-WP14-KazakhInvestmentCA-Eng.pdf. Lattimore, Owen. 1975. Pivot of Asia: Sinkiang and the Inner Asian Frontiers of China and Russia. Boston: Little, Brown & Company; 1st ed. 1950 (Pivot of Asia. New York: AMS Press, 1975). Li, Sheng, ed. 2005. Xinjiang of China: Its Past and Present. Urumqi: Xinjiang People’s Publishing House. Mackinder, H.J. 1904. The Geographical Pivot of History. The Geographical Journal 23: 421–437. McGrew, A. 2005. Globalization and Global Politics. In The Globalization of World Politics: An Introduction to International Relations, ed. J.  Baylis and S. Smith, 19–40. London: Oxford University Press. McMillan, Ann. 2009. Xinjiang and Central Asia: Interdependency—Not Integration. In China, Xinjiang and Central Asia: History, Transition and Cross Border Interaction into the 21st Century, ed. Michael Clarke and Colin Mackerras, 94–114. New York: Routledge.

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Mukherjee, Kunal. 2010. The Uyghur Question in Contemporary China. Strategic Analysis 34 (3): 420–435. Park, June. 2012. Bargaining for More: China’s Initiative for Regional Free Trade in Asia. In China Joins Global Governance: Cooperation and Contentions, ed. Mingjiang Li, 137–154. London: Lexington Books. Reyhan, Dilnur (alias Polat). 2012. Uyghur Diaspora and Internet, 16 p. E-Diaspora Atlas. Accessed August 8, 2018. http://www.e-diasporas.fr/working-papers/Reyhan-Uyghurs-EN.pdf. Roberts, Sean R. 2004. A “Land of Borderlands”: Implications of Xinjiang’s Trans-Border Interactions. In Xinjiang’s China’s Muslim Borderland, ed. S. Frederick Starr, 216–237. London: M. E. Starr. Sadovskaya, Yelena Y. 2018. Ethnically Diverse Diasporas and Migrations from China to Central Asia in the 21st Century: Origin and Contemporary Challenges with Special Reference to Kazakhstan. In China’s Rise and the Chinese Overseas, ed. B.P.  Wong and Tan Chee-Beng, 154–183. London: Routledge. Schwarz, G.  Henry. 1992. An Uyghur-English Dictionary. Washington: The Center for East Asian Studies, Western Washington University, 1st ed. 1982. Accessed July 31, 2018. https://cedar.wwu.edu/cgi/viewcontent.cgi?article= 1029&context=easpress. Sinor, Denis, ed. 1990. The Cambridge History of Early Inner Asia. Cambridge: Cambridge University Press. Soucek, Svat. 2000. A History of Inner Asia. Cambridge: Cambridge University Press. Toops, Stanley W. 2004. The Demography of Xinjiang. In Xinjiang’s China’s Muslim Borderland, ed. Frederick Starr, 241–263. London: M. E. Starr. Turkmenistan’s Gas. 2017. Accessed June 12, 2018. https://www.reuters.com/ article/us-china-gas-turkmenistan/turkmen-november-gas-supplies-to-chinas l i d e - v e r s u s - o c t o b e r- a m i d - w i n t e r- s u p p l y - c r u n c h - c u s t o m s - d a t a idUSKBN1EK0I9. Tyler, Christian. 2004. Wild West China: The Taming of Xinjiang. New Brunswick, NJ: Rutgers University Press. Venier, Pascal. 2004. The Geographical Pivot of History and Early Twentieth Century Geopolitical Culture. The Geographical Journal 170 (4): 330–336. Wiemer, Calla. 2004. The Economy of Xinjiang. In Xinjiang’s China’s Muslim Borderland, ed. S. Frederick Starr, 163–189. London: M. E. Starr. Yaldiz, Marianne. 2005. Chinese Central Asia (Xinjiang): Its Peoples and Its Culture. In Turks: A Journey of a Thousand Years (600–1600), ed. David J. Roxburgh, 42–46. Leiden: Brill. Younghusband, Francis. 1896. The Heart of the Continent. Hong Kong: Oxford University Press.

CHAPTER 4

Infrastructure and the Belt and Road Initiative Manuel Benard

Abstract  This chapter discusses infrastructure and specifically the megaproject of China’s President Xi Jinping, the Belt and Road Initiative (BRI). It is sure that infrastructure is a major point to look at the ethic of China along the Belt and Road Initiative. The author pointed the cases of Sri Lanka, Malaysia, and Myanmar. This chapter deals with the important question of dispute resolution. The outlook on economy, development impacts, risks and challenges, and arbitration on infrastructure along the Belt and Road shows that infrastructure remains a priority for China, a challenger to the existing international order. Keywords  Belt and Road • Development • Deep sea ports • Dispute resolution • Infrastructure • Finance

M. Benard (*) Independent Researcher, Paris, France © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_4

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Introduction The multibillion dollar Belt and Road Initiative (BRI) has either been called a Chinese Marshall Plan, a state-backed campaign for global dominance, or a global marketing campaign for the huge Chinese investment efforts around the world. However, over the five years since President Xi Jinping’s announcement of this initiative to connect Asia, Africa and Europe, it has turned it into a broader concept to describe almost all Chinese investments abroad. Belt and Road, or yi dai yi lu, is a modern “21st century Silk Road,” made up of a “belt” of overland road and rail corridors, and a maritime “road” of shipping lanes. From Southeast Asia to Eastern Europe and Africa, Belt and Road includes around 80 countries that account for half of the world’s population and a quarter of global GDP. The Belt and Road Initiative is expected to cost more than US$1 trillion (£760  billion). To date, the exact amount of money invested is unknown. At the lower end, it is estimated that China may have invested more than U$320  billion during the last two years, 2016 and 2017 (Investment 2018), the majority in Asia. The American Enterprise Institute (AEI) and Heritage Chinese Global Investment Tracker, which tracks Chinese construction and investment across all sectors puts the total at roughly US$340 billion during 2014–2017. The BRI has also only been broadly defined, making reliable investment estimates difficult to perform. The misperceptions about the BRI’s may actually bring benefits. In particular, it is thought that by catching the world’s attention, particularly among developing countries which are “linking” their development plans with the BRI, the BRI enables international companies and investment funds active in the project to reflect China’s vision.

Objective The “Chinese government has drafted and published the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road to promote the implementation of the Initiative, instill vigor and vitality into the ancient Silk Road, connect Asian, European and African countries more closely and promote mutually beneficial cooperation to a new high and in new forms.” The Belt and Road Initiative is also a systematic project, “which should be jointly built through consultation to meet the interests of all, and efforts should be made to integrate the development strategies of the countries along the Belt and Road” (Belt 2015).

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Importance of Infrastructure and Belt and Road Initiative and Geographical Scope The goal of the BRI according to the Chinese official line is “to bring prosperity to the many developing Asian countries along the route that lack the capacity to undertaking major infrastructure projects on their own, connecting them through a web of airports, deep water ports, fiber optic networks, highways [,] railways, oil and gas pipelines” (Scheck 2016). The BRI’s unstated goal is more self-interested than it appears. The real objective to save China from the economic decline, slowing growth rate and high debt levels seems to portend. China’s leaders believe that the infrastructure initiative could create new markets for Chinese companies (Luft 2016). Gal Luft, a co-chairman of the Global Forum on Energy Security in Beijing, describes the infrastructure axis as “corridors.” The main corridors are China Foreign Affairs: 1. A corridor linking northeastern China to energy-rich Mongolia and Siberia by means of a modernized rail network. 2. The second, the China–Pakistan Economic Corridor, will link China’s western region of Xinjiang to the Pakistani deep-water port of Gwadar, on the Arabian Sea. Beijing will open up China’s southwestern provinces to the Indian Ocean by investing in rail, highways, ports, pipelines, and canals in India, Bangladesh, and Myanmar. 3. To the south, China is developing what it has termed the ChinaIndochina Peninsula Economic Corridor, connecting Southeast Asia’s 600 million inhabitants to China’s economy through investments in ports and high-speed rail. 4. Two major rail projects: one will likely link Henan Province, Sichuan Province, and the Xinjiang region to hubs in Poland, Germany, and the Netherlands by way of Central Asia, Iran, and Turkey; the other, the New Eurasian Land Bridge, will connect China to Europe by way of Russia. 5. In Africa, a corridor will connect ports in Djibouti, Kenya, Tanzania, and Mozambique to the Red Sea, the eastern Mediterranean, and central and southeastern Europe (Luft 2016; see Chap. 9 in this book).

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The activities will be divided into three parts: the land (Roads and Railways), the airports, and the Maritime Silk Road (MSR). China is particularly interested in establishing deep sea ports in strategic locations: Kyaukpyu, in the northwestern Rakhine State of Myanmar; Gwadar, in Pakistan; Chabahar, in southern Iran; and the African project of Djibouti. The Belt and Road also develop parallel economies such as oil and gas, Kyaukpyu is the terminus for an oil pipeline and a parallel natural gas pipeline running to Kunming, capital of the neighbor Yunnan Province.

Non-Infrastructure Barriers The investments in hard infrastructure need to be supported by other measures. The barriers to economic integration are complex and encompass interlinked bottlenecks in infrastructure, financial markets, trade facilitation, trade barriers, and limited regional cooperation. When these barriers can be overcome, there is a significant potential for growth. The main barriers are as follows: • Lack of trade experience by Small and Medium Enterprises (SMEs): in most BRI regions small and medium-sized enterprises constituting the bulk of employment, have limited presence in trade, which hinders trade expansion and employment creation. • Lack of Regional institutional cooperation: building institutions that will improve cross-regional coordination and address coordination gaps in areas such as cooperative planning and implementation processes is a major challenge. Coordination policies need to be developed across two or more countries. • Weak custom procedures: customs activity has the most visible impact on increasing the time and cost moving through borders, this can often mask the adverse effects of other agencies and operators in raising border transaction costs (port facilities, transport facilities, excessive documentation, immigration and quarantine requirements, and inadequate information and communication technology). • Non-tariff measures: competition policy, intellectual property protection, and politically sensitive goods such as agriculture are issues that do affect trade (Wolff c.2016).

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Infrastructure is sometimes overstated in its effects on the growth of economic opportunities as transport cost is not the binding constraint to increased trade. Economic activities are concentrated increasingly in coastal areas where the cost of maritime transport is generally lower than for land-based transport. Land-based connectivity often has other objectives, such as national integration or security considerations.

Description “The Belt and Road is an economic cooperation initiative, not a geopolitical or military alliance,” Xi Jinping argued in September 2018. “It is an open and inclusive process, and not about creating exclusive circles or a China club.” At the heart of the program is a web of ‘New Silk Road’ superhighways, connecting China with 80 countries and 4.4 billion people across Asia, Africa, the Middle East, and Europe through multi-trilliondollar infrastructure projects. “Beijing has invested more than US$60 billion in countries along the route, while trade volume has reached 5 trillion yuan (US$734.29 billion), Xi confirmed in his speech, adding that about 200,000 ‘local jobs’ had been created in [BRI] countries” (Xinhua, Asia Times 2018).

Regional Economic Impact The geo-strategic approach of the BRI initiative is producing dividends in Europe. Chinese firms now control almost one-tenth of all European port capacity, with particular focus on Mediterranean ports through acquisitions in Spain, Italy, and Greece. Just this February of 2018, the state-backed shipping conglomerate China Ocean Shipping Company (COSCO) finalized the takeover of the Zeebrugge terminal, Belgium’s second-largest port. In Greece, the same company purchased the Mediterranean port of Piraeus that was acquired in 2016 for €368.5 million, corresponding to a 67 percent controlling stake by COSCO. In Europe, China’s aim appears to want to construct a cross-border corridor that would reduce transportation costs and speed up trade from China to the European market. This Chinese push toward Europe and Africa must be economically put into perspective. In fact, the country has continued for about four decades to expand its presence, its influence or its power in “de-concentric” circles. Increased trade with Asian maritime peripheries (Japan, South Korea,

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Southeast Asia, to Taiwan between 2008 and 2016); then, down the “pearl necklace” in the Indian Ocean, to surround India via Burma, Bangladesh, Sri Lanka, Maldives, and Pakistan. The terrestrial peripheries illustrated a second stage: tightening of links with Russia (signature of major gas contracts in 2016, covering 30 years); and finally silk road. The geopolitical rationality of China is all the more evident as Beijing promotes its expansion with a very long-term vision. Each milestone is always part of an overall strategy. Has the Chinese position not already strengthened over sub-Saharan Africa over time? For the last 30  years, we have witnessed a determined policy of loosening, cautious but far-reaching steps.

Phases The BRI aims first and foremost to create a network of infrastructure dedicated to the transportation of goods from China to Central Asia, as well as Europe and Africa via Central Asia. It also aims to insure access to vital resources such as oil, natural gas and minerals. This involves the construction of new railway lines and a vast road network across the Eurasian continent. On the maritime front, this time it is a question of setting up a whole series of port infrastructures at the Strait of Malacca, between the Malay peninsula and the Indonesian island of Sumatra, along the Indian Ocean, in northeastern Africa and throughout Southern Europe. In a second step, special economic zones should be created to ensure the local development of certain territories. The third and final stage of this project will likely involve the transit of computer data along these commercial axes, via the installation of a fiber optic network. Currently, the BRI consists in the following investments: • The China–Pakistan corridor that connects western China to Gwadar port in the Arabian Sea. This is the most advanced project in the program. • The Myanmar pipeline of oil and gas that will connect the Bay of Bengal to the Chinese city of Kunming in the west, refining area of petroleum products. • The gas pipeline of Central Asia that will modernize an old infrastructure of the Soviet area. The objective is to link the gas reserves of Turkmenistan with the oil reserves of Kazakhstan. The pipeline passes near Khorgos, on the Sino-Kazakh border, where Beijing is building the largest dry port in the world. This dry port is also called the Trans Caspian SEZ Khorgos-East Gate or KTZE-Khorgos Gate.

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Important Financing Gap In a report published on April 9, 2018, the Standard and Poor’s agency writes that the success of the new silk route should be measured by the involvement of private investors. Paul Gruenwald (2017), chief economist of S&P Global Ratings, argues that “The success of the Belt and Road Initiative (BRI), the largest infrastructure project of the 21st century, will ultimately rely on the initial seed money injected by China into solvent projects that can attract the real sector private besides money.” He also argues that “Seen this way, the initiative launched by Chinese President Xi Jinping in Kazakhstan in September 2013 is arguably the largest venture capital project in the world.” Estimates of infrastructure “gaps” amount to trillions of US$. Particularly in Asia the need for infrastructure investments in energy, transport, water, and communication is enormous. Developing Asia alone requires US$26  trillion in infrastructure investment between 2017 and 2030 to maintain current growth rates and adapt to climate change, according to ADB estimates (Hasan et al. 2017). The investment gap in infrastructure is estimated at 5 percent of GDP (US$ 22.6  trillion by 2030) in Asia (Investment Gap 2016). Infrastructure investment has actually declined as a share of GDP in 11 of the G20 economies since the global financial crisis and there is substantial scope to increase public infrastructure investment. China has spent more on economic infrastructure annually than North America and Western Europe combined during the period 1992–2013 and the Belt and Road Initiative is consolidating this tendency. The financial mechanism employed by China is similar to that of an investment fund. First, the Chinese government is investing start-up capital to finance infrastructure and industrial projects in the target countries. These target countries are the equivalent of start-ups or emerging c­ ompanies in the language of private equity. The goal is to generate investment returns, cash in and out. A large financial system has been set up by Beijing, with the support of its own banks but also with that of international financial institutions founded by China and in which it plays a leading role. This is the case of the Asian Infrastructure Investment Bank, which helps finance major infrastructure projects and decompartmentalization of certain territories. China also has substantial foreign exchange reserves that it has long invested almost exclusively in the purchase of US treasury bills. But for the last ten years, China has been trying to diversify the use of its financial reserves. Although Chinese growth has not been as spectacular as in recent years, the country continues to generate surpluses on its trade

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balance that it is in his best interest to reinvest beyond its borders not to generate domestic macroeconomic imbalances such as inflation. The Asian Investment Bank (AIB), inaugurated in Beijing in January 2016, was founded by China to play a key role in financing the BRI.

Private Public Partnership Is Privileged China began marketing its first sovereign dollar bonds since 2004, offering US$1 billion of 5-year notes at a spread of 30 to 40 basis points over Treasuries, and another US$1 billion 10-year bond at 40 to 50 basis points over Treasuries, according to a person familiar with the matter. Macau Daily Times reported: it is best to see the initiative as a “vast geopolitical project aimed at cementing China’s political and trade role over that of the U.S., not an economic one in the sense that each project will generate a return,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong (Erken et al. 2018). China has so far spent or committed more than US$500 billion on the plan, according to data compiled by Bloomberg from official statements and company releases. The figure is considerably higher if lending by China’s big commercial banks is included, though comprehensive data on their activities isn’t readily available. The financing comes in various forms, including from dedicated institutions like the US$40 billion Silk Road Fund and others that aren’t directly linked, such as state-owned banks and the US$100 billion Asian Infrastructure Investment Bank. Even part of China’s 2  trillion yuan (US$300 billion) National Pension Fund will be invested. Though their official documents don’t give specifics, Bank of China said it has lent more than US$80 billion to 470 projects along the Belt and Road route as of the end of June, and other big state-owned lenders including Industrial & Commercial Bank of China and China Construction Bank have also lent billions. A senior official of the National Development and Reform Commission has confirmed that from the US$600–800 billion that will be spent during the period 2017–2022 on outbound investments a significant share will be related to the Belt and Road Initiative (Ma Si 2017). Where the government goes, companies follow. In the first nine months of 2017, domestic companies have invested US$9.6 billion in 57 countries along the route. “Most Chinese spending under One Belt, One Road will see no financial payoff,” said Derek Scissors, resident scholar at the conservative-leaning American Enterprise Institute in Washington. “The firms and banks involved are quite aware of the high likelihood of

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financial losses in many OBOR countries, even if they will not admit to it publicly” (Baloch and Bloomberg 2017). Sovereign debt ratings matter less than the financial stability of each specific project, said Cao Yuanzheng, chairman of the Bank of China International (BOCI) Research Limited in Beijing. “Even in the poorest countries, projects like public water system, electricity grid and railway are all commercially viable as long as there is income generated from user fees,” he said (Dorsey 2018). In the meantime, Chinese companies are more aware of country risks than in the past. China Export & Credit Insurance Corp., the state-owned insurer which covers government seizures, nationalization, political violence and other risks, said it has insured US$480 billion of exports and investments in Belt and Road nations, and paid out US$1.73  billion in claims since 2013. While the risks may be high, the investments could have long-term benefits for China if they succeed, and in the meantime could help utilize China’s excess industrial capacity and expand the use of the yuan abroad, according to Michael Taylor, Moody’s chief credit officer for APAC. “These countries have high growth and growth potential, and often what is holding them back from achieving that potential is a lack of infrastructure,” Taylor said. If the investments succeed in raising productivity, then the countries would “generate the kind of economic growth that would be necessary to repay any debts,” he said (Macau Daily Times 2017). Moody’s points out that Renminbi volatility will rise, as China’s [currently … defends] the Renminbi—involving significant use of foreign reserves. RMB “depreciation will not affect China’s credit profile” (Moody 2018).

Main Impacts for Development The outbound Chinese investments comprise physical infrastructure, an increase in trade volume and subsequently Chinese goods, and the presence of Chinese enterprises. Soft economic presence means trade deals, central bank currency swap agreements, lines of credit, Foreign Direct Investment, and perhaps even efforts aimed at creating a trading bloc. Chinese economic presence is currently expanding. Since America’s exit from the Trans-Pacific Partnership (TPP), regional actors in the East and Southeast Pacific, as well as Australia, have begun to coordinate with China for a new trade plan. It is expected that China will try to capitalize on the opportunity that the Trump Administration has created for China in the Pacific, deviating from Obama’s “pivot to Asia” strategy (Iris 2017; Bush 2012).

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Chinese invested/owned ports in Asia, foremost in Sri Lanka and Pakistan, are early signs of China’s economic expansion. Moreover, the “Road” portion of the OBOR—which is the maritime route—will necessitate Chinese, if not bilateral, investment into ports—especially deepwater ports—for countries that want to join. As shown in a 2016 study by ADB, it is confirmed that the BRI should have a positive impact on Asian economic indicators (ADB 2016). For instance, improving the transport network and trade facilitation in countries along the BRI route could raise the GDP growth in Central, West, and South Asia ranging from 0.1 to 0.7 percentage points. It could also contribute to an increase in welfare from about US$6 billion to about US$100 billion. The total exports of countries in the BRI countries could also increase from about US$5 billion to US$135 billion. Countries such as Mongolia or Pakistan, and subregions such as Central Asia and Southeast Asia stand to gain significant benefit from BRI.  Improving transport and energy connectivity is the crucial building block for greater economic integration. There is a great hope for energy trade, which requires the pooling and interconnection of electric power grids.

Threats for the Realization of Benefits from the BRI There are many factors and challenges that could also hamper the realization of potential benefits from the BRI: the diversity among BRI countries presents a challenge. The vast array of countries along the routes illustrates competing interests or divergent views over how BRI should materialize. This diversity also manifests itself in terms of the development and sophistication of organized systems and institutions. There are likely mismatches in policy frameworks, legal and regulatory rules, credit and payment standards, quality control, and labor and environmental concerns could hamper effective cooperation and coordination. The sovereign (security, political, regulatory, and government effectiveness) and credit risk ratings of BRI countries are also significantly diverse, implying large variations in the quality of governance. For instance, Pakistan, Syria, and Ukraine have high security risks, while Iraq and Greece have great sovereign debt default risks. Many other countries have varying levels of economic stability, meaning their economic priorities in implementing BRI projects might be difficult to coordinate. Political and social issues like trade embargoes,

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political transitions, corruption scandals, social stability, regional rivalries, or confrontation could become problematic for OBOR initiatives (even if one of the aims of OBOR is to promote stability) (ADB 2016). China has in fact committed itself to five principles in pursuing the BRI (Principles 2015): . mutual respect for sovereignty and territorial integrity; 1 2. mutual non-aggression; 3. mutual non-interference in each other’s internal affairs; 4. equality 5. mutual benefit and peaceful co-existence. This vision should be shared by countries to ensure BRI’s success.

Challenges Some worry expanded Chinese commercial presence around the world will eventually lead to expanded military presence. Indeed, Last year, China established its first overseas military base in Djibouti and it is more: “China Merchants in Djibouti in the joint-venture (East Aden Holding Co) (is) in charge of the operation and maintenance of the Djibouti free zone … Great Horn Investment … of the State of Djibouti, holds 40 percent of the shares … the interests of 5 Chinese companies hold 60 percent of the shares … is actually the China Merchants Group … (which) has 73 percent of the votes in the consortium.” “It create a new financial architecture for the construction of the Silk Road.”

Also, China’s focus in Afghanistan is moving away from development projects and toward the containment of perceived security threats. China’s new approach, seen in its patrols of the Wakhan Corridor—in what it calls a “joint counter-terrorism operations” with Kabul—and other security initiatives involving Afghanistan (Guardian, July 2018). This example puts into question whether China’s Belt and Road Initiative (BRI) is still a purely development-focused operation, or whether there is a planned and profound long-term shift in Chinese security priorities. It seems that Beijing’s main concern in Afghanization is that terrorist violence in Afghanistan will spill into either Pakistan rather than Xinjiang autonomous province—perhaps endangering the China–Pakistan Economic

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Corridor (CPEC), its flagship BRI project in Pakistan—or Central Asia. It should be noted that, in recent years, ISIS has claimed responsibility for an increasing number of terrorist attacks in Pakistan, India, and Bangladesh. BRI is in that sense more than just roads, railways, and other hard infrastructure initiative. It can also be seen as a vehicle for China to establish new rules, put in place institutions that reflect Chinese interests, and reshape ‘soft’ infrastructure. “China is systematically establishing and demarcating a maritime equivalent of the Great Wall—a cordon sanitaire running from the South China Sea through the East China Sea to the Yellow Sea” (The Diplomat 2017). An example is given by the Rotterdam Rules that China seems not to accept yet. Article 1 of the United Nations Convention on Contracts for the International Carriage of Good is the following: (1) “Contract of carriage” means a contract in which a carrier, against the payment of freight, undertakes to carry goods from one place to another. The contract shall provide for carriage by sea and may provide for carriage by other modes of transport in addition to the sea carriage. (2) “Volume contract” means a contract of carriage that provides for the carriage of a specified quantity of goods in a series of shipments during an agreed period of time. The specification of the quantity may include a minimum, a maximum or a certain range (Rotterdam Rules: United Nations 2014). So far, US and Western firm participation in BRI-related projects has been relatively modest. Three major barriers exist for international companies to participate to BRI-related projects (CSIS 2018): First, companies need access to timely and accurate information about BRIrelated opportunities. Many international companies are now aware of the BRI’s potential scale and wide range of activities, but they are struggling to identify concrete business opportunities. As noted earlier, one of the nascent trends in the CSIS Reconnecting Asia database is that public information about some Chinese-funded projects is more difficult to obtain in the project’s earliest stages, which is typically when bids are solicited. Greater transparency would help. Second, after learning about specific opportunities, international companies sometimes confront an uneven playing field. Many of the tools for advancing the BRI noted earlier give Chinese firms an edge in winning contracts. National champions benefit from state subsidies. Financing can be tied to picking Chinese firms. As noted earlier, the low participation of international contractors in Chinese-funded transportation projects is not a challenge unique to international firms but affects nonChinese firms more generally. Different methods for estimating project

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costs and revenues can also favor Chinese firms. These considerations extend beyond foreign companies competitiveness and also impact recipient countries, which risk entering commitments without fully accounting for operations, maintenance, and other lifecycle costs. Third, even if competition is open and fair, a host of risks can outweigh the potential rewards for international firms. Partnering with foreign firms can present IP-theft risks. Elections, corruption, complicated land rights, and other political and legal risks can threaten a project’s viability. Funding risks arise from the capitalintensive nature of infrastructure projects, long repayment schedules, and the challenges that developing economies might encounter along the way. When projects are completed, weak demand and other operational challenges remain. These risks are a primary reason why international. Institutional investors, such as pension funds and insurance companies, rarely venture into emerging market infrastructure.

A BRI that succeeds on China’s terms could revise these systems to reflect Chinese interests. Changes would be seen in supply chains for goods, from manufactured products to energy and other resources. China’s currency would become more widely used. Chinese technical standards, for everything from high-speed railway systems to wireless ­networks, would become more widely adopted, as would Chinese preferences for environmental and social safeguards. Collectively, these changes would push the United States away from its current position in the global economy and move China further toward the center of the world order. A BRI that fails also has implications for Western economic interests. The financial burden that developing economies are assuming through Chinese loans is considerable. Many recipients are counting on sustaining high GDP growth to pay back their loans. They have mostly set up ambitious targets that leave little room for error or unexpected events. Many of today’s assumptions about China are also based on its spectacular rates of growth over recent decades. Events within or outside China could lead to enough of these loans failing as to impact the broader global economy. Rather than helping write the next chapter in regional integration, a failing BRI may set the region back, harming global growth. These economic developments carry strategic implications as well. A separate panel will address strategic concerns in greater detail, but two areas are intimately tied with the BRI’s infrastructure focus and should be briefly noted. First, transportation infrastructure is dual-use, meaning that it can be used to move goods to market as well as militaries to battle. Second and more broadly, the United States has the same fundamental interest it has had

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since World War II in ensuring that no single power dominates the Eurasian supercontinent. If a new international world order does emerge, history suggests that “infrastructure will be an important tool and vehicle for influence.”

An Extension of the Chinese Development Model? Some worry China will export its political model. Herbert Wiesner, general secretary of Germany’s PEN Center, says human rights are being “left in the ditches by the sides of the New Silk Road” (Guardian, July 2018). Angela Stanzel (2018: 4) mentioned clearly: “In its report to the 19th Party Congress—held in October 2017—the Communist Party of China (CPC) put forward an ambitious road map that included the first official mention of Beijing’s ambitions of global leadership”. The report states that China will “become a global leader in terms of composite national strength and international influence.” This confirmed a trend China-watchers have observed since Xi Jinping’s ascent to the presidency in 2013: China increasingly seeks to become a global power, as reflected in its growing economic and diplomatic engagement with countries around the world through, for instance, UN peacekeeping missions and contributions to the UN World Food Programme. Beijing has also started to offer a “Chinese solution”—a term Xi first used in October 2016—to global challenges (Xi 2016). The implication behind this offer is that China is better placed to resolve regional and global problems than other countries, particularly the US.  Beijing’s apparent solutions to shortfalls in global infrastructure, economic development, and cultural ties are manifest in the BRI. Chinese characteristics implies that the country will become proactive in regions in crisis, perhaps intensifying its efforts there due to the growing number of Chinese workers and investments abroad. Indeed, Beijing has already started to focus on protecting foreign-based Chinese nationals. Regional and global security threats are therefore increasingly relevant to China’s changing international posture. CPC’s first steps into the next five-year plan indicate that it is enhancing its traditionally low profile on security matters. As announced during the 19th Party Congress (Wang 2018), these steps begin a “new era” in China’s development, one in which the country will become, as Xi put it, “a mighty force” and a “global leader” by 2050. The country will also develop a more assertive foreign policy—with the BRI the leading initiative in this, having been formalized in the CPC’s

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constitution. Beijing has promised that countries committed to the project will gain greater benefit from Chinese trade, investment, and financing; as Xi stated, China is placing “equal emphasis on ‘bringing in’ and ‘going global’ (Stanzel 2018).” “Its approach is calculated toward the long game of assembling institutional power and alliances”. This is explicit in the nature of their loans, which are collateralised by important natural assets with high-long-term value, rather than by short-term commercial viability. If Beijing’s vision towards BRI—to sponsor infrastructure investments, facilitate economic development, promote cooperation and minimize conflict—were to be affirmed in its partnerships, then it will build a case for the superiority of its development model. There are also encouraging signs that China will draw lessons from and apply them to its lending practices. Moreover, calibrating the AIIB into a “knowledge bank” where best practices and technical knowledge are shared across countries could prove more effective than financing in the long run … The long game underlies Beijing’s strategy. Recent railway projects bankrolled by the Exim Bank of China, such as the Addis Ababa-Djibouti Railway (completed in 2016) and Mombasa-Nairobi Standard Gauge Railway (completed in 2017), are tools helping China’s overall strategy. Projects such as these are a stimulus which enhances cooperation on a broad range of economic engagements. It points to a long-term commitment than any quick win classic build and pay-back scheme. This is borne out by McKinsey, which estimates that over 10,000 Chinese firms operate across various sectors of the African economy. The same study estimates that over 90 percent of these companies are privately owned. Nearly one-third are involved in manufacturing, a quarter in services, and around a fifth each in trade and in construction and real estate (Diwakar 2018). It is equally important to understand the kind of aid developing countries require. Given the legacy of problematic loans bankrolled by the IMF and World Bank, it is imperative to consider whether Chinese liquidity will add real value and build socio-economic profitable projects. Indeed, it can be argued that the Chinese model of development should aim to strengthen weak institutions and poor governance of its developing partners, which are often greater obstacles to growth than a shortage of funds. “If the “Chinese Dream” is truly within reach to everyone, the outcome of its BRI engagements will undoubtedly matter. Does China promote investments that drive local economies through diversity and sustainability? Or will it invest in order to serve its own interests through the absorption of excess domestic capacity and the accumulation of geo-strategic capital?” (ibid.).

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Sri Lanka serves as a warning to those interested in Chinese strategical influence: Sri Lanka has always had excellent relations with China. This relationship intensified at the end of the 2000s when Europe condemned the treatment of Tamils by the government. Amongst other projects, Eximbank financed the construction of a port and an airport in Hambantota, the hometown of the Sri Lankan president. Despite Beijing’s support, the president at the time lost the election. The new government inherited a degraded financial situation: public debt in foreign currency increased by US$30 billion, a fifth of which Chinese held. The port and airport at Hambantota ended up being white elephants. Government was also unable to cope with the repayment deadlines. As a result, in order to meet the deadlines, Sri Lankan government was forced to hand over Hambantota port and 6000 hectares of land earmarked for the construction of an industrial zone to a joint venture owned 80 percent by China Merchant for 99 years. Whilst profitability of the port remains uncertain, its strategic interest for China is indisputable because it allows him to control the sea routes to India. Providing credit to neighbors and partners to finance the infrastructure that its companies build allows Beijing to earn more income than its Treasury Bills as well as build new strategic alliance. The example of the settlement imposed on Sri Lanka has resulted in other countries in the region to be reluctant to engage in such high risk agreements, as shown in Burma, Malaysia, and Pakistan.

Infrastructure and Dispute Resolution: Arbitration and Mediation The nature of infrastructure projects and the specifics of the construction industry make dispute an important element of the risk analysis of any major program. Dispute may occur between clients and consulting engineers, in respect of unsatisfactory or poor quality designs; between clients and contractors for instance in relation to the quantity of works realized or planned. Issues of quantity/quality, delays, and claim payment can result in huge sums of money in dispute resolution. The sectors affected are mostly energy, transport, and construction. Not all of the most ambitious BRI projects are about hard infrastructure. “It’s a reminder BRI is about more than roads, railways, and other hard infrastructure,” said Jonathan Hillman, director of the Reconnecting Asia project at the Center for Strategic and International Studies in

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Washington. It’s also a vehicle for China to write new rules, establish institutions that reflect Chinese interests, and reshape “soft” infrastructure. China already set up international courts, in Shenzhen and Xi’an, the former hub of the original Silk Road, to resolve commercial disputes related to Belt and Road. Officials have said the courts, to be based on the judiciary, arbitration, and mediation agencies of China’s Supreme People’s Court in Beijing, will follow international rules and will invite legal experts from outside China to participate. Legal experts say the courts will likely “be modeled on the Dubai International Financial Centre Courts and the International Commercial Court in Singapore, which has already struck an agreement with China to resolve Belt and Road-related disputes” (Guardian, July 2018). The Secretary of Justice of Hong Kong SAR, Mr. Rimsky Yuen (2017), introduced this important question of arbitration and dispute resolution, on September 19, 2017: “Arbitration has thus far been the main focus of resolving infrastructure disputes. Arbitration of course has its advantages, and one can understand why it is a popular form of dispute resolution. However, dispute resolution mechanisms other than arbitration, such as mediation (be it facilitative, evaluative or otherwise), early neutral evaluation and expert determination should also be considered, either on its own or together with arbitration as part of a structured dispute resolution model. Contracts relating to foreign investments in mainland China usually provide that any dispute arising between the parties should be settled by friendly negotiation, failing which the dispute should be referred to arbitration. “Resolution of disputes by arbitration is also recognised in the laws of Mainland China” (Deacons 2014).

Conclusion The Belt and Road Initiative as a systematic project integrates the development strategies from China to Central Asia, as well as Europe and Africa. Land, airports and the maritime Belt and Road insure access to vital resources such as oil, natural gas and minerals. To support this program, a financial system has been set up with long-term perspective to serve China’s economic development. In the medium term, it helps utilize China’s excess industrial capacity and expand the use of the Renminbi abroad. The broad diversity of stakeholders necessitates a complex setup of organized systems and institutions. Effective cooperation and coordination needs new policy frameworks, legal and regulatory rules, quality con-

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trol, and labor guidelines. China already set up international courts to resolve commercial disputes. It is one of the elements showing that BRI is embedded in a general vision that reflect China’s willingness to write new rules, establish institutions that reflect Chinese interests, and reshape the international relations. China considers that it is more able to resolve regional and global problems than other countries, particularly the United States. China’s optimism ignores the present trade war with the United States which already contributes to the instability of Chinese exportations. January’s exports rose by 9.1 percent from a year earlier “in a significant improvement on December when they fell by 4.4 percent” (South China Morning Post, February 14, 2019). China’s February exports fell suddenly by 20.7 percent. It is in the view of the Chinese government that countries should work together to ensure the initiative delivers sustained economic, social, and environmental benefits. Legal and regulatory inconsistencies need also to be addressed and streamlined across the BRI’s corridors in order to reduce trade costs. This is an analysis targeted at stimulating discussion and ­providing a general overview about magnitude of transport infrastructure improvements induced by the BRI in Asia and Africa in particular. Infrastructure remains a priority for China, a challenger to the existing international order.

References ADB. 2016. The One Belt, One Road Initiative, Impact on Trade and Growth, Villafuerte, Corong, and Zhuang. 19th Annual Conference on Global Economic Analysis, Asian Development Bank, June 15. Accessed November 27, 2018. https://www.gtap.agecon.purdue.edu/resources/download/8280.pdf. Baloch and Bloomberg. 2017. Accessed November 23, 2018. https://balochdiplomacy.wordpress.com/2017/10/26/cpec-is-one-of-the-riskiestroutes-of-bri/. Belt. 2015. Accessed November 21, 2018. http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html. Bush III, Richard. 2012, January 31. The Response of China’s Neighbors to the U.S. “Pivot” to Asia. Brookings Institution. CSIS. 2018. Hillman J.E. Accessed November 27, 2018. https://www.csis.org/ analysis/chinas-belt-and-road-initiative-five-years-later-0. Deacons. 2014. A Simple Guide to Arbitration in Mainland China. Hong Kong: Deacons. Accessed November 23, 2018. https://www.deacons.com.hk/ assets/Images/Newspercent20andpercent20Insights/ Publication/2014/201405_SimpleGuidetoArbitrationinChina.pdf.

