President Trump in Asia
While in Japan, President Trump thanked Prime Minister Abe for his Asia "security diamond" strategy and pronounced it more favorable for creating a "free and open Indo-Pacific" than President Obama's Asia-Pacific Rebalancing Strategy. The U.S. and Japan will jointly implement the necessary framework and will invest in infrastructure in the Indo-Pacific region. The biggest challenge will be China’s increasing regional influence with its One Belt One Road Initiative and the AIIB. Read more here.
President Trump announced that the U.S. is committed to reforming its development finance institutions to support Asia. A complete shift from past rhetoric, he said the U.S. would be dedicated to incentivizing private sector investment in Asia for mutual benefit. The promise might expand the Overseas Private Investment Corp (OPIC) to include the US Trade and Development Agency and the US Agency for International Development. President Trump also called on the World Bank and the ADB to collaborate on Asian infrastructure investment. Reports say this shift is in response to Chinese dominance in Asian aid through the One Belt One Road initiative. Read more here.
The US Overseas Private Investment Corporation (OPIC) signed a Memorandum of Understanding with the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI). This announcement is part of President Trump's 'Indo-Pacific' development plan and can be seen as a response to the One Belt One Road initiative. Read more here.
The Asia-Pacific Economic Cooperation Summit
This year’s Asia-Pacific Economic Cooperation (APEC) summit was held in Vietnam, and this past week the Economic Leader’s Meeting discussed deepening regional economic integration, promoting sustainable development, innovation, and growth in inclusiveness, strengthening micro small/medium enterprises, and enhancing food security and sustainable agriculture in response to climate change. During the meeting, the U.S. proposed open trade to be added into the APEC Leaders' Declaration, while China asked for One Belt One Road initiative to be added. Read more here.
Chinese President Xi Jinping and Russian President Vladimir Putin announced plans to strengthen strategic and economic ties between the two countries at the APEC Summit. Xi announced that China was willing to join Russia in promoting bilateral ties in security and development. Specifically, the two countries agreed on the importance of expanding trade, implementing major projects in energy, high-tech, aviation, aerospace, and infrastructure, and furthering integrating Russia and the Eurasian region into China's One Belt One Road Initiative. Read more here.
During the APEC summit, Jin Liqun, president of AIIB, stated that AIIB gives full support to Asia infrastructure construction to promote interconnectivity and economic growth in the region. He pointed out APEC as a good platform for Asia Pacific leaders to work together to develop interconnected policies. Jin pointed out that the AIIB is working with the World Bank and the ADB to address under-investment for infrastructure construction and economic development in the Asia-Pacific region. As of now, the AIIB has approved 21 investment projects with a total investment of 3.5 billion USD. APEC members like the Philippines and Indonesia have benefitted from AIIB investment, and the bank is gearing up to begin work in Vietnam. Read more here.
Jin expressed also a desire to combat poverty and global warming through responsible infrastructure development. Especially as the U.S. pulls out of the Paris Climate Agreement, the AIIB's push for environmental sustainability calls into question Japanese and American efforts to fight climate change, even in the eyes of Japanese observers. Read more here and here.
Updates on the ADB
The ADB and the Alliance for Financial Inclusion (AFI) signed a memorandum of understanding for the promotion of financial inclusion in Asia at the Second Asia Finance Forum. The agreement will have both groups work together to increase technical abilities, administrative capacities, gender gap equality efforts, climate-sensitive policy making, and private sector cooperation in economies across the region. A special focus will be placed on unbanked and under banked areas to bolster their financial markets. The ADB will specialize in digital finance and disaster risk aid. Read more here.
Chinese cooperation agreements
Vietnam and China signed 12 cooperation pacts and seven documents for collaboration. The pacts include memorandums of understanding and plans concerning Vietnam's place in the Chinese One Belt One Road initiative, commerce zones, health collaborations, economic development, and border agreements. The documents include agreements on scientific exchanges, nuclear cooperation, press exchange, and investments including plans for an Agricultural Bank of China in Hanoi. Read more here.
The Commerce Ministers of China and Cambodia signed a Memorandum of Understanding at the APEC Summit in Vietnam, pledging increased cooperation on the development of online business operations. The two countries agreed to focus on policy communication, capacity building, joint research, and other initiatives as a part of a new comprehensive strategic partnership between the two countries and China's overarching One Belt One Road Initiative. Read more here.
During Chinese President Xi Jinping's state visit to Laos, the two countries pledged to "promote sub-regional development and bring more benefits to countries and peoples in the region.” Read more here.
Chinese Premier of the State Council, Li Keqiang, announced plans to expand bilateral relations with the Philippines, as well as multilateral relations with the member states of ASEAN. China plans to participate in the Regional Comprehensive Economic Partnership, a proposed free trade agreement between ASEAN and other states. Chinese involvement in Southeast Asia will also extend to subsidizing several development and cooperative projects, covering areas including connectivity, infrastructure, poverty alleviation, trade, and anti-corruption. Read more here.
