in case you missed out, more obor watch & brief
succeed or not, the project is fun, and besides
given that it succeeded so long ago way back when, why not again
it always puzzle me when folks are steadfast believing it impossible to do again what was done once before as if it all be a big insurmountable deal
very curious
afr.com
China's OBOR revives the old Silk Road – and rewrites the road rules
Chen Haiou, chairman Hezhengyuan Group, which is importing seafood from Pakistan to sell into China. He is in Tashkurgan, near the border with Pakistan, where his company has built a cold storage unit to store the seafood. Lisa Murray
Chen Haiou is standing outside his newly built cold storage facility in Tashkurgan, a small trading town in the mountains of China's far west, close to the border with Pakistan.
The 35-year-old saxophonist-turned-seafood importer is surrounded by a posse of staff and local government officials. He is wearing sharp sunglasses, trendy riding boots and an oversized blue coat.
Standing next to his Porsche SUV, he looks more Korean pop star than Chinese businessman, an impression compounded as he explains it took three drivers no less than three days to transport his car across the country from his hometown of Shenzhen.
"I feel more comfortable driving my own car," he explains.
A new, elevated section of the Karakoram Highway or China-Pakistan Friendship Road that links Pakistan with Xinjiang in China. Lisa Murray
First impressions aside, over the next few hours it becomes clear Chen is a shrewd businessman, and risk-taking entrepreneurs like him are key to understanding China's ambitious foreign and economic policy plan to revive the old Silk Road, redraw the global trading map and expand Beijing's sphere of influence.
The One Belt, One Road (OBOR) strategy – the "belt" refers to the overland route linking China to Central Asia, Russia and Europe and the "road" is a maritime one, connecting the mainland to south-east Asia, India and Africa – was announced by Chinese President Xi Jinping in September 2013.
It has spawned an industry of OBOR specialists and consultants as governments and companies across the globe scramble to unravel its geostrategic implications, work out whether they should be involved and how best to take part in this multi-trillion dollar infrastructure roll-out.
Chen's business was set up to take advantage of a flagship OBOR project, the China-Pakistan Economic Corridor, which is building and upgrading roads, railways and pipelines linking Gwadar Port in Pakistan to Kashgar in China's far west Xinjiang region. Tashkurgan lies near the halfway mark on the Karakoram Highway, which is a key part of the project and is getting a makeover. Beijing has invested $US46 billion in the corridor and a Chinese state-owned company now controls Gwadar port.
The revamped trade route allows Chen to import seafood from Pakistan and sell it throughout land-locked Xinjiang and into other nearby provinces. This will be welcomed as Xinjiang is up to 5000 kilometres away from China's coastal ports, earning its capital, Urumqi, the title of the world's most inland city.
Reviving the old Silk Road. A map showing China's One Belt, One Road strategy.
Chen is only just starting out, having imported 8 tonnes of prawns and fish last month and another 50 tonnes this month. However, he expects the business to ramp up quickly and is planning to bring in 10,000 tonnes of seafood this year.
"This is a very conservative estimate," Chen insists as he chooses some seafood from the storage unit to be cooked for our lunch at a nearby hotel restaurant.
"This month, I am sending two trucks to the port to bring back the seafood. By September and October I think I will be sending 8 to 10 trucks every day."
While Chen is a big believer, the jury is still out on OBOR, which also goes by the name Belt and Road Initiative (BRI). Sceptics view it as China's long-term play for regional dominance, while supporters argue it is the biggest infrastructure upgrade the world has ever seen.
Breakfast at Aketao on the Karakoram Highway also known as the China-Pakistan Friendship Road in Xinjiang, China. Lisa Murray
At this stage, Australia is more sceptic than supporter and has resisted linking its northern Australia infrastructure plans with OBOR and becoming one of the 65 countries officially on board. Australian Prime Minister Malcolm Turnbull won't be among the 28 country leaders in Beijing next Sunday (May 14) and Monday for the first high-level OBOR summit, although Trade Minister Steve Ciobo is expected to attend, and the Labor Party has been more supportive of the initiative.
As a general sign of the wariness, an Australian parliamentary briefing paper last year warned "some see this initiative as a profound challenge to the current global political and economic status quo".