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(The) Diplomat. 2017. Accessed November 28, 2018. https://thediplomat. com/2017/01/chinas-maritime-great-wall-in-the-south-and-eastchina-seas/. Diwakar, Amar. 2018. China’s Debt-Trap Diplomacy Along the Belt and Road. Accessed November 27, 2018. https://thewire.in/world/china-debt-trapdiplomacy-bri. Dorsey, James M. 2018. China and the Middle East: Venturing into the Maelstrom. New York: Springer. Erken, Hugo, Michael Every, and Björn Giesbergen. 2018. US-China Trade War: Back to the Future. Accessed November 22, 2018. https://economics.rabobank.com/publications/2018/june/us-china-trade-war-back-to-the-future/. Gruenwald, Paul. 2017. Accessed November 23, 2018. https://www.spglobal. com/platts/en/market-insights/podcasts/policy/051617-chinas-one-beltone-road-initiative-overview-and-implications. Guardian. July 2018. Accessed November 23, 2018. https://www.theguardian. com/cities/ng-interactive/2018/jul/30/what-china-belt-road-initiative-silkroad-explainer. Hasan, Rana, et al. 2017. Meeting Asia’s Infrastructure Needs. Asian Development Bank, February. Accessed November 21, 2018. https://www.adb.org/news/ asia-infrastructure-needs-exceed-17-trillion-year-double-previous-estimates. Investment. 2018. Accessed November 23, 2018. http://www.oecd.org/daf/ inv/investment-policy/FDI-in-Figures-April-2018.pdf-pivot-to-Asia. Investment Gap. 2016. Bridging Global Infrastructure Gaps. New  York, NY: McKinsey Global Institute. Iris. 2017. Iris #31. Accessed November 27, 2018. http://www.iris-france.org/ wp-content/uploads/2017/05/Asia-Focus-31.pdf. Luft, Gal. 2016. China’s Infrastructure Play: Why Washington Should Accept the New Silk Road. Foreign Affairs 95 (5): 68–75. Accessed November 26, 2018. https://www.foreignaffairs.com/articles/asia/china-s-infrastructure-play; http://www.iags.org/Luft_BRI.pdf. Macau Daily Times. 2017. Accessed November 28, 2018. https://macaudailytimes.com.mo/new-silk-road-runs-straight-junk-territory.html. Ma Si. 2017. China to Invest Heavily in Belt and Road Countries. China Daily, May 13. Moody. 2018. Accessed November 28, 2018. https://www.moodys.com/ research/Moodys-Chinas-Belt-and-Road-Initiative-is-credit-positiveoverall%2D%2DPR_372698. Principles. 2015. Accessed November 15, 2018. http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html. Scheck, Martin. 2016. Accessed November 23, 2018. http://www.media-outreach.com/release.php/View/2593/Silk-Road-Bond-Bridging-theFinancing-Needs-of-Belt-and-Road-Countries.html.

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Stanzel, Angela. 2018. Fear and Loathing on the New Silk Road: Chinese Security in Afghanistan and Beyond. European Council on Foreign Relations. Accessed November 28, 2018. https://www.ecfr.eu/publications/summary/new_silk_ road_chinese_security_in_afghanistan_beyond. Wang Yiwei 王义桅. 2018. Belt and Road Initiative: China’s Rising International Responsibilities (in Chinese). Yidai yilu Zhongguo jue qide tianxia dandang“一 带一路”中国崛起的天下担当。 Beijing: People’s Press (人民出版社)。 . Wolff, Peter. c.2016. China’s ‘Belt and Road’ Initiative–Challenges and Opportunities. Accessed November 27, 2018. https://www.diegdi.de/ uploads/media/Belt_and_Road_V1.pdf. Xi. 2016. The Belt and Road Forum in Beijing, China, May 13, 2017. Xinhua, Asia Times. 2018. Xinhua, August 28, 2018. Asia Times id. Accessed November 23, 2018. http://www.atimes.com/article/chinas-new-silk-roadgets-a-glossy-new-image/?fb_comment_id=2151864928221162_21522 98791511109. Yuen, Rimsky. 2017. The Belt and Road Initiative and Infrastructure Dispute Resolution: A Few Thoughts. Accessed October 10, 2018. https://www.doj. gov.hk/eng/public/pdf/2017/sj20170919e1.pdf

CHAPTER 5

The Greater Bay Area and the Role of Hong Kong and Macau SARs in the Belt and Road Initiative Jean A. Berlie and Steven Hung

Abstract  Mainland China, the Hong Kong and Macau Special Administrative Regions (SARs) of China are involved in the global projects called the Belt and Road Initiative and the Greater Bay Area (GBA). Finance, economy and infrastructure are at the forefront of Hong Kong’s sectors. Its financial system is well regulated in many areas. The urban population of the GBA is growing, and with the development of the Belt and Road Initiative many cities in the Guangzhou-Hong KongMacau triangle will be linked. Hong Kong, since decades is the world’s freest economy, see the 2019 index of economic freedom, and Macau is also a free economy. Hong Kong has a key role—already fully implemented by President Xi Jinping and Hong Kong’s Chief Executive Carrie Lam—for the development of the Greater Bay Area which became promoted with the symbolic and quite extraordinary new giant bridge linking Hong Kong with Zhuhai and Macau (Macau, Ponte HK-Zhuhai-­Macau, Serie IV, Nr 63, 2018).

J. A. Berlie (*) • S. Hung The Education University of Hong Kong, Tai Po, Hong Kong e-mail: [email protected] © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_5

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Already Hong Kong and Shenzhen have merged into one block virtually separated only by the law until 2047. Similar interconnections link Macau and Zhuhai. The Hong Kong Basic Law does not allow the fusion of the two cities, but now the name Greater Bay Area links them and had changed something. It shows the beginning of a future fusion out of the legal system. Foreign Direct Investment (FDI) is one of the most important factors of economic and financial development of China’s globalization. Certainly, the Greater Bay Area will contribute to the development of the Belt and Road Initiative in the future. The major function of the Greater Bay Area is to expand the role of Hong Kong, Macau and the Province of Guangdong to develop the Belt and Road Initiative; this was clearly mentioned by the Chief Executive of Hong Kong SAR, Carrie Lam Cheng Yuet-ngor. Macau is a historical tourist center and was before 2014 the first casino city of the world. Keywords  Belt and Road • Development • Foreign Direct Investment (FDI) • Greater Bay Area • Guangzhou • HK-Zhuhai-Macau Bridge

What Is the Greater Bay Area? How Fast Will It Be Promoted? The Pearl River Delta, an ancient historical name in South China, currently part of the Silk Road, could be one day compared to San Francisco Bay under its attracting name Greater Bay Area (GBA), a core element of the Belt and Road. The Greater Bay Area (GBA) is a huge and densely populated geographic space including Guangzhou and Guangdong Province’s nine cities, two Special Administrative Regions (SARs) and two Special Economic Zones (SEZs). When Foreign Direct Investments (FDIs) will come from many origins (including Taiwan?) this new space named “Greater Bay” will be compared to New York’s Bay according to enthusiastic Chinese scholars (Guo 2018: 21–22). In total GBA includes nine cities of mainland China: Dongguan, Foshan, Guangzhou, Huizhou, Jiangmen, Shenzhen, Zhaoqing, Zhongshan and Zhuhai. Hong Kong and Macau SAR are essential to attract FDIs from the global world and the Lusophone World. Hong Kong SAR and Shenzhen are becoming closer, only legally separated by different legal systems until 2047. GBA unites them as part of a new social and economic relationship. On July 1, 2017, President Xi Jinping attended the signing ceremony of the framework agreement on the development of the Guangdong-Hong Kong-Macau

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Greater Bay Area. The Greater Bay’s manufacturing heartland is centered in the industrial and manufacturing triangle—Foshan, Shenzhen, Dongguan—and includes the southern part of Guangzhou megalopolis; this huge industrial zone grew from 4500 square kilometers in 2000 to 7000 sq. km in 2010. The prefecture of Foshan covers more than 3850 sq. km (around 1485 sq. mi). In brief, the enlarged economic Pearl River Delta, now called Greater Bay Area, includes Guangzhou, the capital of Guangdong Province which is demographically and politically the most important city of the region. However, FDIs will return from Hong Kong and Macau SARs to the manufacturing triangle of Guangdong Province, Shenzhen and Zhuhai SEZs, if FDIs return very dynamically as during the 1990s and early 2000s and will be certainly developed and dynamized under the new name GBA. The financial and capital role of Hong Kong SAR and Taiwan are essential but not yet confirmed in 2019. Currently the essential Greater Bay Area blueprint “will outline the policy directions” to follow up in the years to come. It includes innovation and financial hub that are not really defined. After reading the South China Morning Post one page and a half on the GBA, Hong Kong was “mentioned 102 times in the blueprint,” I advise the reader to read the long articles by Tony Cheung and others: “Business travel” in the GBA (SCMP, February 18 and 19, and March 29, 2019). Victor K. Fung (see Fig. 2.1) and the 2022 Foundation proposed 50 recommendations: “Fostering further economic reform, enhancing cooperation, intensifying regional development, boosting the workforce, increasing understanding of the region, and establishing new institutions, such as a chamber of commerce that would put business leaders from the 11 city economies (9 cities of Guangdong Province and Hong Kong and Macau SARs) under one roof.” In particular GBA “success depends on getting young people on board” and Hong Kong will become richer as 40 years ago. The entities in charge: The State Council, China’s Cabinet and China’s Development and Reform Commission will probably not elaborate clearly what these recommendations and policies are. We cannot forget that the economy has to work normally and it needs investments for its development (Zhang and Felmingham 2002). The ongoing trade war between USA and China plays a negative role, talks went on cordially, but it is not easy to find the real USA-China win-win solution in 2019. Foreign Direct Investments (FDIs) remain essential for the development of the Greater Bay Area. How can FDIs be attracted in a rather depressed economic time? For the development of the Belt and Road Initiative, the Greater Bay Area is a first step forward in the Pearl River Delta to assure a

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smooth development of this great project in South China. This project of the Greater Bay Area is linked to the BRI. These functions are economic, financial and structuralo-legal. The good economic development of this region of China has to be seriously considered in the present situation of the USA-­China trade war. President Xi Jinping pushed ahead to “seek an agreement acceptable to both sides” (SCMP, February 16, 2019). We do not know if the American punitive tariffs will persist and when the Sino-American deal will be finalized. The Greater Bay Area linked with the longest maritime bridge of the world will not be well developed quickly without the good will of the governments of the cities of Guangdong—in particular Guangzhou— Hong Kong and Macau and despite their different legal systems. Mainland China has its own legal system and thanks to their Basic Laws, Hong Kong and Macau SARs have their own essential “way of life” (Table 5.1) as a key concept invented by Margaret Thatcher’s team and clearly explained by the professor of law Tong Io Cheng. “Hong Kong and Macau Basic Law are divergent, mainly because of different geographical and economic conditions…” Gambling, a very important part of the way of life, has a long history in Macau and is in HK also a crucial pillar of the local economy “but limited to horse racing” (Tong 2012: 69–70). The international Table 5.1  Hong Kong and Macau SARs, table of impacts: globalization, industrialization, economy, legal and political systems Dimension Economic dimension impact

Social dimension

Political and legal dimension

Hong Kong

Globalization (Global); Historical British link with Hong Kong; Center of transnational Chinese public; Importance of the family

Basic law and “way of life”; Some democratization, but no universal suffrage; New localism

Long history; Macau linked to the Lusophone world; Macau less global than Hong Kong; Importance of the family

Basic Law and “way of life:” 生活 shenghuo; Limited democratization

Macau

Deindustrialization, organizational changes of firms and banks; State capitalism invasion; Competition; Hong Kong is the world’s freest economy in the 2019 index of economic freedom; Government intervention Almost no industrialization at present; Casino monopoly; Government responsible for the Casino licences (to be renewed in 2020–2022)

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f­unctions of Hong Kong and Macau SARs are economico-­financial, and the region of the Pearl River Delta was renamed GBA. As mentioned by Geoffrey Gunn (2012: 13), the population of this GBA need to be more united. For a significant number of Hong Kong and Macau people “whose lives straddle the colonial and post-colonial periods—a majority of adult … residents—memories, associations, loyalties and values, and their boundaries have undoubtedly undergone significant shifts.” The most important is the return to China of Hong Kong and Macau in 1997 and 1999 respectively. Now, the new challenge is the acceptance of the Belt and Road and the Greater Bay Area which has slowly become an essential choice for the permanent residents of both SARs. Certainly it is easier in Macau than in other place to accept the Belt and Road and GBA because around 50 percent of the population came directly from the mainland before the turn of the century. In reality, Belt and Road is not a local concept, it is an imported one. This is why a local lawyer who support the Belt and Road, with a certain skepticism it seems, just said that the “Belt and Road is not bad for Hong Kong.” Why did he not say more? A main question, for the majority of the Chinese of Hong Kong is the concept “One Belt One Road,” invented in 2013, which is not strongly supported by them. Another concept, the Greater Bay Area, seems a priori more acceptable because the Hong Kong Special Administrative Region (HKSAR) is intrinsically part of it. We will try to answer important questions with the survey of Hong Kong Lingnan University’s Professor Mok Ka-ho, and Sun Yat-sen University, Guangzhou, among 1033 interviewees found that less than 8 percent Hongkongese work in the mainland and only 54 percent visited Guangdong Province in the last year. These statistics show that the majority of the Hongkongese are not yet really ready to promote the Greater Bay Area and the Belt and Road Initiative. Forty-two percent of them fear losing their Hong Kong government benefits if they move out of their city; so, how they could be very interested to promote the Greater Bay Area? A new will is necessary, but the youth of Hong Kong in particular do not really know the Basic Law, which is valid up to July 2047  in the Hong Kong Special Administrative Region (HKSAR). For those who had visited one of the nine cities of the Greater Bay Area in the past year, 60 percent were sightseers, and 24.5 percent visited friends and relatives. For those who did this Guangdong’s visit, 20.5 percent traveled for the “good food,” or because restaurants are cheaper than in Hong Kong? (SCMP, October 24, 2018). Could we believe that they really

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accepted the “Greater Bay Area”? Nevertheless a new integration between Hong Kong, Macau SARs and the Province of Guangdong is on the way. Hong Kong has numerous advantages … The present major function of the Greater Bay Area is to expand the role of Hong Kong to really connect it to the Greater Bay Area. “Hong Kong’s economic freedom score is 90.2, sustaining its status as the world’s freest economy in the 2019 Index.” Its overall score is unchanged from 2018, with increases in scores for trade freedom, monetary freedom and government integrity countered by a decline in judicial effectiveness. As a matter of fact, Hong Kong is the world’s freest economy for the 25th consecutive year under the Index of Economic Freedom (2019).

Stability of the Society in Hong Kong and Macau SARs After 1997 and 1999, Social Harmony and Importance of the Economic Development Created by the Greater Bay Area Inside the Guangzhou-Hong Kong-Macau triangle (GHM), Chineseness is a cultural reality and the GBA is an important concept. The Chinese people in Guangdong Province, Hong Kong and Macau represent 90 percent of the population, and this will not change with the development of the Belt and Road Initiative and the Greater Bay Area. The dominant cultural concept of Chineseness brings social harmony along the Belt and Road of the Greater Bay and may give more chance for the promotion of BRI because Chinese are the majority. The majority in China, Hong Kong and Macau is Han Chinese. The dominant Chinese identity of Guangdong, for Hong Kong and Macau is Cantonese. For the GBA, the question is to harmonize Guangdong with Hong Kong and Macau, and before the years 2047–2049 it will not be easy mainly because of the legal importance of the Basic Laws of Hong Kong and Macau. Historically, the Pearl River Delta is known and distinguished for its “remarkable performance” in attracting Foreign Direct Investment (FDI) and “promoting export production” (Lin 1997: 90–91). It is also sure that Deng Xiaoping is the architect of China’s reforms and economic development between 1980 and 1997. Before going to Zhuhai, on October 22, 2012, President Xi Jinping remembered the importance of history and visited Guangdong province, echoing his first trip in 2010 in Shenzhen, and drawing parallels to Deng Xiaoping’s 1992 tour. The creation of Special Economic Zones (SEZs) and the development of the

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GHM triangle attracted massive foreign investment. Following Deng’s reforms between 1980 and 1990, and according to the Guangdong Statistical Bureau in 1992, the SEZs’ annual growth (Gross Value of Industrial and Agricultural Output-GVIAO or gongnongye zhongchangze) grew by 68 percent in Shenzhen and in Zhuhai; Zhongshan and Dongguan reached 23 percent of growth and Foshan 21 percent in the same period (Lin 1997: 90). In the Pearl River Delta an incredible industrialization took place, and agriculture “has become increasingly diversified and commercialized.” From earlier remarkable “multiplicity of economic and political relations involved in China’s centralized industrial order … and governance since the early 1990s, at present, we still have reforms, but also global giant Chinese firms and big business part of an ongoing situation which coincides with the new wave of globalization” (Chen Li 2015: 17–19, 153, 164). In the coming years, foreign investments will contribute to the economic success and development of the Greater Bay Area. Hong Kong’s FDI continues to be much needed. Social stability is a first step toward economic prosperity; it seems that Macau people during many centuries have understood this evidence. Both society and economy have to be harmonized. This is a condition of stability for the Greater Bay Area; social stability will bring prosperity. The question is the present American high taxation of the Chinese products which did not appear before because China and the region of Guangzhou, Foshan, Dongguan and Shenzhen were part of the useful Chinese “Factory of the World.” The 2018 US high taxation was on the agenda. Many companies were sometimes obliged in Dongguan to massively lay off peasant-workers who were obliged to return to their villages. In April 2018 in Shenzhen, “Gionee, once one of China largest smartphone manufacturers, said it has begun laying off employees at its headquarter, according to NetEase reports (in Chinese)” (Shenzhen 2018). The Shenzhen-based company is reportedly cutting as much as 50 percent of jobs in this city. To avoid that, a continuity of the FDIs is necessary in the Greater Bay Area, with a win-win solution for both the USA and China. Between 2004 and 2013, the World Bank project around Foshan, as we will see below, improved the quality of the water with wastewater treatment, which was rightly publicized, and has attracted fresh money (FDIs). Chinese industry and the region of Foshan were exponentially developed, thanks to Chinese hard-working culture and economic competence. This is how China became the factory of the world. What is the possible effect of President Trump’s high taxation of Chinese products?

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Following the Years 2007–2013, a View on the Economic, Social and Demographic Change in the Pearl River Delta, Now the Greater Bay Area The urbanization of the economic manufacturing heartland of the Greater Bay Area was previously mentioned and studied by the World Bank (see also The Guardian 2015). For example, “600,000 people in Jiangmen and 1.1 million people in Chancheng district in Foshan are direct beneficiaries of the World Bank project. Pollution reduction and water quality improvement in the Pearl River Delta waterways was surveyed by the World Bank during six years (2007–2013).” It was part of the project of the World Bank published in 2016. It benefited 1.7  million people (World Bank 2016) and promoted Foreign Direct Investment (FDI). In particular on 6.7 kilometers of embankments along the Fenjiang River wastewater was redirected to a wastewater treatment plant and one million people benefited, thanks to an investment of US$142.2  million, with US$70.92 financed by a loan from the World Bank and the International Bank for Reconstruction and Development (IBRD), the largest development bank in the world. Now Foshan Water Group Company has a contract with Foshan Municipality up to the year 2030. Consequently, Foreign Direct Investment (FDI) was flowing and prepared the Pearl River Delta to be the present Greater Bay Area, but these investments have to continue flowing for the prosperity and development of this promising region, which is now hit by the US tariffs.

Globalization of Hong Kong and Macau SARs, Guangdong, and Necessary Investments in the Greater Bay Area In the history of capitalism with Chinese characteristics, Deng Xiaoping played an essential role and launched China’s industrial reforms. Another turning point happened in 2001 when China became a member of the World Trade Organization (WTO). FDI is mentioned by the Hong Kong General Chamber of Commerce (HKGCC) which promotes the Greater Bay Area, but, the importance of the Foreign Direct Investment has to be pointed out more positively (GBA 2017: 9, 11, 18). With the economic crisis in 2008, investments were not so easy to attract; now FDI is even more important than earlier. In the past FDI has greatly boosted China’s

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trade volumes in the Pearl River Delta, notably in the textile, metals and machinery sectors and paved the way to marketization. In 2008, the Pearl River Delta (PRD), now the GBA had to devise strategies “to retain rural laborers both within and beyond Guangdong and second, manufacturing industries must find a way to [adjust their production] in order to remain competitive in the global economy” (Cheang et al. 2008: 27–30). This was necessary in 2013 and becomes valid also at present in 2019. In 2013, Xi Jinping launched the Belt and Road. Hong Kong has a long history of investment in the economic triangle, Guangzhou-Hong Kong-Macau. In 2017, 82.8 percent of investment from outside the mainland in Guangdong came from Hong Kong and Macau and 57.5 percent of Guangdong’s investment went to Hong Kong and Macau (Beijing Review, August 16, 2018). An important amount of FDI has been directed toward infrastructure as reflected by the financing of the 55 km giant linking Hong Kong, Zhuhai and Macau Bridge which was opened to public traffic on October 24, 2018. The FDI is essential and constitutes the basis of the incredible economic development of China, which has benefited from China’s policy and institutional reforms, which included the creation of State-Owned Enterprises (SOEs). There are approximately 150,000 SOEs, of which around 50,000 (33  percent) are owned by the central government and the remainder by local governments. The central government directly controls and manages 102 strategic SOEs through the State Assets Supervision and Administration Commission (SASAC), of which 66 are listed on stock exchanges domestically and/or internationally. SOEs, both central and local, account for 30 to 40 percent of the total gross domestic product (GDP) and about 20  percent of China’s total employment (SOEs 2017). See Annex with the names of many SOEs of Guangdong. Multinational enterprises (MNEs) are essential because in a time of globalization and also much earlier in the sixteenth and seventeenth centuries according to Feasel (2018: 190) and Kenwood and Lougheerd (1971) they attracted FDI. This type of enterprises was important for the expansion of trade and at present, they are still able to attract FDI. The FDI is essential for the development of the Belt and Road Initiative and the Greater Bay Area. Without FDI the Greater Bay economy cannot grow. The Greater Bay Area has to follow China’s “policy and institutional development” and it shows that 43 large firms from mainland China entered in Fortune Global 500 list, 2009 (Chen Li 2015: 3, 5). Sinopec was ranked number 36  in 2010, and in 2017 it was ranked number 3. Tencent Holdings mentioned previously was listed no 197 in 2010.

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“At the head of this trend is China Resources, a state-owned conglomerate headquartered in Hong Kong, and its investment in the region stands at US$48billion, spreading across both old and new economy sectors such as healthcare, pharmaceutical, real estate, food and beverage, retail, technology, and utilities. Over the next five years, it is planning to invest at least US$20 billion more (The Greater Bay Area 2018: 9).” Could we believe these planned investments? FDI is absolutely necessary? (GBA 2017)

Importance of Hong Kong and Macau SARs. Globalization in the Chinese Context Hong Kong is really global and we mention its financial and economic importance for the Greater Bay Area. Hong Kong and Macau have been geographically significant bases through which the West entered China. Hong Kong and Macau were populated with migrants from mainland China. Both territories have a greater majority of inhabitants who are Cantonese-speaking Chinese. The separation of Hong Kong and Macau from mainland China and the different rules of governance by the British and the Portuguese respectively led to the distinctive socio-economic development and extraordinary vernacular and indigenous cultures of Hong Kong and Macau. The two territories are characterized by efficient financial infrastructures and free market economies with a low-rate and simple taxation system. Similarities in the political histories of Hong Kong and Macau were not confined to colonial origins. They were bridges of cultural dissemination throughout history, for Britain and Portugal to penetrate China’s economy. The two territories are linked by ethnicity, geography, Western colonization and post-colonial fate. Both territories are located in the estuary of Pearl River, existing in a situation of mutual support. There was an atypical “centremost” sense of Hong Kong and Macau and their self-identities. The following table explains and defines the impact of globalization in relation with the legal, economic, social and political systems of Hong Kong and Macau SARs. The colonial British Hong Kong government invested massively in the global city infrastructure such as telecommunication, port and airport, convention centers and land reclamation for a growing central business development. Moreover, the Chinese Open Door Policy allows Hong Kong to assume a key role for an increasingly globally integrated China and to establish strong cross-border links. Hong Kong, Macau and Pearl River Delta are becoming a global regional metropolis, yet with specific

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characteristics due to the persisting boundaries and with specific roles of Hong Kong and Macau. Under the wave of globalization, Hong Kong has been intricately wired up with the world’s economy. Hong Kong is a major international financial center, comprising an integrated network of institutions and markets which provide a wide range of products and services to international customers and investors. Hong Kong’s financial markets are characterized by a high degree of liquidity, minimum barriers of access to the market by foreign businesses and an absence of restrictions on capital flows into and out of Hong Kong. International trade has been an important economic activity that sustains the Hong Kong economy (Lam 2002: 65). As the Hong Kong economy relies heavily on international investment and trade, the volatility of its economy is linked up with the global economy. A dramatic change of the world economy will affect the export-led economy in Hong Kong (ibid.: 66). It would be true to say that the economic success of Hong Kong was a result of a number of factors, including its strategic geographical location, a deep harbor for shipping, its economic freedom, an efficient civil service, a sophisticated communication and transport system, a hard-working population, a large Chinese hinterland and a beneficiary of the open door policy of China (ibid.: 72).

Hong Kong SAR Founded in 1861, the Hong Kong General Chamber of Commerce (HKGCC) promotes, represents and safeguards the interests of the business community in Hong Kong. The Greater Bay Area (GBA) is essential for the HKGCC (The Greater Bay Area 2017): To develop the Pearl River Delta, renamed the Greater Bay Area, the HKGCC suggests three main focuses for the HKSAR: 1. International finance, shipping and logistics, offshore Renminbi (RMB) transactions and dispute resolution. 2. “One country, two systems” and the rule of law. 3. The development of a manufacturing base connected to the rest of the world. This is not a new way to develop trade and finance, but the GBA concept needs also to motivate and convince particularly the Hong Kong residents, members of the HKGCC. In Hong Kong also, as we will see for

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Macau, the Chinese associations promote relationship and economic development, and geographical and historical roots exist. The fast economic development of Dongguan in 1986 operated in particular through the Dongguan residents who had 650,000 relatives in Hong Kong, and so FDI comes easily (Lin 1997: 171; Berlie 2012). Around the year 2012, the author found that 55 percent of the Chinese of Macau interviewees have their origin in Zhongshan, Shunde and Panyu, and they invested to develop the economy of Zhongshan and Panyu (Berlie 2012: 127, 203). The most dynamic association is the Zhongshan Association. Historically, the reason is simply because the Chinese could not stay intra-muros in the Portuguese colonial fortress at night. The sellers and artisans working inside the walled city during the daytime were mostly from this district of Zhongshan close to Zhuhai and Macau. After becoming a special administrative region 20  years ago, Hong Kong is now a key gateway for Chinese capital. Investors and corporate occupiers have been deploying smart money in the city, snapping up commercial real estate and residential assets. Hong Kong has also become an important fundraising destination for Chinese entities, with more than 700 mainland companies listed on the HK exchange. With new financial market policies such as the proposed Shanghai-Hong Kong Stock Connect scheme, a closer bonding between the financial markets in Hong Kong and the mainland is expected. The broad agenda for mainland China to gradually open up its financial markets to the rest of the world will see Hong Kong assuming a unique role. Hong Kong entrepreneurs see the mainland as an unmatched market to grow their business. The top ten listed Hong Kong property developers in China, combined, have more than 10,000  hectares of land bank on the mainland, seven times the 1500  hectares they hold in Hong Kong. They also own a combined 3.3 million square meters of Grade A office space in the four first-tier cities on the mainland, accounting for 23 percent of total stock in these cities. In addition to fund and money flows, people and trade flows across borders have also become increasingly important for Hong Kong. In 2017, the city welcomed 58.47 million tourists (China Daily January 31, 2018) and 75 percent of them were from the mainland. They spent HK$169 billion on shopping, accounting for 34 percent of Hong Kong’s total retail sales. In 2018, 51 million tourists from the mainland entered Hong Kong; this constitutes a record number (Table 5.2). Hong Kong has been one of the world’s best performing retail markets over the past decades. For six of the last ten years, Hong Kong has registered double-digit retail sales growth. Within this growing integration

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Table 5.2  Numbers of Hong Kong visitors and mainlanders visiting Hong Konga Year

All visitors

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

13,060,000 13,730,000 16,560,000 15,540,000 21,810,000 23,360,000 25,250,000 28,170,000 29,500,000 29,590,000 36,030,000 41,920,000 46,520,000 54,320,000 60,840,000 59,310,000 56,650,000 58,470,000 65,147,555

By mainland visitors 3,790,000 4,450,000 6,830,000 8,470,000 12,250,000 12,540,000 13,590,000 15,490,000 16,900,000 17,950,000 22,680,000 28,100,000 34,900,000 40,740,000 47,270,000 45,840,000 42,780,000 44,450,000 51,040,000

Mainland % 29.0% 32.4% 41.2% 54.5% 56.1% 53.7% 53.8% 55.0% 57.1% 60.7% 63.0% 67.0% 71.8% 75.0% 77.7% 77.3% 75.5% 76.0% 78.3%

By other visitors 9,270,000 9,280,000 9,730,000 7,070,000 9,560,000 10,820,000 11,660,000 12,680,000 12,600,000 11,640,000 13,350,000 13,820,000 11,620,000 13,580,000 13,570,000 13,470,000 13,880,000 14,030,000 14,110,000

Source: Immigration Department The figures are rounded to ten thousand

a

with mainland China, the rise of a mega metropolis in the Hong Kong-­ Pearl River Delta region will result in dramatic changes in the long term, traditionally led by Guangzhou. There is rise of technology giants and insurance companies in southern China, combined with financial sector firms doing direct and indirect business with the Shenzhen Stock Exchange. Seven hundred mainland companies are listed on the Hong Kong stock exchange (Investing 2018, SCMP).

Revisiting Chinese Opportunities for the Youth The youths are very important; they are the future of Hong Kong SAR. The following Table 5.3 and comments give a clearer view of the current situation. As a matter of fact, the Anti-National Education Issue highlights the importance of the youth policy. Leung’s 2013 Policy Address merely provided one paragraph for youth development. The content related to youth development is an empty vessel, with nothing there.

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Table 5.3  Hong Kong residents who had worked in mainland China on age groups in 2013 and 2017 Age group Hong Kong (2013) and (2017) Mainland, Macau & Taiwan* Other places Total working populations

15-29 647800 708288 3200 6205 2000 6308 653000 720801

30-39 799300 921005 9100 13663 3700 4172 812100 938840

40-49 865100 854044 22700 25638 4000 2563 891800 882245

50-59 788300 832908 23100 30284 1500 2292 812900 865484

60+ 227100 328346 7800 16935 # 2305 235100 347586

Total 3327600 3644591 58100 92725 11200 18640 3404900 3755956

Source: Hong Kong Census and Statistics Department 2017. Hong Kong residents who had worked in the mainland China. The data from 2013 may not include workers who worked in Taiwan and Macau as the source did not specify that clearly (Hong Kong Economic Journal 2015)

It cannot be a response to post-materialistic youth’s values even though it promises to provide more opportunities for their development. It is so heartless that it cannot cater for students’ political stance to resist the mainland’s effects and democratization. The following paragraph reveals how materialistic and instrumental the policies are that were adopted by the authorities. Young people represent our future. Our policies should focus on creating development opportunities for them. We should foster a culture of multifaceted excellence that will offer abundant opportunities for young people to pursue their studies or career and realize their potential. Our policies should also be inclusive and enable young people from different backgrounds, including new arrivals and ethnic minorities, to enhance their capabilities and broaden their horizons. The Commission on Youth will continue to reach out to young people and assist the Government in formulating policies related to youth development and coordinating the efforts of different bureaux, so as to achieve policy synergy. In collaboration with various organizations and post-secondary institutions, we will make available additional resources to provide more internship opportunities in the mainland for our young people. Such experience will help broaden their exposure and boost their confidence (Leung’s Policy Address 2013). Different leaders and politicians including three chief executives have repeatedly expressed that the mainland has good prospects for development of the youth and that they should make good choices in finding opportunities in the mainland. Recently, Anthony Leung, the former Financial Secretary, said that young people are living lives which are comfortable. He

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suggested again that Hong Kong youth should seek opportunities in mainland China. On the contrary, the factual data does not speak to such bright prospects and instead suggests that the opportunities do not cater to the young generation in Hong Kong. The following data is provided by the Census and Statistics Department of the Hong Kong Government. The statistical results reveal the actual situation of Hong Kong’s populace, which reveals that more than 60 percent of job opportunities in China are occupied by age groups between 40 and 60 years. The situation is quite contradictory for age groups below 40 working in other regions of China recently. Only a small portion of young people are able to work in mainland China, as a matter of fact. It is sure that the social stability of Hong Kong, compared to Macau, does not beneficiate of the very important percentage of mainlanders— who know better what is the Cultural Revolution in China, 1966–1976— they came to Macau after the handover in the year 2000 and even before. In Hong Kong a book on “the Chinese of Hong Kong” does not exist so far. The Chinese of Hong Kong are those who are permanent residents since at least five generations. This advantage of the social stability in Macau has to be well pointed out. This social stability of Macau Special Administrative Region is also related to its 500-year history; this is why the Chinese of Macau weathered the cruel fall of the economy of the Casino industry in 2014—which did not destabilize Macau. Macau’s society has a better knowledge of the social philosophy which is the acceptation of the ups and downs of the economy, but also personal or familial ups and downs.

Macau SAR and Zhuhai SEZ The historical legacy of Macau—some 500 years of history—as an original paradigm of early globalization, plays a significant role. Macau is one of the world’s largest gaming centers. Except small casinos in Yunnan, Macau is only place in China where casinos are legal, and gaming-related taxes account for about 80 percent of government revenue. Traffic from the mainland decreased as a result of the PRC’s high-profile 2013 anticorruption campaign but rebounded in 2017. High-end patrons still account for more than half of the gambling revenue, but less wealthy visitors are seen as crucial to future growth. Government efforts to encourage economic diversification face formidable constraints. Table 5.4 compares the origin of the visitors to Hong Kong and Macau SARs.

42,778,145 Not applicable Not significant 2,011,428 1,392,367 1,0.092,329 535,542 594,615 674,006 791,171 464,406 372,435 1,211,539 551,930 369,363 575,812 56,654,903

2016 44,445,259 Not applicable Not significant 2,010,755 1,487,670 1,230,010 516,701 560,507 627,612 894,489 482,022 392,853 1,215,629 555,353 370,335 567,881 58,472,157

2017

Hong Kong

51,038,230 Not applicable Not significant 1,925,234 1,421,411 1,287,773 510,601 571,606 610,508 894,821 427,007 386,681 1,304,232 572,739 377,992 580,167 65,174,555

2018 20,45,000 6,420,000 Not applicable 1,075,000 662,000 310,000 223,000 263,000 156,000 287,025 182,476 165,278 190,885 61,301 Not significant 93,286 30,242,567

2016 22,196,000 6,165,000 Not applicable 1,060,000 847,000 329,000 218,000 198,000 143,000 307,139 197,139 148,121 186,378 57,121 Not significant 88, 988 31,917,187

2017

Macau

25,260,556 6,327,925 Not applicable 1,060,107 812,842 325,798 227,845 181,379 134,840 312,072 173,836 147,870 208,810 58,319 Not significant 90,914 35,803,663

2018

Source: Government of Macao Special Administrative Region Statistics and Census Statistics, https://www.dsec.gov.mo/Statistic.aspx?NodeGuid=251baebb6e5b-4452-8ad1-7768eafc99ed; Visitor Arrival Statistics, Hong Kong Tourism Board, https://partnernet.hktb.com/filemanager/intranet/pm/ VisitorArrivalStatistics/ViS_Stat_E/VisE_2018/Tourism%20Statistics%2012%202018_R1.pdf

Mainland Hong Kong Macau Taiwan Korea Japan Malaysia Thailand Singapore Philippines Indonesia India USA Britain Canada Australia Total

Country

Table 5.4  Main visitors to Hong Kong and Macau in 2016, 2017 and 2018

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Macau also has faced challenges. Following a fast and unprecedented economic growth crosses between 1999 and 2014, an economic decline occurred in 2014 for the first time since its return to China, but still with a demand of globalization. Macau is in fact an earlier pioneer of globalization: Asia, Europe and America to trade silk and import silver from Mexico in the seventeenth century (Berlie 2012: 11–65). However, in 2018 it continues to diversify the Casino economy called gaming industry, and the long relationship with the Lusophone world is still present culturally, but not economically. Macau must be mobilized to face with advantages the inevitability of a global world-system cored by the selective gathering of historical world-economies in a new universal economy (Institute of European Studies of Macau 2006: 3). Pansy Ho Chiu-King, a Chevalier of the French Legion of Honor, has publicly emerged as Stanley Ho heir-apparent. She has shareholdings in the Sociedade de Jogos de Macau (SJM Holdings) and Macau MGM Company (29 percent). She believes sincerely in the successful development of the Greater Bay Area (personal interview on the launching day of the France Macau Chamber of Commerce (FMCC) on October 13, 2017). A few months after promoting the Greater Bay Area allied with Henry Fok she managed to control 53  percent of the Sociedade de Turismo e Diversoes de Macau (STDM) which owns 54  percent of the SJM. SJM is the main Casino holding in Macau (JTM, January 25, 2019: 5). The promotion of the Greater Bay Area by Madam Pansy Ho is evident and shows progress for the Belt and Road Initiative in Macau. Concerning the advantages of Macau SAR, it is sure that Jorge Neto Valente, the President of the Lawyers association of the MSAR, is right when he wants to promote the question of the Lusophone world and local arbitration. For commercial arbitration and in particular the question of investor-State the confidentiality is an important advantage of the arbitral process. So Macau which relies too much on Hong Kong’s arbitration has to do more. The Law Department of Macau University wants to promote each year the United Nations-UMAC’s UNCITRAL Conference at the end of the year (December); which is useful for the promotion of MSAR and the question of arbitration development. As UNCITRAL 2017, the next UNCITRAL 2019 will certainly be an important one with the participation of cadres of the Commission on International Trade Law coming from Vienna to Macau. Understanding associations is essential to learn how Chinese business works, and this is also important to develop the Greater Bay Area and more generally the Belt and Road Initiative which is

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Chinese. For the development of the Greater Bay Area, Chinese associations are also essential. “Associations are the roots of social life, improve the well-being of the society of Macau, maintain a close relationship with the mainland, and are essential in developing MSAR’s complex economy. Almost every day a page of the Aomen Ribao is dedicated to Macau associations” (Berlie 2012: 124, 127). The main link of Macau with the Greater Bay Area is Zhuhai SEZ and Zhongshan. The Macau Zhongshan Association (Aomen Zhongshan Tongxianghui) is particularly active, so Zhongshan, from where many Chinese of Macau come from, is a cultural marker for Chinese of Macau identity and, since the handover of Macau to China, the cadres of Zhongshan district have wisely promoted Zhongshan to Macau people, using all possible means of communication: media, television, newspapers, radio and even the internet. This link is ignored in Beijing and will certainly beneficiate to the development of the GBA. In recent years Chinese of Macau have been buying property in Zhongshan as well as in nearby Zhuhai SEZ. The constant improvement of communication has been significant in recent years and will continue to accelerate the relationship between the MSAR and Guangdong Province. The investment in infrastructure which increased after Deng Xiaoping’s reforms in the 1990s will continue on the banner of Greater Bay Area. Zhuhai’s long coastline, is one of the longest among the Greater Bay Area cities; it gives a good geomancy to this liveable city. As a manufacturing city, the SEZ’s innovation, technology and biopharma are its best known industrial assets. The main universities of Guangzhou have branches in Zhuhai.

