More from the 19th National Congress of the Communist Part of China
The 19th National Congress of the Communist Party of China voted to expand the party constitution to contain the "Chinese Dream" which includes promoting One Belt One Road construction and combatting corruption. In addition, the conference added "Xi Jinping's Thought On Socialism with Chinese Characteristics for a New Era" into the party constitution. Xi Jinping laid out his plans for new international cooperation and a vision for further accelerating Chinese development in the developing world. This, coupled with the increasing isolationism of the Trump-led United States, could be a sign of a shift in global development finance.
The ABD is providing 1.2 billion USD for the second phase of the Dhaka-Northwest international trade corridor upgrade. The project will aid regional prosperity, aligning with the ADB-supported South Asia Sub-Regional Economic Cooperation program. Road infrastructure is crucial to Bangladesh, and the project includes improvements along roads from Elenga through Hatikurul to Rangpur, strengthening the Roads and Highway Department, and road safety efforts focused on women. Read more here.
As the Duterte administration moves forward with its “Build, Build, Build” initiative to enhance and rebuild the infrastructure of the Philippines, the ADB has pledged a loan of 100 million USD. These funds will be channeled to the nation’s Infrastructure Preparation and Innovation Facility. The Philippine Department of Public Works and Highways will use the funds to work on 75 flagship programs developing large-scale, modern railway and highway systems, as well as airports, seaports, and flood control systems. These projects are expected to last into 2022. Read more here.
The ADB is loaning 65.5 million USD to India to mitigate coastal erosion in the state of Karnataka. The loan has a 20-year term and is the second tranche of the 250 million USD financing plan under the Sustainable Coastal Protection and Management Investment Program. The State of Karnataka's Department of Public Works will implement environmental projects to protect the state's coastal economic sectors. Read more here and here.
The ADB approved a 200 million USD loan for the Ceylon Electricity Board to develop the first 100-megawatt wind park in Sri Lanka. Population access to electricity in Sri Lankan has grown from 29 to 99 percent. The project will develop wind energy in a country that desperately needs more renewable energy resources, as two-thirds of Sri Lanka’s power comes from coal and oil. Read more here.
The ADB sold a 1.5 billion USD global benchmark bond in the US dollar bond market. The bond matures in 10 years and will pay off to the new investors in November 2027. The majority of the bonds were purchased in Asian trade markets by central banks and institutions. The ADB provides the terms of the bond on their website.
The ADB funds the Central Asia Regional Economic Cooperation Program
The ADB is committing 5 billion USD to support the Central Asia Regional Economic Cooperation (CAREC) program for the next five years. CAREC is a cooperative operation focused on developing Central Asian member countries. The program seeks to expand infrastructure, social services and the general economic abilities of its members. The corridor is also funded to help facilitate energy trade, general trade and easier connectivity between those involved.
The ADB's investment will support the CAREC 2030 plan and will fund projects that include a Turkmenistan-Afghanistan-Pakistan transmission line project and other regional projects. The ADB is allotting an 800 million USD Multi-Tranche Financing Facility for the CAREC program to develop roads in Pakistan. Finance Minister Ishaq Dar embraced the program when he noted the geo-strategic importance of Pakistan's location for trade in the region. Read more here.
Chinese investment in Egypt
The Egyptian trade minister is talking with the ADB in search of funding for infrastructure projects, including additional funding of small and medium sized solar power projects that need up to 210 million USD. Meanwhile, China has invested in other renewable energy projects in Egypt. Alongside the World Bank and other regional and international banks, the AIIB and the ADB will invest to construct 13 solar plants in the solar park of Benban, outside of Aswan, Egypt. This project is expected to amount to 653 billion USD and will be one of world's largest solar parks, with 32 solar plants. Read more here, here and here.
The AIIB will provide 210 million USD to 11 Egyptian solar PV projects with its PPP model, reducing their risks by distributing funds among various private and public capitals. This investment shows the AIIB commitment to reducing CO2 emission and their support of clean energy, but thus far, the AIIB has not considered nuclear energy due to lacking expertise. Read more here.
On October 25, the three-day Egypt-China Investment and Trade Fair began in Cairo, featuring over 70 exhibitors. The Egyptian General Directorate of Investment was invited to explain Egypt's new "Investment Law" so more Chinese enterprises can understand the current investment environment in Egypt. Up to now, China has invested close to 7 billion USD in Egypt, and the two countries have confirmed plans for over 20 joint projects. Read more here and here.