And Canberra faced strong criticism from security analysts as well as United States President Barack Obama when Darwin Port was sold to Chinese company Landbridge in 2015. While it is not officially listed as an OBOR project, Landbridge founder Ye Cheng has said previously the Darwin Port lease meets with China's foreign policy goals under OBOR. Since the acquisition, oversight of foreign takeovers in Australia has been tightened.
Apart from this strategic wariness in other countries, OBOR is also up against some internal challenges. In Xinjiang, which is on the OBOR frontline being China's key overland link to Europe, a dramatic security crackdown is under way, justified in Beijing as necessary to combat terrorism in the majority Muslim region although critics claim the threat from Uighur separatists has been exaggerated. At the same time, there is a lack of coordination among local governments and China has been accused of using OBOR to address chronic overcapacity in everything from steel to cement.
Police officers are stationed at regular intervals, just hundreds of metres apart, at Kashgar's old town in Xinjiang, China. Angus Grigg
China, for its part, is playing down the strategic dimensions of OBOR. In a recent editorial, state-owned newsagency Xinhua urged journalists to refer to OBOR as a "proposal" rather than a "strategy," a term that risks scaring off potential partners.
However, changing the language used to describe OBOR is not going to address widespread concerns about Beijing's motivations. Take the China-Pakistan Economic Corridor, for example, on which Chen's business relies.
There is no doubt the improved roads are making a difference. We drove five hours up through the mountains from Kashgar to meet with Chen in Tashkurgan on a pristine, elevated road – the new and improved Karakoram Highway or China-Pakistan Friendship Road. Alongside a 70km section that was only just opened in January, the old dirt road is visible, skirting dangerously around the edge of the mountains renowned for frequent landslides.
The upgrade on the Chinese side has cut travelling time by two-thirds and is bound to significantly improve the economics of the region. However, it is also undoubtedly a strategic play for Beijing. A trade route through Pakistan offers China an alternative and shorter way to access the Indian Ocean, reducing its reliance on the Strait of Malacca. This maritime route to the Middle East, Africa and Europe is controlled by the US and Singapore as far as Beijing is concerned, leaving the country vulnerable to a blockade in times of conflict. Most of its energy imports come from the Middle East.
Wang He, Vice-General Manager of Jinyi Group, which is based in Horgos city in China's far west region of Xinjiang and last year sold $US70 million worth of fruit and vegetables to Kazakhstan. Lisa Murray
Peter Cai in a report for the Lowy Institute on OBOR cautions against "overstating geostrategic dimensions of [OBOR], while underappreciating the economic agenda."
"The two goals are not, in fact, contradictory," he writes. "China is using OBOR to assert its regional leadership through a vast program of economic integration. Its aim is to create a regional production chain, within which China would be a centre of advanced manufacturing and innovation, and the standard setter."
However, increasing reports of China's plans to base marines at Gwadar Port and service its navy ships, add a stark military dimension to Beijing's economic plans. As Cai points out in his report, Gwadar is a deep water port and could accommodate submarines and aircraft carriers.
In February, the state-run China Overseas Port Holding Company officially took control of operations at the port, a lease it holds until 2059. China's growing ties with Pakistan are creating significant unease in India as some of the infrastructure projects in the corridor will run through disputed territory in Islamabad-controlled Kashmir. Meanwhile, there are concerns about Pakistan's internal security situation, prompting its government to employ thousands of personnel as part of a special force to protect OBOR projects.
But Chen, who is among a league of entrepreneurs making the most of the government incentives being thrown at OBOR-related projects, is not too concerned. He says Pakistan is more stable than people think and financially, the numbers add up.
"As a company, we are not interested in politics." Composed and confident, he is reclining in an enormous leather chair in the corner of our dining room waiting for his seafood to be cooked, a process which takes time as it first has to be thawed. We are inside the town's tallest building, a four-storey hotel that is framed by the snow-capped mountains of the rugged Kunlun range. Like many businesses in Tashkurgan, Chen has invested in the hotel.
"We're just focused on business and trade," he says. "More and more companies will start taking advantage of this opportunity."