The World’s Longest Bridge Over Sea, Xi Jinping’s Visit to Guangdong Province and Zhuhai The Bridge Hong Kong-Zhuhai-Macau The project started in 2009, constructions on the Hong Kong section of the Hong Kong-Zhuhai-Macau Bridge started in 2011, and the main tunnel was completed in February 2018. The engineer Naeem Hussein, in charge of this mega project by Arup firm, said: it is “something unique that nobody had done before … The cable-stayed design was chosen because it was the most economical” (SCMP, October 21, 2018). “Hong Kong has so far committed to contributing about HK$10.7  billion (US$1.38 billion), or 43 percent, of the main bridge’s construction cost”

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(SCPM, April 5, 2018). However, local officials will also end up spending another HK$110 billion to build the city’s connection to the main bridge, but now Hong Kong is much closer from Zhuhai with the mega bridge, transport will be largely facilitated after its opening in October 2019. The Hong Kong-Zhuhai-Macau bridge is a symbolic preliminary spectacular accomplishment to promote the Greater Area Bay and Belt and Road Initiative. The bridge was inaugurated in Zhuhai SEZ, on October 23, 2018, under the patronage of President Xi Jinping to fulfill China’s “dreams” and “confidence,” as “a symbol of Chinese ambition and innovation to achieve greater national integration.” For the inauguration of this Hong Kong-Zhuhai-Macau Bridge, on the artificial island in Zhuhai were invited the Hong Kong Chief Executive Carrie Lam Cheng Yuet-­ ngor, the Chief Executive of Macau, Fernando Chui Sai-on, Vice-Premier Han Zheng, and the first Hong Kong Chief Executive Tung Chee-hwa. China has become the most expert country on man-made constructions, and Zhuhai has one of the most sophisticated artificial island for the new bridge and tunnel. Concrete blocks placed around edges of this artificial island for protection have to be secured, the Highways Department said it would “keep communicating with the authority and monitor” concerning the main bridge works to ensure that “its quality meets the relevant requirements” (SCMP, April 5, 2018). Xi Jinping On the day before, President Xi returned to Guangdong Province as a reminiscent of Deng Xiaoping’s visit in 1992, as we already noted, to launch his reforms; it included for President Xi: Qingyuan, in the north of the province, “to inspect poverty alleviation work”; Guangdong is China’s richest province but there are still 2277 villages and 1.76 million people there that are considered to be “relatively poor.” President Xi visited also Jinan University in Guangzhou and according to South China Morning Post spent time in Qianhai, close to Shenzhen “to develop closer ties between the mainland and Hong Kong” in industrial innovation. In Zhuhai, he visited also the headquarters of Gree Electric Appliances, a multinational enterprise with 70,000 employees which grew 46 percent despite the recession in 2008 (SCMP, October 24 and 25, 2018). Two days later, on October 24, Zhuhai’s residents and transport companies benefited from this new infrastructure and went to Hong Kong in around 30 minutes. The giant bridge includes three beautiful bridges,

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tunnels and two artificial islands including the island where the inauguration took place. It should be noted that in the past, Hong Kong was rather remote from Zhuhai, and some five hours travel was required to link these two cities.

Finance, Currencies and Belt and Road Short Comparison with the US Globalization and the Mega Bridge Globalization could be a source of anxiety. Economists “worry whether deregulation produce greater wealth at the price of increased inequality” (Beck 2000: 153). “Political scientists worry that their field might vanish along with their favorite object, the nation-state, if globalization creates a world without borders” (Appadurai 2001: 1). It is sure that on September 20, 2017, the fall of the US dollar was not a minor event. The rate of interest was immediately increased to try to limit this important event in money exchange. It is too early to completely analyze these economic events indirectly related to the Belt and Road Initiative. In 2018 there was fear of a “trade war.” US targeted import taxes took effect from September 24, starting at 10 percent and increasing to 25 percent from the start of March 2019 unless the two countries agree a deal. The result was a depreciation of the Euro and more consequently a devaluation of the Renminbi (RMB). Following the devaluation of the Renminbi, on November 1, 2018, “Donald Trump and Xi Jinping have ‘good conversation’ about trade war ahead of G20 meeting, both leaders have confirmed the phone call, with Trump calling it a ‘good conversation’ and Xi saying differences must be resolved” (SCMP, November 2, 2018). Already about arbitration, which is an important question, disputes between mainland and HKSAR could be naturally solved by lawyers-­ arbitrators. Dispute resolution becomes sometimes necessary. Companies in both cities, Hong Kong and Shenzhen, are sometimes obliged to resolve their disputes by arbitration or mediation; the lawyer-arbitrators of Hong Kong travel relatively often in Guangdong Province and even further in the mainland. These arbitrators were in Hong Kong originally trained under the British Common Law, which has the advantage of being more international. For example, the penalties on delays which occurred on the mega Hong-Kong-Zhuhai-Macau bridge will be solved in 2019 and like the Macau Light Rapid Transit (MLRT) of Macau, could lead to arbitration. “China’s entry into the World Trade Organization in 2001

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was a transformational moment in the global economy—the beginning of a new era of globalization. But now there’s a popular backlash against [China’s] globalization in the West. What happened?” And what comes next? (Charlene Barshefsky, Wall Street Journal May 22, 2017). American and western globalization and trade are global with the internet. China’s Belt and Road has to fit with this international globalization, but we do not know how and when these two globalizations will be adjusted. In the Greater Bay Area, we will see. At the level of Guangdong, Hong Kong, Macau and the Greater Bay Area, the mega bridge linking them now was opened to public on October 24, 2018, and this was only officially announced by the three governments [Hong Kong, Macau and Zhuhai] five days before its opening. However, the first day, “from 9 am until 10 pm on Wednesday, the bridge authority recorded a total of 2,305 vehicular trips, of which 1,340 were bound for Zhuhai or Macau while 965 went to Hong Kong. Among the vehicles, 1,154 were private cars, 1,120 were shuttle buses or cross-border coaches and [only] 31 were goods vehicles … It will not reach the government’s original; estimation of 9,000 to 14,000 vehicles using it each day” (SCMP, October 25, 2018). The quickest access near Tai Ho on Lantau Island, will shorten traveling time to the Hong Kong Port, but needs some time to be fully operational. This may affect the traffic flow on the bridge for some time. We have to be realist and say that “at a meeting between representatives of local bus operators, logistics companies, government departments, academics and the operator, many argued that the government should cover part of the cost of cross-border shuttle and bus services in order to make using the bridge more attractive to travelers” (Verdict 2018). The bridge passed well its first real test in October 2018. On December 12, 2018, 100,000 mainland Chinese tourists crossed the mega bridge on a single day trip (Channel NewAsia). In 2019, this number is not anymore the record number.

Conclusion The Chinese of Hong Kong do not fully accept the concept of the Greater Bay Area (GBA) associated with the Belt and Road Initiative. Nevertheless it is useful to note that the Pearl River Delta’s central administrative power and industrial heart, the huge and more densely populated part of Guangdong Province is now more closely associated with Hong Kong and Macau SARs with the new mega bridge. The general integration in the GBA is difficult because the Greater Bay Area has a minimum number of

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three main legal systems: China’s legal system based in Beijing, Hong Kong SAR legal system and Macau SAR legal system, without mentioning the particular case of the Special Economic Zones. The GBA, through Hong Kong has assimilated western knowhow, British modern management and the rule of law. In Macau the link with the Lusophone countries always played a historical role. As before, the Pearl River Delta (PRD), and now the GBA, has to find new strategies to retain rural laborers, both within and beyond Guangdong, this is valid today with the current trade war going on. All that coincides with a new wave of globalization … Certainly, in a few years, the Greater Bay Area will contribute to the development of the Belt and Road Initiative.

Annex: Names of SOEs in Guangdong Province The following SOEs are present among others in Guangdong Province: Air China 中國國航, Bank of China 中國銀行, Bank of Communications交通 銀行, China Aviation Supplies Holding Company (CAS) 中国航空器材集 团公司, China Citic Bank 中信銀行, China COSCO Shipping Corporation Limited 中国远洋海运集, China Guangdong Nuclear Power Holding Co. (CGNPC) 中国广核集团, China National Aviation Fuel Group Corporation (CNAF) 中国航空油料集团公司, China Railway Engineering Corporation Group (CRECG) 中国铁路工程总公司, China Railway Group 中國中铁, China Railway Signal & Communication Corporation (CRSC) 中国铁路 通信信号集团公司, China Southern Air Holding Company (CSAH) 中国 南方航空集团公司, China TravelSky Holding Company (TravelSky) 中国 民航信息集团公司, China Telecommunications Corporation (China Telecom) 中国电信集团公, Dongfang Electric Corporation (DEC) 中国东 方电气集团, Guangdong Heng Jian Investment Holding (Local Government-dependant) 广东恒健投资控股, Guangdong Investment 粤 海投资, Guangdong Provincial Communication Group (Local Government-dependant) 广东省交通团, Rising Asset Management 广东 省广晟资产经营 (Local Government-­dependant), Guangzhou Automobile Industry Group 广州汽车通团, Guangzhou Shipyard International 广州广 船国际股份集团, Guangzhou Zhujiang Brewery Group 广州珠江啤酒, Industrial Bank (Local Government-dependant) 广州广船 国际股份集团, Rising Nonferrous Metals Share (Local Government-dependant) 广晟有 色, Shaoguan Iron and Steel Group (49 percent) (Local Governmentdependant) 中国韶关铁钢集团, Zhongjin Lingnan (36.04 percent) (local Government-­dependant) 中金嶺南 (SOE List n.d.).

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References Appadurai, Arjun, ed. 2001. Globalization. London: Duke University Press. Beck, Ulrich. 2000. What Is Globalization? Cambridge: Cambridge University Press. Berlie, Jean A. 2012. The Chinese of Macau: A Decade After the Handover. Hong Kong: Proverse. Cheang, Miles, et  al. 2008. Transportation Investment in Rapidly Urbanizing China: Best Practices for Supporting Balanced Regional Economic Returns. In Transportation and Development Innovative Best Practices 2008: Proceedings of the First International Symposium Beijing, ed. Louis F.  Cohn, 27–32. Reston: ASCE. Chen Li. 2015. China’s Centralized Industrial Order: Industrial Reform and the Rise of Centrally Controlled Big Business. London and New York: Routledge. Feasel, Edward M. 2018. Challenges Confronting Globalization. In Exports, Trade Policy and Economic Growth in Eras of Globalization, ed. E.M.  Feasel, 190–213. London and New York: Routledge. Greater Bay Area (GBA): (The) Greater Bay Area. 2017. Accessed October 12, 2018. https://www.chamber.org.hk/FileUpload/201710040918418786/ The-greater-bay-area-initiative_EN.pdf; Greater Bay Area 2014–2018: Craig Shute. 2014. Hong Kong’s Stepped-Up Integration with Pearl River Delta (Greater Bay Area). South China Morning Post, October 24, 2014. (The) Guardian. 2015. Accessed October 4, 2018. https://www.theguardian. com/cities/2015/jan/28/china-pearl-river-delta-overtake-tokyo-world-largest-megacity-urban-are. Gunn, Geoffrey C. 2012. Foreword. In The Chinese of Macau: A Decade After the Handover, ed. J.A. Berlie, 11–30. Hong Kong: Proverse. Guo, Shiping, ed. 2018. Yuegangao dawanqu. Guihua he quanqiu dingwei (Guangdong Hong Kong Macau Greater Bay Area. Project and Global Perspective). Guangzhou: SPM. Index of Economic Freedom. 2019. [PDF]. Accessed February 1, 2019. https:// www.heritage.org/index/country/hongkong. Institute of European Studies of Macau. 2006. Macau in the Crossroads of Globalization Between Asia and Europe. Accessed January 28, 2019. https:// www.researchgate.net/profile/Ivo_De_Sousa/publication/326318325_ MACAU_IN_THE_CROSSROADS_OF_GLOBALIZATION_BETWEEN_ ASIA_AND_EUROPE/links/5b45bbccaca272dc385f91a1/ MACAU-IN-THE-CROSSROADS-OF-GLOBALIZATION-BETWEENASIA-ANDEUROPE.pdf?origin=publication_detail. Investing. 2018. (SCMP): The Greater Bay Area. Accessed October 4, 2018. http://www.scmp.com/property/hong-kong-china/article/1625828/timeplan-hks-stepped-integration-pearl-river-delta.

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Kenwood, A., and A. Lougheerd. 1971. The Growth of the International Economy 1820–1960. Albany, NY: State University of New York Press. Lam, Jermain. June 2002. Globalization and Fiscal Management in Hong Kong. New Zealand Journal of Asian Studies 4–1, 62–83. Accessed January 28, 2019. http://www.nzasia.org.nz/downloads/NZJAS-June02/Lam.pdf. Lin, George C.S. 1997. Red Capitalism in South China: Growth and Development of the Pearl River Delta. Vancouver: UBC Press. Macau. Agosto 2018. Ponte HK-Zhuhai-Macau, Serie IV, Nr 63. Shenzhen. 2018. Accessed October 23, 2018. https://technode.com/2018/04/11/ gionee-layoffs/. SOE List. n.d. Accessed October 15, 2018. https://ipfs.io/ipfs/ QmXoypizjW3WknFiJnKLwHCnL72vedxjQkDDP1mXWo6uco/wiki/ List_of_State-owned_enterprises_in_China.html. State-Owned Enterprises (SOEs). 2017. Accessed October 15, 2018. https:// www.export.gov/article?id=China-State-Owned-Enterprises; https://cloudfront.ualberta.ca/-/media/china/media-gallery/research/policy-papers/soepaper1-2018.pdf. Tong Io Cheng. 2012. The Basic Law and the Chinese of Macau. In The Chinese of Macau a Decade After the Handover, ed. J.A.  Berlie, 66–84. Hong Kong: Proverse. Verdict. 2018. Accessed October 25, 2018. https://www.verdict.co.uk/hongkong-zhuhai-macau-bridge/. World Bank. 2016. Accessed October 4, 2018. http://www.worldbank.org/en/ results/2016/05/26/cleaning-up-china-polluted-pearl-river; and https:// www.worldbank.org/en/who-we-are/ibrd. Zhang, Q., and B. Felmingham. 2002. The Role of FDI, Exports and Spillover Effects in the Regional Development of China. The Journal of Development Studies 38 (4): 157–178.

CHAPTER 6

China’s Development of Public Goods in the South China Sea Islands Zhang Mingliang

Abstract  It is necessary for China to offer more public goods meaning more facilities available to all nations and peoples coming in the South China Sea (SCS) to help secure peace, stability and freedom of navigation in the South China Sea. Arbitration, an important question for the South China Sea and the Belt and Road Initiative (BRI), is discussed. This chapter shows a positive view of China in the Paracel and Spratly Islands, but does not forget to point out the slow implementation of the development of public goods, the services useful for the seamen entering in a contested region of the world. Keywords  ASEAN • Arbitration • Development • Public goods • South China Sea (SCS)

Z. Mingliang (*) Institute of South East Asia Studies, Jinan University, Guangzhou, China School of International Studies, Guangzhou, China © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_6

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Introduction As China builds infrastructure on its islands in the South China Sea (SCS), it will offer public goods that will contribute to maritime search and rescue, navigation safety, ocean science and research, and other services which are needed in the South China Sea (SCS). The opportunity for China to take more responsibility in the SCS should be viewed as a good national chance to provide public service; China’s intention and capability in offering public goods in the SCS must be discussed. China has frequently emphasized its international responsibilities and obligations in the SCS, and the country had to respond to suspicion toward its massive construction works in the Spratly Islands (Nansha Islands). During the process of construction work in these islands, China publicly and unequivocally declared that its intention was to fulfill its international responsibilities and obligations. China will be rewarded for providing public goods in the South China Sea. The SCS has a critical importance for China and other countries and remains a particularly dangerous sea from a seaman viewpoint. In recent years, there has been growing misunderstanding and misperceptions from the international community concerning China’s SCS policy. As a result, SCS cooperation between China and some ASEAN countries has been affected in the last few years, and there is no clear resolution on how to solve disputes in the SCS. The importance of the SCS for China and other countries is obvious, so it seems that public goods in the SCS are also important. Starting with China’s Belt and Road Initiative (BRI), ASEAN is not always positive concerning this important question. Unfortunately, tensions in the SCS continue to generate negative implications for China’s Belt and Road Initiative. China’s military superiority in the SCS is well established after its massive building works there. Confrontations between China and other states in the SCS are now more frequent than ever before. Lastly, there are tensions between China rejecting arbitration and ASEAN states preferring arbitration over their territorial claims in the SCS. In China’s artificial islands in the Spratly archipelago (Nansha), China could do more to provide public goods for its neighbors in the SCS, which could be helpful for the regional community. More public goods in the SCS provided by China could lessen the suspicion toward China’s construction projects there. China’s works and efforts to fulfill its international responsibilities and obligations in the South China Sea could be considered one of the best solutions to resolve SCS disputes. There could be many approaches for China to meet its responsibilities in the SCS. One of the best approaches for China to contribute to the resolu-

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tion of SCS disputes is hosting disaster relief exercises in its waters around China’s controlled artificial islands in the SCS. China did it in Malaysian waters in 2015 and with Singapore in 2018 (People’s Daily Online, June 1, 2015; Lim Min Zhang, August 3, 2018). Preparing drill exercises in disaster relief as soon as possible will be helpful for China in the SCS. It is necessary to discuss the possibility for China to provide more public goods in the SCS as China’s motives have been questioned. China’s militarization of the SCS is mentioned often in the academic field, but little research has been done to scrutinize China’s efforts to provide public goods for the regional and international community in the Spratly Islands and its positive implications. The military aspect of China’s construction works in the Spratly Islands has alarmed officials and specialists from other nations. Not only officials from other countries, but also researchers on SCS issues have deep concerns regarding the military implications of China’s construction work in the SCS (Huong Le Thu, May 3, 2017).

China’s Political Will to Provide Public Goods in the SCS China has frequently and clearly demonstrated its political will to offer public goods to the international community in its facilities in the Spratly Islands. However, due to its military involvement in these islands, China’s work was questioned and criticized by other nations and by experts on the SCS.  The first time that China made a public statement regarding its intention to offer public service in the SCS was in April 2015 during the news briefing by China Foreign Ministry Spokesperson Hua Chunying. China publicly said that one of its main purposes in carrying out construction work on the garrisoned islands and reefs was for the purpose of “better performing China’s international responsibility and obligation in maritime search and rescue, disaster prevention and mitigation, marine science and research, meteorological observation, environmental protection, navigation safety, fishery production service and other areas” (Hua Chunying, April 9, 2015a). Before that public statement on the objectives of its massive construction projects, China only safeguarded its sovereignty over the islands in the SCS when it had to respond to speculation about Chinese construction on those islands and reefs. Moreover “the extent to which claimant states have delimited marine areas to promote sound management in the Spratly Region” is unclear (Prescott 1999: 44).

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China began its construction work in the Spratly Islands in 2014. Before starting these massive construction works, China did not publicize its aims for those works. When China had to defend its work, China did not proclaim its international responsibility and obligation in the SCS until April 9, 2015. China has made notable contributions to public goods in the SCS since the late 1980s. China considers its efforts in the Spratly Islands since 1987 as an example of fulfilling its international responsibilities and obligations in the SCS. “In February 1987, the 14th Session of the Assembly of the Intergovernmental Oceanographic Commission (IOC) at the UNESCO in Paris, France, adopted a global sea level observing plan, entrusting the Chinese side with the building of five out of the 200 ocean observation stations across the world, including those on the Nansha Islands” (Hua Chunying, March 8, 2015b). Additionally, China’s public clarification for the scale of its construction is that “the scale of China’s construction work should be commensurate with its responsibility and obligation as a major country to meet actual needs” (ibid.). The Foreign Ministry provided more details regarding China’s intention to offer more public goods through its artificial islands in the South China Sea. Ouyang Yujing (欧阳玉靖), director-general of the Chinese Foreign Ministry’s Department of Boundary and Ocean Affairs, told Xinhua News Agency and China Daily in May 2015 that, “China is a big country that shoulders more international responsibilities and obligations,” when China’s construction work on some garrisoned islands and reefs on the Nansha Islands had been frequently questioned. According to Ouyang Yujing, those responsibilities include “search and rescue, disaster prevention and mitigation, meteorological observation, ecological conservation, navigation safety and fishery services.” Construction work by China on the Spratly Islands is designed to “provide better services for the ships of China, its neighbors and other countries whose ships and boats pass through the South China Sea.” Furthermore, construction and maintenance of facilities on China’s garrisoned islands and reefs will facilitate joint response to challenges on the sea and provide safety of navigation (Zhang Yunbi, May 2015). In addition to the Foreign Ministry of China, other branches of China’s government have also reiterated China’s international responsibility in the Spratly Islands of the SCS.  For instance, according to one senior official from the Ministry of Transport, the construction and use of five lighthouses demonstrate China’s efforts to ­perform its international responsibilities and will contribute to navigation safety, maritime search and rescue, navigation safety, fishery production,

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disaster prevention and relief and other services (Xinhua Agency, June 11, 2016). The deputy director of the Hainan Maritime Safety Administration expressed a similar view by saying: “The increasing presence of China’s lighthouses and rescue facilities will provide better conditions for China to shoulder its international responsibilities and obligations to conduct maritime search and rescue, disaster relief and ocean ecology protection” (People’s Daily Online, June 7, 2016). The latest official statement regarding China’s intention to improve the provision of public goods in the South China Sea was released on April 24, 2018. China voiced that “it could better fulfill its international responsibilities and obligations, provide more public goods to the international community, and help to safeguard the security of the South China Sea navigation channels which are vital to the development of China and regional countries” (Lu Kang 2018). Since China’s first public statement regarding its determination to offer public services in the South China Sea, the Chinese Foreign Ministry spokesperson has repeatedly stressed this point. It is expected that China will continue to publically repeat its intention to offer public goods in the SCS when it has to justify its works in the Spratly Islands. Unfortunately, China has never told the world its timetable to promote its intention for public goods. Making promises without activities to support them would lead to more suspicion toward China’s work, hurt China’s international image and produce negative implications for China’s ties with other countries.

More Facilities and Increasing Capabilities for Public Service in SCS China’s capability to offer public services in the South China Sea is increasing as it develops more facilities in the Spratly Islands. China’s ability to offer public goods in the SCS is more efficient than others because China has more facilities there since its construction work in 2014 and after. Before the operation of China’s lighthouses in the Spratly Islands in 2015 and 2016, China did little to offer public goods in the SCS. At present, no state has more facilities in the SCS, including lighthouses, than China. The chance for China to offer public service in the South China Sea came in 1987 when United Nations Educational, Scientific and Cultural Organization (UNESCO) asked China to build marine weather stations there. China built the first marine weather station in the Spratly Islands,

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which began operation on Fiery Cross Reef (Yongshu Jiao) in 1988. Since then, China’s abilities for public service have been increasing. China has begun to provide reliable maritime security services for both domestic and international vessels sailing through the SCS and has made an essential contribution to international disaster relief and oceanic weather research (Baldor 2018). China’s ability to offer public goods in the SCS sharply increased in 2015 when finishing some new facilities. The following are just some examples: The lighthouses in the Spratly Islands that were built by China from 2015 to 2016 are essential for the safety of maritime navigation in the SCS and should be viewed as part of the public goods provided by China in that region. On the one hand, the lighthouses are important for China and the world. On the other hand, there is still a shortage of public goods in the SCS. China’s lighthouses in the Spratly Islands could contribute to the security of vessels passing through these waters, while other Chinese facilities in the Spratly Islands, which have been frequently criticized as military by America and other countries, also could be considered public goods in the SCS. One of China’s senior officials from the maritime affairs department under the Ministry of Transport said in June 2016 when four lighthouses had been placed in operation by China in the Spratly Islands that the Chinese lighthouses there had significantly improved the security of vessels passing through the waters around them. China’s lighthouses in the Spratly Islands, equipped with substantial modern rotating lanterns with a diameter of 4.5 meters, are large and multi-functional. The lanterns on the lighthouses, with their heights from 50 to 55 meters, can send a white beam of light as far as 22 nautical miles. With the help of equipment such as automatic identification system (AIS) and very high frequency (VHF) communication on them, China’s lighthouses can work as radio beacons to assist ships with information exchanges, such as warnings and requests for help between the lighthouses and the ships (Xinhua Agency, June 11, 2016). Unfortunately, despite the reports in China’s media, there are almost no foreign reports or studies covering the positive implications of China’s lighthouses for the safety of navigation in the SCS. Xinhua news agency reported in 2015 that China would build lighthouses on Cuarteron, Subi and Johnson South Reefs. May 26, 2015, “witnessed the ground-breaking of construction of the 50-meter-high cylindrical Huayang (Cuarteron) and cone-cylindrical Chigua (Johnson South) Lighthouses with reinforced concrete structures, a light range of 22 nautical miles and a glowing cycle of 8 seconds” (Xinhua Agency,

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October 9, 2015). On October 9, 2015, “a completion ceremony for the construction of Huayang and Chigua Lighthouses on Huayang Reef of China’s Nansha Islands, marking the start of the operation of these two lighthouses,” was held (Xinhua Agency, October 9, 2015). In April 2016 the completion ceremony marking the start of operations of the 55-meter (180-ft) high lighthouse on Subi Reef (Zhubi Jiao) was held by China’s transport ministry (The Straits Times, April 7, 2016). According to China’s state news agency Xinhua, the construction for the lighthouse on Subi Reef began in October 2015. Subi Reef is an artificial island that was built up from 2014 to 2015 by China with dredged-up sand. Before China turned it into an island, Subi Reef was submerged at high tide. “Xinhua said the lighthouse, emitting a white light at night, can provide efficient navigation services such as positioning reference, route guidance and navigation safety information to ships, which can improve navigation management and emergency response. Asked about the lighthouse, the Foreign Ministry spokesman said China was dedicated to providing public services in the South China Sea to ensure safety and freedom of navigation, which would be helpful for commercial users of the waters” (Reuters, April 6, 2016). There are four lighthouses in operation by China in the Spratly Islands, though there could be five lighthouses. According to Xinhua’s report in June 2016, China had completed the construction of four lighthouses on reefs in the South China Sea and is building a fifth one to aid sea navigation in the area. The four lighthouses on Cuarteron (Huayang) Reef, Johnson (Chigua) Reef, Subi (Zhubi) Reef and Fiery Cross (Yongshu) Reef are already in operation, while the fifth is in the process of construction on Mischief (Meiji) Reef. It was announced in June 2016 that the main part of construction of this lighthouse was finished and further information would be released via navigation announcement (Xinhua Agency, June 11, 2016). Nevertheless, as of 2018 there has been no public report about China’s fifth lighthouse in the Spratly Islands. In addition to lighthouses, China’s hospital in Fiery Cross Reef also could increase China’s abilities to offer public services to the regional and international community. Construction of the high-level hospital on that reef started in November 2015, and it began operations after its launch in July 2016. Before this hospital was built, patients needing emergency medical treatment had to be transferred by air to Sanya, Hainan Province. It is reported that it is no longer difficult for people on the Spratly Islands to seek medical help. “With gradual improvement, a comprehensive and modern medical treatment platform means better and more convenient

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medical treatment available for merchant ships, fishermen and soldiers stationed on the Nansha Islands” (People’s Daily Online, November 24, 2016). As of 2018, there has been no report of medical treatment of foreigners in the Yongshu (Fiery Cross Reef). Is it possible for this hospital to provide medical help for foreigners, if China agrees to fulfill its proclaimed international responsibility and obligation? Foreigners living or working on the Spratly Islands or passing by may also need medical treatment. The Yongshu Hospital can now offer medical care to residents and migrant workers in the Spratly Islands as well as to sailors aboard merchant vessels passing through the South China Sea. Professor Zhou Wei of Hainan University, an expert in international relations and the SCS, stated: “The hospital will benefit local residents, Chinese and foreign fishermen and merchant vessels in the surrounding waterway. It shows China’s role as a responsible nation. It will also help boost China’s public service in the South China Sea, promote international cooperation with surrounding countries and regions and safeguard navigation in the South China Sea” (China Daily, November 25, 2016). The lighthouses and hospital in the Spratly Islands are all new facilities built by China, but these are only a few of its facilities. In addition, China has built up ports, airstrips and other structures that could be used to offer public services for all those in need. China’s construction or improvement of facilities in the Spratly Islands could be “conductive to maritime rescue and search, natural disaster relief, scientific research, meteorological services, environmental protection, navigation safety, and services for the fishing industry, which benefit not only China but also the international community” (Baldor 2018). China’s approach to disaster relief has evolved: “China has built a well-oiled machine to deal with various types of natural disasters and other emergencies. In the process, the government’s attitude toward the outside world has evolved from distrustful and confrontational to open and cooperative, gradually accommodating itself to prevailing international norms and standards in disaster management” (Springer: Evolvement of Disaster Management Practices in China n.d.). Unfortunately, China’s contributions to public service in the South China Sea have been overlooked, and its determination to deliver public goods in the SCS has been questioned and criticized. Usually, China has been accused of militarizing the SCS region by building artificial islands on Chinese-controlled reefs, setting up military facilities and deploying weapons on them (DNI 2016). For those who criticize China’s military involvement in the Spratly Islands, the public goods in the SCS have been

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ignored. However, in fact China has done few things to support its promise to provide public services in the SCS.  Moreover, China’s pledges of public service in the SCS are contradicted by its actions (Ordaniel 2015). Foreign officials, think tanks and news agencies keep attention focused on China’s offensive and defensive facilities in the Spratly Islands, which have been viewed as greatly improving China’s capability to project military power (Defense Intelligence Agency 2019). American officials, politicians in Congress and think tanks continue to be concerned over China’s militarization of the South China Sea. In the last few years, top officials from America’s military and diplomatic branches frequently and sharply criticized China’s actions in the SCS.  In July 2018, the Secretary of Defense Jim Mattis accused China of “intimidation and coercion” by placing weapons on the man-made islands in the Spratly Islands (Baldor 2018). In 2016 America’s former director of national intelligence, James Clapper, wrote a letter to Senator John McCain providing an assessment of China’s progress on construction works in the Spratly Islands. In 2015 one of the famous think tanks in America, the Center of Strategy and International Studies (CSIS), founded the Asia Maritime Transparency Initiative (AMTI), which mainly focuses on China’s policy and works in the SCS. AMTI’s reports about China’s work in the SCS usually focus on China’s military buildup. For example, AMTI’s update on June 29, 2017, reported the major construction of military and dual-use infrastructure on the Spratly Islands’ “Big 3”—Subi, Mischief and Fiery Cross Reefs (AMTI, June 29, 2017a).

Code of Conduct and Cooperation in the South China Sea The concept for a Code of Conduct (COC) for the South China Sea was first proposed in the 1990s. Good intentions for cooperation exist, but they are not enough. Since August 4, 2002, ASEAN states and China are working together on a Code of Conduct for the South China Sea, and the second round for negotiations concerning this Code of Conduct started in 2013. In 2016 tensions appeared between China and ASEAN, but have calmed down “since the 19th ASEAN-China Joint Working Group on Implementation of the Declaration of Conduct in the South China Sea” (Lee 2017). There are “attempts to enforce the Declaration of the Conduct of Parties in the South China Sea and the corollary quest for a

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binding COC in the South China Sea” (Nguyen and Jenner 2016: 140, 148). China and ASEAN had no binding agreement whatsoever for a COC in the SCS, but since 2017 the possibilities for cooperation in the SCS have been progressing without real success. In 2018 a non-binding agreement for a COC was proposed by Singapore as the chair-state for ASEAN and accepted by China. There is a preliminary agreement between ASEAN and China on a single text as a basis to negotiate a final COC in the SCS (The Straits Times, August 3, 2018). However, to finalize a real COC, it is first necessary to secure an acceptable Declaration on the Code of Conduct (DOC). “While traditional realist theories remain powerful analytical tools, the persistent difficulties in finding practical solutions to the dispute in the South China Sea necessitate new scholarly approaches” (Nguyen and Jenner ibid.). Another example of China’s contributions in the South China Sea being overlooked is the Philippines’ response to China’s efforts to offer public services. Although China’s public services in the SCS probably benefit Filipino ships and fishermen, the Philippines still criticized China’s island-building activities in the area. After the report on the completion ceremony marking the start of operations of the lighthouse on Subi Reef, the Philippines slammed China for operating the lighthouse and charged that Beijing’s move undermines peace and stability in the region, ignoring China’s contribution to public service in the SCS, which could benefit the Philippines. A spokesperson for the Philippines’ Department of Foreign Affairs said that the Philippines government is opposed to all these actions of China. In the opinion of the Philippines, China’s actions and its efforts to assert and enforce its claim to all the area within the nine-dash-line violate the 2002 ASEAN-China Declaration on the Conduct of Parties in the South China Sea (DOC). “Nine-dash line” refers to China’s sweeping claims to territory in the South China Sea, demarcated by nine dashes on new Chinese maps. At the ASEAN Regional Forum on August 6, 2015, Chinese Foreign Minister Wang Yi said in Manila, “The Philippines knew only too well that China would never accept arbitration…, yet it insisted on pursuing the so-called arbitration with no regard to Article 4 of the DOC and its earlier agreement with China to settle dispute through bilateral channels. So why did it do this? There can be only one explanation which is trying to provoke confrontation with China. But by using such practices the Philippines cannot solve the problem once and for ever. Does it serve the fundamental interests of the Philippines and its people? I think the answer is No!” (Wang Yi 2015).

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Reducing Anti-China Sentiments and Safeguarding Common Interests If China provides more public goods in the South China Sea, it could reduce the popular suspicion and resentment toward China that result from China’s island-building activities in the SCS. Likewise, the increasing importance of the SCS could pressure China to offer more public goods to the regional and international community. China’s economic and political dependence on the SCS has increased. The importance of the SCS, the shortage of public goods there and the increasing need for more public services in the SCS are all reasons for China to offer more public services in this region. The South China Sea is a critical maritime corridor linking the Pacific and Indian Oceans and is an important fishing ground for regional fishermen. About US$5 trillion of trade passes through the SCS every year (Reuters, April 6, 2016). Maritime routes crossing the SCS are important sea lines of communication connecting China with the rest of the world. China is one of the world’s major trading countries, and many of its goods are imported or exported through the SCS (People’s Daily Online, June 8, 2015). At the same time, there is an increasing need for more public goods in the South China Sea. Some issues related to public services in the SCS, such as high traffic density, complex navigation conditions and a severe shortage of aid and response task forces have combined to imperil navigation safety and possibly hinder economic and social development in the region. According to Zhang Jie, deputy director of the Hainan Maritime Safety Administration, “The South China Sea is a crucial sea passage linking China and the world … For a long time, the limited safety protection measures for vessels and inadequate emergency response forces has restrained the economic and social development as well as navigation safety in the South China Sea.” Zhang noted that the lack of navigation facilities had often led to vessels hitting reefs and getting stranded (People’s Daily Online, June 7, 2016). Other countries in the region mistrust China’s motive for building islands and are alarmed at China’s military progress in the South China Sea. These are reasons for China to pay more attention to common interests and public goods in the SCS through its facilities in the Spratly Islands because providing more public services through its facilities in the islands could be one of the best ways to improve China’s image. The increase of massive anti-China sentiment in Vietnam in the last ten years is an example that could show the negative implications of China’s activities in the South China Sea.