Chinese firm, BYD announced that it signed a contract with the city of Alexandria to construct a 128km monorail. At the moment, the project cost and details remain unknown. But the agreement shows BYD’s desire to further its implantation in Egypt, beyond the vehicles already produced and sold in the country. Read more here.
China’s One Belt One Road
China emphasizes that the One Belt One Road is a mutually beneficial and a win-win solution for both developed and developing countries. China continues to promote the idea of a “community of common interest” and “community of common destiny” around the globe. Read more here.
Meanwhile, China is becoming increasingly involved in green financing, pushing environmentally friendly projects and sustainable development as new hallmarks of China’s developmental strategy. This week, Chinese President Xi Jinping endorsed this form of finance, facing concerns over the pollution and sustainability of his One Belt One Road initiative. Read more here.
According to a new report conducted by Baker McKenzie and Hong Kong Silk Road Associates, One Belt One Road related projects will be worth 350 billion USD in the next five years. The report indicates that about 60 countries are involved in the One Belt One Road, but just China and ten other markets account for two thirds of the One Belt One Road’s GDP. Those countries include India, Indonesia, Iran, South Korea, Poland, Russia, Saudi Arabia, Thailand, Turkey, and Taiwan. Read more here.
China has started to develop Pakistan’s Gwadar port. Gwadar serves as an important commercial hub for the China-Pakistan Economic Corridor (CPEC), since it would connect China to the Indian Ocean. The CPEC is key to China’s One Belt One Road initiative, and the project might also benefit Pakistan by stabilizing a region that has been affected by terrorism and corruption. Read more here.
The first China-Slovakia freight train was launched on October 27. It takes 15 days for the train to travel 10,537 kilometers from Dalian, a port city in northeast China, to Bratislava, the capital of Slovakia. Shipping via railway saves about 30 days time compared to traditional maritime shipping. Slovakia is a transit hub on the One Belt One Road, and many multinational companies build their factories there, including Samsung Electronics, Volkswagen, and Hyundai Motor. The Slovak ambassador to China, Dusan Bella, said the China-Slovakia train provides more business opportunities to logistic companies and other industries in both China and Europe. Read more here.
Recognizing their 60th anniversary of diplomatic ties and the 65th anniversary of the Rubber-Rice Pact, the China and Sri Lanka plan to further cooperate under the framework of China's One Belt One Road Initiative. Chinese Foreign Minister Wang Yi expressed support for a variety of development goals, which were codified by a mutual legal assistance treaty. In order to support Sri Lanka’s long-term socioeconomic development, China will support infrastructure development, bilateral investment and trade, and maritime connections. Read more here.
The Export-Import Bank finances the One Belt One Road in Bangladesh
On October 29, Chinese and Bangladeshi government representatives signed an agreement for China to finance construction of oil pipeline projects in Bangladesh. The China Export-Import bank will provide concessional loans, while the China Petroleum and Natural Gas Pipeline Bureau will carry out construction under the 550 million USD contract. This project is of great significance to China's One Belt One Road initiative because it helps to expand the Bangladesh-China-India-Myanmar economic corridor.
The Chinese Export-Import bank will fund Bangladesh's largest infrastructure project to date, the Padma Bridge. The travel time from Khulna to Dhaka will decrease to three and a half hours. The Chinese Export-Import Bank will have a draft of the loan in the first week of November. Read more here.
Updates on the Chinese Development Bank
The Minister of the Popular Power of Oil of Venezuela, Eulogio Del Pino, the VP of the China National Petroleum Corporation, Wang Dongjin, and representatives of the Chinese Development Bank, met to evaluate the progress of development contracts signed 20 years ago. Venezuela is looking to expand crude extraction and exportation. Meanwhile, China looks to continue all business ties which are estimated at 40 percent of the stake in oil-related transactions, despite U.S. attempts to halt trade. Read more here.
China Communications Construction Company (CCCC) is constructing a railway project in Malaysia, helping to connect the east and west coast in Malaysia. Meanwhile in Sri Lanka, CCCC is starting construction on a 1.4 billion USD Colombo Port City development that had been suspended for a year. The project is set to reclaim about 2.7 square kilometers of land. Both these projects are partly financed by the Chinese Development Bank (CDB). However, some concerns have been raised about the CDB's ability to preserve the environment to the same strict standards as the World Bank. Read more here.
