My recent trip to China to have a further look into China’s Belt Road and growing regional influence was conducted with a wonderful backdrop of significant international events. There was the G7 summit, ending with personal insults traded between the USA and Canada, highlighting the growing dissent and division within NATO and its allies. On the other hand the Shanghai Cooperation Organization (SCO) ended its meeting on a more positive note and reflecting greater unity within the Asian/ Central Asia axis. There was also the highly anticipated meeting between US president Trump and North Korea’s Kim Yin Un that promises much after a better than expected first consultation, but fraught with danger. All of this points to the growing importance of Asia to world peace and economic prosperity, and in particular the manner in which China’s policy around the Belt Road (BRI) is making China an increasingly attractive trade and geo-political partner.
Members of the SCO include: China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India and Pakistan. A clear indication of growing Chinese influence and importance in the Region is the inclusion of new members, Pakistan and India, for the first time. Not only is it significant that India and Pakistan have been able to set aside strident political differences, it also points to the geo political affects that the Belt Road is having on promoting cooperation and regional development.
The SCO now represents approximately half the world’s population. Coming out of the SCO meeting is the collaboration along the BRI in terms of resources around railways, trade, financial services, and people to people exchanges. Trade within the SCO grew by 19% in 2017, and totalled us$217bn. There has also been reciprocal investment, with China’s indirect investment into SCO members of us$74bn, and us$1bn by member countries into China. Facilitating this trade has been the establishment of 21 economic and trade cooperation zones.
More importantly the meeting of the SCO has important ramifications for Myanmar, particularly as the recently announced China / Myanmar economic corridor was in response to India’s poor reception of China and the BRI. Whilst India’s attendance and participation is noteworthy, Myanmar should not be too concerned about its potential involvement in this ambitious infrastructure project. Whilst it is not a member of the SCO it still provides an important strategic part in China’s ‘go west “programme to redress internal uneven economic development. When looking at the population map of China below, it is evident that Myanmar has a direct border with that part of China that holds 96% of the Chinese population, as well as access to that part of China requiring development and access to markets.
With this backdrop and meeting with people and interest groups in China, a number of interesting developments emerged. There is a clearer understanding of what roles differing cities will play under the BRI. For example; Shanghai, Qingdao and Qinzhou are important port/rail pairings for the Chongqing trade zone, therefore important infrastructure connection construction. When placing these on a Map, together with the SCO participants, it is clear that whilst Singapore may claim that its MOU with Qinzhou makes it a strategic partner in the BRI, it does not make commercial or rational sense. Why, for example, would a manufacturer want to rail product to Qinzhou then ship to Singapore, offload and tranship when they can simply ship to a destination country or rail to other ports that are directly connected by rail i.e. Gwadar in Pakistan, Kyauk Phyu in Myanmar, Thailand and Malaysia? Furthermore, can the Singapore connection effectively compete with the Yangtze River Route that offers 83 quay berths, 6 bonded facilities and operates 24 domestic and foreign shipping routes?
These concerns are clearly evident when looking at the transport corridors mapped below. Since the drawing of the map, the Malaysian election result has delivered a benefit to Myanmar when the new government cancelled the rail project with Singapore, limiting it to the old paradigm of port-to-port logistics rather than the newer approach pursued by the BRI of “door – to – door” logistic solutions.
Furthermore, Qinzhou is part of the Beibu Gulf Economic Zone that incorporates six cities and initially part of China’s “Go West” drive through the ASEAN countries such as Vietnam and Cambodia. The other five cities are: Nanning, Beihai, Yulin, Fangchenggang and Chongzuo. They all have significant BRI rail and port pairing projects in play and incorporates a more sustainable connectivity solution that includes not just Yangon, but Kyauk Phyu as well. In a sense it could be likened to Hong Kong’s Greater Bay Area project that joins Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, and Zhongshan and offers trade access.
It would appear that the BRI is breaking ground and causing disruption to current alliances. It has achieved a greater sense of unity within the SCO and highlights the division that currently bedevils the G7. Although not a member state of the SCO, Myanmar will play an increasingly facilitative role due to its strategic participation and location within the BRI. With disunity within G7 and the Eurozone , China and its BRI is an attractive trade option to Europe that could benefit Myanmar, however, the risks and uncertainties still needs to be carefully evaluated.