The Asian Infrastructure Investment Bank
The China Clean Development Mechanism Fund, AIIB, and the Beijing Gas Group Co. jointly promote the development and use of green low-carbon energy starting from Beijing and eventually across China. Both financial institutions finance projects to promote environmental protection, and Beijing Gas Group Co, the largest city gas company in China, is responsible for the infrastructure construction.
The AIIB, founded in 2016, is now made up of nearly 84 countries and has dispersed around 4.2 billion USD around the world. An officer of the AIIB recently reported that Argentina would be one of the next countries to enter the agency with speculation that entry will be finalized by 2019. Argentina already has access to financing from the World Bank, IDB, and Andean Development Corporation, and could gain access to the long-term credits offered by the AIIB. It is assumed that as the AIIB grows, the world will see AIIB finance in South America as early as 2019.
The Asian Development Bank updates
Iceland and China
The ADB is loaning 250 million USD to a joint-venture between Iceland's Arctic Green Energy Corporation and China's Sinopec to develop Chinese geothermal resources. The project is aimed to lessen Beijing's reliance on coal for power, addressing pollution and sustainability concerns. Iceland has extensive geothermal development, and both companies say northern China has the same potential.
The ADB and the Japan International Cooperation Agency (JICA) are loaning 163 million USD to Olam International Limited (OIL) and Cafe Outspan Vietnam Limited (COVL) to support smallholder farms in Indonesia, Papua New Guinea, Timor-Leste, and Vietnam. Funding will support OIL's processing fo midstream products, provide working capital investments for smallholder farmers, and offer capacity building training to farmers, mainly in the coffee industry.
The Philippines has collaborated with the ADB to create a 164 million USD Infrastructure Preparation and Innovation Facility (IPIF) to ensure infrastructure projects will meet international standards. The facility will address administrative bottlenecks in implementing quality infrastructure projects. In October, ADB loaned 100 million USD for the facility in support for the Philippine "Build, Build, Build" plan.
The ADB is loaning 100 million USD to Sri Lanka to further support the ongoing Skills Sector Development Program (SSDP). The program, which received 100 million USD in 2014, addresses the country's lack of skilled labor by providing training and collaborating with the private sector for aligning labor. ADB will also grant 3 million USD through the Japan Fund for Poverty Reduction (JFPR) to focus on women's participation and employment.
Micronesia internet connectivity
The ADB is granting 36.6 million USD for internet connectivity projects in the Federated States of Micronesia, Kiribati, and Nauru as part of the ongoing Improving Internet Connectivity for Micronesia Project. The project is aimed to provide stronger, more reliable internet services to the three participating countries. The grant will fund the installation of a submarine cable between Kiribati and a proposed transpacific cable, and the World Bank will help in financing Nauru's share of the East Micronesia Cable System.
The Mekong River
Six countries along the Mekong River have adopted an investment plan worth over 66 billion USD over the next five years. Leaders from Vietnam, Thailand, Cambodia, Laos, Myanmar, and China agreed on the plan to spur economic growth, mainly through infrastructure projects. The ADB will provide at least 7 billion USD, with the rest coming from the private sector and the governments involved.
Cooperation with the AIIB
Officials from China, Vietnam, Cambodia, Myanmar, Laos, and Thailand participated at the sixth Greater Mekong Subregion (GMS) Economic Cooperation summit on March 31, 2018. Cambodia's Prime Minister, Hun Sen, showed support for Chinese-led development efforts, stating an interest in further cooperation with the AIIB. After the summit, the Cambodian prime minister asserted that 'China supports [his] reelection,' on his Facebook page. Cambodia's general election will be held on July 29, 2018.
In northern Laos, villages are witnessing large construction dedicated to a future rapid train that will connect China to Singapore within 10-years. The colossal project generates hope in a mostly enclaved and isolated population. The train route would decrease travel from the capital to the Chinese border from 20 hours to just 3 hours. Concerns, however, are rising as the constructions lead to the expulsion of thousands of people from their home and massive takeovers of factories and plantations by Chinese investors along the route.
U.S. increases tariffs
Chinese Vice Premier Han Zheng spoke at the China Development forum, where he condemned a possible trade war with the U.S.. A looming trade war is invoked by the U.S.’s announcement of increased tariffs directed at China,on steel and aluminum and other products and is estimated to be worth 60 million USD. The U.S. administration has cited China’s violation of U.S. intellectual property as a reason for the increased tariffs. Han Zheng proposed that the only peaceful step toward progress was to open up free trade around the world.
Trade war presents an opportunity?
While the United States and China become engrossed in trade conflicts created by increased tariffs, emerging countries will take advantage of the situation and improve their economic situation, says Martin Currie, an affiliate of Legg Mason. These countries will be able to advance through increases in intraregional trade caused by decreased exports to the U.S.
Concern surrounding the BRI
Michael Clauss, Germany's Ambassador to China, argues that while the Belt and Road Initiative shows great promise, primarily as a promoter of sustainable growth in Europe, Asia and Africa, China needs to demonstrate a greater commitment to transparency, as well as international standards and procurement procedures, as the basis of deeper international cooperation.