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Resentment toward China in Vietnam, rooted in history, is spreading mainly because of China’s words and activities in the SCS. Anti-­China protests have erupted in Vietnam mainly resulting from the SCS issue, Vietnamese historical resentment against China does exist (Parameswaran, July 17, 2018; Thomas, June 26, 2018). According to polls, China has been viewed far less favorably than any other country (Vice, August 23, 2017). Since the first public protest against China in December 2007, it has been normal for the Vietnamese public to be angry over China’s claims in the SCS, and antiChinese sentiment could easily erupt again in Vietnam. The worst riots broke out in 2014 after China placed an oil rig in disputed waters between Vietnam and China. In 2017 diplomatic disputes, particularly in the South China Sea, exacerbated resentment (Tatarski 2017). In fact, other issues related to China may trigger resentment against China. The issue that triggered anti-China protests in June of 2018, which broke out in several cities across Vietnam, including Ho Chi Minh City and Hanoi, actually had nothing to do with China and the SCS issue (The New  York Times, June 11, 2018; South China Morning Post, June 11, 2018). However, it is impossible to discuss the background of the Vietnamese protests without reference to the SCS dispute, which has strongly intensified anti-Chinese attitudes in Vietnam (Parameswaran, July 17, 2018). Anti-China sentiments in countries around the South China Sea not only make it difficult for regional countries to strengthen relations with China but also hurt China’s reputation. A mighty wave of anti-China feelings in Vietnam and the Philippines in recent years appeared with the Belt and Road Initiative. It is the core of a new and deeper nationalism in Vietnam and the Philippines. China’s confrontation with some ASEAN states over the SCS has led to anti-China sentiments (Bill Hayton 2014: 87–88). Confrontations between China and other states have increased in the last few years. Here are just a few examples: (1) Confrontations between the Philippines and China around Scarborough Shoal and Second Thomas Shoal; (2) confrontations between Vietnam and China over the Hai Yang Shi You 981 oil platform in 2014 and others; (3) confrontations between Malaysia and China in the waters around the Luconia Shoals (in particular mid-2013) will oblige the purchase of 50 vessels for the Royal Malaysian Navy to protect its waters (East Asia, March 24, 2017); and (4) maritime skirmishes also occurred between Indonesia and China near the Natuna Islands in 2016. China’s arrest and harassment of foreign fishing vessels significantly hurt China’s image without any apparent positive outcome; it has been

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reported by news agencies around the world and criticized by other governments and academics. Before 2009, when China’s coastguard began escorting its fishing ships in the southern SCS, there was almost no reporting about China’s “official” ships harassing other country’s fishing vessels. China could not protect its fishing boats in the southern part of the SCS, and other countries often harassed Chinese fishing vessels. In Scarborough Shoal (Huanygan Dao) before April 2012 the China Coast Guard stopped the Philippine Navy from harassing Chinese fishermen and even began to harass Filipino fishermen (Viray, June 8, 2018a). In June 2018 China’s navy harassed Filipino troops conducting supply missions to Second Thomas Shoal (Ren’ai Jiao, called Ayungin Shoal in the Philippines). The Philippines quietly protested (Viray, June 6, 2018b). China’s navy started patrolling in the waters near Sarawak in mid-2013 (Laeng, The Borneo Post, June 3, 2015). In 2015 a China Coast Guard ship prevented Malay fishing ships from Miri, Malaysia, to work in South Luconia Shoals (Nankang Ansha), this was reported in Malaysia in 2015 (The Borneo Post, September 27, 2015). Luconia Shoals has two parts: the North and South Luconia Shoals. China views Luconia Shoals as part of the Nansha Islands, which are all Chinese territory, while Malaysia considers Luconia Shoals and surrounding waters as part of its territory (Noor Elina, January 8, 2016). The presence of China’s official ships in the shoals “provoked hearings in the Malaysian Parliament and repeated complaints from government officials—a minister in the Prime Minister’s Department even posted aerial photos of the ships on Facebook in June 2015, sparking outrage” in Malaysia (AMTI, April 5, 2017b; Hiebert 2017). China’s intention to provide public goods for the international community by building facilities on the islands and reefs in the South China Sea has frequently been doubted. One researcher, who examined many cases concerning the contradiction between China’s promises and its actions in the SCS, concluded that China could not be trusted (Ordaniel 2015). This conclusion is shared by many experts on China and the SCS (Goldstein, October 16, 2016). Foreign academic works on the South China Sea issue describe China’s behavior as “talk-and-take policy, creeping assertiveness, creeping invasion, or ‘strategic double speak’. Some researchers say that there exists a persistent disconnection between China’s words and actions, in many of its engagements with its neighbors” (Ordaniel 2015). Each time Beijing is confronted with these facts, it reasserts its “indisputable sovereignty” and claim over the disputed areas. Chinese actions have worsened the region’s security environment.

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Easing Tensions from Conflict Through Arbitration If China provides more public goods in the South China Sea through its facilities in the Spratly Islands, it could ease misunderstanding and resentment against China from ASEAN states, which is largely linked to China’s rejection of arbitration to resolve disputes. Diplomatic disputes between China and the majority of ASEAN member states over South China Sea arbitration happened between 2013 and 2016 while the SCS United Nations Arbitral Tribunal was still considering the case Philippines versus China. On July 12, 2016, the tribunal ruled in favor of the Philippine claims. However, China absolutely rejects arbitration over the SCS issue. This has been China’s core argument against because China views it to be against their interests and the lawfulness of China’s claim of historic rights in the vast maritime area within the nine-dash line. Nevertheless, some ASEAN member states are determined to support arbitration The SCS arbitration and its negative implications for the relations between China and ASEAN could trigger tension in the South China Sea and international relations. Defending the South China Sea Arbitration is a common task for the majority of ASEAN member states as it benefits their national interests. Implicitly defending arbitration means safeguarding the arguments in arbitration. The arbitration award results from the United Nations Convention on the Law of the Sea (UNCLOS), so defending UNCLOS while talking about the SCS issue implies defending the arbitration, as was done by Singapore in 2018. When Singapore hosted the ASEAN conference, a top official from Singapore said that the United Nations Convention on the Law of the Sea (UNCLOS) should also be strengthened, as it is “the legal framework on which both rights of navigation and claims of resources are based on” (The Straits Times, August 6, 2018). ASEAN member states such as the Philippines and Vietnam have softened their stance on arbitration, which offers major advantages for their interests. The judgment on the South China Sea, issued in 2016, by a tribunal at the Permanent Court of Arbitration in The Hague, is widely seen as a victory for the Philippines and maybe other ASEAN members over China (Khoo, October 7, 2016). On July 12, 2016, the Permanent Court of Arbitration (PCA) issued a definitive ruling. Almost no ASEAN member has publicly supported this arbitration. Sobriety concerning arbitration was advised to ASEAN states by China. President Duterte privately told his ministers to be magnanimous and not to pique Beijing (The Straits

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Times, July 15, 2016). Actually the majority of ASEAN states absolutely and strongly support arbitration and mediation, but ASEAN states’ disagreements over the South China Sea and their respective ties to China prevent ASEAN as a block from supporting arbitration, although some ASEAN states push ASEAN to publically and clearly support the award won by an ASEAN member. Before the 2016 ASEAN foreign ministers conference in Laos, the first gathering after this ruling, it was said to be necessary to issue separate statements after the verdict (Prashanth Parameswaran, July 7, 2016). It was difficult for ASEAN to issue a collective statement concerning the SCS arbitration, though the Philippines has worked hard to pressure other ASEAN members to support the arbitral ruling invalidating China’s expansive SCS claims (The Straits Times, July 14, 2016). However, ASEAN as a block could not be moved by the Philippines efforts as some ASEAN member states such as Laos and Cambodia had been urged by China not to support the Philippine proposals (ABS-CBN News, July 25, 2016). Cambodia blocked any reference to the SCS ruling against Beijing’s claims to the SCS in an ASEAN conference statement and asked to remove a previously routine phrase expressing concern about “militarization” in the SCS, which was totally aimed at China’s activities (Willemyns, July 25, 2016). As the result, the first ASEAN foreign minister’s statement after the SCS ruling didn’t contain any comments relating to SCS arbitration (Bai Tiantian, 2016). In ASEAN conferences and gatherings, the term “South China Sea arbitration” is not used. Due to certain disunity among the ten-member association, there is almost no possibility to discuss the issue of arbitration in the SCS (Mergawati Zulfakar, July 14, 2016). The Philippines’ total support for arbitration has never changed, though top officials from Duterte’s administration do not defend the arbitration award won by the Aquino administration. It was the Philippines that had asked for arbitration. For example, the physical interception by Chinese marine surveillance vessels in 2011 of a ship carrying out seismic activities under Filipino authorization at Reed Bank, and the order to stop those activities and leave the area, was a violation of the Philippines’ ­exclusive rights with respect to its continental shelf. The Arbitral Tribunal found that China’s construction activities at Mischief Reef violate the Philippines’ rights with respect to its exclusive economic zone and continental shelf, including those concerning the construction of artificial islands, installations and structures under Articles 60 and 80 of the United Nations Convention on the Law of the Sea (Oxman 2017). It could be

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concluded that President Duterte will not publicly support the arbitration. The golden age for Filipino-Chinese relations during the Duterte regime could not be long lasting as its soft stance on arbitration and the SCS issue has been frequently questioned and criticized by politicians outside the government and others who are active in Philippine politics. Vietnam has been viewed as the big winner in the SCS arbitration. “No other country stands to gain more from the ruling than Vietnam” (Zachary 2016). “Although Vietnam did not participate in the July 12 SCS arbitration, nonetheless it now finds itself on the right side of the facts and the law in its disputes with China over maritime rights in the South China Sea,” as the award of jurisdiction could greatly benefit Vietnam, Malaysia, Indonesia, Singapore and the Philippines, which “have an interest in the maintenance of freedom of navigation in the region” (Kraska 2016). Vietnam, with the help of American lawyers, has been the first state to formally question and deny China’s claims on the SCS islands and their adjacent waters. The American lawyers’ report on the SCS for Vietnam in 1995 is the pretext for the SCS arbitration in 2016. Vietnam’s reactions during the progress in arbitration reflect its future actions. “Vietnam should move swiftly, to formulate a position” (Truong-Minh and Nguyen 2016). Formally, Vietnam supported the arbitration with a statement of the Ministry of Foreign Affairs on December 5, 2014, and July 12, 2016 (Arbitration 2016). Outside Vietnam there are supporters of this arbitration. Vietnam was advised to quickly take advantage of the court’s ruling or else it might miss a chance to garner public support, but Vietnam delayed its legal stance regarding the tribunal’s judgment.

Disaster Relief and Exercises Would Improve China’s Image and Create a Desire of ASEAN Regional Players to Build Mutual Trust in the SCS Providing public services in the South China Sea should be for China one of the best solutions to avoid more disputes. Arbitration is not a solution, and in fact the Philippines did not succeed in 2016. China rejected the arbitration of the International Court of Justice, and this has deteriorated the good relations of the two countries. Territorial disputes are always very sensitive. Any state around the SCS could do almost nothing. China does not want to discuss the territorial issue of the SCS. There has been almost no room for negotiation with other states. China has proclaimed many

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times its will to open its facilities in the Spratly Islands. After finishing its construction work in the Spratly Islands, including more advanced ports for big ships, China may offer more public goods in the SCS. Is it possible for China to chair and organize more exercises with ASEAN for disaster relief in waters around China’s artificial islands in the Spratlys, whose facilities could support works for disaster relief? Disaster drills are used to perfect the response to particular emergency situations, such as extreme weather in the SCS. The drill for disaster relief is one of the most important steps for disaster relief and other public services in the SCS. China has great experience in chairing exercises for disaster relief in other waters in cooperation with ASEAN countries. From May 24 to 29, 2015, China and Malaysia co-chaired the ASEAN Regional Forum Disaster Relief Exercise (ARF DiREx) in Malaysian waters, and more than 4000 people from the 21 members of ASEAN Regional Forum (ARF) and eight other regional and international organizations participated. It was the first time for China to organize a large-scale disaster relief exercise overseas (People’s Daily Online, June 1, 2015; ARF Statement on Disaster Management Cooperation 2018). Another ASEAN-China maritime exercise occurred in Singapore’s Changi Naval Base, with plans to have a field exercise in China involving the China Navy and all ASEAN countries in the future. It was a two-day table-top exercise, without involving actual drills. The Republic of Singapore Navy (RSN) hosted the two-day table-­ top exercise at the base’s Multinational Operations and Exercises Centre. It saw participants cooperate on maritime safety incidents in international waters, such as collision of merchant ships, oil tanker on fire and plans to tackle simulated scenarios on search and rescue operations and medical evacuation. ASEAN and China organized an ASEAN-China Maritime Field Training Exercise in October 22–27, 2018, co-led by Singapore and China: “The countries deploying ships include Brunei, China, the Philippines, Singapore, Thailand and Vietnam” (Lim 2018; ASEAN-­ China 2018). After its cooperation with ASEAN states, China could have more experience in hosting maritime exercises (Laude 2018). China should organize a large-scale disaster relief exercise in waters around its man-made islands in the South China Sea as soon as possible. Furthermore, China could start the discussions in other ASEAN Regional Forums to build disaster relief cooperation mechanisms that would suit the SCS region’s actual needs (ARF Statement on Disaster Management Cooperation 2018).

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Instead of harassing other countries’ fishing vessels, it is also possible for China to help those ships in need by offering access to various facilities in the Spratly Islands. China has claimed to “provide better services for the ships of China, its neighbors and other countries whose ships and boats pass through the South China Sea.” Furthermore, construction and maintenance of facilities on China’s garrisoned islands and reefs could facilitate joint response to challenges on the sea and provide navigation safety in a rather dangerous sea (Zhang Yunbi, ibid.). China should make public a timetable to open its facilities in the South China Sea to other nations, in particular the ASEAN states. China has not issued documents announcing its policy on the SCS.  China has promised to open its facilities in the Spratly Islands for civil purposes and seems to have the political intention to do more concerning public goods in the SCS.  In April 2018 China reiterated its willingness to open its facilities in the Nansha (Spratly) Islands. However, China not only has not opened its facilities in the Spratly Islands, but also has no timetable for that. A good point is to build trust in the SCS. However, China has no clear policy on this topic and this will not help to promote its international image in the South China Sea. Contrarily, attempts to enforce the Declaration of the Code of Conduct and the Code of Conduct in the SCS constitute a positive factor.

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Vietnamese Protest an Opening for Chinese Territorial Interests. 2018. The New York Times Online, June 11. Viray, Lourdes Patricia. 2018a. Chinese Coast Guard Continue to Harass Filipino Fishermen in Scarborough—Report, The Philippine Star Online, June 8. Accessed October 29, 2018. https://www.philstar.com/headlines/ 2018/06/08/1822747/chinese-coast-guard-continue-harass-filipinofishermen-scarborough-report#5uM3eR2C3Dkpkkck.99. ———. 2018b. Duterte Clueless on Chinese Harassment of Filipino Troops on Ayungin Shoal. The Philippine Star Online, June 6. Accessed October 29, 2018. h t t p s : / / w w w. p h i l s t a r. c o m / h e a d l i n e s / 2 0 1 8 / 0 6 / 0 6 / 1 8 2 2 1 0 5 / duterte-clueless-chinese-harassment-filipino-troops-ayungin-shoal. Wang, Yi. 2015. At the ASEAN Regional Forum on August 6. Accessed October 29, 2018, https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1287277.shtml. Willemyns, Alex. 2016. Cambodia Blocks ASEAN Statement on South China Sea. The Cambodia Daily Online, July 25. Zachary, Abuza. July 13, 2016. Hanoi’s Hopes Rise with China’s Dashed Nine-­ Dash Online. Accessed November 4, 2018. http://www.newmandala.org/ hanois-hopes-rise-chinas-dashed-nine-dash-line/. Zhang, Yunbi. 2015. Nansha Islands Construction “Benefits China’s International Responsibilities”. China Daily, May 27.

CHAPTER 7

China’s Globalization and the Belt and Road Project: The Case of Indonesia and Malaysia Geoffrey C. Gunn

Abstract  This chapter seeks to position two countries straddling mainland and maritime Southeast Asia within China’s Belt and Road Initiative (BRI), namely Indonesia and Malaysia. China’s BRI is not seen as threatening per se, this is related with our theme of the book. While in Indonesia the Bandung Railroad project funded by China also remains an area of controversy, in contrast to Malaysia, Chinese projects in Indonesia are spread more widely ranging from infrastructure, steel, agriculture and high technology. In the case of Indonesia, China must step carefully with its high profile initiatives, especially given the history of nationalistic backlash against the nation’s small but economically important Chinese minority. In Malaysia, Chinese investment in transport infrastructure—including grandiose railway projects—appeared to trigger a strong reaction in 2018 on the part of the incoming government led by newly sworn-in Prime Minister Mahathir Mohamad citing potential indebtedness and echoes of neo-colonialism. Keywords  ASEAN • Belt and Road • Indonesia • Mahathir • Malaysia G. C. Gunn (*) Nagasaki University, Nagasaki, Japan © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_7

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Preface Indonesia and Malaysia offer two contrasting cases where China’s Belt and Road Initiative (BRI) find both traction and resistance. In one, Indonesia, the two countries have a checkered relationship reaching back through the Western-backed Suharto-led military dictatorship. Malaysia, with its large Chinese overseas population in many ways mirroring Singapore, has always looked to China for trade and investment. But whereas Indonesia has undergone a veritable democratic revolution following the end of the authoritarian New Order in the wake of the Asian economic crisis of 1998, Malaysia under Prime Minister Najib Razak in office exercised an increasingly authoritarian government mired in corruption and kickbacks. Unlike reformist Indonesia, governance in Malaysia seemingly remained outside of public scrutiny. That changed with the electoral victory in May 2018 of a coalition headed by former Prime Minister Mahathir Mohamad who pledged to clean the Aegean stables. In both cases, Indonesia and Malaysia, big projects vicariously linked with the BRI have come under major scrutiny. Such students of China’s interface with Asia as with Rozman and Liow (2018) divide their world into a Northern Tier (driven by Sino-Russia relations but not neglecting the two Koreas) and a Southern Tier including the Association of Southeast Asian nations (ASEAN), Australia and India. Tensions in the Southern Tier focus on the South China Sea while tensions in the Northern Tier focus upon North Korea’s nuclear threats. In this logic ASEAN cohesion and Korean reunification have dominated thinking about the two tiers respectively. They claim that in the present conjuncture, China is rapidly giving rise to a new conceptualization of the Southern Tier both testing ASEAN and obliging Australia and India to make strategic choices. Part of this new thinking or “reimagining” is the notion of an Indo-Pacific region—a kind of strategic planning counterpoint to China’s BRI but also taking into account the rise of (or actually revival of) India and a kind of strategic rethinking about the maritime world. Together with the Maritime Silk Road Initiative (MSRI) and the Silk Road Economic Belt (SREB), the BRI was the mega plan announced by People’s Republic of China (PRC) President Xi Jinping in 2013 aiming to develop a network of land and sea links with Southeast Asia, Central Asia, the Middle East, Europe and Africa. As envisaged, the plan includes not only building hard infrastructure but attending to the extension of Chinese soft power as well.

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Works like the Jean-Marc F. Blanchard (2017) collection which focus upon China’s MSRI argue that it has numerous economic and political purposes at the national and subnational level. Contributors to this book highlight the daunting hurdles faced by China, noting the vital importance for China to bring India on board to realize the MSRI’s full potential. Nonstate actors are also an important part of the story. As this work argues, MSRI-generated economic stimuli may not necessarily have positive political consequences. This caveat is undoubtedly true and is not unfamiliar to students of interstate relations. Yet given the relative novelty of the BRI initiative, it remains to examine the political and economic consequences arising from large-scale infrastructure projects and associated financial transfers, investments and, especially debt funding, such as tested against a range of cases. This I do with two examples, namely Indonesia and Malaysia. The first, Indonesia, the world’s fourth most populous country with over 238 million people, is also Southeast Asia’s largest economy and, none the least, the region’s most geopolitically strategic nation lying between the Indian and Pacific Oceans. It also hosts the world’s largest Muslim population although unlike Malaysia where Islam is the official religion, Indonesia espouses a more pluralist and secular political ideology. Both Malaysia and Indonesia host important Chinese minorities, just as political discrimination has figured in the recent history of both countries. On its part, sharing the Malacca Straits littoral with Indonesia as well as a land border in its Borneo states, Malaysia is in some ways economically complimentary to Indonesia in terms of its export profile with China. Nevertheless, as economic ties with China developed rapidly from the 1980s, both Indonesia and Malaysia have looked to China for trade and investment and, with the advent of BRI, have been eager to rebuild infrastructure with Chinese assistance.

The Example of Indonesia As the most populous and dominant nation inside ASEAN, setting aside its rich natural resource base, Indonesia is also an archipelagic nation astride the sea lanes linking the Indian and Pacific Oceans. On December 13, 1957, under founding President Sukarno, the cabinet of Prime Minister Djuanda Kartawidjaja declared that the Indonesian government had “absolute sovereignty” over all the waters lying within straight baselines drawn between its outermost islands. Eventually, in 1982, Indonesia gained international recognition for its claim when the United Nations

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Convention on the Law of the Sea formally recognized the existence of a new category of states known as archipelagic states and declared that these states had sovereignty over their “archipelagic waters” (Butcher and Elson 2017). It is to be noted that Indonesia does not host foreign military bases and has been a staunch defender of the Zone of Peace, Freedom and Neutrality (ZOPFAN), such as proclaimed by ASEAN in 1971. As a member of the Group of 20 Finance Ministers and Central Bank Governors (also known as the G-20), Indonesia joins such other East Asian nations as China, Japan, India and South Korea. Following long decades of military-­ backed authoritarian role and following a populist reformasi or reform movement in favor of political change, in 1998 Indonesia returned to civilian rule in the aftermath of the Asian Financial Crisis of that year. Considered by the West as a moderate Muslim majority nation, Indonesia is hailed as a reliable and responsible ally in the western Pacific. The incumbent President Joko (Jokowi) Widodo is a civilian taking over in 2014 from Bambang Yudhoyono, a graduate of an American military college, just as many Indonesians look (over the Islamic world) to the West (Gunn 2014). Today, as the dominant economy within an expanded ASEAN, post-Suharto reformist Indonesia stands at a juncture where the nation appears to be shedding its strict neutrality in foreign policy by hedging against a rising China (Gunn 2018, 2019). As demonstrated below, the secular and unitary state ideal with the army or Tentara National Indonesia (TNI) as its defender has held across a sequence of presidencies in Indonesia. By way of elaboration, this has been witnessed through the long Sukarno presidency (1945–1965), the even longer rule of his successor, the military-backed General Suharto (1965–1998), his appointed successor, the technocrat B.  J. Habibie (1998–1999); the democratically elected Abdulrahman Wahid (1999–2001) and head of the largest Islam social-political organization, the Nahdatul Ulama; his elected successor, the military-backed nationalist and daughter of the founding president, Megawati Sukarnoputri (2001–2004); and the former military general Susilo Bambang Yudhoyono (2004–2014) serving two five-year terms in office and the incumbent Joko (Jokowi) Widodo (2014–19) and reflected for another five-year term in 2019. As a presidential political system with strong concentration of powers, the head of state in Indonesia literally sets the tone for foreign policy initiatives, although backed by a professional foreign affairs ministry and with foreign ministers, as mentioned below, of some caliber and influence.

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The Broad Lines of Indonesian Foreign Policy: From Sukarno to Suharto to Post-Reformasi In fact, there has been remarkable continuity and consistency in Indonesian foreign policy, especially around the themes of non-alignment, neutrality, defense of territory including the archipelagic principle (whereby Indonesia claims sovereignty over all waters enclosed by its baselines) and a declaimed bebas/aktif (“independent and active”) foreign policy. Under threat of US and UK machinations, namely coordinated attempts to overthrow his regime, President Sukarno would tilt to a Phnom Penh-Beijing-Pyongyang axis down until his ouster by General Suharto in 1965–1966  in events which led to the massacres of hundreds of thousands of members of the Indonesian communist and nationalist parties including many ethnic Chinese thus leading to a diplomatic break with China (see Mozinga 1976; Leifer 1983; Kahin and Kahin 1997). Backed by the military, for the next 34  years Suharto would anchor Indonesia to ASEAN.  With Western support he would also use ASEAN as a cover for the Indonesian military invasion and occupation of the former Portuguese colony of East Timor. From the fiery Subandrio, foreign minister under Sukarno, to former Tan Malaka associate and founder of the official Indonesian news agency, Antara, Adam Malik, Mochtar Kusumaatmadja and Ali Alatas, sequential foreign ministers under Suharto, to post-reformasi foreign ministers, Dr. Hassan Wirajuda, Dr. Marty Natelegawa, an Australian-trained political scientist and Dutch-educated Retno Marsudi (the first woman in this position), all speak the international relations language of realism. In other words, since its origins, Indonesia has sought to address the concerns of an archipelagic nation facing multiple challenges, not only related to security from external threats, but societal on the part of a Muslim majority nation with major ethnic and religious diversity, alongside a welter of secessionist and autonomist claims challenging both the unitary state as well as the secular state principle.

“The Garuda and the Dragon”: Indonesian Relations with China in the 1990s With relations suspended in 1967, they were resumed only in 1990 (thus opening the way for the Republic of Singapore to follow suit and with Singapore deferring first to Jakarta on this important issue). As I wrote in

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my 1986–1987 article, “The Garuda and the Dragon: Indonesian-Chinese Relations” (Gunn 1986–1987), economic diplomacy between Jakarta and Beijing preceded the establishment of political links. In particular, I focused upon, first, the visit to China in July 1985 by an Indonesian economic delegation under Kamar Dagang dan Industri (KADIN) or the Indonesian Chamber of Commerce and Industry, an umbrella organization of Indonesian business chambers and associations, maintaining a privileged liaison to government officials, and second, the reciprocal visit to Jakarta of a Chinese trade mission in August 1985. From statistics supplied to myself by the Indonesian Trade Commissioner office in Hong Kong, the volume of two-way trade at that time was insignificant given the size of the two economies (and with estimates ranging from US$200 million to 900 million per annum). Indonesia not only hedged against China with Taiwan trade but then actively promoted two-way trade with the Soviet Union and Eastern European countries, along with Vietnam. Nevertheless, the process was glacial hedged by Indonesia’s paranoia over communist plots and Chinese conspiracies that still inform hardliner elements in military and civilian-religious circles. Although KADIN had earlier sent a team to China in May 1978 to probe the possibility of resuming direct trade, Suharto and the military drew a red line virtually repudiating the visit claiming overweening Chinese domination of the economy (Sukma 1999). In fact, it was only at the 30th anniversary of the landmark Bandung Conference in May 1985 (such as originally hosted by President Sukarno in 1955 and attended by Chinese Premier Zhou Enlai), that tentative contacts were resumed but only with respect to trade (Gunn 1986–1987: 17). In December 1989, China and Indonesia held talks on the technical issues regarding the normalization of bilateral relations. With Alatas visiting China in July 1990, the two sides issued the Agreement on the Settlement of Indonesia’s Debt Obligation to China and, on August 6, 1990, China and Indonesia issued a Communiqué on the Restoration of Diplomatic Relations. Based upon the Five Principles of Peaceful Coexistence and the Ten Principles of the Bandung Conference of 1955, this was a matter of astute statecraft on both sides. Especially, as suggested, one should not ignore the deep-seated Sino-phobia and fear of communism, the hallmark of the Indonesian “New Order” under the generals.

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Sino-Indonesian Relations in the Wake of the Asian Financial Crisis of 1998 While Suharto did not survive the Asian Financial Crisis of 1998, neither did the dictator make a graceful exit. In anticipation, the USA, Japan and other nations positioned warships offshore Jakarta to rescue their nationals. China too responded to the rape and murder of ethnic Chinese in Jakarta with great indignation. Indonesian Maritime Affairs Coordinating Minister Luhut Binsar Pandjaitin (2018) is correct in noting in an op ed. article published in the South China Morning Post that just prior to his visit to Beijing in 2018 relations were “unfortunately” tested again in 1998 when attacks on ethnic Chinese in Jakarta led to Beijing’s intervention on their behalf (even though they were now Indonesian citizens). Although not mentioned, certain of these attacks have been attributed to Suharto’s former son-in-law and political controversialist Lieutenant General Prabowo Subianto, presidential contender in 2014 and again in 2019. In reaching out to a largely Islamic constituency, including Islamic radicals, Prabowo pulls no punches when it comes to raising communist bogeys and external threats in general (and, as the presidential candidate in 2019), even the viability of Chinese-funded mega projects in Indonesia. There is no question that under President Widowo, Indonesia has quietly come out of its erstwhile internationalist isolation, as with condemning the Trump administration shift of its embassy from Tel Aviv to Jerusalem (warning Australia of the same), condemnation of US meddling in Syria, warmer relations with Iran, and so on. Setting aside Jakarta’s act in July 2017 in renaming the northern reaches of its exclusive economic zone in the South China Sea as the North Natuna Sea, seldom do we see a broad position paper on USA-China as in Pandjaitan’s op ed article (2018). Filling in rare Indonesian elite discourse on where Jakarta positions itself between powers in the Indo-Pacific/Southern Tier, he asserts that now, as in the era of Bandung, “Indonesia remains central to outcomes on the tri-continental expanse that China seeks to bring within its strategic reach.” Because of its geography, population and economy Indonesia “will be instrumental in the success of Chinese efforts.” This is a strong statement made ahead of his 2018 visit to Beijing and demands attention given the geographical facts and the domestic politics in Jakarta that I have briefly described. Pandjaitan also asserts that Indonesia’s foreign policy precludes it from being part of any global attempt to contain China (notwithstanding the concern of some Indonesians and members of

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ASEAN as to China’s goals in the South China Sea). Neither, he declaims, does Jakarta perceive China as a threat. And neither does Indonesia wish to become part of any Chinese push to exclude the US presence in the Indo-Pacific region. As an emergent middle power, he contends, Indonesia does not want to take sides, whether joining an American sphere of influence or that of China. Thus, Indonesia sees itself as an “honest broker” in relations between the USA and China. The salience of this remark was pointed up by the visit to Jakarta later in June 2018 by Indian Prime Minister Narendra Modi. In line with India’s “Act East Policy,” Indonesia and India pledged to step up defense and maritime cooperation, with plans to develop a strategic Indonesian naval port in the Indian Ocean. In a joint statement, the two sides stressed the importance of a free, open, transparent, rules-based and peaceful Indo-Pacific region (Anon, Economic Times, May 30, 2018a). With their military ties elevated to a “comprehensive strategic partnership,” as some analysts interpreted, this was a pushback by India and Indonesia against China’s growing dominance in the region. Needless to say, with the resumption of relations, trade, investment and links with China have flourished in many domains as with tourism, investment and support for big infrastructure. Today, Indonesia is the world’s 16th largest economy (several ranks below Australia) and with China emerging as Indonesia’s leading trade partner (its number one source of imports and number one destination for exports) especially owing to mineral and other exports. It is hard to get a fix on trade and other statistics relating to Indonesia-China trade and investment, but taking it from officialized Chinese sources, back in 2010 Indonesia signed more than 20 cooperation agreements ranging from infrastructure, steel, agriculture, high technology, creative industry and intellectual property rights protection. In 1990, two-way trade between Indonesia and China stood at just 1.18 billion US dollars. It increased sharply to 31.5 billion US dollars by 2008. By 2010 China became the second largest trade partner to Indonesia (Xinhua, Shanghai, October 25, 2010). According to the trade report by the Indonesian Central Statistics Bureau, in January–November 2017, Indonesia’s foreign trade amounted to US$295.78 billion, up 16.3 percent year on year. Exports amounted to US$153.9 billion, up 17.2 percent year on year; with imports amounting to US$141.88  billion, up 15.5  percent year on year. The trade surplus was US$12.02  billion (Anon, 2017).

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In April 2018, Indonesia and China signed five contracts worth US$23.3 billion for several infrastructure projects including two hydropower plants in North Kalimantan worth nearly US$20  billion, a US$1.6 billion power plant in Bali, a US$1.2 billion steel smelter, a facility to convert coal into dimethyl ether, among others. According to Foreign Minister Retno Marsudi, among the commodities Indonesia wants to promote in China are palm oil, fruits, coffee and cocoa. She also said that Indonesia wanted to ensure that investments came with transfers of technology to add value to the labor and improve the environment. In 2017, China was ranked as the country with the third-largest foreign investment in Indonesia at US$3.36 billion, a significant increase from US$2.66 billion (S$3.55 billion) in 2016. Among foreign leaders visiting Indonesia in 2018 was Chinese Premier Li Keqiang arriving on May 6. Symbolic of ties, his visit marked the 5th year of Indonesia and China’s strategic comprehensive partnership. The visit also drew attention to such issues as Indonesia’s push for a better trade balance with China (and with China offering to increase its import quota of palm oil to 500,000  tonnes a year). At the China-Indonesia Business Summit meeting the following day, he noted that China has been Indonesia’s biggest trading partner for seven years, and that two-way trade was rising and moving toward greater balance. He also noted that China is a major source of Foreign Direct Investment (FDI) in Indonesia. He also hailed progress on flagship infrastructure projects, such as the Jakarta-­ Bandung high-speed rail and the (much delayed) Surabaya-Madura Bridge. He also sought to induct Indonesia into China’s BRI and so, presumably, to match Indonesia’s Global Maritime Fulcrum (Widowo’s 2014 pledge to position Indonesia as a “fulcrum” of Indo-Pacific maritime activity) with China’s Maritime Silk Road.

Case of the Jakarta-Bandung High-Speed Rail: “An Icon for China’s Belt and Road Initiative” The case of the Jakarta-Bandung High-Speed Rail (HSR) reveals just some of the complexities confronted by China (and Japan) in winning infrastructure projects in Indonesia and with infrastructure development one of the key planks of President Widowo’s office. Dating back to 2010, studies were prepared for a HSR link between Jakarta and Bandung. Both Japan and China had expressed their interest in the 150 kilometer project.

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The bid marked rivalry between the two countries in their competition for Asian infrastructure projects. On March 26, 2015, during a visit to Beijing, President Widowo gained Chinese President Xi Jinping’s support for the HSR project and the two governments signed a memorandum specifying China’s interest in the Jakarta–Bandung line. In late September 2015, Indonesia duly awarded the rail project to China, utterly deflating Japan’s expectations and attracting severe press comments in Japan about Jakarta’s apparent turnaround. In October 2016, the Indonesian government announced plans to build a 600 km medium-high-speed railway between Jakarta and Surabaya and this time invited Japan to invest at this project. Early in 2018, the Chinese HSR project was described as “stagnant”— mired by land acquisition issues—with Pandjaitan announcing that a review would be conducted to consider whether a high-speed rail system really was needed. Nevertheless, the Jakarta-Bandung HSR was described by the PRC Embassy in Jakarta as China’s first attempt to promote a complete set of its high-speed railway system and “an icon for China’s Belt and Road Initiative” (Anon, People’s Daily online, January 11, 2018c). Many other questions are raised by this US$5.1  billion joint-venture project, especially relating to need, cost overruns, environment/land, priority, and so on. The stalled HSR project was also on the agenda of discussions with Premier Li. In any case, China’s BRI projects have increasingly come under focus in Indonesia’s 2018–2019 presidential election campaign with Prabowo’s brother and campaign manager, Hashim Djohadikusumo seriously questioning the viability of the Jakarta-Bandung HSR (Yuniar 2018).