Chen's career path is an unusual one. He studied music in Beijing before moving to Shenzhen, which is on the mainland opposite Hong Kong, and starting a trading company. Shenzhen is a sister city to Tashkurgan and, encouraged by a variety of government policies to promote investment in the area as part of China's efforts to develop its western regions, Chen began buying and processing local yak meat to sell across China. Once he heard about Beijing's investment in Gwadar port and infrastructure links with Pakistan, he decided to move into seafood.
Security teams patrol the area around Kashgar's Id Kah Mosque in Xinjiang, China. Angus Grigg
It's a similar story in Horgos, a new city in Xinjiang's northwest, where enterprising entrepreneurs have flocked to take advantage of its expanding free trade zone, also a key project in OBOR.
"Ten years ago, Horgos was a cross street surrounded by single-storey houses," says Wang He, Vice-General Manager of Horgos Jinyi International Trade Group, which last year exported $US70 million of fruit and vegetables to Kazakhstan. Wang, who was inspecting a box of capsicums about to be loaded on a truck bound for Kazakhstan's largest city, Almaty, when AFR Weekend caught up with him, expects those sales to jump to $US100 million this year.
Streamlined customs processes have cut delivery times in half. Along with tax breaks and other incentives for companies in the special economic zone, this has accelerated growth in the company he started with four others just five years ago.
"After Xi Jinping announced the Belt and Road in 2013, there was a strong pick up in business sentiment in Horgos," says Wang in his dusty truck yard close to the border with Kazakhstan.
Eventually, Wang and his fellow executives are hoping to benefit from the growing number of trains travelling from a handful of cities in China such as Chongqing, Yiwu and Chengdu to places in Europe like London in the UK, Duisburg in Germany and Lodz in Poland.
"We would like to export into Europe if there are cold storage trains and the trains start operating more regularly. That's the plan. We hope it happens."
The trains, which have generated plenty of headlines, are more expensive but faster than shipping, while also cheaper than air freight. However, the logistics are still being worked out. One problem is that trains have to be changed along the way as railway gauges vary between countries. Still, the potential is there for companies to bring down transport costs and overhaul trading routes.
For Xinjiang, the trains are less important as they will more likely pass through the region rather than originate there. According to government representative Mao Hui, of the 2000 trains that travelled through Xinjiang to Europe between March 2011 and February 2017, only 238 started there.
A man at his fabric stall in Kashgar's Grand Bazaar in Xinjiang, China. Angus Grigg
Mao, who has the grand title of deputy director-general of the Leading Group Office for Opening-up Affairs of Xinjiang, says the target for trains this year is 300.
But for this vast and ethnically diverse region, there is one glaring issue.
OBOR's success depends on the free flow of goods and people across borders but Xinjiang, which is home to an estimated 10 million Uighurs, a Turkic-speaking Muslim people, is in the midst of a dramatic and draconian security crackdown.
On a day spent visiting entrepreneurs in the free trade zone in Horgos last week, AFR Weekend went through no less than 19 security checks. Bags were scanned, pockets emptied and bodies patted down.
The police presence in the cities of Horgos, Yining, Kashgar and the capital Urumqi is overwhelming.
Xinjiang's Uighur community complains it has endured decades of discrimination and repression which has resulted in the escalating tensions with China's dominant Han ethnic group. China's Communist Party rulers, meanwhile, blame Uighur separatists for a series of terrorist attacks in recent years, that have become more frequent since violent riots in 2009. They have attempted to address the issue by ratcheting up the security presence.
Under Xinjiang's new Party Secretary Chen Quanguo, a new system of so-called "grid-style social management" has been introduced. Shiny new police kiosks now occupy most street corners, complete with flashing lights and officers standing guard outside.
Chen was appointed to the top post in Xinjiang last August after what was deemed a successful stint governing China's other troublesome region, Tibet. One of his big initiatives is to stage regular and elaborate "anti-terrorism" military parades to rally the troops and put the general public on notice.
A local butcher in Kashgar's old town in Xinjiang, China. Angus Grigg
AFR Weekend witnessed three parades last week, one in Urumqi and two in Kashgar. In the latter, the old town, which is also the Islamic quarter and a major tourist attraction, was shut down on two consecutive days, with people on foot, on motor bikes and in cars queuing for hours to exit or enter the area.
