| | | China’s ‘Belt and Road’ vision struggles to leave port
Grand plans for Qinzhou trade hub with south-east Asia yet to be realised
When Najib Razak visited Qinzhou in south-western China, the Malaysian prime minister crowed about the rapid pace of development at the south-east Asia-focused port.
“In the future, if I want a project to be finished as fast as possible, I would say, ‘Finish it with Qinzhou speed’,” he said after his 2012 visit.
Five years later, the project is making slow progress, with no big vessels calling at the port, investors complaining about an insufficient workforce and grand plans to turn Qinzhou — located in the Beibu Gulf near the border with Vietnam — into China’s latest factory hub yet to be realised.
The challenges facing Qinzhou underline the large gap between the overblown rhetoric of President Xi Jinping’s “Belt and Road” infrastructure initiative — launched in 2013 to build new trade networks binding Europe and south-east and Central Asia into China’s vast production network — and the prosaic reality.
“It takes years to grow everything and it’s not easy, because you need customs officials, investors and trained workers,” says Simon Pun, a Hong Kong investor who runs a wine-importing business at Qinzhou. “The Belt and Road initiative gives the project more focus, but it’s not a magic wand.”
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The plan to build Qinzhou into a key port for trade with the fast-growing economies of nearby south-east Asia was approved by Beijing in 2008 as it sought ways to promote development in Guangxi, one of China’s poorest regions. It was later incorporated into Belt and Road.
Mr Xi visited Guangxi last month to emphasise its role in the programme, which he will promote to world leaders at a forum in Beijing on May 14-15.
As of the end of last year, China Development Bank, a state lender, had granted loans worth $160bn to countries involved in the Belt and Road plan and had identified additional potential projects worth $350bn.
But Brian Eyler, who analyses China-south-east Asia relations at the Stimson Center, a foreign policy think-tank in Washington, warns that unless this money is invested well, it will only exacerbate the mounting debt problem that Mr Xi’s government has pledged to tackle but done little about.
Wang Wenyuan, deputy director of the Qinzhou port administration, says the Belt and Road imprimatur has helped attract foreign investors, in addition to cheap land, tax incentives and its location.
In 2015, PSA International, the Singaporean port operator, and Pacific International Lines, a Singaporean shipping group, formed a joint venture with the local government to build a new container terminal with an eventual capacity of 3m 20-foot equivalent containers per year.
Several Malaysian companies have said they plan to invest in the Sino-Malaysian industrial zone being built near the port. Container throughput has risen steadily to 1.4m 20-foot equivalent units last year from 470,000 in 2012. Qinzhou is targeting 1.8m containers this year and 5m by 2020.
That is still way behind China’s main trade hubs such as Shanghai, the world’s busiest container port, which moved 37m boxes last year. Shenzhen moved 24m and Ningbo moved 22m.
The small scale of the trade at Qinzhou makes it hard to attract the largest container ships, which operate long-distance routes. Instead, it has to rely on smaller vessels trans-shipping through Shenzhen, Hong Kong and Singapore, which drives up costs.
Olaf Merk, a ports expert at the OECD, the inter-governmental club of developed nations, says China already has too many ports, with excess capacity of 50m containers per year as of 2013. That is likely to double by 2030 because of plans to expand Qinzhou and other shipping centres.
Secondary ports such as Qinzhou do have a role in promoting regional trade and integration, Mr Merk says. But there is a risk that inclusion in political projects like the Belt and Road initiative “becomes the justification for investment, whereas a proper market assessment would still be needed to avoid overcapacity”.
Building ports is relatively straightforward. Attracting industrial investors to Qinzhou is much harder, without skilled workers, a network of suppliers or banks experienced in trade financing.
Regal International, a property developer, is one of several Malaysian companies that intends to invest in Qinzhou, building a halal-food processing zone. It sees “huge” potential in using Qinzhou as a base to distribute food to the more than 20m Muslims in China, as well as exporting halal products globally.
But despite the tax exemptions and financial assistance offered by the government, it has yet to finalise its investment. Many of the plans for factories at Qinzhou remain on the drawing board.
Mr Eyler says Guangxi has long been a neglected part of China and that Qinzhou will not take off until there is a well-educated workforce and a pool of large private-sector Chinese investors.
“Eventually, the chickens will come home to roost for the Belt and Road initiative and only the competitive projects will last,” he warns. Additional reporting by Archie Zhang |
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