Malaysia Dramatically, in May 2018, veteran politician and former Prime Minister Mahathir Mohamad returned to power at the head of the now-ruling Pakatan Harapan coalition, having defeated the ruling Malay-dominated Barisan Nasional government in Kuala Lumpur, hegemonic since the country’s independence in 1957. It came at a time of increasing authoritarianism seemingly seeking to gag investigation of a multi-billion dollar financial scandal involving the state fund 1Malaysia Development Berhad (1MDB). While the election campaign focused upon ruling party corruption, it also had an anti-China tangent as well, especially as the then Prime Minister Najib Razak appeared to be colluding with Chinese interests in furthering huge infrastructure projects linked with the BRI.  Beijing’s

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­ ecision to send naval ships close to Malaysian waters around the time of d the elections was also a cause for concern in Kuala Lumpur (and with Malaysia occupying at least five features in the disputed Spratly Islands, including a small naval presence in the oceanic atoll known as Swallow Reef, which falls within the “nine-dash line” that marks China’s claims in the South China Sea). Since returning to power in May, Mahathir has been outspoken about Beijing’s activity in the South China Sea (Wong 2018). To put matters in context, China is Malaysia’s number one source of Foreign Direct Investment (FDI) and Malaysia was the fourth-largest target of Chinese FDI in the world in 2017, up from 20th largest just two years prior. Malaysia was then committed to tens of billions of dollars in BRI-­related megaprojects, one of the largest monetary bonds to China in Asia, including the 688 kilometers East Coast Rail Link (ECRL) currently also under construction at a cost of $80 billion ringgit slated for completion in 2024, industrial parks, deep water seaports, and the massive Forest City private residential project in the Iskander Malaysia special economic zone of Johor state. While Mahathir has been cautious in declaring the BRI a problem in the press, in a Bloomberg interview, he stated that Sri Lanka had “lost a lot of land” (in Hambantota) because it could not pay back exploitative Chinese loans (Romero 2018). Taking the offensive, in July, the Mahathir government suspended the ECRL, under construction by China Communications Construction Co. with an estimated price tag of 81 billion ringgit (US$20 billion). He also canceled a gas pipeline project worth US$2.3 billion slated to be built by the China Petroleum Pipeline Bureau. In both cases, he cited high costs, also blaming the Najib government of pushing Malaysia into a debt trap. Mahathir also suspended construction of a high-speed rail project with Singapore and placed under review a $14 billion local rail line to be built by Chinese companies. According to media reports, Mahathir then said that the Chinese-funded ECRL project and a natural gas pipeline project in Sabah would be canceled for now (Lee et al. 2018). In June 2018 Mahathir alerted that he would send his finance minister to Beijing to renegotiate infrastructure contracts with the possibility of terminating some of them following the discovery of unfavorable terms committed to by the previous government. Blaming the Najib government, he stated that three Chinese-funded and built projects where payments had been made were based on agreed time milestones and not work completed. Meantime, Minister of Finance Lim Guan Eng told media that

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he suspected money laundering at play involving two projects worth $2.36 billion asserting that it was “all part of the 1MDB scam.” The government had said that all these big-ticket projects would be scrutinized to ensure that they would truly benefit the country. The government pointed to the ECRL project for which over a third of the total payment was disbursed to the contractor in the first year of a seven-year project although only about 14 percent of the work was completed. Reportedly, as Mahathir stated, “We will study the ECRL project, either to defer or terminate it,” although it was still subject to negotiation with the Chinese contractor, state-owned China Communications Construction (Tan 2018). Soon after his election, Mahathir visited Japan (returning two more times in 2018). According to some analysts, this suggested a shift back to his Look East policy to strengthen ties with East Asia, especially Japan, and as a move away from China. As generally interpreted, Malaysia was also looking at Japan as a source of low-cost capital, and with Malaysian state-­ linked companies as possible investment targets of Japanese companies. In 2017, Japan was Malaysia’s largest FDI contributor at $13  billion. In 2018, with Mahathir in charge, it was expected that Japan would accelerate the pace of its investment in Malaysia (Anon 2018b).

The Mahathir Visit to China (August 2018) Arriving in China on August 17, 2018, or some five months after his electoral victory, Prime Minister Mahathir Mohamad reportedly told Chinese President Xi Jinping and other Chinese leaders that Malaysia needed to cut its debt burden and could not afford US$22 billion worth of Chinese-­ backed infrastructure projects. As Mahathir told reporters in televised remarks. “They understand our problem. They understand why we have to reduce our debt” (Chen 2018). With his disarming candor Mahathir obviously set himself apart from a raft of world visitors to Beijing either cap in hand or obsequious in the extreme. To be sure, this was not the message Chinese Premier Li Keqiang expected to hear when meeting the Malaysian leader. Reportedly, as Mahathir told Li, he supports free trade as long as it is fair. As stated, everyone needed to remember that countries were at different stages of development. As he stated, “You don’t want a situation where there’s a new version of colonialism happening because poor countries are unable to compete with rich countries in terms of just open, free trade.” As Mahathir continued, “It must also be fair trade. Then I support free trade

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together with Prime Minister Li because I think this is the way to go for the whole world.” Malaysians would have noted that these words echoed Mahathir’s criticisms of Beijing which he made on the campaign trail, when he said “we gain nothing” from Chinese investment and warned of selling off the country to foreigners. As Premier Li reportedly told Mahathir, “China will not change its long-term friendly policies toward Malaysia because of changes in domestic situations.” Hedging, Mahathir responded that he would work to upgrade relations. Just ahead of his scheduled meeting with President Xi Jinping on the same day, he asserted. “Our relationship is mutually beneficial.” “I know there are ups and downs, but in relationship between nations, sometimes they are very strong and sometimes they are very weak” (Martin and Raghu 2018). One of the main outcomes of Mahathir’s visit to China was a pledge by China to increase imports of Malaysian palm oil and other goods. Reportedly Mahathir commented that he was “glad to hear” China’s stance on palm oil, adding that he hoped China would also help Malaysia with its debt burden. To be sure, with Indonesia and Malaysia together controlling some 80 percent of palm oil production, Mahathir was pleased with a client who did not raise environmental concerns surrounding an industry riven with human rights issues and known to blight the tropical landscape as with generating massive pollution over Singapore in particular. With Mahathir set to negotiate construction and funding terms on contracts for major infrastructure projects backed by Chinese state companies, including the ECRL, he asserted, “I believe and hope China will look sympathetically towards the problems we have to resolve and perhaps help us to resolve some of our internal fiscal problems” (Martin and Raghu 2018). In late 2018 while talking up the contribution made by Chinese to the local economy at a World Chinese Economic Summit held in Kuala Lumpur on 9 November, Mahathir conceded that he was still talking with China on negotiations over the ECRL only noting that it would “take time” to resolve (Sukumaran 2018).

Conclusion As this chapter has highlighted, Indonesia and Malaysia present complementary studies when it comes to relations with China. Both are rich in tropical commodities in high demand in China, namely palm oil. Both are in need of critical infrastructure, Indonesia especially. Both historically have looked to Japan as a source of FDI and also for infrastructure ­support.

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Indonesia, especially, has had a history of acrimony with China and antiChina phobia is deep-rooted in both countries on the part of Islamic majorities. Both Indonesia and Malaysia treat China’s claims to ownership of the South China Sea with some disdain, although hardly a point of major conflict. Indonesia, especially, upholds its own maritime sovereignty and, together with Malaysia, dominates the Malacca Straits. Nevertheless, both are developmentalist states with their economies increasingly bound with China. China’s BRI is not seen as threatening per se and, as the Malaysian case demonstrates, when an authoritarian state lacking transparency in financing mega projects engages China, then multiple risks can accrue. The alacrity in which Malaysian Prime Minister Mahathir visited China and mixed deals sends a strong message to China, namely the limits as to some of the hubris surrounding the BRI. Moreover, both Indonesia and Malaysia can also deal with Japan and/or Korea when it comes to entering into economic partnerships or in sourcing high end technology whether or not for civilian or military use, and with India another card to play when it comes to security as demonstrated by a recent warming between Jakarta and New Delhi.

References Anon. 2017. Ministry of Commerce, PRC “Statistics on China-Indonesia Trade in January–November 2017”. http://english.mofcom.gov.cn/article/statistic/ lanmubb/ASEAN/201712/20171202691130.shtml. ———. 2018a. All That Happened When PM Modi Visited Indonesia. Economic Times, May 30. https://economictimes.indiatimes.com/news/politics-andnation/all-that-happened-when-pm-modi-visited-indonesia/modi-inindonesia/slideshow/64385099.cms. ———. 2018b. In Mahathir’s Malaysia, Japan Is Back Amid Doubts over Chinese Funding. REUTERS Asahi Shimbun, June 10. http://www.asahi.com/ajw/ articles/AJ201806100024.html. ———. 2018c. Indonesia Calls for Self-Inspection Amid Stagnant High-Speed Railway Project. People’s Daily online, January 11. http://en.people.cn/ n3/2018/0111/c90000-9314327.html. Blanchard, Jean-Marc F. 2017. China’s Maritime Silk Road Initiative and South Asia: A Political Economic Analysis of Its Purposes, Perils, and Promise. London: Palgrave Macmillan, November. Butcher, John G., and R.E.  Elson. 2017. How Did Indonesia Become an Archipelagic State? The Strategist, May 11. https://www.aspistrategist.org.au/ indonesia-became-archipelagic-state/.

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Chen, Laurie. 2018. Why Belt and Road Risks Fail to Deter Chinese Firms. South China Morning Post, April 16, p. B1. Gunn, Geoffrey C. 1986–1987. The Garuda and the Dragon: Indonesian-Chinese Relations, Asia-Pacific Review (Australian Institute of International Affairs), No. 5, Summer, pp. 17–34. ———. 2014. Indonesia in 2013: Oligarchs, Political Tribes, and Populists. Asian Survey 54 (1): 47–55. ———. 2018. Indonesia in 2017: Shoring Up the Pancasila State. Asian Survey 58 (1): 166–173. ———. 2019. Indonesia in 2018. Asian Survey 59 (1): 156–163. Kahin, George McT., and Audrey Kahin. 1997. Subversion as Foreign Policy: The Secret Eisenhower and Dulles Debacle in Indonesia. Seattle, WT: University of Washington Press. Lee, Liz, Rozanna Latiff, Ben Blanchard, and Praveen Menon. 2018. Malaysia’s Mahathir Cancels China-Backed Rail, Pipeline Projects. Reuters, August 21. https://www.reuters.com/article/us-china-malaysia/malaysian-pm-mahathirsays-china-backed-rail-pipeline-projects-canceled-for-now-repor tsidUSKCN1L60DQ. Leifer, Michael. 1983. Indonesia’s Foreign Policy. London: Allen and Unwin. Martin, Peter, and Anuradha Raghu. 2018. Mahathir Warns Against New “Colonialism” During Visit to China. Bloomberg News, August 20. https:// www.bloomberg.com/news/articles/2018-08-20/mahathir-warns-againstnew-colonialism-during-visit-to-china. Mozinga, David. 1976. Chinese Policy Toward Indonesia, 1949–1967. Ithaca, NY: Cornell University Press. Pandjaitan, Luhut B. 2018. Why Jakarta Can Be an Honest Broker Between Powers. South China Morning Post, April 10. Romero, Nicholas. 2018. China’s Brain, Malaysia’s Pain: Malaysia’s Mahathir Should Reconsider Alibaba’s City Brain First, June 6. Accessed December 19, 2018. https://thediplomat.com/2018/06/chinas-brain-malaysias-pain/. Rozman, Gilbert, and Joseph Chinyong Liow, eds. 2018. International Relations and Asia’s Southern Tier: ASEAN, Australia, and India. Singapore: Palgrave Macmillan. Sukma, Rizal. 1999. Indonesia and China: The Politics of a Troubled Relationship. London: Routledge. Sukumaran, Tashny. 2018. Malaysia Still Talking to Beijing on Rail Link. South China Morning Post, November 10. Tan C.K. 2018. Malaysia to Send Envoy to China to Renegotiate Contracts. Nikkei Asian Review, June 6. https://asia.nikkei.com/Politics/Malaysia-intransition/Malaysia-to-send-envoy-to-China-to-renegotiate-contracts. Wong, Catherine. 2018. China’s Stalled Investments to Top Agenda When Malaysian Envoy Visits Beijing, Observers Say. Close Aide to Recently

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Re-elected Prime Minister Mahathir Mohamad Is Expected to Pave Way for Leader’s Trip Next Month. South China Morning Post, July 17. https://www. scmp.com/news/china/diplomacy-defence/article/2155710/south-chinasea-disputes-stalled-investments-top-agenda. Xinhua. 2010. Indonesian President Visits China to Boost Bilateral Trades, Shanghai, October 25. Yuniar, Resty Woro. 2018. “Road” Plan Review if Prabowo Is Elected. South China Morning Post, October 23.

CHAPTER 8

Timor-Leste and the Australia Treaty on Maritime Borders and Implications for the Belt and Road Initiative Peter Murphy and Jean A. Berlie

Abstract  This chapter deals with the dispute resolution on the maritime borders of Timor-Leste. On March 6, 2018, a treaty was signed in New York between Australia and the Democratic Republic of Timor-Leste establishing their maritime boundaries in the Timor Sea. However, the two states could not come to an agreement on how to develop the Greater Sunrise gas fields and to build a Timorese plant; the negotiations are continuing. Bayu-Undan, the major producing field within the new Timorese maritime area, is expected to cease production around 2022. The main question is Timor-Leste’s desire to build a Liquefied Natural Gas (LNG) plant on the southern coast of the island. At present, it seems to be the sine qua non condition for the Government of Timor-Leste and

P. Murphy (*) Independent Researcher, Surry Hills, NSW, Australia e-mail: [email protected] J. A. Berlie The Education University of Hong Kong, Tai Po, Hong Kong © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_8

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Xanana Gusmão, the main negotiator. Diversifying the economy of the new country is not working so well, and developing tourism will not make Timor-Leste as attractive as Bali, so the rich fields of Greater Sunrise will have to be the main economic resource for the Timorese people. The new country of the twenty-first century would receive 80 percent of the revenue if gas from the fields is piped to the existing ConocoPhillips-operated Darwin LNG processing terminal in northern Australia. Timor-Leste would receive 70 percent if the gas is piped to a not-yet-built industrial complex on its southern coast. This chapter also considers the Chinese Belt and Road Initiative, especially its processes for dispute resolution, and its potential to play a direct role in the Timor-Leste petroleum sector. Keywords  Australia • Belt and Road • Development • Dispute resolution • Harmony • Maritime borders • Negotiations • Timor-Leste

Introduction The treaty, between Australia and the Democratic Republic of Timor-­ Leste, establishing their maritime boundaries in the Timor Sea was signed at the United Nations in New  York. However, the two states could not come to an agreement on how to develop the Greater Sunrise gas fields and to build a Timorese Liquefied Natural Gas (LNG) plant; the negotiations are continuing. Bayu-Undan, the major producing field within the new Timorese maritime area, is expected to cease production around 2022. The main question is Timor-Leste’s desire to build a Liquefied Natural Gas (LNG) plant on the southern coast of the island. At present, it seems to be the sine qua non condition for the Government of Timor-Leste and former resistance hero and president, José Alexandre Xanana Gusmão, the main negotiator. Diversifying the economy of the new country is not working so well, and developing tourism will not make Timor-Leste as attractive as Bali, so the rich fields of Greater Sunrise will have to be the main economic resource for the Timorese people. The new country of the twenty-first century would receive 80 percent of the revenue if gas from the fields is piped to the existing ConocoPhillips-operated Darwin LNG processing terminal in northern Australia. Timor-Leste would receive 70 percent if the gas is piped to a not-yet-built industrial complex on its southern coast. The chapter also considers the Chinese Belt and Road Initiative, especially its processes for dispute resolution, and its potential to play a direct role in the Timor-Leste petroleum sector.

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Introduction A central politico-economic issue between Australia and Timor-Leste is still oil and gas. The two countries had been aiming for an agreement over the disputed maritime boundary in resource-rich waters near the common median maritime line. In October 2016, confidential meetings between the two countries were “very productive,” at the Permanent Court of Arbitration at the Peace Palace in The Hague, Netherlands. This court does not have sitting judges; the parties themselves appoint arbitrators. In Copenhagen, the Ambassador of Denmark to India, Peter Taksoe-Jensen, was the president of the International Court of Justice, which ordered compulsory conciliation in the case. After the court ruling, Australia and Timor-Leste discussed the maritime boundary during 2017 and 2018. The Parties’ agreement was reached in Copenhagen on August 30, 2017. It was formalized on March 6, 2018, at the United Nations Headquarters in New  York, in the presence of the Secretary General of the United Nations, António Guterres, and signed by Australia’s Minister of Foreign Affairs, Julie Bishop, who visited Dili in 2018 for the first time, and the Timor-Leste Deputy Prime Minister Agio Pereira. The Conciliation Commission judgment has been praised as a significant breakthrough, but a number of critical issues remain to be resolved before the settlement of the maritime boundaries in the Timor Sea. A final fair resolution of the maritime border between Timor-Leste and Australia is expected in a few months. However, in December 2018, the international situation was not clear, in particular the establishment of an Australian or a Timorese submarine pipeline and the construction of a Liquefied Natural Gas plant, in Darwin or in Timor-Leste. As an arbitration case, what are the similarities and differences between this Australian-­ Timorese maritime controversy vis-à-vis the Belt and Road Initiative and international arbitration?

Story and History The oil and gas issue is still a thorny problem between the two countries namely Australia and Timor-Leste. Timor-Leste is now dependent on Australia’s decision and we have to watch the post-treaty period in 2019–2020. The two countries are linked in an unequal manner, and TimorLeste does not want to be subordinate (Nester 2010: 181): The Timorese

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still do not want to be “the peoples for whom decisions were made by others.” In the global economy, thanks to the Greater Sunrise petroleum fields, Timor-Leste can survive. Short chronology: On October 9, 1972, Australia and Indonesia [without Portugal] signed a seabed boundary treaty. That treaty entered into force in November 1973 (TLMB 2016). Without Portugal, between 1989 and 1991, a treaty was negotiated between Australia and Indonesia concerning Timor-Leste, then the 27th Province of Indonesia; this “Timor Gap Treaty” entered into force in February 1991. On February 10, 2000, agreements were signed between Australia and the United Nations Transition Administration in East Timor (UNTAET) between 2000 and 2002. On January 12, 2006, Timor-Leste and Australia signed the Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS), and on March 6, 2018, the Treaty on Maritime Boundary was signed by Australia and Timor-Leste. The bases of arbitration and dispute resolution are carefully mentioned in Article 23 of the Timor Sea Treaty 2003, or 2003-2-Timor-Treaty on Dispute Resolution Procedure: 1. An arbitral tribunal to which a dispute is submitted pursuant to Article 23 (b) shall consist of three persons appointed as follows: (a) East Timor and Australia shall each appoint one arbitrator; (b) the arbitrators appointed by East Timor and Australia shall, within sixty (60) days of the appointment of the second of them, by agreement, select a third arbitrator who shall be a citizen, or permanent resident of a third country which has diplomatic relations with both East Timor and Australia; (c) East Timor and Australia shall, within sixty (60) days of the selection of the third arbitrator, approve the selection of that arbitrator who shall act as Chairman of the Tribunal. The main point is that the 11th country of Southeast Asia needs international support and, since 1999, the continuous goodwill of Australia, which is often very supportive to the newest nation in the twenty-first century. During World War II, Australian elite troops did their best for the Timorese under Japanese semi-occupation; Portugal was not at war against Japan. On October 16, 1975, in Balibo, five Australian journalists were killed while trying to report the beginning of the Indonesian military invasion. In 1980 a book was banned in Australia for stating that the oil issue “could be more readily negotiated” with Indonesia than with an independent East Timor (Berlie 2018: 57; Walsh and Munster 1980). In 1999, Australian troops

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liberated the 27th Indonesian Province of Timor following a United Nations-conducted Referendum on autonomy under Indonesia that failed, rejected by the Timorese people. Again in May 2006, Australian troops led a multi-national intervention to stabilize the political situation in TimorLeste. It will be better if the two states can avoid tensions on the development of the Greater Sunrise Gas fields (The Interpreter 2018: 1). The years 2016 and 2017 had ups and downs. On March 22, 2016, and one day later, thousands of Timorese people rallied in front of the Australian embassy in Dili to demand a quick resolution for a median line maritime boundary. Since the Australian-Timorese Treaty on March 6, 2018, the relationship between the two countries has been better, but the application of the maritime borders following an International Court of the United Nations was not solved yet. The median line was accepted by Australia and Timor-Leste in New York in 2018, so Timor-Leste should now have exclusive rights to the resources north of that line. The two countries adopted an accepted median line of the maritime borders following the compulsory conciliation under the United Nations Convention on the Law of the Sea (UNCLOS), but the situation is not solved yet. Concerning the median line the treaty was accepted as a fair dispute resolution, but the Australian statement quoted here suggests the persistence of real problems: It is often claimed that a median line would be an equitable solution and would put Greater Sunrise in Timorese waters. Such claims ignore the fact that applying median line principles would leave not more than 20 percent of Greater Sunrise in Timorese jurisdiction, resulting in much less revenue for Timor-Leste than provided for in the current treaties. Under the former Timor Sea Treaty, Timor-Leste receives 90  percent of petroleum revenue from the Joint Petroleum Development Area. As a result, Timor-Leste has received over US$11  billion and accrued a Petroleum Fund now worth almost US$17 billion. Australia receives 10 percent of petroleum revenue from the Timor Sea Joint Petroleum Development Area (JPDA) and has received US$1.29 billion. (Median Line and Australia)

Chip Henriss (n.d.), a former commissioned Australian officer who wants to protect the interests of Timor-Leste, mentioned his view on the median line, but the situation is more complicated in fact than the following:

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In situations such as this one, international law calls for a “median line” solution. This simply means drawing a line half way between the two coastlines. It’s fair and simple. If an oil or gas field is located closer to East Timor then it should belong to East Timor. The Timorese fought for 25 years for their independence they simply want what is theirs by law.

The Australian Parliament’s Joint Standing Committee on Treaties is empowered by its resolution of appointment to inquire into and report on matters arising from treaties and related National Interest Analysis and proposed treaty actions were presented or deemed to be presented to this Parliament. Nearly all treaty actions proposed by the Australian Government are tabled in Parliament. The Committee invited interested persons and organizations to make submissions by April 20, 2018. The Public Hearing was on May 7, 2018 (Canberra, ACT). The Committee’s webpage included: inquiry home page, Submissions, Government Response, Committee Membership, Report 180, Committee home page. All the results of the Committee’s work in 2018 are not fully known (see Map 8.1 of TimorLeste maritime borders). On April 20, 2018, 12 organizations and individuals made submissions. From the Public Hearing in Canberra, among the 12 submissions, only one, by Ian Melrose, bluntly called the proposed treaty unfair and urged that the Committee recommend against ratification.

Map 8.1  Timor-Leste maritime borders

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The submissions by the Timor Research and Advocacy Centre, La’o Hamutuk, the Timor Sea Justice Campaign, Timor Sea Justice NSW and the Uniting Church Synod in Victoria and Tasmania all called for the treaty to be ratified, but at the same time argued that it does not go far enough. They asked the Committee to recommend that Australia returns petroleum revenues to Timor-Leste, return to the jurisdiction of the International Court of Justice and International Tribunal for the Law of the Sea, reject the use of spying for commercial purposes and cease the legal action against Witness K. and lawyer Bernard Collaery, the two Australians charged over the spying controversy related to the CMATS negotiations. The Timor Sea Justice Campaign challenged the location of the lateral boundaries of the Timor-Leste maritime zone because they were “squeezed into” the boundaries of the previous Joint Petroleum Development Area. Another submission, by Prof Don Rothwell and Robert King, also recommended ratification but criticized the National Impact Statement of the Department of Foreign Affairs and the past policies of Australian governments, as well as indicating future difficulties with Indonesia and its lateral seabed boundaries with Timor-Leste and with Australia (Rothwell 2018). In March 2018, the Greater Sunrise Joint Venture major shareholders, Australian oil and gas company Woodside (33 percent working interest) and ConocoPhillips (30 percent) welcomed the treaty and re-stated the need for these companies to have stability in the commercial and regulatory framework for the existing fields and for Greater Sunrise. The American energy company ConocoPhillips, centered in Houston, Texas, is the world’s largest independent exploration and production company. The Committee reported on August 21, 2018 (Australian Parliament 2018). A significant point it made in regard to the interaction between the exhaustion of the Greater Sunrise Fields and the final boundaries is: Article 7 establishes the Greater Sunrise Special Regime (Special Regime). Within this area, Australia and Timor-Leste jointly exercise their rights as coastal states pursuant to article 77 of UNCLOS, until the Special Regime ceases to be in force. After the Special Regime ceases to be in force, the Parties shall individually exercise their rights as coastal states on the basis of the continental shelf boundary established in article 3 of the Treaty. In other words, the continental shelf boundary in the Special Regime Area only becomes relevant after the Special Regime ceases to be in force. (Australian Parliament 2018: 41)

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Timor-Leste has no navy capacity to exercise its rights. The Committee supported the treaty between Australia and the Democratic Republic of Timor-Leste Establishing their Maritime Boundaries in the Timor Sea and recommended that binding treaty action be taken (Australian Parliament 2018: 47). Before the 2018 treaty, Australia followed the preexisting and legally binding 2002 Timor Sea Treaty and the 2006 Treaty on Certain Maritime Arrangements in the Timor Sea (CMATS), which was signed by the Foreign Ministers José Ramos-Horta and Alexander Downer. In 2016, the Australian Government was not yet ready to negotiate with Timor-­Leste on maritime boundaries. According to Timorese sources, exploitation of the country’s oil reserves is viewed as a means to the full restoration of TimorLeste’s economic independence and development. The validity period of the CMATS was until 2057, but on February 3, 2016, the government appointed Xanana Gusmão, State Minister of Planning and Strategic Investment, as chief negotiator of the Negotiating Team for Treaties. Major nationalist demonstrations were organized in Dili and Australia in March and April 2016 calling for more rights on the Timor Sea. The protesters were against Australia’s refusal to negotiate a permanent boundary in the Timor Sea. Despite the Australian beneficial treaty arrangements, on April 11, 2016, Timor-Leste requested a Conciliation Commission under the UN Convention on the Law of the Sea (UNCLOS) to conciliate differences between Australia and Timor-Leste on maritime boundaries in the Timor Sea. On September 26, 2016, the Conciliation Commission announced that it had jurisdiction to proceed with the conciliation. Australia accepted the Commission’s decision and continued to engage in good faith during the next phase of the conciliation process. The boundary issue raises many questions, but unexpectedly in January 2017, new Maritime Arrangements in the Timor Sea seemed possible. The agenda of the negotiations was yet to be finalized, but the limit of the validity period, 2057, was canceled in 2017. The CMATS Treaty arrangements, which were consistent with international law, would be discussed. Essential preliminary renegotiations between the two countries took place in Holland in April 2017, with State Minister Xanana Gusmão as the head of the Timorese delegation. The treaty was signed by Agio Pereira, Deputy Prime Minister. An agreement on maritime boundaries was first expected in September 2017. The Timor Sea Justice Campaign cannot, unfortunately, guarantee that oil and natural gas will be found inside the new maritime borders. Before, in 2002, Australia withdrew its recognition of the jurisdiction of the International Court of Justice over the maritime boundary

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issue. Too pro-Australian, on January 12, 2006, the treaty between Australia and East Timor on CMATS, tried to unilaterally provide the two countries with a distribution of revenue derived from the disputed Greater Sunrise oil fields. Under CMATS, Timor-Leste would receive 50 percent of the revenues from Greater Sunrise, which is at the eastern edge of the former Joint Petroleum Development Area in which the Bayu-Undan and some other fields are located. Bayu-Undan fields were discovered in 1995 and the production started in 2004. Revenues from the Joint Petroleum Development Area were split 90 percent to Timor-Leste and ten percent to Australia (Treaty Article 4a). At present, the new deal means that TimorLeste would receive at least 70 percent of the revenues from the largest gas fields, Greater Sunrise, which are worth an estimated US$40  billion (A$51  billion). Previously, revenue was to be split evenly between the countries. The new treaty creates a new Greater Sunrise Special Regime to manage the development and exploitation of Greater Sunrise. It is hoped that the deal, signed at the United Nations in New York (March 6, 2018), will end the bitter dispute over oil and gas reserves in the Timor Sea. The two nations have agreed to split revenue from the Greater Sunrise oil and gas deposit, which lies between Australia and East Timor. There has been no agreement yet (in April 2019) on where the gas and oil will be processed, and future negotiations on the subject could be difficult. Australia has offered to give East Timor 80 percent of the revenue if the oil and gas is piped to Darwin, while East Timor prefers a 70 percent share with the resources processed on its shores.

LNG Plant Timor-Leste’s former president, Xanana Gusmão, has accused Australia of “colluding with resource companies to ensure the resources are piped south to Darwin instead of north to East Timor. Australia is deeply sceptical about East Timor’s capacity to develop the plant” (ABC March 2018). We are waiting to see if there is a new agreement leading to an acceptable compromise, a dispute resolution between the two countries. Agio Pereira said in New York (Media, March 7, 2018): “Building a pipeline and LNG plant in the South Coast (of Timor-Leste) that builds trust that Timor can do much more than that … The socio-economic impact will be immeasurable” (Ichizo and Kikkawa c.1995). The independent commission studying the Timorese pipeline and the pipeline to Australia “found that Timor-Leste would need a subsidy of US$5.6  bn to make their project

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feasible. This is around four times its normal yearly national budget.” What will Timor-Leste finally decide? We do not know yet, but if Timor-­ Leste seeks “to engage China’s Belt and Road Initiative for the pipeline subsidy,” we could see this as a new chapter in bilateral Australian-Timorese relations (The Interpreter 2018: 2–3). The concept to combine LNG plant with a power plant was confirmed to have an economical advantage compared with the stand-alone plant from the view point of LNG cost and electrical power cost. Under the new deal means Timor-Leste will receive, at least Australia will lose its jurisdiction in oil fields currently shared by both nations (BBC n.d.). An example of submarine pipe between the Timorese maritime fields and Australia already exists. The most lucrative field in the Joint Petroleum Development Area is Bayu-Undan; its first production started in 2004, and was estimated to hold around 400  million barrels of condensate and 3.4  trillion cubic feet of gas. The main operator of Bayu-Undan us ConocoPhillips (57 percent initially), co-venturers include Santos (11 percent), (ConocoPhillips Factsheet 2018). It is linked to the construction of the ConocoPhillips Liquefied Natural Gas (LNG) plant in the Northern Territory in Darwin, which began in June 2003, with the plant being officially commissioned in January 2006 (full operation). Gas is sent via a 502 kilometer pipeline from the Bayu-Undan field to the plant at Wickham Point, where it is converted into Liquefied Natural Gas for sale to Tokyo Electric and Tokyo Gas in Japan (see Map 8.1 of Timor’s maritime borders). Since 2006, an average of one cargo per week has been safely shipped to customers (ConocoPhillips Factsheet, March 2018; The Interpreter 2018). Bayu-Undan field will not produce natural gas after the year 2022.

Short Comparative on the Timor-Leste-Australian Treaty Versus the Global Question of Arbitration on the Belt and Road Initiative It is not easy to compare China with the single case of Australia—Timor-­ Leste international arbitration—a simple dispute resolution which was already accepted and jointly signed by the two parties, but not yet resolved in fact. Global acceptance of arbitration by China is out of question for the moment. How to deal with so many countries which accepted the Belt and Road? On the other hand, Timor-Leste is small, but it recognizes the importance of international references. This does not mean that China has to change quickly, but just to say that the Belt and Road Initiative has to

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play with 80 countries at present, and probably more later. The Belt and Road Initiative is already global, but these 80 countries have their own linguistic and cultural experience. To legally deal with so many countries is impressive, and the Supreme Court of the People’s Republic of China cannot deal directly with dispute resolution outside the country. So, up to now, international arbitrators of Chinese origin or other do solve these questions of dispute resolution and come into mainland China sometimes and even can deal also outside, such as in Hong Kong or in Great Britain or elsewhere. States, companies and sometimes individual persons also may be compelled to resolve disputes, so this legal process will go on. All depends upon China. China will probably slow down this possibility. It remains to be seen. “Recently, the U.S. has praised India for handling its maritime disputes with its neighbors, asking China to follow their example. U.S. engagement in the Timor-Leste dispute over its maritime boundary with Australia would allow the U.S. to further pressure China to cooperate in the South China Sea dispute. The U.S. should encourage its ally, Australia, to recognize the relevance of international law in this dispute. In doing so, the U.S. and Australia can work as allies to enforce international law in the South China Sea dispute” (Gonzalez 2016). Malaysian Economic Affairs Minister Azmin Ali said: “We maintain that freedom of navigation in the South China Sea must remain unencumbered” (SCMP, October 11, 2018). On April 18–20, 2019, in Dili during the ASEAN Security Forum, China played an active role. Would China consider assisting Timor-Leste with the significant cost of the pipeline to the south coast and the construction of an LNG plant there? The USA and Australia have different opinions toward China. Australia has often a more positive view. The Australia-China Belt and Road Initiative (ACBRI) Business Association was established in 2016. Australia has a large trade surplus with China, and it is difficult to see how China may help Timor-Leste to build its own LNG plant. The Timor-Leste Strategic Development Plan puts major emphasis on development through the creation of a petrochemical industry in the under-developed southern region of the country. This project is called “Tasi Mane,” and comprises a Supply Base at Suai, a Refinery and Petrochemical Industry cluster at Betano, an LNG Plant at Beaço, as well as an airport. This is Timor-Leste’s “mega-project,” and while it is internally popular it has also been subjected to significant criticism by the research and advocacy institute La’o Hamutuk (Timor-Leste Strategic

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Development Plan 2011–2030: 138–140; La’o Hamutuk 2016). The key debate concerns risks if the gas never lands in Timor-Leste and the relatively huge investment required—in the order of US$16  billion—compared to the current size of the Timor-Leste Petroleum Fund (the sovereign wealth fund) of US$16.8 billion in December 2017 (Ministry of Finance 2018: 1; the Minister Alfredo Pires, Timor-Leste). There is also a parallel debate that investment in education, health and housing is a higher national development priority. “The maritime boundary between Timor-Leste and Australia has been a matter of controversy and due to the large reserves of natural resources lying down within it, the definition of definitive boundaries has been postponed and being substituted by provisional agreements related for exploring the resources within the Timor Sea. In one hand, Australia maintains its former position negotiated first with Indonesia […] On the other hand, Timor-Leste, as an independent country since 2002 defends that continental shelf boundary as well as Exclusive Economic Zone (EZZ) should be drawn along the median line, as it seems to be the subsidiary rule under the UNCLOS and a more equitable solution (…) However, it seems that an equitable solution required by UNCLOS is not in place” (Pereira c.2012). “It’s time to draw the line, seeking more legal and commercial certainty (…) The Timorese expect nothing more than that we Australians act decently and fairly while they consider the complex options for future resources” (Brennan 2013) (Fig. 8.1). At the end of August 2018, a close professional and technical source in Dili said after consultation with the companies specialized on this question Fig. 8.1  Petroleum Minister of Timor-Leste, Alfredo Pires. NGO La’o Hamutuk, Dili

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that the submarine pipeline from Greater Sunrise fields to the southern part of Timor-Leste “is feasible.” After the recent treaty in 2018, the partners of these fields were Woodside Petroleum (33.4 percent), ConocoPhillips (30 percent), Shell (26.6 percent) and Osaka Gas (10 percent) (ConocoPhillips Factsheet 2018, Lao Hamutuk). In late September 2018, Timor-Leste continued to push its cards: “Timor-Leste buys $484 million stake in Greater Sunrise fields and pushes for 150 km LNG pipeline” (ABC News Oct. 2018a). In late November 2018, Timor-Leste’s government decided to buy the Shell share for A$413 million (ABC News, November 2018b; Shell 2018). We have to see. However, these statements are important for the new country and contrast with the lack of information in Australia on the establishment of an LNG plant, following the detailed article of Rebecca Strating (2017) supporting Australia and a fair, valid, but incomplete Australian-Timorese Sea Treaty in March 2018. Interestingly, on October 5, 2018, using an international link, the President of the Saldanha University, former Minister of Timor-Leste Government, Joao M.  Saldanha, on my question of the LNG plant answered “Thank you. No answer.” For this important question, the new country may follow the geopolitical and geo-economic approaches given by a former Indonesian foreign affairs minister and leader of ASEAN, Marty Natalegawa (2018, 232–233) who proposes three different dynamics not to be static: the “reactive, responsive and transformative” approaches. The challenge of Timor-Leste to succeed to have its own plant is gigantic, so to be responsive and transformative, to develop a new perspective to resist to Australia, a giant country is really a challenge. If capitalism is ethically a system of social cooperation and collaboration, which was Australia’s approach after the Cold War in the pre-­independence period for Timor-Leste (1990s–2002), now we are clearly in a system of Australia-Timor-Leste competition. To underline the internal debate inside Timor-Leste about the audacious purchase of a majority share in the Greater Sunrise Joint Venture, Timor-Leste’s President Francisco Lu’Olo Guterres vetoed the parliament’s law (first amendment to Law 13/2005/Law on Petroleum Activities) to enable the use of the Petroleum Fund to purchase the ConocoPhilipps share, on November 11, 2018 (Reuters, December 14, 2018). Finally, few months later, the Parliament of Timor-Leste fought back and rejected this veto. What will be the future of the Timorese nation with this huge investment is difficult to estimate, but it is financially risky.

