Filtered Kapi - Zooming into the BRI
Taking a closer look at Central Asia and Djibouti's role in the BRI
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Filtered Kapi Newsletter #7
In the previous newsletter, I wrote about the advantages that BRI brings to the partner countries as well as China.
To grasp the makings of the mammoth structure of the BRI, we have to delve deeper into Xi Jinping’s mindset and his vision for China.
In March of 2013, Xi was elected as President of China; merely 6 months later the land component of BRI was announced in Kazakhstan. This shows the significance of BRI to drive the economy, which after years of double-digit growth was stabilizing.
Over time we’ve seen that BRI allows China to leverage trade to project military superiority across the globe. Both of which are key focuses for China.
As stated in the report to the 19th Party Congress his vision for the “new era” is for China to be a global leader by 2050. To do so BRI is fundamental to propelling China into a financial and military powerhouse, which can then strengthen the “People’s Leader’s” grasp on power.
Let’s zoom in on how the BRI is affecting two regions in particular.
Central Asia
Unveiling BRI in Kazakhstan, which has a relatively low international profile shows the importance of Central Asian countries to BRI. The region consists of the former Soviet republics of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.
Image by Cacahuate
Trade Relations
China is the world’s largest importer of oil. A significant chunk of its oil demand is met by the Gulf States, Russia and Angola.
Securing passage for Energy commodities is what drives a large number of BRI projects. Having a land-based connection to the Middle East and Africa reduces dependence on maritime shipping lanes which are “controlled” by the USA and her allies. Once executed it reduces the risk that in times of crises China could be cut-off from critical supplies of oil.
Let’s take the Strait of Malacca as an example. It serves as a passageway to South China Sea. In 2016 over 64% of China’s and 42% of Japan’s maritime trade transited the waterway. It serves as the shortest sea route between suppliers in Africa and the Gulf and markets in Asia.
In a time of crisis it would easily become one of the key strategic choke points for any countries allied against China. Effectively blocking off the majority of Chinese trade as well as access to oil.
Image from Oil exchange
By focusing on building out the land route the BRI manages to build China a ‘Plan B’ for this crisis in the future.
By investing in improving infrastructure, strengthening supply chains and faster access to financing it builds gateways to massive export markets. This secures a land based route for trade as well as critical supplies of oil.
The masterstroke is that it does so while lifting millions out of poverty in Central Asia by engaging them to build out this infrastructure.
Furthermore,
It’s a win-win situation, if executed properly.
Geopolitical Relations
China considers the proximity of its “rebellious” Xinjiang territory to Kazakhstan, with which the locals enjoy ethnic ties a cause of security concern. With three of the six corridors of the BRI passing through Xinjiang, China is relying on local co-operation with Kazakhstanis to stamp dissent within Xinjiang.
Recent protests in Kazakhstan cities have highlighted the challenges facing the neighbors as they seek to strengthen economic ties. The financial benefits from BRI projects have not trickled down to the middle class.
There is a prominent divide between the ruling elite and working class of Kazakhstanis when it comes to trading with China. The mistreatment of their Muslim brothers in China coupled with the lack of access to opportunities might pop the BRI dream.
Djibouti
Home to a million Africans having a GDP below $1.8 billion, this country has received upwards of 72 billion dollars as investment from Chinese companies. The reason being the country’s strategic location on the eastern edge of the African continent and the western shore of the Indian Ocean.
China’s state companies have become a partner in the continent’s growth by investing in shipping, mining and defence industries.
The Chinese People’s Liberation Army Support Base in Djibouti is a stone’s throw away the French, Italy, USA and Japanese bases. Control over the nearby Doraleh multipurpose port which manages incoming supplies for the other naval bases is a massive security concern.
Building the naval base adjoining the port shows China’s escalating policy of global military engagement stretching from the South China Sea to East Africa. A strong naval presence also projects China’s military power across the globe.
It also helps the Chinese defend against another critical supply chain being choked away from it in times of a crisis.
Did the US leave a wide opening for China all over Africa?
The Trump administration has encouraged private investment in Africa to combat China’s growing footprint in the continent. But such loans historically come tied with bureaucratic red tape attached to improving human rights.
While on the surface this seems reasonable it has prevented many deals from going through. This has the knock on effect of stalling economic development which in turn does not create opportunities to migrate out of such countries.
Additionally, relationships with the British and USA have historically always been transactional, not enough attention has been given to boost local employment or development of infrastructure.
That’s exactly the hole that China has stepped in to fill with gusto.
There are of course pros and cons for the countries that chose China as their partner.
The pros of aligning with Chinese investment has been their focus on developing infrastructure and trying to boost local employment to some degree.
The cons of aligning with Chinese investment is foreign dependency and massive debt.
“Yes, our debt to China is 71% of our GDP, but we needed that infrastructure. Even the United States has trillions of dollars in debt to China, you know,”
- Mahamoud Ali Youssouf, Djibouti’s Foreign Affairs Minister
Next time I’ll be looking at the security and ‘debt trap’ implications.
I would love your feedback on this newsletter by leaving a comment or replying to this email.
Filtered Kapi - Zooming into the BRI
Absolutely love it! So well written. So informative.
I feel that the BRO can be China’s trump card in it’s land accession game!
Waiting to read about the debt trap!
Very nice article Aditi. Covered so well.
I was recently reading somewhere that if China wants to punish the USA they just need to start selling the govt bonds that they hold.
And also the debt trap which has given China equity in a Sri Lankan port.
Looking forward to the next one.