The One Belt One Road:
As of June 2017, the China Export-Import Bank's Shanghai branch has contributed to over 100 projects in more than 20 regions under the One Belt One Road initiative. The Shanghai branch has provided 22.6 billion CNY in loans supporting One Belt One Road projects, which account for 21 percent of the total loan balance of Export-Import Bank branches. Additionally, according to statistics from the Shanghai Development and Reform Commission, the city of Shanghai has invested 5.49 billion USD in 246 projects in One Belt One Road regions. Read more here.
Poland and Russia
The One Belt One Road initiative is one of the most important topics of this year’s Warsaw Security Forum. The “OBOR will bring win-win results for China and the European Union,” says Professor Wang Yiwei, director of the Center for European Studies at Renmin University of China. Dominik Mierzejewski, a professor at the University of Lodz in Poland, also says the OBOR has greatly contributed to Poland’s economic development. Read more here.
During the “Russia-China: challenges and outlooks for global integration” conference, Russia predicted a boost of Chinese tourism in Russia, since business traveling has doubled in the past two-years. This implies that Chinese government has interest in local Russian investment. Russia has come out of recession, with a large market and cheap resources; the only hindrance for Russia to benefit from One Belt One Road is the Moscow-Kazan high-speed railway. Read more here.
The case for more One Belt One Road financing
Former President of People's Bank of Chin, Jun Ma discusses the need to mobilize global capital to better facilitate infrastructure programs in the One Belt One Road. The OECD has estimated the OBOR countries need for infrastructure building is 5.5 trillion USD. However, the gap is currently filled mostly by Chinese investment and is not nearly closing the gap. On the other hand, global investment capital is over 100 trillion USD, but only a few percent is used on infrastructure. Therefore, he hopes to enhance transparency and develop better financing tools in order to draw that capital into infrastructure investment.
Jun Ma urges the need to devise a safe net for the high risks of PPP, especially for political risks. He cites MIGA, set up by World Bank in the 1998, as it guarantees 4.3 billion USD for political risks. But just like other institutions providing these kind of services, they are limited in terms of insurance, and avoid can’t incidents like war or terrorism attacks. He also touches on the topic of sustainable development in OBOR countries as most of them have not been careful regarding this, and have relatively fragile environments. Read more here and here.
The AIIB: green projects and railways
The AIIB is currently reviewing a number of green projects in Malaysia, and abroad with Malaysian firms. These projects focus mainly on renewable energy and green technology. AIIB senior economist, Dr. Thia Jang Ping, stated that the AIIB has been watching the green tech scene in Malaysia for some time, especially since the government announced their intent to partner on a massive solar plant. Read more here.
The AIIB will be lending the Bangalore Metro Rail Corportation a 300 million USD loan needed to fund the Namma Metro project, a new transportation infrastructure project in India. The project is co-financed with the European Investment Bank (EIB), who is providing a 500 million dollar loan. The EIB and AIIB are funding implementation of Phase 2 of the project, which is expected to take 5-years. Read more here.
A 23-member Chinese delegation, led by China’s National Railway Administration, met in Nepal and started preliminary research on possible railroads. Nepal will receive China’s technical support and the AIIB's financial support for its railway project. However, the visit has lead suspicion in India. Some Indian media sources think that China’s real purpose is to invade South Asia. Read more here.
Chinese investment in Latin America and Africa
The Bolivian Space Agency outlined plans to construct a second telecommunications satellite. The satellite will cost 250 million USD and will use experiences from the first satellite's launch in 2013 by the Chinese Academy of Space. The Chinese Development Bank funded 85 percent of the initial project’s funding, while the Bolivian government funded 15 percent. Read more here.
The Argentinian government approved a loan contract for a solar energy park in Juyjuy, Argentina. The China Export-Import Bank financed 85 percent of the project, estimated to cost 331.5 million USD. Read more here.
China has been Brazil’s largest trade partner for eight consecutive years. State Governor of Mato Grosso, Pedro Taque’s visited China to attract more Chinese companies to invest in the state. At the forum, he introduced the state's investment and economic environment, and the status of multiple projects. Most of the projects he introduced are infrastructure projects, including road construction, network construction, and airport construction. He believes that these projects correspond to the One Belt One Road initiative and the goal of strengthening infrastructure construction. Read more here.
The completion ceremony of the new Soubre hydroelectric power station in Soubre, Cote d'Ivoire, was held on 2 November 2017. Sinohydro, a company under the Power Construction Corporation of China, built the power station. As the largest power station in the country, the project took 56-months to finish and a total investment of 572 million USD, with the China Export-Import Bank providing 500 million USD. Read more here.