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Conclusion Will the resolution of the impasse over Greater Sunrise drag into the year 2019, and Timor-Leste accept the propositions of Australia? At present, concerning these fields, Australia and Timor-Leste have to find a compromise inside the binding treaty signed in March 2018. Discussions are ongoing between the two governments and the Sunrise co-­ venturers with respect to the development concept for Greater Sunrise. Until the governments and the Sunrise co-venturers are aligned on a development concept, activities are currently restricted to compliance and social investment, maintaining relationships and continued engagement with the governments for future development options. (ConocoPhilipps Factsheet 2018)

Timor-Leste has achieved a significant advance by a combination of an original legal action in the International Court of Justice under the UN Convention on the Law of the Sea, combined with a political strategy of mobilizing popular opinion in Timor-Leste and in Australia for a fair delimitation of its seabed border with Australia. Neither direct diplomacy nor seeking friendly countries to pressure Australia to address the Timorese demands had any measurable impact. In this situation, Timor-Leste received somewhat fortuitous assistance from the US government, which had become highly concerned that Australia’s rejection of the jurisdiction of UNCLOS in the Timor Sea would undermine US demands in the South China Sea. However, Timor-Leste did not succeed in all its objectives because the development of the Greater Sunrise petroleum resource remains to be determined. This was a formal objective of the compulsory conciliation process under UNCLOS, but was stymied because of the relative power of the Greater Sunrise Joint Venture Partners (Woodside, ConocoPhillips, Shell and Osaka Gas) to influence the position taken by the Australian government, and by the Conciliation Commissioners themselves. Timor-­ Leste’s government has responded to this blockage by attempting to buy at least a majority if not all of the Greater Sunrise Joint Venture. And there are now considerable internal differences inside Timor-Leste about how best to proceed with the Greater Sunrise project. This situation demonstrated a certain weakness in the legal framework of the United Nations conciliation, which does not give it any “redistributive” function, but does require an “equitable” outcome. For now, the Timor-Leste government can celebrate the achievement of a fair maritime border with Australia, but

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must engage in direct negotiation with the remaining Joint Venture Partners, particularly Woodside, to try to achieve its goal of onshore LNG processing as a key to its Tasi Mane mega-project. China may have an interest to have a deal with Timor-Leste on the submarine pipeline or the LNG plant, but at present, nothing is known. With its US$ currency as national currency, a unique case in Asia, Timor-Leste—not yet a member of ASEAN—is considered part of the Belt and Road Initiative. Elsewhere, importantly, Thailand, Indonesia, Cambodia and Brunei support strongly the ASEAN candidacy of the new state. The process of securing an ASEAN candidacy is not clear for the majority of the Timorese, so ASEAN cannot help at present, it not at all a part of the “ASEAN way” policy to interfere. Timor-Leste is alone facing Australia—fortunately for Dili, with maritime borders secured by a binding treaty—and the Australian strong will to continue operating its own LNG plant dominates. Greater Sunrise will produce natural gas for a longer time than Bayu-­ Undan, but Timor-Leste continues to be one of the world’s most oil-­ dependent countries. “An agreement on how to exploit the Greater Sunrise gas reserves remains a long way off” (The Economist, October 18, 2018). Certainly, at present, Australia and Timor-Leste have to find a compromise concerning the LNG plant location, following the treaty signed in March 2018. The new country, David facing Goliath, is closer to success? What will be the final word concerning this plant? We do not know.

References ABC (Australian Broadcasting Corporation). March 2018. Accessed August 20, 2018. http://www.abc.net.au/news/2018-03-07/australia,-east-timor-signdeal-on-maritime-border/9522902. ABC News. 2018a. Timor-Leste Buys $484 Million Stake in Greater Sunrise Fields and Pushes for 150km LNG Pipeline. Accessed October 4, 2018. http://www.abc.net.au/news/2018-10-02/timor-leste-buys-stake-ingreater-sunrise-fields/10328274. ———. November 22, 2018b. Timor-Leste Buys Shell’s Stake in Greater Sunrise Oil and Gas in Controversial Plan to Build Hub. Accessed November 22, 2018. https://www.abc.net.au/news/2018-11-22/timor-leste-buys-shells-greatersunrise-oil-and-gas-stake/10534814. Australian Parliament. 2018. Accessed August 20, 2018. https://www.aph.gov. au/Parliamentary_Business/Committees/Joint/Treaties/TimorTreaty. BBC. n.d. Accessed August 20, 2018. https://www.bbc.co.uk/news/world-australia-43296488.

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Berlie, Jean A. 2018. East Timor Independence, Indonesia and ASEAN. New York: Palgrave Macmillan. Brennan, Frank. 2013. Accessed August 28, 2018. https://www.eurekastreet. com.au/article.aspx?aeid=36275. ConocoPhillips. 2018. Accessed August 20, 2018. http://www.oilfieldconnect. com.au/conoco-phillips-darwin-liquefied-natural-gas/. Economist: The Economist, April 9, 2016. “Timor-Leste Is One of the World’s Most Oil-­ Dependent Countries.” Accessed August 11, 2016. http://theconversation. com/whats-behind-timor-lestes-approach-to-solving-the-timor-seadispute-57883. Factsheet March 2018. Accessed October 9, 2018. http://static. conocophillips.com/files/resources/factsheet-apme-march2018.pdf. Gonzalez, Enya. 2016. Timor-Leste: The Key to the South China Sea. Accessed April 6, 2019. https://www.americansecurityproject.org/timor-leste-key-tothe-south-china-sea/. Henriss, Chip. n.d. Accessed August 20, 2018. http://www.abc.net.au/ news/2015-09-21/henriss-address-the-oil-injustice/6790978. Ichizo, Aoki, and Yoshitsugi Kikkawa. c.1995. LNG Plant Combined with Power Plant. Accessed August 21, 2018. https://inis.iaea.org/collection/ NCLCollectionStore/_Public/28/038/28038245.pdf?r=1&r=1. Interpreter. 2018. The Interpreter, August 7. Timor and Australia: A New Chapter or a Stalemate Timor Treaty Sea Treaty. Accessed August 20, 2018. http:// timor-leste.gov.tl/wp-content/uploads/2010/03/R_2003_2-Timor-Treaty.pdf. Ministry of Finance. 2018. Accessed September 28, 2018. https://www.mof.gov. tl/wp-content/uploads/2018/08/PF-FINAL-REPORT-2017.pdf. Natalegawa, Marty. 2018. Does ASEAN Matter? A View from Within. Singapore: ISEAS. Nester, William R. 2010. Globalization, Wealth, and Power in the Twenty-First Century. New York: Palgrave Macmillan. Chapter 8: Rich versus Poor in the Global Economy, 181–209. Pereira, Eliana Silva, c.2012. The International Legal Regime Established Between Australia and Timor-Leste … Law Diploma. Accessed August 24, 2018. http://www.euclid.int/papers/Elianapercent20Silvapercent20Pereirapercent 20LAW-INTpercent201.pdf. Reuters. December 14, 2018. E. Timor President Vetoes Using Petroleum Fund to Buy Sunrise Gas Project. Accessed December 14, 2018. https://www.reuters. com/article/timor-gas-sunrise/e-timor-president-vetoes-using-petroleumfund-to-buy-sunrise-gas-project-idUSL3N1YJ2MG. Rothwell, D.R. 2018. Australia and Timor-Leste: the 2018 Timor Sea Treaty. The Strategist, March 14. Accessed August 22, 2018. https://www.aspistrategist. org.au/australia-timor-leste-2018-timor-sea-treaty/.

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Shell. 2018. Accessed November 28, 2018. https://www.abc.net.au/news/201811-22/timor-leste-buys-shells-greater-sunrise-oil-and-gas-stake/10534814. Strating, Rebecca. 2017. Online 2016. Timor-Leste’s Foreign Policy Approach to the Timor Sea Disputes: Pipeline or Pipe Dream? Australian Journal of International Affairs 71 (3): 259–283. Timor Sea Treaty. 2003. PDF.  Timor-Treaty R_2003-2-Timor-Treaty. Accessed August 25, 2018. https://timor-leste.gov.tl/wp-content/uploads/2010/03/ R_2003_2-Timor-Treaty.pdf. Also Called: Timor Sea Treaty Between the Government of Australia and the Government of East Timor, Done at Dili on May 20, 2002. Timor-Leste’s Maritime Boundaries (TLMB). 2016. Policy-Paper PDF_English, August 2016. Accessed August 24, 2018. http://www.laohamutuk.org/Oil/ Boundary/2016/MBOPosnPaper29Aug2016pt.pdf. Walsh, J.R., and G.J. Munster. 1980. Munster, Documents on Australian. Defence and Foreign Policy, 1968–1975. Sydney: Hale & Iremonger.

CHAPTER 9

Africa-China Relations in the Context of Belt and Road Initiative: Realizing African-Chinese Dreams for Common Development? Raymond Kwun-Sun Lau

Abstract  Since its launch in 2013, the Belt and Road Initiative (BRI) has become synonymous with Chinese foreign policy under Xi Jinping. While China has seen its relations with Africa institutionalized in the Forum on China-Africa Cooperation (FOCAC) since 2000, little attention, however, has been paid to exploring the role of African countries in China’s Belt and Road Initiative. This chapter seeks to understand Africa-China relations in the context of Beijing’s new-found interest in inserting Africa into the Belt and Road route. Contrary to China’s official rhetoric on sharing the benefits of the country’s economic growth globally, it argues that Africa’s inclusion in the Belt and Road Initiative—

R. K.-S. Lau (*) Department of History, Hong Kong Baptist University, Kowloon Tong, Hong Kong e-mail: [email protected] © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_9

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President Xi Jinping’s signature foreign policy—is to demonstrate China’s system self-confidence and belief that it can offer a Chinese model of economic development—the path of socialism with Chinese characteristics as an alternative to Western model for developing countries in Africa to learn from. Keywords  Belt and Road Initiative • Forum on China-Africa Cooperation (FOCAC) • China Dream • China model

Introduction On 3 and 4 September 2018, the Forum on China-Africa Cooperation (FOCAC), under the theme, ‘China and Africa: Toward an Even Stronger Community with a Shared Future through Win-Win Cooperation’ took place in Beijing (Xinhuanet 2018a). With 53 out of 54 African countries represented,1 the 2018 Beijing Summit of the FOCAC was arguably one of the most significant diplomatic events of the year for China.2 Since its inception in 2000, the FOCAC has become a regular event, taking place once every three years alternatively in China and Africa. It has established itself as what Beijing defines as ‘a platform established by China and friendly African countries for collective consultation and dialogue’ and a ‘cooperation mechanism between the developing countries’ in the form of South-South cooperation (Ministry of Foreign Affairs of the People’s Republic of China 2018a). Indeed, China’s present-day engagement in Africa is not entirely new as developing countries in Africa have frequently received attention from the leadership in Beijing in specific historical time periods. The mid-1950s and early 1960s, for instance, saw China’s attempt to position itself in a supportive role towards independent Africa by appealing to anticolonialism and anti-imperialism (Gurtov 2013: 40), while China appears to have emerged as a counter-balancing force to the United States and a leader of the Third World in the post-Cold War period (Muekalia 2004). Yet, perhaps more importantly, it was the emergence of the FOCAC in 2000 that marked the institutionalization and formalization of China’s 50-year relationship with Africa (Taylor 2011: 1). The FOCAC, since then, has played a vital role in consolidating Africa and China’s political and economic relations. In 2009, China has already surpassed the United States as Africa’s largest trading partner (Ighobor 2013). The 2018 FOCAC summit, however, is particularly significant because this year marks the 40th anniversary of China’s reform and opening-up policy and the 5th anniversary of the launch of what is now called the One

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Belt One Road (OBOR) or the Belt and Road Initiative (BRI). Since its launch in September 2013, the BRI has been enshrined in the Chinese Communist Party (CCP) Constitution (China Internet Information Center 2017). Indeed, the adoption of the Beijing Declaration and the 2019–2021 Action Plan for China and Africa (Xinhuanet 2018b) represents a striking departure in China’s policy towards Africa, highlighting the BRI’s importance for the leadership in Beijing. For the first time, the Chinese government has explicitly called for making the FOCAC a major platform for cooperation between China and Africa under the Belt and Road Initiative, with Africa being depicted as ‘part of the historical and natural extension of the Belt and Road’ (Ministry of Foreign Affairs of the People’s Republic of China 2018b). While China-Africa relations has long been one of the most important aspects of China’s foreign relations, little attention has been paid to exploring the role of African countries in China’s Belt and Road Initiative. This chapter seeks to understand China’s push for the enhanced participation of African countries in the BRI. Along with advancing China’s economic (i.e. strategic pursuit of resources and trade) and political (one-China policy) interests, this chapter argues that the overarching driver of Beijing’s foreign policy towards Africa under President Xi Jinping is to making a show of China’s system self-confidence and belief that it can offer a Chinese model of economic development—the path of socialism with Chinese characteristics (Xinhuanet 2017a)—as an alternative to Western model for developing countries in Africa to learn from. While it is not entirely about ‘exporting the Chinese model’ (Fukuyama 2016), Beijing’s efforts to incorporate Africa into the BRI is an incentive-based approach to getting Africa to facilitate the Chinese Dream of national rejuvenation. This chapter begins by providing a brief overview of contemporary Africa-China relations. It specifically examines China’s efforts to institutionalize its relations with Africa through ‘country-to-country’ summits in the form of FOCAC since 2000. Along with tracing the origins and development of the FOCAC and institutional frameworks, it also explores key policy decisions and promises made in subsequent FOCAC meetings. The chapter is then followed by the analysis of the changing role that Africa has played in China’s pursuit of political, economic and ideological interests in the region. The next section details China’s foreign policy making under President Xi Jinping by assessing the strategy, aims and objectives of BRI. The chapter is concluded with a discussion of the implications of BRI for Africa-China relations.

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Contemporary Africa-China Relations Under the Auspices of FOCAC To begin with, strengthening and developing friendly cooperation with developing countries has long been an important ‘foundation’ of Chinese foreign policy.3 The rationale behind Beijing’s preoccupation with developing countries, as Ian Taylor suggested, is that developing ‘common interests’ with the South is crucial for China to raise its global stature and increase its bargaining leverage with the United States (Taylor 2010: 69). Africa has especially occupied an important place in Beijing’s eyes. This importance has been manifested on the number of high-level official visits between Africa and China since the 1960s (670 African leadership visits and 160 Chinese visits to Africa involving 51 African countries) (Shelton and Paruk 2008: 52). Particularly important is Chinese Premier Zhou Enlai’s articulation of ‘Five Principles Governing the Development of Relations with Arab and African Countries’ and ‘Eight Principles for Economic Aid and Technical Assistance to Other Countries’ during his visit of ten African countries in 1963 (China Internet Information Center 2003). Since then, these principles form the basis of Beijing’s promotion of friendly Africa-China relations. In addition to this, Premier Zhao Ziyang proposed four principles for developing China-Africa economic (as opposed to political) and technical cooperation during his visit of 11 African countries in 1982. These four principles governing relations between China and Africa emphasize equality and mutual benefit, practical results, variety of cooperation forms and common progress. In view of Deng Xiaoping’s launch of the reform and opening-up policy at the 11th Party Congress of the Chinese Communist Party in December 1978, this was an important shift in China’s policy towards Africa from supporting Africa’s national liberation struggles to advocating a more commercial-based interaction (Shelton and Paruk 2008: 55). The post-Cold War period also saw a continuation of China’s business and economic-oriented logic of interaction with Africa. Building on Deng’s economic development emphasis and opening approach, President Jiang Zemin outlined a ‘five-point proposal’ for developing a long-term stable relationship between China and Africa during his visit of six African countries in 1996. Jiang’s proposal, including fostering sincere friendship, respect for sovereignty and non-interference in internal affairs, common development on the basis of mutual benefits, enhancing consultation and

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cooperation in international affairs and creating a ‘more beautiful world’ (China Internet Information Center 2003), has confirmed Beijing’s ‘Africa first’ approach through expanding economic and trade cooperation with Africa. But perhaps most importantly, Jiang’s efforts to seek a commercially based (rather than ideologically motivated) partnership with Africa has laid the most important foundation for strengthening and institutionalizing relations between China and Africa in the form of FOCAC, the first gathering of its kind in the history of Africa-China relations. The year 2000, as mentioned earlier, is significant because it was in that year that China initiated the FOCAC, marking the institutionalization and formalization of Africa-China relations. The ‘Beijing Declaration’ and the first action plan ‘Programme for China-Africa Cooperation in Economic and Social Development’ were adopted as founding working documents for the first FOCAC meeting (2000). Since then, high-level Ministerial Meetings within the FOCAC framework have been held in Addis Ababa in 2003 (the first FOCAC being hosted by an African country); in Beijing in 2006 (China’s first White Paper on Africa Policy published); in Sharm El Sheik, Egypt, in 2009; in Beijing in 2012; in Johannesburg, South Africa, in 2015 (China’s second White Paper on Africa Policy published) and most recently in Beijing in September 2018. According to the FOCAC official website (Xinhuanet 2018c), there are five guiding values embodying this growing trend of South-South Cooperation: equality and mutual benefit; diversity in form and content; emphasis on practical results; pursuit of common progress; and amicable settlement of differences. Indeed, all subsequent Declarations and Action Plans concerning Africa-China cooperation are predicated on trade and investment, China’s cancellation of African debt, increase of development aid volume, and market access facilitation through encouraging Chinese investment in Africa. Most notable in terms of China’s strong commitment to economic cooperation are the launch of the China-Africa Development Fund (CADFund) and Special Economic Zones (SEZs) in the 2006 FOCAC meeting. And according to one estimate, Africa-China trade volume will be scaled up to US$400 billion in 2020 from US$220 billion in 2014 while the Chinese side will increase its stock of direct investment in Africa to US$100 billion in 2020 from US$32.4 billion in 2014 (Mackinnon 2016). Beijing’s rhetorical commitment to mutual economic benefit, development assistance, common prosperity and international cooperation was further cemented in the publication of China’s first White Paper on African

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Policy in January 2006. Being the first of its kind in China’s diplomatic history, this white paper made specific reference to the need for China, ‘the largest developing country in the world’, to ‘establish and develop a new type of strategic partnership with Africa’, a continent which encompasses ‘the largest number of developing countries’ (Ministry of Foreign Affairs of the People’s Republic of China 2006). Also, while China ‘respects African countries’ independent choice of the road of development’, the white paper somewhat deliberately suggested that China is willing to negotiate Free Trade Agreement (FTA) with African countries and African regional organizations ‘when conditions are ripe’ (Ministry of Foreign Affairs of the People’s Republic of China 2006). In view of the new type of China-Africa Strategic Partnership, Beijing has proposed the ‘4-6-1 model’ for defining its future interaction with Africa. The model, being proposed by Premier Li Keqiang during a speech at the African Union in 2014, is based on the four principles such as respecting for sovereignty and each other’s core interests, achieving mutual benefit and seeking pragmatic cooperation. These principles will be carried out by six projects/areas of cooperation: industrial cooperation, financial cooperation, poverty reduction, cultural exchanges and peace and security through one platform, FOCAC (South African Institute of International Affairs 2015). During the latest summit in Beijing, President Xi Jinping highlighted eight major initiatives as the focus of China-Africa cooperation in the coming three years: industrial promotion, infrastructure connectivity, trade facilitation, green development, capacity building, health, people-to-­ people exchanges and peace and security (The Straits Times 2018). Xi’s renewal of financial commitment of $60 billion to Africa, in the form of grants, interest-free loans and concessional loans, has made China become the third largest official donor to Africa after the United States and the European Union (Overseas Development Institute 2018). Also, with Xi’s emphasis of ‘Sino-Africa Community of Common Destiny’, the two most notable highlights were Beijing’s support of African exports to China and 10 Luban Workshops in Africa to offer vocational training for young Africans. This shift in emphasis to China’s expansion of capacity building programmes in Africa has demonstrated Beijing’s enthusiasm for shaping the next generation of African leaders and elites (Sun 2018). Beijing’s investments and financing to assist the continent in building its capacity to improve infrastructure and improve people’s standard of living has led some African analysts and commentators to suggest that

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China can help ‘realizing African dreams through FOCAC’ (Irandu 2018). The strengthening and institutionalization of relations between China and Africa in the form of FOCAC, however, is not what Chinese policymakers describe as ‘a model for South–South cooperation’ (Ministry of Foreign Affairs of the People’s Republic of China 2018c). Instead, being part of the Chinese government initiatives, FOCAC is a prominent example of a major international event that is strategically being utilized by Beijing to become a full-fledged major power in order to influence or manipulate African perceptions (and not the other way around) (Plessis 2014: 122–123). The text of the FOCAC’s 2012 Beijing Declaration (Ministry of Foreign Affairs of the People’s Republic of China 2012), which calls for a ‘more just and reasonable international order’, is testament to ‘China’s foreign policy concepts for an “equal world order” and its resentment towards Western dominance’ (Plessis 2014: 118). With China being the most powerful (economic and political) member by setting the rules of the game (Declarations and Action Plans) for FOCAC, Africa merely plays the role of a passive partner (Plessis 2014: 118). Therefore, as astutely suggested by Chris Alden and Daniel Large (2011), it would be erroneous to focus exclusively on Africa-China economic win-win cooperation by excluding the ideological element of China’s foreign policy towards Africa. Before understanding Africa’s role in China’s BRI under President Xi Jinping, it is vital to comprehend the range of economic, political and ideological interests that has driven Beijing’s engagement with Africa. Political, Economic, Security and Ideological Interests in China’s Policy Towards Africa Notwithstanding the rhetoric about long-lasting bonds of all-weather friendship between China and Africa (He 2018a), China has been instrumental in cultivating its relationship with African countries following the end of the Second World War and the birth of the PRC. Sun Yun, a non-­ resident fellow with the Africa Growth Initiative at Brookings, has pointed out that China’s foreign policymaking in Africa is not purely resource-­ driven, and Africa is not simply China’s supplier of raw materials. In fact, Beijing’s national interest in Africa can be identified in four dimensions: political, economic, security and ideological (Sun 2014). Politically, Beijing has ratcheted up efforts to project itself as the de facto leader of the developing world, since ‘China sought Africa as an ally

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in its struggles against imperialism and hegemony’ (Le Pere 2015: 363). Particularly significant was China’s deliberate attempt to play on African leaders’ historic suspicion of the West through strengthening the country’s connectedness with the continent in the name of third world solidarity and shared historical experiences: Africa and China, being the victims of ‘colonization by the capitalists and imperialists’, were engaged in the same task of national independence and liberation after the Second World War (Sun 2014: 3). The 1955 Bandung conference, which set the stage for the Non-Aligned Movement, can be identified as the genesis of Chinese (political) interest in Africa (Taylor 2011). Africa’s political importance to China is affirmed in the support given by the newly independent countries for PRC’s admission to the UN in 1971. Among the 76 countries that supported and voted for the motion, 26 were from Africa. The fact that more than one-third of the African countries voting in favour of the Resolution led Chairman Mao Zedong to suggest that ‘it was African black friends who carried us back in’ (Li 2014: 262). In addition to this, it was also African countries which helped to break Beijing’s international isolation and Western sanctions in the aftermath of the 1989 Tiananmen Square incident: ‘The first head of state, the first head of government and the first foreign minister to visit China after the political turmoil of 1989 all came from Africa’ (Ching 2018). Consequently, Beijing embarked on a deliberate practice of paying official visit to Africa as the first overseas trip of Chinese foreign ministers every year since 1991 (Ministry of Foreign Affairs of the People’s Republic of China 2018d). Equally significantly, African countries have been diplomatically important for Beijing to isolate Taiwan through their endorsement of the ‘One-­ China’ policy.4 In view of Beijing’s diplomatic competition with Taipei, constraining Taiwan’s international presence is crucial for PRC to bolster its regime legitimacy as the only lawful representative of China. Beijing’s preoccupation with marginalizing Taiwan completely on the continent is evidenced in Foreign Minister Wang Yi’s remarks following Bukina Faso’s switch of diplomatic allegiance to Beijing: ‘Now Africa has only one country with which we have not yet established [relations],…We hope this country can join the big China-Africa family of friendship as soon as possible’ (Ching 2018). Currently, Swaziland (the country was renamed as Eswatini in April 2018 by King Mswati III) is the only African country that maintains diplomatic ties with Taiwan (Chan 2018).

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Yet, with China becoming the world’s largest oil consumer and importer since 2017 (BBC News 2017a), Africa’s economic importance as a source for natural resource imports, a growing market for exports and investment for China has been further consolidated as a result of Beijing’s introduction of ‘Going Out’ strategy in the 1990s. According to one estimate, China’s financing to African governments and state-owned enterprises has reached US$86.3 billion between 2000 and 2014 (Brautigam and Hwang 2016). This policy of promoting investment in Africa in the form of acquiring natural resources and service contracts for China and providing financing and infrastructure for Africa is essentially a form of ‘resource-­ based foreign policy’ (Zweig and Bi 2005), which by its very nature is Beijing’s efforts to ensure resource security and domestic economic growth. Against the backdrop of China’s growing economic presence in Africa, protecting the Chinese nationals from domestic political instability, terrorism and kidnapping and its existing economic interests has become Beijing’s foremost emerging security interest in the continent (Sun 2014; Thrall 2015). Put differently, providing adequate protection for its citizens and assets is crucial for the Chinese government’s domestic political legitimacy. One of the most notable overseas operations by the People’s Liberation Army includes the evacuation of its more than 30,000 citizens from Libya in 2011, a rescue operation portrayed by Chinese analysts and the media as ‘a reflection of the country’s growing comprehensive national strength and rising naval capabilities’ (Krishnan 2011). China’s participation in UN peacekeeping operations in Africa is also an increasingly important dimension of Beijing’s security interest, since Chinese security participation in Africa is linked to China’s commitment to peaceful development and China-Africa solidarity. While Beijing’s support of Africa’s national liberation through employing the anti-colonial rhetoric of Third World solidarity and independence was ideologically driven, China’s ideological interest in Africa has persisted since Deng Xiaoping adopted the reform and opening-up policy in 1978. This has usually been manifested in Beijing’s efforts to spread and popularize China’s successful development model, where a capitalist economy is married to an authoritarian state (Zhao 2015). Beijing’s subtle promotion of its own brand of state capitalism, as suggested by Ian Taylor, has long been its policy goal: ‘By portraying itself as an advocate for the developing world and emphasizing the rhetoric of South-South cooperation, China has arguably sought to offer itself up as an alternative model to Western dominance’ (Taylor 2011: 33).

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Indeed, the fact that China was being able to avoid a Soviet-style collapse following the end of the Cold War had ignited the debate surrounding the idea of a China model in the 1990s. Xi Jinping’s rise to power in 2013, however, has seen the debate reinvigorated because of the president’s endorsement of the China model as part of his ‘China Dream’ vision of national rejuvenation (Zhao 2015). It is therefore important to illuminate and understand Xi’s visionary idea for China before an assessment of BRI—Xi’s signature foreign policy strategy—and its relationship with Africa can be done. In the remaining sections of this chapter, several aspects of Chinese foreign policy under Xi Jinping, including his vision for the ‘China Dream’ and advocacy of the BRI will be addressed.

Xi Jinping’s Belt and Road Initiative in the Context of the China Dream The notion of ‘China Dream’ is perhaps one of Xi’s most important ideological campaigns since coming into office. At the National Museum’s ‘Road to Revival’ exhibition during his visit in November 2012, the new president called on the Chinese people to realize the ‘China Dream’ as a great national revival. The essence of the ‘China Dream’, in Xi’s own words, is ‘a rich and powerful country, revitalizing the nation and enhancing the well-being of the people’, and that it constitutes ‘the inner meaning of upholding and developing socialism with Chinese characteristics’ (Ferdinand 2016: 946). This dream of ‘revitalizing the nation’, as one Chinese scholar suggested, is ‘a continuation of the rejuvenation narrative which highlights a return to [China’s] greatness and not a rise from nothing’ (Wang 2013, 2014). Since then, the China Dream—with ‘national rejuvenation’ being the core concept—has constantly been promoted as the vision for the country’s development. This great rejuvenation of Chinese nation can materialize through realizing the two centennial goals, that is, to establish a ‘moderate well-off society by 2021 and a rich and strong country by 2049.’ Particular important is the role of the Chinese Communist Party in leading the national revival of the Chinese nation, because “only the CCP can rejuvenate China”. Accordingly, the China Dream can only be implemented through the path of ‘socialism with Chinese characteristics’ (Sorensen 2015: 56). Along with his ‘China Dream’ at home, the most eye-catching initiative and visionary idea put forward by Xi at abroad has been the Belt and Road

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Initiative (BRI). It was in September 2013 during his visit to Kazakhstan, and in the same year in Indonesia, that President Xi proposed the building of the New Silk Road Economic Belt and the twenty-first century Maritime Silk Road. This vision of the Silk Road Economic Belt, connecting China and Europe through countries across central Eurasia, and the twenty-first century Maritime Silk Road, connecting China, Southeast Asia, Africa and Europe through the South China Sea and Indian Ocean, was initially known as One Belt One Road (OBOR). Shortly after its inception, this signature foreign policy plan of Xi was officially endorsed by the Third Plenary Session of the 18th Central Committee of the Communist Party of China in November 2013. It called on the government to ‘accelerate the construction of infrastructure connecting China with neighbouring countries and regions, and work hard to build a Silk Road Economic Belt and a Maritime Silk Road, so as to form a new pattern of all-round opening’ (Hong 2016: 3). The establishment of a new Silk Road Fund of US$40 billion in November 2014 was then followed by the issuance of the official founding document for OBOR, ‘Vision and Actions on Jointly Building Silk Road Economic Belt and twenty-first century Maritime Silk Road’ (Visions and Actions for short) with State Council authorization in March 2015. OBOR has since then been officially known as BRI because of the Chinese government’s efforts to standardize the English translation of the name of Xi’s signature foreign policy vision. According to Vision and Actions, BRI is aimed at enhancing connectivity across Asian, European and African continents through ‘promoting orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets. And China, as the document reads, has since promoted key cooperation projects in the fields of infrastructure connectivity, industrial investment, resource development, economic and trade cooperation, financial cooperation, cultural exchanges, ecological protection and maritime cooperation’. More importantly, multilateral cooperation priorities underlying BRI should be carried out in policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds (National Development and Reform Commission 2015). The BRI seemed to be gaining momentum when the 1st Belt and Road Forum for International Cooperation took place in Beijing (14–15 May 2017), which was attended by some 30 world leaders. According to the State Council Information Office, China has since signed trade and

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e­ conomic cooperation cooperation deals with 68 countries under the BRI (The State Council Information Office of the People’s Republic of China 2017). With Chinese enterprises building 56 economic and trade cooperation zones in over 20 countries, total trade volume with countries along the BRI route has surpassed 3 trillion US dollars from 2014 to 2016 (The State Council Information Office of the People’s Republic of China 2017). During the Forum, President Xi suggested that China’s pursuit of the Belt and Road Initiative is meant to foster a ‘new type of international relations’ featuring ‘win-win cooperation’ with Belt and Road countries (Global Times 2017). Xi went on to emphasize the benign feature of BRI: We are ready to share practices of development with other countries, but we have no intention to interfere in other countries’ internal affairs, export our own social system and model of development, or impose our own will on others. In pursuing the Belt and Road Initiative, we will not resort to outdated geopolitical maneuvering. What we hope to achieve is a new model of win-win cooperation. (Global Times 2017)

Belt and Road Initiative and the China Model: A Demonstration of China’s System Self-confidence On the face of it, the BRI is Beijing’s efforts to present a global framework for common development through promoting economic and trade cooperation between Asia, Europe and Africa. Yet, it is important to note that this Initiative is an integral part of China’s 13th Five-Year Plan (2016–2020), which guides the national investment strategy throughout that period (Yu and Rizzi 2018: 55–56). In this sense, the BRI is, first of all, a top-level design for connecting the Chinese economy to regional and global raw material suppliers and markets through the construction of a coherent infrastructure of transportation networks (Noesselt 2016). From the economic point of view, this is a significant shift in China’s strategy on development which involves economic upgrading, rebalancing and further opening, a process what Jia Qingguo called ‘new wave of opening’: ‘Unlike in the past when China opened itself up to attract foreign investment, technology, and management skills, China is now reversing its role by opening outwards to help push through its domestic reforms’ (Hong 2016: 11). Apart from domestic economic driver, the Initiative’s focus on connectivity and infrastructure construction across Eurasia and Oceania must be

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seen in the context of the ‘China Dream’ and Xi’s emphasis on the great rejuvenation of the Chinese nation. With the BRI encompassing 4.4 billion people, at least 65 countries (most of them developing economies) and a combined economic output of $21 trillion (29% of global GDP), the BRI can reasonably be understood as a long-standing deeply held belief that a rejuvenated Chinese nation, as Xi himself put it, is able to offer ‘Chinese wisdom and a Chinese approach as ‘a new option for other countries and nations who want to speed up their development’ (China Daily 2017a). Kerry Brown (2018), one of the most influential Western thinkers about Chinese politics, has rightly depicted the Chinese leaders’ mentality on the BRI: The rationale here is that after four decades of rapid industrialization and construction, China is in a position than before to show others how to undertake urbanization and build high speed railways and motorways, among other things. China … has usually been figured in ways which place it as a student, and the outside world—Europe, America and the developed world in particular—as its teachers.’ Now this situation has changed. No other country has lifted so many from poverty and built so much hard infrastructure in such a short period of time. It is now, therefore, the era of China the teacher, not China the student. The Belt and Road Initiative is one way that this is unfolding. (italics added)

Underlying the BRI is first and foremost the assumption of Beijing’s growing self-confidence of China’s economic achievements and its model of development during the past four decades. Indeed, Xi’s emerging BRI vision for solving ‘the problems facing mankind’ corresponds consistently with this new-found assertiveness in Chinese foreign policy. Along with the above-mentioned ‘China Dream’ concept, Xi’s emphasis on China’s unique development road as shaped by socialism with Chinese characteristics is evidenced by his advocacy of ‘four confidences’ (sometimes described as the ‘Confidence doctrine’) in his inaugural speech at the National People’s Congress: that is confidence in the path, theory, system, and culture of socialism with Chinese characteristics (China Daily 2018). Beijing’s leaders’ growing confidence in the country’s capacity to manage social and economic affairs is especially fuelled by its success in weathering 2008 global financial crisis. But perhaps more fundamentally, China’s capacity of being a leading force among emerging market economies in the midst of what it called a ‘period of strategic opportunity’ has made

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President Xi to believe that the China model of development, which could simply be understood as a mixture of a state capitalist economy (mainly through spending money and building large-scale infrastructure projects) and an authoritarian state, can potentially be used to develop and improve infrastructure and financing system of the world’s impoverished areas. The task of the final section is to address China’s attempt to get Africa involved in the BRI and its implications for Africa-China relations. Belt and Road Initiative and Africa: Realizing African-Chinese Dreams or Xi’s Testing Ground? On the surface, Africa’s need for infrastructure and innovative investment for it—and China’s capacity and willingness to provide it—makes the continent perfectly suited to the BRI.  But somewhat surprisingly, while 53 out of 54 African countries are FOCAC members, Africa was hardly mentioned when the BRI was launched in September 2013. In fact, it was the former chief economist of the World Bank Justin Yifu Lin who first advocated the inclusion of Africa into the BRI in early 2015. In calling for a ‘One Belt, One Road and One Continent’ strategy, Lin argued that Africa is vital for China’s foreign investment and economic transformation, since China can transfer its labour-intensive industries to Africa (industrial relocation) while fostering the growth of African countries through infrastructure construction (Lin 2015). Lin’s call for Africa’s inclusion in the BRI was swiftly followed by the signing of the Memorandum of Understanding on the Promotion of China-Africa Cooperation in the Fields of Railway, Highway, Regional Aviation Networks and Industrialisation in late January 2015 (Xinhuanet 2015). Since then, Kenya, Ethiopia, Egypt, Djibouti and Morocco have become official BRI countries. Still, the fact that no reference is made to the BRI in China’s second Africa policy paper in 2015 nonetheless suggests the phenomenon of Africa’s initial marginalization in the BRI (Van Staden et al. 2018: 11). And even though the 2015 Vision and Actions for the BRI document has seen Africa being included, the continent is only mentioned 6 times while Europe is referred to 12 times and Asia and its sub-regions have more than 30 general references in the document (World Wildlife Fund for Nature 2016). What is even more striking is that Africa is being equated with South America in the official communique of the 1st Belt and Road Forum in May 2017: “[W]e welcome and support the Belt and Road Initiative to enhance connectivity between Asia and Europe, which is also open to

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other regions such as Africa and South America” (China Daily 2017b). After all, the BRI is aimed originally at boosting trade and infrastructure integration across Eurasia via Africa: African countries are not regarded to play important roles in regional and global order. However, there is emerging evidence suggesting that China is increasingly enthusiastic about Africa’s inclusion in the BRI. Three notable outcomes of China’s massive global infrastructure projects in Africa include the opening of the Mombasa-Nairobi Railway (2017) and Addis Ababa-­ Djibouti Railway (2018) and China’s first overseas military base in Djibouti (BBC News 2017b). With both railway lines being funded by the Export-­ Import Bank of China, the $  3.2  billion Mombasa-Nairobi Railway is Kenya’s biggest infrastructure project since independence, while the Addis Ababa-Djibouti Railway is Africa’s first transboundary and longest electrified railway line (Biswas and Tortajada 2018). The base’s construction, on the other hand, supports China’s anti-piracy efforts in the Gulf of Aden (Xinhuanet 2017b). While the African leg of the BRI has begun with East African countries (such as Egypt, Djibouti and Ethiopia), Beijing’s infrastructure networks are expanding: Senegal has become the first West African country to sign a Belt and Road cooperation document with China (Asia Times 2018). This highlights China’s efforts to consolidate African countries’ support of President Xi’s Belt and Road initiative of massive global infrastructure projects. But perhaps more fundamentally, the way in which China managed to integrate Africa into the BRI route has transformed Africa’s role in the world: from being passive receivers of development assistance to competitors for trade and investment with other BRI countries (Van Staden et al. 2018: 23). Some Chinese scholars have suggested the interconnection of development vision between China and Africa: ‘Just as the Chinese people harbor the Chinese dream of national rejuvenation, the African people hold the African dream of achieving development and alleviating poverty’ (He 2018b). But while Beijing-backed investment has provided African countries much-needed infrastructure, it has also generated scepticism about the reason behind China’s attitudes change over Africa’s role in the BRI. China’s Africa policy, as Sun Yun (2015) argues, will not undergo fundamental change no matter whether the ‘One Belt, One Road’ strategic framework is introduced or not. Given that the FOCAC is now a set of institutionalized political and legal structures (with high level of cooperation among Chinese and African governments), it is doubtful that Beijing’s

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decision to insert Africa into the BRI can be justified as realizing China-­ Africa’s shared development visions. With the BRI being an integral part of Xi’s grand initiative of realizing the ‘great rejuvenation of the Chinese nation’, securing positive endorsement from African countries is instrumental to its successful implementation and Xi’s vision to restore the country to its rightful place as a global power. In fact, against the backdrop of the highly institutionalized cooperation in the FOCAC, African countries do not seem to question China’s appeal to the developing world. Responses from African government officials about Beijing’s emphasis on infrastructure development and investment are largely positive, as the Nigerian Minister for Foreign Affairs put it: Of course, for today, China is a model for developing countries, a model of how a government with a vision and with discipline can transform a huge country and lift millions and millions of people out of poverty. (Bona 2017)

The remarks of the Nigerian Minister of Foreign Affairs was in line with the report released by Afrobarometer—an African-led research network conducting surveys in 36 African countries—about people’s perception of China’s growing presence in Africa. The report suggests that it is not just African political leaders but people in general too have a positive attitude towards China: 63% of respondents thought China’s economic and political influence in their country was positive (Afrobarometer 2016). Just like Beijing’s efforts to institutionalize its relationship with Africa through FOCAC, Africa’s inclusion in the BRI also serves four broad Chinese national interests. Politically, Beijing helps African countries to achieve their (Africa) dream of development for the sake of realizing the China dream of national rejuvenation. Economically, BRI countries in Africa are crucial for China to transfer its labour-intensive industries overseas (industrial relocation) through large-scale infrastructure development. From a security perspective, having its first African military base in Africa ensures the security of trading routes on the Maritime Silk Road. China’s ideological interest with Africa in BRI lies in its success of showcasing the Chinese style of infrastructure development projects. Therefore, in a nutshell, if FOCAC is China’s institutional desire to counter-balance the Western dominance, then incorporating Africa into the BRI is Beijing’s deliberate attempt to demonstrate China’s system self-­ confidence to the world by offering the China model—socialism with Chinese characteristics—as an alternative development for the developing

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world. Although the Chinese government still remains cautious not to speak of seeking a global leadership role, it is becoming obvious that the Chinese leader is driven by a deep-seated belief in China’s capacity to ‘offer[s] a powerful counter-narrative to Western-based norms of development’ (Ang 2017).