The China Development Bank's Russian Siberian-Far East Working Group has issued 12.9 billion CNY in credit transfers to Russian banks to help finance the development of the Russian coastal international transport corridor. The Binhai 1 and Binhai 2 projects will pass through China's Heilongjiang and Jilin provinces as well as Russia's Vladivostok free port area. Read more here.
AIIB around the world…
The AIIB and India have signed a deal to provide 300 million USD to promote fiscal reform and better delivery of public services in West Bengal. Read more here.
This week, Canadian Liberals introduced a law establishing Canadian participation in the AIIB, allotting 256 million CAD to purchase shares in the development bank. The bill has been tabled because of opposition suspicion of Prime Minister Justin Trudeau and his agenda to strengthen trade relations with China. Read more here.
Related news: E-commerce, rise of the Yuan, and wind energy in the South China Sea
China's Ministry of Finance successfully issued a 2 billion USD sovereign debt in Hong Kong. Many see this as enhancing fund accommodation between mainland China and Hong Kong, and as a mechanism that promotes One Belt One Road. In a way, this solidifies Hong Kong as a world financial center. Read more here.
China wants all major foreign aid commitments, including AIIB’s investments, to be in Chinese yuan. China is negotiating with Saudi Arabia to have key imports traded in CNY. This move is intended to elevate China's economic status to that of the U.S. Read more here.
China has announced the implementation of a new wind turbine system, called the Longyuan Zhenhua 3. The system has a lifting capacity of two thousand tons and is set to operate in the Formosa 1 offshore wind farm in the South China Sea. The region is known for its abundant wind resources, and could potentially boost international cooperation between China and countries in Southeast Asia, many of which lack the energy infrastructure needed to take advantage of wind resources. The system could accomplish this goal by providing energy and supplies to ships and other vessels that traverse the South China Sea. Read more here.
Last year, China's e-commerce was valued around 1 trillion USD. Recently, Chinese technology and e-commerce firms, like Alibaba, have made moves to expand cross-border e-commerce into neighboring markets. Alibaba founder Jack Ma endorsed a plan to develop e-commerce infrastructure in the Philippines, including building new markets and strengthening logistics. The Philippines is a potentially strong emerging market, while disparities in Internet access and geography create incentives for Chinese firms to invest and boost e-commerce. Read more here.
What are Japan's current opinions?
Japanese economist Akifumi Kuchiki writes about growing concerns in Japan about Chinese developmental finance. Japanese companies and citizens are worried about the rapid growth of the AIIB and its projects. While the AIIB is establishing partnerships with the Deutch Bank in Germany and General Electric in the U.S., the Japanese government has delayed their response to the AIIB. Read more here.
Ahead of President Trump's visit to Asia beginning on November 3, Japanese observers speculate that China’s strategy will be to address North Korea's nuclear and missile issues, and trade problems with the U.S., as well as long-term relationship building with the U.S. After Xi Jinping's re-election as general secretary during the 19th National Party Congress, Trump comments likening Xi Jinping to a 'king' is likely to have an impact on U.S.-Japan relations. Read more here.
Japan's Foreign Minister, Taro Kono, said Japan would propose dialogue with the U.S., India, and Australia, to promote free trade and strengthen defense cooperation in the South China Sea, Indian Ocean, and Africa sea areas. Garren Mulloy, an associate professor of international relations at Japan’s Daito Bunka University, believes this proposal will be beneficial to the region, but the four countries’ scale of investment will not be as much as China’s One Belt One Road initiative. Read more here.
China's relations in Latin America and Africa
The Chinese government has taken a new interest in Ecuador, growing its credit and loan investment to help develop Chinese interest in Ecuador. Ecuador has chosen China to be the main financer of much of its development, while it could have selected other international organizations such as the IMF. Read more here.
Algerian media TSA interviewed Yang Guangyu, the Chinese ambassador to Algeria. The ambassador talked about a new center for the Chinese visa applicants, and the Chinese-Egyptian bilateral relation in the context of Egypt’s economic crisis. He also highlighted new investment projects in Algeria, and reasserted China’s will to invest in the automobile and mineral sectors in Algeria. Read more here.
China and Mozambique signed an economic collaboration agreement to erase part of Mozambique’s debt that resulted from Chinese loans, which represents more than 36 millions USD. This agreement to sustain Mozambique’s economic development follows previous Chinese investment in numerous sectors, including infrastructure, energy, agriculture, tourism, mining resources, transport, and communications. Read more here.