Chinese development projects have not demonstrated a satisfactory track record on transparency and adherence to international rules and standards, which increases risk for investors, particularly in foreign markets. Furthermore, around 90 percent of Belt and Road projects have been financed by Chinese companies, and Clauss argues that other countries like Germany do not have ample room to engage with the Belt and Road.
Despite promoting values like inclusive development, China has thus far not succeeded in ensuring a level playing field for all participants in the BRI, and an exclusively China-centric development model could scare away potential investors in places like Europe. Finally, the Belt and Road Initiative has a debt sustainability problem, and critics argue that poor lending practices and geopolitical interests could jeopardize sustainable growth.
Conflicting views of Japanese and Chinese relations
Competing over coal
A geopolitical rivalry has emerged between China and Japan in efforts to obtain coal from Southeast Asia in order to provide efficient technology at minimal waste. Multiple reports indicate a boom in Southeast Asia’s coal industry. While China maintains dominance in the coal power industry, it also suffers from issues regarding the pollution caused by these coal plants. These pollutants led China to place stricter regulations on domestic coal plants, which in turn led Beijing to push their coal production to Southeast Asia as part of the BRI. China’s increasing clout in the energy sector (amongst other sectors) has been cause for concern to industrial rival, Japan, who is also seeking entry into the Southeast Asian coal industry to combat their shrinking influence in the region.
Taking advantage of China’s economic sphere
From Japan's perspective, China's economic circle resulting from the BRI has built an extensive supply chain. The two countries have turned from a competitive to a cooperative stance since the Japanese government adopted a positive view of the initiative. In the past month, many Japanese companies have announced their plans to cooperate with Chinese to develop shared trade routes and to proactively explore business opportunities in China.
China in Africa
After the 15th Summit of Macao, Cape Verde wants to become a privileged platform for Chinese investments in Africa. Cape Verde promotes their unique assets such as their geographic location, their political and social stability, the facility to transfer funds, and their young workforce. The archipelago wants to deepen its relations with China, following a model for the largest Chinese investment in the country, construction of a 250 million USD hotel resort.
Zimbabwean President Mnangagwa is visiting his Chinese counterparts in Beijing to reassert that Zimbabwe is “open to business.”. China is the first commercial partner of Zimbabwe with exchanges worth more than one billion USD. China is essential to support the rebound of the Zimbabwean economy, a priority for the approaching presidential elections.
The head of the China Development Bank in Morocco, Liu Xin, and Brahim Benjelloun Touimi, president of the BMCE Bank of Africa, signed a memorandum of understanding to increase bilateral trade and investment. The Morocco stop on the BRI will provide significant opportunities to establish bilateral trade and relations with more countries in Africa.
Chinese investments were an important part of the presidential elections debate in Sierra Leone. The second round of debates included discussion between pro and anti Chinese investments. For instance, Julius Maade Bio, candidate of the opposition, has qualified Chinese projects as “deception”, “irrelevant for the economy of the country or the population”. These critiques also react to some slogans claimed by the candidate of the current majority: “we are all Chinese.”
Latin America’s Dependency
China has long been the largest lender in Latin America. Over the past decade, Chinese banks have transferred more than 150 billion EUR worth of loans to Latin America, far more than the World Bank and the International Monetary Fund. In exchange for easy loans to Latin American governments, China is able to buy resources it lacks for comparatively cheap. However, Beijing has gained a lot of influence of certain Latin American governments, which is worrisome as China is known for its history of ignoring human rights and environmental standards abroad.
Maritime trade route
Duisburg Harbor AG, also known as Duisport, is intensifying its rail freight and trailer traffic with Trieste, the largest Italian Adriatic port, which is connected by the maritime Silk Road from southern China via the Suez Canal to the Mediterranean Sea. Alongside China Merchants Logistics, one of the leading logistics companies, Duisport is implementing projects along the corridors of the Silk Road Initiative throughout the Eurasian region. Duisport hopes to further expand trade with China in the coming years by continuing expanding infrastructure along the New Silk Road and by coordinating customs procedures.
Vineyards in France
Since 2008, the region of Bordeaux in France, famous for their vineyards, has experienced an increasing trend of vineyard buybacks by Chinese investors. According to the Bordeaux inter professional wine council, in 2018, 140 vineyards belonged to Chinese investors. The Chinese estate represents 3 percent of the vineyard areas in Bordeaux and attracts mainly representatives of big firms.
Other news related to Chinese development and finance
Chinese authorities have confirmed that the Central Bank of China is in the process of developing a national cryptocurrency. Both physical currency and cryptocurrency will flow at the same time for the time being, but many believe physical currency will become obsolete.
China’s International Maritime Judicial base
Liu Guixiang, member of the Supreme People's Court judicial committee, stated China has now become the world's largest trade and maritime transport nation. Based on China's participation in economic globalization, the Supreme People's Court (the highest level of court in China) declared it's crucial to strengthen China's maritime judicial capacity through its newly established International Maritime Judicial base.