Conclusion The launch of the BRI, in which President Xi calls ‘a project of century’, is meant to benefit people across the world by achieving economic integration and interconnected development, according to the official rhetoric (Xinhuanet 2017c). All countries, from either Asia, Europe, Africa, or the Americas, as Xi himself puts it, can be international cooperation partners of the BRI (Xinhuanet 2017c). From Beijing’s perspective, incorporating Africa into the BRI route is about extending China’s growing presence in international development on the continent through spending money and building large-scale infrastructure projects. China can boast of possessing the world’s second largest economy after four decades of reform and opening up. In terms of tackling poverty and delivering efficient governance, the Chinese model of economic development—achieving economic prosperity without becoming liberal democratic—is appealing and attractive to developing countries. As suggested by the above-mentioned Afrobarometer report (2016), Africans (in some countries) rank China (rather than the United States) as a preferred development model as they hold generally favourable views of Beijing’s economic and assistance activities. To be sure, the fact that China’s own developing story—a country being transformed from extreme poverty to a global powerhouse—being positively endorsed by African countries has strengthened Beijing’s diplomatic self-assurance. China’s strong sense of confidence was clearly shown in an article published by the People’s Daily, the CPC flagship newspaper, in January 2018: The world needs China…[as]China was at a historic period for the cause of socialism with Chinese characteristics to leap forward, for the system of socialism with Chinese characteristics to mature and for the world pattern to reshape. (People’s Daily 2018)

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In this context, Africa’s inclusion in the BRI has nothing to do with Beijing’s official rhetoric of (just) sharing practices of development with other countries. It is, instead, Beijing’s subtle promotion of its own model of economic development, showcasing that there is not only a single Western model of development. For all Beijing’s official rhetoric about the BRI being open and inclusive, it is broader than just China’s investment on infrastructure for achieving global economic growth and shared prosperity of all countries. Africa, after all, is being instrumentalized to serve as a testing ground for Xi’s grandiose claim of ‘Chinese wisdom and a Chinese approach’ for global development.

Notes 1. The only country being left out at the FOCAC is Swaziland (the country was renamed as Eswatini in April 2018 by King Mswati III), which still maintains diplomatic ties with Taiwan. 2. For the purpose of this chapter, “China” means the regime established by the Chinese Communist Party in 1949. 3. According to China’s foreign policy principle, the country’s foreign affairs are categorized as “Big powers are the key; China’s periphery is the priority; developing countries are the foundation; multilateral platforms are the stage”. 4. The essence of the ‘One China’ policy is that any country that wishes to establish diplomatic relations with China cannot officially recognizes Taiwan.

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CHAPTER 10

A Chinese-African Cross Cultural Perspective on Dispute Settlement and the Belt and Road Initiative: Challenges and Risks Facing Chinese Investors Li Ke

Abstract  Dispute settlement is essential not only in China and South Africa but also along the global Belt and Road Initiative project of China. It is important to protect the interest of Chinese investors. Two main legal points are discussed: the umbrella clause and the fork-in-the-road provision. The wish to have more transparency is clearly mentioned. However, it is too early for China to accept a high level of transparency as in other bilateral investment treaties (BITs). Besides arbitration, the author also suggests other flexible ways, such as consultation and negotiation between government and private parties to resolve investment disputes in Africa. Few African countries prefer to resolve investment disputes with Chinese investors by means of arbitration or litigation.

L. Ke (*) Faculty of Law, University of Macau, Macao, China e-mail: [email protected] © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_10

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Keywords  Arbitration • Bilateral investment treaty (BIT) • China • Dispute (settlement or resolution) • Investor • South Africa

Introduction An effective dispute resolution mechanism matters for Chinese investors in South Africa and for China’s Belt and Road Initiative. As one of the mainstream dispute resolutions, arbitration is broadly used in settling investor-to-state disputes. Unlike commercial disputes between two private parties, the “relationship of the two parties in investors-to-states disputes is not horizontal but rather vertical”; the investor is a private entity, whereas its opponent is a sovereign state that at least has the power to pursue its own interests unilaterally (Kulick 2012: 225). In this chapter the author aims at reviewing the dispute settlement clause in the China-­ South Africa bilateral investment treaty (BIT) and analyzing significant issues involved in treaty arbitration initiated by Chinese investors against South Africa. Although there have been no arbitration proceedings carried out between Chinese investors and South Africa so far, discussion in this chapter provides a valuable reference to Chinese investors for predicting and preventing possible challenges and risks they may face in settling investment disputes in South Africa in the future. Besides discussion on the current investor-state arbitration clause in the China-South Africa BIT, this chapter also illustrates the increasing transparency in investment treaty arbitration and challenges facing Chinese investors which arise from the transparency trend and the existence of the Belt and Road Initiative. “China competes to attract African states rich mineral ressources, for example Kenya is rich” (sic) (Pautasso 2016: 127; Sharma 2017: 399). The relations with Portuguese speaking countries in Africa such as Angola also have to be promoted. The promotion of Macau SAR to be linked with the African states of the “Portuguese World” was often proposed by the Chief Executive Chui Sai On. We will see if Macau will finally succeed to promote, but the memorandum (MoU), signed in 2018 by the Presidents of China and Portugal is already a successful story. The approach of Chinese investment in South Africa and other African countries was described in a report of UNCTAD as through “establishing forums and dialogue platforms” and “frequent high-level official visits”. The report further states that China “generally uses official flows to ­promote trade and investment activities in Africa” (UNCTAD 2010). As

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investment flow from China into South Africa is largely promoted by the governments of the two countries as part of the Belt and Road Initiative, the governments’ intervention is unavoidable in resolving investment disputes between Chinese and South African parties, especially where Chinese state-owned enterprises are concerned. Chinese parties prefer to resolve large commercial and investment disputes with their African counterparties through diplomatic channels or other informal dispute resolution mechanisms, especially when the Chinese state-owned entities are engaged in disputes. Some BITs concluded between China and African countries (including South Africa) expressly stipulate that investment disputes between the two countries shall be settled through diplomatic channels first (BIT Art. 9, Zhu 2012: 85). It may be an effective way to resolve disputes and protect the interests of Chinese investors in host countries, but criticism of the influence of political power in economic relations increases, which in turn results in strong political overtones to Chinese investment in South Africa and other African countries. Conflicts emerged between Chinese employers and local employees, for example, in the Collum Coal Mine in southern Zambia on 15 October 2010. Eleven miners were wounded. Two Chinese managers were charged with attempted murder by a Zambian court, but the Chinese Consulate intervened actively and the “two managers were finally not accused” (Bearak 2011). There are still academic criticisms questioning China and its economic involvement in Africa (Mohan 2013: 44). By considering the lack of transparency and the disadvantages of African countries in political wrestling behind the economic disputes, more and more African countries prefer to resolve investment disputes with Chinese investors by means of arbitration or litigation. Chad initiated an International Chamber of Commerce (ICC) arbitration against the China National Petroleum Corporation (CNPC) in August 2014 and raised claim compensation for environmental damages allegedly caused by the dumping of excess crude oil by CNPC in pits (Snider 2014). As a traditional means of dispute resolution, litigation is frequently used to resolve various types of legal disputes that a Chinese investor may face within the duration of his business operation in South Africa. It includes licensing, regulation and compliance issues, manufacturing and consumer matters, natural resources, supply contracts, employment matters, personal injury, property and land matters, and so on. Chinese investors may be involved in litigation either as a claimant or as a defendant. Litigation in South Africa has obvious advantages. Generally, local courts of South

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Africa have jurisdiction over any disputes that happened within the bounds of a particular geographic territory, which is called “territorial jurisdiction”. Chinese investors are suggested to choose litigation, thus respecting the territorial sovereignty of South Africa. Moreover, litigation before a competent court of the host country is provided as an option parallel to international arbitration in the China-­ South Africa BIT (Art. 9(2) 1997). Article 9(2) of the China-South Africa BIT stipulates that “if the dispute (between foreign investors and host state) cannot be settled through negotiations within six months […] the dispute may require the investor to initiate administrative review procedures in accordance with its laws and regulations, and provided that the investor has not submitted the dispute to a domestic court of that Contracting Party”. However, for Chinese investors the disadvantages of litigation and the risks involved in the process of litigation cannot be ignored. First of all, for Chinese investors the South African legal system and the court structure are “strange” (Van der Merwe and Du Plessis 2004: 433). Commercial disputes are usually heard in an appropriate High Court division. There are 13 High Court divisions in major commercial centers such as Johannesburg and Pretoria. That makes it more complicated to litigate in South Africa than in China. Secondly, Chinese investors need to have knowledge about the duration of litigation in South Africa. The fact is that actual contentious litigations can be as long as two to three years in South Africa (OECD 2013). Any foreign litigant preparing for international litigation must be prepared for this time duration in terms of expenses and patience. Thirdly, to effectively resolve cross-border investment disputes by litigation, international judicial cooperation is indispensable. However, such judicial cooperation between China and South Africa is insufficient. As of this writing, South Africa has not joined the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. China ratified the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (The Hague Evidence Convention) on 8 December 1997, which became effective in China in February 1998. China strictly follows the principle of pacta sunt servanda. Moreover, Article 260 of the Civil Procedure Law of China rules that where there is any discrepancy between an international treaty concluded or acceded to by the People’s Republic of China and this Law, the provisions of the international treaty shall prevail, except clauses to which the People’s Republic of China has declared reservations. Although South Africa acceded to the Hague Evidence Convention in 1997, the

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Convention has not been incorporated into South African domestic law. Article 231(4) of the Constitution of the Republic of South Africa 1996 provides that “a self-executing provision of an agreement that has been approved by Parliament is law in the Republic unless it is inconsistent with the Constitution or an Act of Parliament”, but the South African Law Reform Commission views that the Hague Evidence Convention does not fall within the category of “self-executing agreement” (de Wet et  al. 2015). In this case, Chinese courts will consider a request from a South African court for evidence collection under the principle of reciprocity. In terms of reciprocity, international law establishes a system in which states understand that if they cause harm, they will suffer harm in return (Shahrad 2018: 17). Lack of judicial cooperation between two countries increases both the cost and difficulties of cross-border litigation and execution of court judgments. China and South Africa have both accepted the New York Convention. China adopted both the reciprocity reservation and the commercial reservation under which the former provides that China recognizes only those arbitral awards made in other states that are signatories to the Convention (Böckstiegel 2012: 578). Finally, in the case of investor-­ state disputes, Chinese investors may fear a lack of impartiality from the courts of the state against whom they wish to pursue their claims (Dolzer and Schreuer 2012: 214). By contrast, arbitration shares unique advantages in resolving investment disputes in South Africa. It is the primary channel to settle investment disputes between Chinese investors and South Africa, as stipulated in the China-South Africa BIT.

Investor-State Arbitration Under the China-South Africa BIT In the China-South Africa BIT, Article 9 deals with disputes “between an investor of one Contracting Party and the other contracting party in connection with an investment in the territory of the other Contracting Party” (BIT). Different from commercial disputes between two private parties, investment disputes involve a sovereign state as one of the parties to the investment disputes. Although there has been no arbitration filed so far against South Africa by Chinese investors as per this provision, Chinese investors may at any time resort to the arbitration clause in the China-­ South Africa BIT to protect their rights and interests. Therefore, it is ­necessary to analyze the clause and potential issues which may be faced by

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Chinese investors in resolving future disputes with South Africa. The China-South Africa BIT was first signed on 30 December 1997. Unlike first-generation Chinese BITs concluded in 1980s, which only allowed a narrow range of issues to be submitted for arbitration, Article 10(1) of the China-Ghana BIT states that only disputes “concerning the amount of compensation for expropriation” may be submitted to an arbitral tribunal. Chinese second-generation BITs that were signed in the 1990s granted investors the choice of submitting their investment disputes to either a domestic court or international arbitration. Most of these BITs limit the scope of arbitration to disputes with respect to the amount of compensation against expropriation only. For the amount of compensation in the case of expropriation to the International Centre for Settlement of Investment Disputes (ICSID) see Article 10 “Settlement of Disputes between one contracting party and investors of the other contracting party” (China-Gabon BIT). The China-South Africa BIT is another exception. It allows “any disputes between investors of one contracting party and the other contracting party in connection with an investment in the territory of the other contracting party” to be submitted to an international arbitral tribunal. Focusing on this clause itself, it seems that Chinese investors in South Africa may have more chances to submit their investment disputes for international arbitration by comparison with other African Countries who signed BITs with China in the 1990s. However, through analysis of Article 9 together with other clauses under the BIT it could be noted that there are certain limitations for Chinese investors who wish to submit investment disputes for international arbitration.

Umbrella Clause in the China-South Africa BIT In the context of a bilateral investment treaty (BIT) an umbrella clause is a clause that obliges the host state to observe specific undertakings toward its foreign investors (Muchlinski et  al. 2008: 54). Umbrella clauses are commonly used in BITs. UNCTAD estimates that about 40 percent of existing BITs contain an umbrella clause (UNCTAD 2007: 73). The China-South Africa BIT also contains an umbrella clause. Article 10(2) of the BIT stipulates that “Each Contracting Party shall observe any other obligation it may have entered into with regard to investments of investors of the other Contracting Party”. Controversies arise out of the interpretation of the umbrella clause. Divergent conclusions given by

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international arbitral tribunals make the umbrella clause one of the most uncertain issues in the field of international investment law. In Société Générale de Surveillance S.A. v. Pakistan (SGS), the allegation of breaching an umbrella clause was rejected by the tribunal, who explicitly showed their attitude on the interpretation of the “observance of the commitments” clause (so-called umbrella clause) under the BIT that such a clause does not cover every contract or other commitment that a contracting party has entered into, or may in the future enter into with respect to an investor. In the view of the tribunal, the consequences of broad interpretation of the umbrella clause would be “so far-reaching in scope, and so automatic and unqualified and sweeping in their operation, so burdensome in their potential impact” on a host State, which could not have been the intent of the Contracting Parties. The position taken by the tribunal in the SGS v. Pakistan case obtained support from other ICSID tribunals. Joy Mining v. Egypt found that an umbrella clause in a BIT cannot be used to automatically transform a contract claim into a treaty claim unless there exists “a clear violation of the Treaty rights and obligations or a violation of contract rights of such a magnitude as to trigger the Treaty protection” (Joy Mining 2004). The tribunal in CMS v. Argentina, by analyzing the Argentina-United States BIT, allowed that “not all contract breaches result in breaches of the Treaty”, even when there is an umbrella clause present (CMS 2005: 299). However immediately after the tribunal had given its decision in the SGS v. Pakistan case, another tribunal gave a completely different decision in the SGS v. Philippines case despite the similarity of the facts in these two cases. The tribunal in SGS v. Philippines sat with the claimant. The tribunal decided that “the phrase ‘any obligation’ is wide enough to include obligations arising under national law with regard to an investor-state contract”. Article X (2) of the Switzerland-Philippines BIT reads: “Each Contracting Party shall observe any obligation it has assumed with regard to specific investments in its territory.” Although the tribunal’s decision in this case drew much criticism, there is no lack of followers, such as the tribunal in EDF v. Argentina. The tribunal held that the breach of a contract between a province of Argentina and a company constituted a breach of the umbrella clause. In SGS v. Paraguay the tribunal explicitly denied that a forum selection clause can be an obstacle to the umbrella clause claim. However, some tribunals were inclined to defer to the exclusive forum selection clause and held that an exclusive forum selection clause in the contract renders the umbrella clause claim inadmissible.

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Unlike the broad interpretation in SGS v. Philippines or the narrow interpretation in SGS v. Pakistan, some tribunals recently adopted a more compromising approach to deal with the issue of whether a pure contractual claim under the umbrella clause could be referred to treaty arbitration. The El Paso v. Argentina case decided by ICSID in April 2006 was a pioneering precedent case in this respect. In the award of the El Paso v. Argentina case, the application of “umbrella” clause had been discussed in detail. The award analyzed the nature of host country’s act, specifically, whether the government of the host country was intervening in a “state contract” or was in a breach of a “commercial contract” to determine whether the “umbrella” clause shall apply. If the host country acts like a “businessman” and takes actions of a nature in breach of a “commercial contract”, then it will not constitute a breach of the “umbrella” clause under the BIT, over which ICSID has no jurisdiction. Where the host country acts as a “sovereign power” and takes actions of a nature intervening in a “state contract”, then the “umbrella” clause could change the contractual dispute into a “legal dispute” under a BIT, over which ICSID may have jurisdiction. The tribunal in Sempra Energy v. Argentina (Energy 2006, 2016) also looked at the nature of host country’s act. Unlike the tribunal in El Paso v. Argentina, which focused on the nature of conduct through which the contract was formed, the tribunal in Sempra Energy v. Argentina looked into the nature of the state conduct that was alleged to have breached the contract to decide whether an umbrella clause claim was admissible or not. The tribunal in Aconquija and Vivendi v. the Argentine Republic also emphasized the nature of the host country’s act and “the fundamental basis of the claim” when determining the jurisdictional issue. It clearly stated that there is no necessary connection between a contractual claim and treaty claim. The Aconquija and Vivendi annulment committee made it clear that “whether there has been a breach of the BIT”, “a state may breach a treaty without breaching a contract, and vice versa”. The tribunal has jurisdiction only over the claims on nonfulfillment of the respondent state’s treaty obligations (Aconquija and Vivendi 2002, 95–96, 101–102). Although from the above analysis it seems that current jurisprudence on umbrella clauses can be roughly divided into three categories, that is “narrow interpretation”, “broad interpretation” and “intermediate interpretation” based on the nature of the state’s conduct, it is noteworthy that all these previous decisions only examine a particular umbrella clause in a specific fact scenario. This is because there are some academics who divide the

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jurisprudence on the umbrella clause claim into four categories: Besides the “narrow” interpretation, if the contract contains a conclusive forum selection clause, investors need to abide by this clause before they vindicate their rights under the investment treaty (BIVAC Veritas). Some other issues that are not discussed above may also have influence on the tribunals’ decision in the umbrella clause claim, such as whether a claim arising from a contract between a state agency and foreign investors can be covered by the umbrella clause in investment treaties, and so on. Moreover, as ICSID awards do not follow a system of precedent, the above cases illustrate inconsistency in the jurisprudence on umbrella clause claims and provide several possibilities that tribunals may adopt in interpreting umbrella clauses in the future. Due to a lack of unified interpretation on umbrella clauses, which makes the awards on this clause unpredictable, more and more countries are beginning to avoid this clause in both bilateral investment treaties and multilateral agreements. For instance, an umbrella clause does not exist in the Canadian Model BIT (Canada 2004), French Model BIT (France 2006) or Colombia Model BIT (Colombia 2007). It will also be avoided in the Norway’s draft BIT as the Norwegian drafters only wish to protect fundamental international law principles, not mere contractual obligations (Peterson 2015). India also avoids an umbrella clause in its 2015 draft BIT (India 2015). There is no umbrella clause in some multilateral agreements such as North American Free Trade Agreement (NAFTA) (NAFTA chapter 11) and the ASEAN-Australia-­New Zealand Free Trade Agreement (ASEAN chapter 11). Although the China-South Africa BIT signed in 1997 contains an umbrella clause, considering the controversy on the interpretation of this clause and South Africa’s objection to investor-state arbitration (South Africa 2015), it is unlikely that South Africa will accept a broadly stipulated “umbrella clause” that contains the undertaking to “observe any other obligation it may have entered into with regard to investments of investors of the other Contracting Party” (Art. 10.2 China-South Africa BIT) if it renegotiates BIT provisions with China in the future (Snider 2015). It is especially noteworthy that, in the commentary to the Southern African Development Community  (SADC) Model BIT where South Africa has taken leading roles in drafting it, it is strongly recommended to avoid an umbrella clause which can elevate any investment contract to a treaty level (SADC 2012). To eliminate the uncertainties that are brought by the umbrella clauses, clauses that precisely define the scope of disputes that can be submitted for international arbitration may be helpful. In this regard, the US 2012 Model BIT can be taken as a reference. It limits disputes that can

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be submitted to international arbitration to those disputes in connection with natural resources, supply of utility services or performance of infrastructure projects or the claimant “on its own behalf” may submit to arbitration (US Model BIT 2012, Art. 24-1). Investors are also asked to waive their rights to other remedies if they want to pursue an arbitration claim (US Art. 26 Model BIT).

Conditions to International Arbitration Under the China-South Africa BIT: Domestic Administrative Review and the “Fork-in-the-Road” Provision The “fork-in-the-road” is a provision by which an investor has the choice “to submit disputes either to a local court or international arbitration” (Allen and Overy 2009). Article 9(2) of the China-South Africa BIT stipulates that “if the [investor-state] dispute cannot be settled through negotiations within six months, the either Party to the dispute shall be entitled to submit the dispute to an international arbitral tribunal provided that the Contracting Party involved in the dispute may require the investor to initiate administrative review procedures in accordance with its laws and regulations, and provided that the investor has not submitted the dispute to a domestic court of that Contracting Party”. Two conditions are added to investors’ right of submitting investment disputes to international arbitral tribunal: one is initiating administrative review procedures as required by the host country, the other one is that the dispute has not been submitted to a domestic court of the host country. The “administrative review” requirement is added in many BITs concluded by China (Art. 6 China-Germany BIT 2003, China-Finland BIT 2005), the original intention of this requirement is to give the Chinese government rights to supervise disputes between foreign investors and the Chinese government before foreign investors may resort to international arbitration, such as through “administrative review” (Wang 2011). Unlike some BITs which put “administrative review” as a compulsory requirement for submission of the disputes to international arbitration (China-­ Germany BIT, Art. 6), the China-South Africa BIT uses the word “may” to grant the government of host countries the right to choose whether to ask investors to go through an administrative review process (China-South Africa BIT, Art. 9-2). In the China-South Africa BIT the right to ask for

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administrative review is not exclusively granted to the Chinese government; both the Chinese government and South African government have this right, which is in line with the requirement of the domestic laws of these two countries and permitted by the ICSID (ICSID 1992) that China has ratified as well. “A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention.” However, the requirement of administrative review before international arbitration is sometimes criticized as “nonsensical from a practical point of view” (Bulgaria 2005: 224) because the most likely effect brought by this requirement to foreign investors is delay and additional cost (Schreuer 2010a). It is suggested that Chinese investors who want to avoid the application of this requirement can invoke the most favored nation (MFN) clause in the China-South Africa BIT (China-South Africa BIT, Article 3-2), which allows them to rely on other BITs concluded by South Africa that contain no requirement for administrative review before resorting to investor-state arbitration. For Chinese investors it is easy to find BITs concluded by South Africa without an administrative review requirement for investor-state arbitration. No domestic administrative review procedure is required in, for example, the South Africa-Nigeria BIT, the South Africa-Sweden BIT, or the South Africa-Finland BIT.  In practice, some investors successfully avoid the application of the administrative review procedure. The problem of the “administrative review” requirement in the China-­ South Africa BIT is not merely “nonsensical”. The wording of Article 9(2) of the China-South Africa BIT makes it possible that initiating an administrative review procedure as required by the host country may constitute a “choice” under the “fork-in-the-road” clause of the treaty, and therefore investors may lose the right to international arbitration. Article 9(2) of the China-South Africa BIT sets two conditions to investor-state arbitration: one is the “administrative review” as requested by the host country, and the other one is that “the investor has not submitted the dispute to a domestic court” of the host country. The clause which contains the later condition is called a “fork-in-the-road” provision, which provides investors with a choice of either seeking remedy before a domestic court of the host country or raising claims before an international arbitral tribunal. Once the choice is made it is final, and the other option is gone (Schreuer 2004). However, these two conditions may contradict each other. In case there is a dispute between Chinese investors and South Africa that arises from an administrative decision of the government of South Africa, and

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the government of South Africa asks the Chinese investors to apply a review of administrative decisions before an administrative court of South Africa, does initiating this administrative procedure constitute a submission of the dispute to a domestic court, and do the Chinese investors therefore lose their right to submit the dispute before an international arbitral tribunal? “Any person may institute proceedings in a court or a tribunal” (PAJA 2000). As to the language of the China-South Africa BIT, it is possible for South Africa to avoid investor-state arbitration by simply requiring Chinese investors to initiate an administrative review procedure before its local court. As there is no restrictive clause to the “fork-in-the-­ road” clause in the China-South Africa BIT, any submission of an investment dispute before a domestic court, including judicial review of an administrative action, can trigger the “fork-in-the-road” clause. Besides the above-mentioned problem, Chinese investors may still face a situation of losing their rights to submit an investment dispute to international arbitration when they are passively engaged in domestic legal proceedings concerning contractual disputes with host states. To resolve this problem, some arbitral tribunals have adopted the “double identical” rule to decide whether the “fork-in-the-road” provision is triggered. They have mainly examined whether the parties and the causes of actions in two proceedings were identical. Some arbitral tribunals follow “triple identical” tests to examine whether the fundamental bases of the claims are the same. A “fork-in-the-road” provision is triggered where: (a) the treaty claim has the same fundamental basis as the claim submitted to the local courts; (b) the factual components of a treaty cause of action have already been brought before the local courts; and (c) the treaty claim does not truly have an autonomous existence outside the contract (Egypt 2015). If investors base their claims on a BIT’s substantive provisions, such as an expropriation provision or a fair and equitable treatment provision, claims raised by investors before domestic courts for seeking contractual remedies will not be treated as a choice under the fork-in-the-road clause. Claims under a contract governed by municipal law and seeking contractual remedies are legally distinct from claims under an investment treaty (Schreuer 2010b). However, the inconsistency in the jurisprudence and lack of unified interpretation of “fork-in-the-road” clauses increase the unpredictable factors of investor-state arbitration. Recently some Chinese investment agreements have adopted a more flexible way to avoid duplicate proceedings that does not impede the investors from submitting their disputes before ICSID or temporary arbi-

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tral tribunals even after such investors had filed their disputes for domestic proceedings. The New Zealand-China Free Trade Agreement is a typical case (New Zealand-China 2008). Article 153(3) of the New Zealand-­ China Free Trade Agreement rules that “in case a dispute has been submitted to a competent domestic court, it may be submitted to international dispute settlement, on the condition that the investor concerned has withdrawn its case from the domestic courts before a final judgment has been reached in the case”. Similar provisions could be found in the ASEAN-­ China Investment Agreement (ASEAN-China 2009). This condition in the aforesaid provision is to some extent similar to the “waiver” as provided under NAFTA, that is, before submitting the dispute for arbitration, investors shall execute a written statement to waive their rights to commence or continue legal proceedings before domestic courts. Article 1121 “Condition Precedent to Submission of a Claim to Arbitration” stipulates that a disputing investor may submit a claim under Article 1117 to arbitration only if he consents to arbitration and waives his right to initiate or continue before any administrative tribunal or court under the law of any party (NAFTA). Such waiver is also attached to treaty claims under the Trans-Pacific Partnership Agreement (TPPA 2016, Article 9.21). It provides that no claim shall be submitted to investor-state arbitration under TTP unless the claimants submit a written waiver. “Waiver” provisions are more flexible and provide investors broader forum selection rights, which follow the principle of “res judicata” and better protect investors’ rights to make claims. A matter already judged cannot be presented another time. However, drafting “waiver” provision calls for prudence, especially when the contracting states hope to make “administrative review” as a precondition of international arbitration. Provisions shall be carefully drafted and must clearly stipulate whether the “administrative review proceeding” as required by host states shall be withdrawn before treaty claims. Under NAFTA, investors are required to waive their right to initiate or continue “any proceedings” except “proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Party” (NAFTA Art. 1121 and b). It is very clear that the “waiver” clause is designed to avoid parallel proceedings and prevent a risk of double compensation for investors. Pursuant to Article 1121 of NAFTA, the “administrative review” precondition does not contradict the “waiver” obligation as far as the administrative review proceeding is for interim injunctive relief, not for compensation. If the “fork-in-the-road”

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provision with “administrative review” requirement in the China-South Africa BIT is redrafted in the future, it is suggested to adopt “waiver” to avoid parallel proceedings and clarify the scope of administrative review proceedings that do not need to be waived or withdrawn before Chinese investors can initiate international treaty arbitration. Another option is the way that is adopted in the China-Germany BIT (China-Germany BIT 2003). Under this BIT the right to require “administrative review” is only granted to the Chinese government. This BIT sets a time limitation on the “administrative review” proceeding. If the investment dispute cannot be resolved within three months by the administrative review proceeding, German investors can submit the dispute to international arbitration provided they have withdrawn any proceedings before Chinese domestic courts (China-­ Germany BIT, Art. 6). It is clear that “any proceeding” including “administrative review proceeding” required by Chinese government shall be waived or withdrawn before treaty claims as the BIT already gives the Chinese government three months to review and adjust their decisions before an investment dispute in respect of their decisions is submitted to an international arbitral tribunal.

Ad hoc Arbitration for Investor-State Disputes Under the China-South Africa BIT The China-South Africa BIT chooses ad hoc arbitration instead of institutional arbitration as the mechanism for settling investor-state disputes. However, the BIT puts ICSID as the appointing authority if an arbitral tribunal cannot be constituted within four months (China-South Africa BIT, Art. 9.3). Meanwhile, both China and South Africa consent to take the ICSID arbitration rules as guidance to determine the arbitral procedure of investor-state arbitration. Indeed, ad hoc arbitration shares some advantages that institutional arbitration does not have, such as more flexible procedural rules (Jenkins and Stebbings 2006), and it is less expensive: “Ad hoc arbitration enables the disputing parties to decide the arbitration procedure” (Rubino-­Sammartano 2014: 410). However, in some cases flexibility can also be a disadvantage of ad hoc arbitration. For example, parties under ad hoc arbitration have the option of negotiating a complete set of rules which meet their needs. However, this approach can require considerable time, attention and expense with no guarantee that the terms eventually agreed will address all eventualities (Pinset Masons 2011). Furthermore, ad hoc arbitration has a significant disadvantage regarding the enforceability of its arbitral awards.

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The enforcement of ad hoc arbitration tribunal awards relies on the national laws, the New  York Convention and other relevant treaties (OECD 2006: 187). In the China-South Africa BIT, both parties commit themselves to the enforcement of the award in accordance with their respective domestic law (China-South Africa BIT, Art. 9.5). In this regard, both China and South Africa have ratified the New York Convention, but China adopted the commercial reservation, which limits the scope of recognition and enforcement only to arbitral awards that have been rendered in commercial cases, which means applicants cannot invoke the New York Convention to apply enforcing an investor-state arbitration award in China; China adopted two reservations: reciprocity and commercial reservations (Tao 2008: 161). South Africa also ratified the New  York Convention, but Article 2(2) of the Foreign Arbitral Awards Act No.40 of 1977 and domestic law of South Africa has its own restrictions on enforcing and recognizing foreign arbitral award, which make ad hoc arbitral awards difficult to be recognized and enforced in this country too. In a recent case on 20 April 2016 the Hague District Courts had set aside three interim awards and three final awards rendered against Russia in the joined cases raised by Veteran Petroleum Limited, Yukos Universal Limited and Hulley Enterprises Limited. Taking all these factors into account, it is suggested that ICSID arbitration can be considered, as the ICSID Convention includes a self-contained enforcement regime, so all the contracting states to the ICSID Convention have the obligation to enforce ICSID arbitral awards (ICSID Convention, Art. 53). China may reconsider the “commercial” reservation under the New York Convention, so that at least the purely contractual claims or claims under concession agreements with host countries shall not be excluded from the scope of the New York Convention.