On the second day, a line of armoured personnel vehicles and more than 30 trucks, each carrying several dozen troops looped the old town twice. On the second loop, the troops marched in formation along the street behind the procession of vehicles. One local shop owner shrugged his shoulders as he explained this happened regularly.
Every day, police patrol the laneways of Kashgar's old town and the area around the Id Kah Mosque in teams of three. They march a short distance before stopping and forming a triangle, their backs to each other as they stare out into the crowd.
In the morning, afternoon and evening, meanwhile, whistles are blown and shop owners in the old town line up outside their businesses armed with metal pipes or wooden sticks as part of compulsory drills to practise fighting off terrorists.
The security crackdown has been ramped up in recent months ahead of next week's OBOR summit in Beijing and the National Party Congress at the end of the year, when leadership positions will change over.
Chen is in the running for a position on the 25-member Politburo.
James Leibold, an associate professor at La Trobe University and an expert on China's ethnic relations policies, says the anti-terror rallies are Chen's way of "demonstrating his control over Xinjiang" and proving he "is a capable leader who deserves a Politburo seat."
However, the security tightening poses a dilemma for OBOR.
Xinjiang is up to 5000 kilometres away from China's coastal ports, earning its capital, Urumqi, the title of the world's most inland city. Lisa Murray
"There is a contradiction at the heart of Chinese policy," he says. "On the one hand, OBOR is all about the movement of goods, people and ideas freely across borders but then there is this security imperative we see on display in the anti-terror rallies as well as the monitoring and surveillance. Can they do both?"
The strict security measures are accompanied by paranoia about foreign journalists visiting the area. No private business person or government official would speak to AFR Weekend without prior approval and local government officials from the propaganda department insisted on being present during interviews. In Horgos, a man who said he was from the propaganda department, but had a police badge in his wallet travelled along with AFR Weekend to and from appointments.
In Kashgar, a government official was waiting at our hotel when we arrived and took down the number of our driver, who was later contacted by a police officer and asked to report on our movements. A Uighur guide we had booked for a tour of the old city suddenly cancelled and we were informed the only guides we could use were those approved by the propaganda department, an offer we declined.
On the way to Tashkurgan, there were four separate security checks, including car searches and passport inspections. Large printed signs appeared periodically alongside the highway extolling the virtues of the Communist Party – "Good Life Comes from the Good Policies of the Party" – and promoting ethnic harmony – "Integration with Ethnic Minorities is Good".
However, while AFR Weekend was in Xinjiang, there was little evidence of ethnic harmony as the government circulated a list of banned Islamic names, including "Muhammad," "Medina" and "Jihad". This followed on from the region's "Regulation on De-extremification", adopted at the end of March, which prohibits long beards and other words and actions that may be considered "extremism".
This effort to secularise Xinjiang and marginalise its Muslim people, which account for over half the population, is unlikely to play well with Muslim countries in the region, which are crucial to the success of OBOR.
All of the business people making the most of government incentives to promote development under the OBOR banner, who were interviewed for this story, were Han business people, from China's dominant ethnic group.
"China's central government exerts power by having people on the ground," says Tom Cliff, from the Australian National University, who wrote the book, Oil and Water: Being Han in Xinjiang. "Once you have the local economy beholden to the centre, it gives it more control. That comes from control over money, control over the way people interact with each other."
Shop owners in Kashgar's old town assemble for compulsory anti-terrorism drills three times a day in XInjiang, China. Lisa Murray
Asked about the conflict between overt security measures and open trade policies, Xinjiang government official Mao denies it exists.
"Making sure Xinjiang is a safe place is a top priority for the central government," he says in a large meeting room at the government offices in the regional capital, Urumqi.
"We take various measures to fight against terrorist separatists. We will cooperate with anti-terrorism forces and groups in other countries."
He pauses before emphasising "there is a good balance between development and security. It is being handled well."
The Han entrepreneurs looking to benefit from OBOR's promotion of regional trade and investment are also seemingly oblivious to the clash between the security situation in Xinjiang and its efforts to open up trade and investment links with other countries.