More Transparency in China-South Africa Treaty Arbitration? Transparency: The Growing Trend of Investment Arbitration Confidentiality is one of the principles of private commercial arbitration, and many proponents of international arbitration cite confidentiality as an important advantage of the arbitral process. Among other things, confidentiality is perceived as encouraging efficient and dispassionate dispute resolution, reducing damaging disclosure of commercially sensitive information to competitors and others and facilitating settlement by minimiz-

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ing the role of public posturing. For a long time, investment arbitration followed confidentiality rules and kept all the information and documents used in an arbitration undisclosed to the public; however, it has been changed nowadays. The international investment regime shall not only respect private actors’ rights, which mainly refers to foreign investors’ rights, but also the public interest that host states have responsibilities to protect. Controversy over investor-state arbitration also illustrates why international investment law is now developed in a more balanced way with the consideration of not only foreign investors’ interests but also all affected stakeholders’ interests. To protect the affected public interest of host countries, which means the interest of most people in host countries, an enhanced transparency procedure of investor-state arbitration is needed. That means relevant information of investor-state arbitration shall be disclosed to the public and more participation of non-dispute parties shall be allowed in treaty arbitration so as to ensure the fairness of investor-state arbitration. Now some countries are working on incorporating enhanced transparency provisions in investment treaties. For example, the 2004 US Model BIT included high transparency standards through provisions requiring the publication of documents and open hearings subject to the non-disclosure of protected information (Art. 29 of 2004 US Model BIT) and providing tribunals with the authority to accept and consider amicus curiae submissions. These provisions have been included in subsequent US BITs and recent investment chapters of Free Trade Agreements (FTAs), including, for example, the US-Rwanda BIT and the Dominican Republic-Central America-United States FTA.  Much more recently the United States reaffirmed and strengthened its commitment to transparency in arbitration, retaining these provisions without change in the newly-­ released 2012 Model BIT and adding provisions requiring inter alia the Parties to consult periodically on transparency practices and to ensure that there are transparency procedures in any future appellate mechanism similar to those provided in Article 29 for the arbitral proceedings (Art. 28(3) of 2004 US Model BIT, 11(1) and 28(10) of 2012 US Model BIT). The Australia-Chile FTA, which entered into force in March 2009, requires the publication of documents and open hearings subject to the non-disclosure of protected information (Art.10.22 of Australia-Chile Free Trade Agreement, 2009) and provides tribunals with the authority to accept and consider amicus curiae submissions. (ibid. Art. 10.20(2))

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The EU Commission’s July 2010 Communication Paper, entitled “Towards a Comprehensive European International Investment Policy”, states that the EU should ensure transparent investor-state dispute settlement, including publication of documents, open hearings and amicus curiae submissions. Nowadays, more transparency requirements appear in some well-known institutional arbitration rules, such as ICSID Arbitration and “non-disputing party participation and rules on friend of court” (Nakagawa 2013: 120–127). UNCITRAL Transparency Rules and UN Transparency Convention United Nations Commission on International Trade Law (UNCITRAL) issued Rules on Transparency in Treaty-based Investor-State Arbitration in 2014 (the 2014 UNCITRAL Rules on Transparency). The 2014 UNCITRAL Rules on Transparency provide an important instrument to promote transparency in investment arbitration (UNCITRAL 2014). First of all, the transparency rules specify the scope of information that shall be made available to the public. “This includes not only the names of disputing parties, the economic sector involved and the treaty under which the claim is made but also various documents created by the parties during the arbitration. The notice of arbitration, response to notice of arbitration, statement of claim, statement of defense, any further written submissions, any written submissions provided by third parties or non-disputing parties to the relevant treaty and transcripts of hearings”, and orders, decisions and awards of the tribunal will be made available to the public (Wilkie 2013). Whilst expert reports and witness statements will not automatically be released, they may be published (excluding exhibits) following a specific request. There will be public access to any table of exhibits to the parties’ submissions, expert reports and witness statements, but not the exhibits themselves. However, the Rules do give the tribunal a broad discretion to order disclosure of such exhibits or any other documents provided for or issued by the tribunal (on consultation with the parties) (2014 UNCITRAL Transparency Rules, Article 3-3). Besides expert reports and witness statement, the Transparency Rules give arbitral tribunals discretion to keep other documents confidential, such as “confidential business information, information protected against being made public under the treaty or under the law of the respondent state, or any other applicable laws, where it would be contrary to the

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essential security interests of a respondent state, and information the disclosure of which would impede law enforcement” (Wilkie 2013). Second, besides the disputing parties, the Rules also give opportunities to other persons to join the arbitration by filing a written submission with the arbitral tribunal regarding a matter within the scope of the dispute, which means other persons will not only be allowed to get information in connection with arbitration, but also have reasonable opportunities to give comments on the arbitration to the tribunals. Articles 4 and 5 list detailed requirements for the participation of “a non-disputing party to the treaty” and “a third person” who are not a disputing party or a non-­ disputing party to the treaty separately. The term “third person” is virtually synonymous with the term “amicus curiae”, a legal Latin term indicating someone who is not a party to a case, nor has not been solicited by any of the parties to assist a court, but who offers information that bears on the case. Originating in Roman law the amicus curiae was incorporated into English law in the ninth century and later extended to most common law systems. Also known as “friend of the court” (Collins 2004: 809), it is used in the context of court procedure in most of the cases. Amicus curiae participation in arbitral proceedings is a more recent evolution. It is one of the advantages of the Rules to introduce the notion of amicus curiae in UNCITRAL Arbitration as it ensures that awards given by the tribunal will not depend solely on the parties directly involved in the case. In order to provide rules that would be understood in the same manner in all legal systems, the Rules does not use the term “amicus curiae” or “friends of the court”, but “third persons”. Although the term “third persons” is used in the UNCITRAL Arbitration Rules as well, it shares different meanings with the “third persons” in the Rules, as a “third person” under the UNCITRAL Arbitration Rules refers to a person who is a party to the arbitration agreement and who joins the arbitration at the request of any disputing party (UNCITRAL 2014 Arbitration Rules. Art. 17(5)). Besides the “third person”, the Rules give arbitral tribunals discretion to invite a “non-disputing party to the treaty”, that is a state party to the investment treaty that was not a party to the dispute, to make submissions after consultation with the disputing parties. Such state party could often provide important information, such as information on the travaux préparatoires, thus preventing one-sided treaty interpretation in the arbi-

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tration. It was said that several investment treaties allowed for the participation of a non-disputing State, such as the North American Free Trade Agreement (NAFTA), which included an article 1128 entitled “Participation by a Party.” Instances of similar provisions could as well be found in other treaties included the Central American Free Trade Agreement (CAFTA), and in the Canadian Model BIT (2004). However, under the Rules the intervention of a “non-disputing party to the treaty” is limited to making submissions on the issues of treaty interpretation, excluding the factual aspects of the dispute or matters of law. That was meant to address concerns raised that an intervention by a non-disputing State to file submission beyond matters of treaty interpretation, of which the investor was a national, might pose the risk of a resurgence of diplomatic protection, which should not be posed by the participation of a “third person”. Therefore, it is wise to deal with the “third person” and the “non-disputing party to the treaty” separately in the Rules, which marks the difference between submission by a third party and by a non-­ disputing State Party to the treaty. “The UNCITRAL Rules on Transparency in Treaty-based Investor-­ State Arbitration shall apply to Investor-State arbitration initiated under the UNCITRAL Arbitration Rules pursuant to a treaty providing for the protection of investments or investors concluded on or after 1 April 2014 unless the Parties to the treaty have agreed otherwise.” The Transparency rules can apply in two different ways, either as a part of the UNCITRAL Arbitration Rules in arbitrations conducted under UNCITRAL Arbitration Rules or as a free-standing set of rules which can be applied in arbitrations conducted under other arbitral rules, such as ICSID rules or in ad hoc proceedings, as long as the disputing parties agree thereto (UNCITRAL 2014 Arbitration Rules, Art. 1-9). After issuing the UNCITRAL Transparency Rules, General Assembly of United Nations passed a resolution called “United Nations Convention on Transparency in Treaty-based Investor-State Arbitration” on 10 December 2014 (UNCITRAL 2014). This convention opened for signature on 17 March 2015. At the time of writing, 18 countries have signed the UN Transparency Convention. This convention determines when and how UNCITRAL Transparency Rules shall apply to investorstate arbitration (UN Transparency Convention Art. 1(9)). However, at the time of writing, neither China nor South Africa has signed the UN Transparency Convention.

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China’s Position on the Transparency of Investor-State Arbitration Under the China-South Africa BIT As mentioned above, transparency in investor-state arbitration is now accepted as an important principle by the international community. The ICSID amended its arbitration rules in 2006 and added the requirements for transparency, and UNCITRAL promulgated special rules to increase transparency as well. In practice, some tribunals are also inclined to support transparency. For instance, the tribunal in Suez and others v. Argentina held that “public acceptance of the legitimacy of international arbitral processes, particularly when they involve states and matters of public interest, is strengthened by increased openness and increased knowledge as to how these processes function” (Suez 2005: 22). Scholars also see increasing transparency as the trend in the development of treaty investment arbitration (Yu 2011: 132). Nevertheless, transparency in treaty investment arbitration is still limited and not a general duty in arbitral processes. For example, pursuant to ICSID Arbitration rules and the transparency rules of UNCITRAL, not all the documents produced during the arbitral process can be disclosed to the public automatically; it is still possible for the parties to a dispute to restrict access to documentation by applying to the tribunal for a confidentiality order. In most cases, oral hearings continue to take place in private. Confidentiality in arbitration is appreciated by a company that wants to protect its business secrets or protect its public image when even the mere fact of litigation released to the public might cause harm to its reputation. Protection of government secrets is sometimes needed by host States when they are involved as respondents. Moreover, in the absence of any non-disputing parties’ involvement, it might be easier for the disputing parties to agree on certain aspects of a case and thus to accelerate the arbitration proceedings. It may be particularly important to facilitate any move toward an amicable settlement via negotiation between an investor and a host State that have a long-term relationship between them. Confidentiality and transparency are squarely conflicting principles serving competing interests. It is an unavoidable trend toward increasing transparency in treaty investment arbitration, but to what degree the arbitral process shall be disclosed to the public is not an easy question to answer. Especially for China, acting both as a big source and recipient country of Foreign Direct Investment, which has developed a long-term friendly relationship with South Africa and other African countries at eco-

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nomic and political levels, it is not appropriate to simply say that China shall or shall not advocate more transparency in Sino-Africa investment treaty arbitration. The China-South Africa BIT stipulates that “investor-­ state disputes shall be settled by ad hoc arbitration” (Art. 9.3 of the China-­ South Africa BIT). In ad hoc arbitration, the disputing parties have liberty to decide how much transparency they want in their arbitral process. At this time, it is essential for China and Chinese investors to figure out whether the transparency rules will benefit or harm their interests in the arbitration. As illustrated above, the purpose of transparency reform is to promote openness and public participation in treaty arbitration so as to make up for the defect originating from its confidential nature. To ensure the public’s right to information via enhancing the transparency of the arbitral process will urge the arbitrators to make the decision prudently, which is good for China and its investors. It will, however, bring new challenges to Chinese investors and China: How to protect their secret information under the transparency rules? How to ensure the efficiency and independency of the tribunal with the participation of the “friend of the court”? It seems that neither China nor Chinese investors are ready to answer these questions. For instance, although China promulgated the Regulation of the People’s Republic of China on the Disclosure of Government Information in 2007 and amended the Law of the People’s Republic of China on Guarding State Secrets in 2010, the scope of secret information is still obscure (National Security). When foreign investors file claims against China and China is required to disclose some information under transparency rules, China may have to tender some information that does not fall into the category of “secret information” under the current Chinese law but may still damage China’s national interests. Taking the participation of amicus curiae or “friends of the court” as another example, China had no rule permitting the participation of amicus curiae or “friends of the court” in litigation or arbitration in the past. Now in civil litigation Chinese law has started to allow third parties to join in environmental damage claims. See Article 55 of the Civil Procedure Law of the People’s Republic of China (amended in 2012). However, the law still needs to be improved through its implementation in practice. In this respect Chinese investors lack experience in handling cases with the participation of amicus curiae or “friends of the court” such as non-governmental organizations (NGOs). Therefore, at this stage, Chinese investors will encounter difficulties in investment treaty arbitration that involves amicus curiae or “friends of the court”,

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especially in investment disputes against South Africa where environmental issues and human rights issues are raised and many local NGOs actively participate. Now besides the multilateral investment treaties like NAFTA, no valid BITs expressly impose a transparency duty in the investment arbitration clause except for American BITs. The United States encourages the promotion of transparency in investment treaty arbitration and sets high standards for transparency in its BITs because transparency in investment treaty arbitration will benefit the national interests of the United States. Taking the new Art. 28(3) 2012 US model BIT as an example, it has no limitation on the participation of amicus curiae in investment arbitration. As the involvement of amicus curiae in civil proceedings has been developed well in the United States for a long time, encouraging the participation of amicus curiae in investment arbitration will not harm the nation’s interest. “In the United States, for example, non-profit legal advocacy organizations, such as the American Civil Liberties Union or the Landmark Legal Foundation frequently submit such briefs to advocate for or against a particular legal change or interpretation” (Kochevar 2013: 33). Instead, American NGOs will be a strong backup in investment treaty arbitration where a claim is filed against the United States Furthermore, arbitral proceedings under the new US model BIT are required to be open to the public (Art. 29 of 2012 US Model BIT) while it also has detailed regulations on the protection of secret information, and the boundary of secret information is precisely defined (Art. 18 “Essential Security”, Art. 19 “Disclosure of Information” and Art. 29(3) “The protection of secret information in arbitral proceedings” of 2012 US Model BIT). There are also advantages to enhancing the transparency of the arbitral process in the China-South Africa BIT. It can ensure the public’s right to information, which will to some extent urge the arbitrators to make the decision prudently, and therefore strike a balance between the rights and interests of investors and host states. However, it is too early for China to accept a high level of transparency as settled in the US model BIT. The involvement of amicus curiae in civil procedures is new for China, and whether the acceptance of amicus curiae submissions will harm or benefit the interests of China or Chinese investors depends on a case-by-case analysis. Therefore, it will be more appropriate to add some limitations to the tribunals’ discretion and entitle the disputing party the right of rejection of the amicus curiae’s involvement in Chinese BITs. Chinese investors when they file claims against South Africa or other host countries in Africa

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need more openness and transparency of the arbitral process and China’s support. More importantly, China shall take great caution on making the arbitral process open to the public, more international and transparent to promote the Belt and Road Initiative.

Conclusion The China-South Africa bilateral investment treaty is studied in this chapter concerning arbitration and dispute resolution. Although investment treaties always contain investor-state arbitration clauses, Chinese investors incline to resolve investment disputes in Africa by relying on negotiation between the Chinese government and the governments of host countries. Negotiation at government levels may be an effective way to resolve investment disputes, but the negative impact of this practice is always ignored: government’s intervention in economic relations is criticized especially when the Chinese investors are state-owned entities. In the long run, this practice will not eliminate but exacerbates conflicts in Africa, and therefore may impede the Belt and Road plans in Africa. It is important to define the investment legal relation between China and African countries, especially South Africa, and explore appropriate ways to settle investment disputes there. When invoking arbitration clauses under investment treaties, Chinese investors shall pay special attention to the “umbrella” clause and “fork-in-the-road” clause due to the inconsistent interpretation of these clauses given by arbitral tribunals. While transparency is indispensable in investor-state arbitration, China would be prudent to accept a high level of transparency as settled in other BITs. Chapter 9 confirmed China’s non-interference “in other countries’ internal affairs”. The following epilogue tries to finally explain China’s globalization, dispute resolution possibilities and if the Belt and Road project became an alternative to a Western model for developing countries in Africa.

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CHAPTER 11

Epilogue Jean A. Berlie

Abstract  The Belt and Road Initiative (BRI), sometimes criticized, already succeeded to link many countries on all five continents. There is no infrastructure development without risks. The USA and China are two superpowers which need to have more cooperation to avoid a negative post-Cold War. Peace is essential for the future of humanity. Keywords  Arbitration • Dispute resolution • BRI • Globalization • Opportunities • Risks • Silk Road This book has discussed China’s globalization in the twenty-first century and the modern Silk Road, which is a new maritime and land globalization. The name Silk Road is ancient, with 2000 years of history, and continues to be very attractive. Globalization also has a long history, but it is different nowadays because the internet and the digital communication became part of our daily life. The re-emergence of Central Asia in world history imposes a new consideration of Xinjiang, the gate of the BRI. Xinjiang and Kazakhstan are considered to be a pivot of the new history of Central Asia linked with the BRI. J. A. Berlie (*) The Education University of Hong Kong, Tai Po, Hong Kong © The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5_11

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The Western empires succeeded to develop trade and exchanges of culture and education, which were also part of the colonial discourse. Chinese globalization is digital and much more global. China’s discourse on the Belt and Road includes political economy, finance, geopolitics, e-­commerce and world trade, which occupy a very important space. Infrastructure development is essential to establish the Belt and Road project that was initiated in 2013. ASEAN, where many overseas Chinese stayed for centuries, is also very important for the Belt and Road Initiative (BRI). To catch the meaning of the Belt and Road, it is useful to remember what Mahathir Mohamad has said: he wants Malaysia “to be integrated into the broader China-driven regional production network as an equal partner” (SCMP February 16, 2019). PM Mahathir Mohamad also said: “I support the Belt and Road,” this is significant and confirmed the good relationship between China and Malaysia. It was pointed out during the Belt and Road Initiative (BRI) when he attended the Belt and Road Summit in April 2019. The BRI certainly predicates modernity, multiculturalism and interdisciplinarity. The new globalization of the Belt and Road Initiative is different from the ancient Silk Road which concerned trade mainly. The Belt and Road Initiative includes policy coordination, infrastructure, mobility and connectivity, cultural exchanges, tourism, cooperation, financial investment and trade. This volume discusses infrastructure along the BRI, especially the megaprojects of President Xi Jinping. It is certain that infrastructure is a major point to look at China’s ethics along the Belt and Road Initiative. Benard pointed out the cases of Bangladesh, Sri Lanka, Malaysia and Myanmar. Dispute resolutions along the BRI are detailed elsewhere in this book. The outlook on the economy, development impacts, risks, challenges and arbitration on infrastructure along the Belt and Road shows that infrastructure remains a priority for China, a challenger to the existing international order. Infrastructure and transportation of people, goods, services and finance is an inherent part of the BRI. We might call it trade, but the Belt and Road Initiative is something else—a more inclusive globalization, timely, conducive to a negotiated partnership footing. Mainland China and the Hong Kong and Macau Special Administrative Regions of China are involved in the global projects called Belt and Road Initiative and Greater Bay Area (GBA). The importance of the sectors of finance, economy and infrastructure cannot be denied, in particular in Hong Kong, which is the world’s freest economy (Index of economic freedom 2019), and Macau, which is also free. The urban population of

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the GBA is growing, and with the development of the BRI many cities in the Guangzhou–Hong Kong–Macau triangle will be linked. Already Hong Kong and Shenzhen have merged into one block with two different legal systems until 2047. The Hong Kong Basic Law does not allow the fusion of the two cities, but now the name Greater Bay Area links them and has changed something. It shows the beginning of a future fusion of their legal systems if the Hongkongese are cooperative enough in the framework of the Basic Law which is the legal reference. To explain in few words the Greater Bay Area, Eric Cheung mentioned 10 facts: 70 million population, GDP, air freight traffic, top 10 container ports, Hong Kong green bond market, Hong Kong health care professionals, Macau’s vibrant tourism industry, Guangzhou’s transport hub, Shenzhen’s investment in research and development and Dongguan’s service industry hub (SCMP April 1, 2019). However, no smooth development of the GBA is imaginable without the good will of the Hongkongese and a de facto recognition of the importance of Guangzhou megapolis, the extraordinary, so useful and symbolic mega bridge Hong Kong–Zhuhai–Macau cannot be the main present and future center of the GBA which is Guangzhou. This needs to be harmonized with the philosophical meaning of the GBA and Foreign Direct Investments (FDIs) which remain one of the most important factors of economic and financial development of this part of China’s globalization. The current main project in Timor-Leste consists in building a Liquefied Natural Gas (LNG) plant on the southern coast of the island. At present, it seems to be the sine qua non condition for the Government of Timor-­ Leste and Xanana Gusmão, the main negotiator. We suggest that diversifying the economy of the new country is not working very well, and developing tourism will not make Timor-Leste as attractive as Bali, so the rich Greater Sunrise oil fields constitutes the main economic resource for the Timorese people. Timor-Leste will receive 80 percent of the gas revenue from the fields if it is piped to the existing ConocoPhillips-operated Darwin LNG processing terminal in northern Australia, or would receive 70 percent if the gas is piped to a not-yet-built industrial complex on its southern coast. We also consider the Chinese Belt and Road Initiative and its relationship with East Timor, especially its processes for dispute resolution, and this plays a direct role in Timor-Leste’s petroleum sector. China does consider very seriously its relationship with Timor-Leste, which supports positively the BRI. The new country of the twenty-first century, on April 18–20, 2017, organized in Dili an ASEAN Security Forum, a

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Seminar on Preventive Diplomacy; the active participation of the Chinese delegation was a manifestation of the excellent Sino-Timorese relationship. One Belt, One Road (OBOR) has become synonymous with Chinese foreign policy under President Xi Jinping. Raymond Lau has made an important contribution to understanding the role of African countries in China’s Belt and Road Initiative since its launch. In particular, this contribution on politics, economy and security is necessary and significant to understand the incorporation of Africa into the BRI and to implement President Xi’s global vision. It also examines Africa-China relations and China’s strong interest to draw Africa into the Belt and Road projects in the context of the Forum on China-Africa Cooperation (FOCAC) since 2000. While acknowledging China’s official rhetoric on sharing the benefits of the country’s economic growth globally, Africa’s inclusion in the BRI has largely demonstrated China’s growing self-confidence and belief that it can offer a Chinese model of economic development—socialism with Chinese characteristics as an alternative to the Western model for developing countries in Africa. The author of this book, born in West Africa, does not want to conclude on the advantage of the “Western model,” but ask the reader to judge by herself/himself and remain confident of the real value of the Belt and Road. The post-cold war is over, the world is really changing and cooperation between nations, rich and poor, became more necessary than ever. There is no inconsistency or contradiction between the two chapters on Africa, rarely studied in the numerous books on the Belt and Road. The Chinese investment in Africa mainly focuses on natural resources and infrastructure projects. Most Chinese investors in Africa are state-owned companies having the capacity to undertake natural resource exploitation and infrastructure projects. Consequently, some environmental issues of public interest are important. However, investment should be more transparent and China should be wise to accept a higher level of transparency. Dispute settlement is essential not only in China and South Africa but also along the global Belt and Road project of China. It is important to protect the interest of Chinese investors all over the world to secure the BRI. Main legal points are well discussed in Chap. 10. The wish to have confidentiality and more transparency is clearly mentioned by Kelly Li Ke. However, it is too early for China to accept a high level of transparency as settled in other countries. The lack of transparency is one of the reasons why more and more African countries prefer to resolve investment disputes with Chinese investors by means of arbitration or litigation. Consultation or

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negotiation should be used by Chinese investors to settle investment disputes in a friendly and peaceful manner in Africa, but it is not evident yet that Chinese investors could refuse international arbitrations if they are forced to solve their dispute with African companies.

Opportunities and Risks of the Belt and Road Initiative A critical theory of globalization and the Belt and Road “is explicitly guided by a normative vision—the ideal of a more egalitarian and less violent global order” (Steger 2004: 11). The World Bank tries to balance the pros and cons of the Belt and Road Initiative.

Risks of the BRI There are many risks and challenges that could also hamper the realization of potential benefits from the BRI: The diversity among BRI countries presents a challenge. The vast array of countries along the routes illustrates competing interests or divergent views over how the BRI should materialize. This diversity is also manifested in terms of development and sophistication of organized systems and institutions. There are likely mismatches in policy frameworks, legal and regulatory rules, credit and payment standards, quality control, and labor and environmental concerns could hamper effective cooperation, coordination and the sovereignty of some countries. The sovereign (security, political, regulatory and government effectiveness) and credit risk ratings of BRI countries are also significantly diverse, implying large variations in the quality of governance. For instance, Pakistan, Syria and Ukraine have high security risks, while Iraq has great sovereign debt default risks. Many other countries have varying levels of economic stability, meaning their economic priorities in implementing BRI projects might be difficult to coordinate, particularly in fighting corruption. Political and social issues like trade embargoes, political transitions, corruption scandals, social instability, regional rivalries or confrontation could become problematic for OBOR initiatives (even if one of the aims of OBOR is to promote stability). There are risks in the Belt and Road Initiative as in all types of globalization, especially for the infrastructure projects that involve loans. And finally macro risks, for some countries, could represent unsustainable levels of debt. For instance, the construction of the Lao

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PDR section Kunming–Vientiane of the Kunming–Singapore Railway has an estimated cost of US$6 billion—nearly 40 percent of the GDP of Laos in 2016. The project will be delayed, but the consequences for the Lao People’s Democratic Republic are not fully studied yet. In Laos also the question of energy, between modernity and sustainability, deals with the Belt and Road. Modernization and “energy questions go straight to the heart of how we govern and practice our daily life, institutions, countries and regions” (World Bank 2018; Smits 2015: 193). We will not mention so much the risks along the Belt and Road Initiative in Central Asia, because China needs so much of the oil and gas of the region, and Russia is so close culturally, economically and politically that Chinese errors and bad loans must be limited in Central Asia compared to other parts of the world. This book is not mainly concerned with the risks. Rather it emphasizes the positive aspects of the BRI, which are also essential. Peace is useful, William Nester (2010: 248) concluded his book with a pitch for peace: “Sooner or later the superpowers (the USA and China) will (have to) cooperate with one another.” Chinese authors, who are economically oriented, think that there are political risks for the numerous Chinese state-­ owned enterprises in countries on the Belt and Road. These companies should take consideration of “political, economic and social situations” in the countries where they invest; the Foreign Direct Investment (FDI) may reach US$10 billion, such as in Singapore, Russia or Poland. Any neglect of political risk evaluation “is likely to result in loss of properties” (Piao Zhuhua et al. 2017: 223, 233, 248). The example of Pakistan and Karachi was given in 2014 with the problem of Balochistan separatists. Elsewhere, the economy is at risk after the G20 Summit in November 2018. Singapore’s Baker McKenzie firm also studied in a more global way the opportunities and risks of the Belt and Road: For Stanley Jia of this firm: “China’s Belt and Road Initiative is and will continue to be the most important and impactful macro-economic undertaking in the world, for at least the next 10  years.” Similarly Ms. Ai Ai Wong, member of Baker McKenzie Global Executive Committee, said, “The Belt and Road Initiative is a historic marshalling of capital and a remarkable geopolitical foray…” It is also not without risk. To be positive for the Belt and Road, we agree with Saskia Sassen (1998: xx) that the BRI and the current global economy “allows us to see the multiplicity of economies and work cultures in which the global information is embedded (along the BRI).” To try to follow the 2008 Rotterdam Rules and arbitration would be useful but is not yet on China’s agenda (Yu and Chang 2018).

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However, against this background, on June 29, 2018, the Supreme People’s Court of China (SPRC) officially launched its International Commercial Courts, the China International Commercial Courts (CICC) in Shenzhen and Xi’an, respectively, to handle a wide range of international commercial disputes. It came into force on July 1, 2018. The CICC is intended particularly to deal with disputes arising out of projects under the BRI. The author can confirm this trend as he followed a course of arbitration at the Shenzhen Court of International Arbitration (SCIA) in April 2018. Negotiation “is an art.” N.O. Mimiko (2012: 144–147) gave the following useful guidelines, valid along the Belt and Road: “Adequate preparation, keep emotions out of the negotiating process, determine the options before going into a negotiation, urgency and delay (which are both important to succeed), in negotiation to go through matters on which agreements have been reached first and (have) a negotiator that has ample authority. Keys to successful negotiation are: Facts prepared in advance, ask for what you want before the negotiation, seek a win-win solution, and practice, practice.” “Robert Sutter of George Washington University, an expert on communist China’s diplomatic history, said the US government was undergoing its most substantial re-evaluation of China policy since Nixon’s trip in 1972” (SCMP November 12, 2018). Arbitration, we think, is important, but a positive view of the Belt and Road Initiative is useful despite the rarity of China’s official publicity on arbitration and mediation in China, which is contradicted by numerous arbitrations and awards delivered by Chinese arbitrators, for example, in Shenzhen. The Shenzhen Court of International Arbitration was established in 1983 in the Shenzhen Special Economic Zone. It was previously known as the China International Economic and Trade Arbitration Commission South China Subcommission (CIETAC South China Sub-­commission). The SCIA resolves contract and property rights disputes between individuals, legal entities and institutions, both Chinese and foreigners, but this does not mean that the SCIA is perfectly able to deal with Belt and Road questions.

Opportunities of the BRI 1. Tremendous size and scope. BRI economies account for one-third of the global GDP and trade, and close to two-thirds of the world population. 2. Large unexploited potential. 3. Connectivity: It currently takes about 30 days to ship goods from China to Central Europe (World Bank 2018). 4. The British economist Jim O’Neill said: “the single most important thing in the world economy is reviving the Chinese consumer”

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(O’Neill 2018) and “the BRI is possibly the most important thing for the future of world trade.” (China Daily September 14, 2018). 5. In Vladivostok, an important meeting happened on September 12, 2018, between President Vladimir Putin and President Xi Jinping. The development, and a “win-win cooperation” of six Northeast Asian countries was studied, but the Belt and Road Initiative was not mentioned. The Belt and Road Initiative is essential, but soft discourse and “development” are often mentioned (China Daily ibid.: 1, 9). “China’s Belt and Road initiative brings new investment opportunities but also an increased need for careful risk management. Prior to entering into any investment, it is important for contracting parties to consider their dispute resolution options and to ensure these are properly reflected in the contracts” (HK Arbitration 2017). For the success of the Belt and Road Initiative, it is useful to remember the words of Briand, the Nobel Prize winner in 1926: “Peace through victory” given to Germany at the end of the First World War, with the mention of reparations, restitution and guarantees (Thomson 1930). Guarantees are also important to mention to the states which want to be part of the modern Silk Road. Mediation and negotiation are important for the former Timor-Leste President José Ramos-Horta and Nobel Peace Prize laureate (1996), and peace is linked with world security. He wants to build “a new international dialogue” on peace and world security that “accommodates critical view, embraces ethnic and religious diversity and political plurality” as presented at the University Hong Kong on September 7, 2018. The American Marshall Plan after World War II succeeded because Europe and Russia’s spheres of influence, capacities and interests were kept as they were at that time. At present, the problem is that, in addition to China, there are three other spheres of influence: Europe, Russia and the USA. It is much more difficult for the Belt and Road to deal with three spheres of influence than the Marshall Plan which had dealt with two only: Europe and the Soviet Union. “The USA, EU, China… are forced to choose between two alternatives: either accept the multipolar world… or agree to co-operate loyally with the other world order that can guarantee a form of global governance” (Montani 2019: 244, 273). Montani proposes also a new currency union including the USA, EU, Japan and other G20 countries such as China and Russia. The Logic here is the peculiar strategy, not the economy. The US wants to change China’s economic model; China doesn’t want to change it. “Any deal reached between Washington and Beijing will be superficial, difficult to enforce” (SCMP 3.18.2019). If one sees this is as about trying to impose a painful change of behavior, then the logic is hopefully clearer: “Only by imposing the threat of a crippling cost can one hope to dissuade an opponent from fighting back” (Erken et  al. 2018). Many Americans are still skeptical: “How could China catch up with

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the West?” (The NY Times November 24–25, 2018: 1). China as a great power “is a strong state with the ability to mobilize the country’s human and material resources in the service of its worldview and policy objectives” (Kim 1997), but to better succeed the Belt and Road may possibly need a new Chinese ethic. Different types of ethic of responsibility were proposed by De Villiers: A normative ethical ‘approach’ with morals and “goals that need to be set and achieved… and ‘norms’ that need to be followed” by “peaceful coexistence and cooperation.” (De Villiers 2018: 208–211)

Prospects We believe that the Belt and Road Initiative is going to be a success story of globalization. Negotiation, mediation and international arbitration are important for the future of the Belt and Road. The English language is already used in international communications along the BRI; it is too early to forecast more development for another international language spoken widely on the BRI. Maintaining world peace is essential to solve the global economic problem at the beginning of the twenty-first century. China will continue to publically repeat its intention to offer public goods in the South China Sea (SCS) which is a good start toward peace in the SCS. It is still also urgent to secure a Declaration on the Code of Conduct (DOC) between China and ASEAN countries involved in the SCS to have peace there. Superpowers should cooperate with each other to find peaceful solutions to stabilize the world economy. A solution for peace in Korea is also possible; the USA and China will be rewarded for that. It was tried for the second time in Hanoi on February 27 and 28, 2019. It seems that the good point is that following this peace meeting on the new Silk Road Vietnam will be economically promoted by the USA for the technological development of its industry. On the Belt and Road we always have to think globally. South America is also part of the Belt and Road and Brazil seems a good example. At the remote end of the BRI, in Venezuela, Juan Guaidó was elected in the National Assembly and he will not try to prevent China from making investments in his country. An American intervention in Venezuela is not possible, but if the USA and China cooperate, the people in Caracas will suffer less, but if Russia is also interested by Venezuela’s oil, it will be geopolitically complicated. It’s time to find solutions to solve the USA–China trade war; otherwise, it could spill into other technological and geopolitical spheres. The peace spirit of Aristide Briand will help both superpowers to reassure the world. Harmony, world peace and security also can secure the future of the Belt and Road Initiative.

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Index

A Africa Nigeria, 23, 189 South Africa, 2, 23, 180–195, 197–201, 210 Alibaba, 28 Arbitration Ad hoc arbitration, 192–193, 199 Umbrella Clause, 184–188, 201 Association of Southeast Asian Nations (ASEAN), 2, 4, 5, 15, 16, 22, 26–28, 30–34, 102, 109, 110, 112, 114–118, 124, 125, 127, 130, 149, 151, 153, 187, 191, 209, 215 Australia, 2, 5, 25, 28, 49, 65, 124, 129, 130, 140–143, 145–153, 209 B Beijing, 4, 6–8, 16, 21, 23–27, 31, 42, 44, 49, 50, 52, 59, 61–65, 70–73, 85, 94, 98, 113, 114,

128, 129, 132–135, 158, 159, 161–164, 167, 171, 172, 214 Belt and Road Initiative (BRI), 1–9, 14, 16, 18–24, 26, 27, 31, 33–35, 41–53, 58–74, 78–98, 102, 112, 124, 131–132, 140–153, 159, 166–173, 180–201, 208–215 Bolivia, 8 Brazil, 215 Brunei, 32, 117, 153 C Central Asia, 2, 8, 16, 18–20, 25, 29, 34, 35, 41–53, 59, 62, 66, 68, 73, 124, 207, 212 Kazakhstan, 8, 30, 35, 42–53, 62, 63, 167, 207 Kyrgyzstan, 42, 44–46, 49, 50 Tajikistan, 45, 46, 49, 51 Turkmenistan, 35, 44–46, 48, 51, 62 Uzbekistan, 44, 45, 50, 51

© The Author(s) 2020 J. A. Berlie (ed.), China’s Globalization and the Belt and Road Initiative, Politics and Development of Contemporary China, https://doi.org/10.1007/978-3-030-22289-5

237

238 

INDEX

Challenges, 2, 6, 17, 25, 27, 35, 60, 66–70, 74, 81, 93, 104, 118, 127, 145, 151, 180–201, 208, 211 China, 1, 18, 44, 61, 83, 104, 124, 149, 160, 180, 208 Chinese (Han), 44, 46, 49, 51, 52, 82 Overseas Chinese, 45, 51, 52, 208 Cycles, 106 D Deep sea port, 60 Dili, 31, 141, 143, 146, 149, 150, 153, 209 Dispute resolution, 2, 6–8, 29, 32, 72–73, 87, 96, 140, 142, 143, 147–149, 180, 181, 193, 201, 208, 209, 214 E Economy, 2, 18, 19, 24, 27, 35, 41, 44, 46–49, 52, 59, 69, 71, 79, 80, 82, 83, 85–88, 91, 93, 94, 97, 125, 126, 128–130, 135, 140, 142, 165, 168, 170, 173, 208–210, 212–215 European Union (EU), 8, 48, 52, 162, 195, 214

93, 96–97, 124–136, 201, 207–209, 211, 215 Greater Bay Area (GBA), 2–4, 17, 22, 27, 78–98, 208, 209 G20 meeting, 96 Guangdong Province, 2, 78, 79, 81, 82, 94–97 Guangzhou, 16, 78–83, 85, 89, 94, 209 Guterres, António, 141, 151 H Harmony, 2, 4, 6, 8, 21, 23, 25–26, 28, 82–83, 215 History, 2, 4, 9, 18, 20, 35, 41–53, 70, 80, 82, 84–86, 91, 112, 125, 136, 141–147, 161, 162, 207, 213 Hong Kong SAR, 7, 9, 73, 78, 79, 87–89, 98 Hong Kong-Zhuhai-Macau Bridge, 3, 85, 94–96

F Finance, 2, 6, 63, 72, 87, 96–97, 126, 133, 150, 208 Foreign Direct Investment (FDI), 3, 4, 65, 78, 79, 82–86, 88, 131, 133–135, 198, 209, 212

I Indonesia, 2, 4, 30, 31, 112, 116, 124–136, 142, 143, 150, 153, 167 Infrastructure, 2, 3, 5, 7, 8, 20, 24–25, 27, 29, 30, 32, 35, 45–47, 52, 58–74, 85, 86, 94, 95, 102, 109, 124, 125, 130–135, 162, 165, 167–174, 188, 208, 210, 211 International Monetary Fund (IMF), 71

G Globalization, 1–6, 8, 15–24, 27, 28, 34, 35, 43, 45, 47, 83–87, 91,

J Japan, 20, 25, 26, 47, 61, 126, 129, 131, 132, 134–136, 142, 148, 214

 INDEX 

L Laos (Lao People’s Democratic Republic (PDR)), 212 Li Keqiang, 8, 31, 131, 134, 162 Liquefied Natural Gas (LNG) plant, 5, 48, 140, 141, 148, 209 M Macau SAR, 2, 3, 78–98, 180 Mahathir Mohammad, 4, 31, 32, 124, 132–136, 208 Malaysia, 2, 4, 21, 25, 30–33, 112, 113, 116, 117, 124–136, 208 Middle East, 16, 47, 61, 124 Myanmar, 7, 27, 59, 60, 62 N North Korea, 3, 4, 124 O One Belt One Road (OBOR), 2, 7, 19, 20, 28, 47, 64–67, 81, 159, 167, 170, 171, 210, 211 Opportunities, 2, 7, 52, 61, 65, 68, 89–91, 102, 169, 196, 211 P Philippines, 21, 110, 112–117 Pivot of Asia, 2, 41–42, 49 Public goods, 4, 102–118, 215 R Ramos-Horta, José, 30, 146, 214

239

Risks, 2, 6–8, 65, 66, 69, 72, 136, 150, 180–201, 208, 211–213 Russia, 26, 30, 35, 43–46, 48–51, 59, 62, 212, 214, 215 S Sea transportation, 19 Security, 3, 32, 47, 49, 51, 61, 66, 67, 70, 105, 106, 113, 127, 136, 153, 162–166, 172, 196, 210, 211, 214, 215 Shanghai, 16, 18, 24, 26, 29, 34, 49, 88, 130 South China Sea (SCS), 2, 4, 31–34, 68, 102–118, 124, 129, 130, 133, 136, 149, 152, 167, 215 South Korea, 61, 126 Sri Lanka, 7, 62, 66, 72, 133, 208 Sustainability, 6, 71, 212 T Thailand, 25, 30, 117, 153 Timor-Leste, 2, 5, 27, 30, 31, 140–153, 209, 214 Trade, 2, 4, 7, 8, 15, 16, 18–21, 23, 25–30, 43, 44, 47, 49, 51, 52, 60, 61, 63–66, 71, 74, 80, 82, 85, 87, 88, 93, 96–98, 111, 124, 125, 128, 130, 131, 134, 149, 159, 161, 162, 167, 168, 171, 180, 208, 211, 213–215 Transportation (sea, rail, road, air, pipeline, digital), 3 Trump, Donald, 3, 21, 25, 65, 83, 96, 129 Turkey, 30, 43, 52, 59

240 

INDEX

U UNCITRAL, see United Nations Commission on International Trade Law United Nations (UN), 4, 5, 21, 68, 70, 93, 114, 140, 141, 143, 147, 152, 164, 165, 197 United Nations Commission on International Trade Law (UNCITRAL), 93, 195–197 USA, 4, 7, 8, 20, 25, 26, 29, 83, 149, 212, 214, 215 Uyghur, 42, 43, 45–47, 52 V Vietnam, 21, 25, 33, 34, 111, 112, 114, 116, 117, 128, 215

W Wang Yi, 5, 19, 33, 110, 164 World Bank, 71, 83, 84, 170, 211–213 X Xi Jinping, 5, 14, 19, 23, 26, 27, 31, 34, 45, 58, 63, 70, 78, 80, 82, 85, 94–96, 124, 132, 134, 135, 159, 162, 163, 166–173, 208, 210, 214 Y Yunnan, 16, 31, 60, 91