In Horgos, property developer Gu Yong is effusive about the strategy.
"The belt and road strategy is creating a global village without boundaries," he says at the construction site of his unfinished building, an exhibition and trade centre in the Horgos Free Trade Zone.
"We are on the front line here."
A woman sells jewellery at a stall beside the White Sand Lake along the Karakoram Highway, linking Pakistan with China's far west region of Xinjiang. Lisa Murray
He says his building is shaped like two outstretched arms toward Kazakhstan. To emphasise his point, the chairman of Xinjiang Xinlei Group (and the richest man in Horgos, according to our driver), dramatically imitates the embrace at his construction site. The back of the building will resemble two warships, he adds, insisting he is building not just an exhibition centre but an aircraft carrier. Gu clearly didn't get the memo,as outlined in the Xinhua editorial, about refraining from the use of military-related words when describing OBOR-linked projects.
Inside, Gu and his partner Shen Jian have just pointed out where the "Australia pavilion" will be, showcasing Australian-made vitamins and other healthcare products, in between the pavilions for Georgia and Taiwan. Brisbane-based company, 2 Chemist, has already been lined up as a supplier and its owner, Will Ma, said he had visited the site in Horgos. He said the pavilion would sell Blackmores and Swisse vitamins, A2 and Bellamy's infant formula and some insect spray products.
Gu and his partners have invested 550 million yuan ($106 million) in the project.
"Whoever wants to take part and benefit from the belt and road can," Gu says. "It will improve infrastructure and bring new vigour to trade."
Gu, who initially made his money building gas pipelines, is planning to open his centre on July 1, the date China's Communist Party celebrates its founding, as a "birthday present".
His building is part of a project to expand the International Centre for Boundary Cooperation (ICBC), a five-square-kilometre duty free zone first announced by China and Kazakhstan five years ago. The ICBC was established to allow Kazakh and Chinese traders to buy and sell goods from each other without requiring a visa or having to officially cross the border.
The tight security, which involves a passport check if you are a foreigner and applying for a special permission slip if you are a Chinese citizen, means the experience is similar to crossing a border. However, plenty of duty free shops and other businesses have set up there and are doing well.
Sitting on a leather couch in his shop surrounded by mink coats, Liu He, from the Horgos Jufeng Import and Export Trading Company, says his business has grown from nothing less than three years ago to more than 60 million yuan in sales last year. He began importing mink coats from the US and Denmark to sell to mainly Kazakh clients. He has broadened his range to leather as well as hats and other accessories.
The incentives offered to businesses operating here mean that Liu can be "much more price competitive".
"In Shanghai, a mink coat might sell for an average price of 10,000 yuan," he says. "Here, because of the export rebate, I can sell it for 8,700 yuan."
Wang Gang's company set up in Horgos to buy from rather than sell to Kazakhstan. Xinjiang Zhaofenghe Biotechnology Company imports wheat and then grinds it into a powder at a factory just across the border from Kazakhstan, before selling it to Chinese companies, which use it to make animal feed.
The factory employs about 80 people and was built with an investment of 53 million yuan. However, Wang says it closes during winter when it is too cold and is only one of three or four companies that has set up in the bonded zone.
Across the border from Horgos, the Kazakhstan city named Khorgos is promoting its Gateway project, a dry port for handling trans-Eurasian trains as one of the key parts of OBOR. The Gateway project includes a special economic zone for large-scale manufacturing and warehousing operations. The area officially opened at the end of last year and is being managed for 10 years by DP World, the company that helped create modern Dubai by running its main port and free trade zone.
There are 39 China-Europe routes in operation but the trains typically run just once or twice a week, so there is a push for the services to become centralised with the setting up of key transshipment hubs to make them viable.
Still, many of the projects which now come under the OBOR banner were under way well before the strategy was outlined by Xi Jinping in 2013. Perhaps now, these projects will have easier access to funding and be more coordinated, but it is still too early to tell their overall impact.
"China tends to use the back door into Central Asia as a way of countering what it sees as the containment strategy of the US," says La Trobe's Leibold.
It's the prospect of a highly coordinated strategy, driven by the central government, which has sparked global concern. China, like most countries, is looking to expand its strategic options. |
