Belt and Road, Economy, Talking Point

Silky persuasion

Differing media views as delegates meet for Xi Jinping’s signature summit


Xi was joined at the Beijing-based forum by Vladimir Putin and government heads from 28 other nations

Hong Kong may soon get its own offshoot but the first permanent ‘branch’ of Beijing’s Palace Museum was opened on Xiamen’s Gulangyu island last week.

The satellite venue will exhibit some of the Forbidden City’s collection of 13,000 foreign artifacts, many of which were brought by diplomats to the imperial court under the tributary system through which China managed foreign relations and international trade for centuries.

Under the system, foreign merchants would be allowed to conduct trade with the Chinese on the condition that emissaries of their own rulers had demonstrated their subservience to the emperor, mostly in the form of a token offering of native goods. Unusual items were occasionally on offer (including giraffes from Africa, presented as unicorns) but most of the tributes were of little material gain to the Chinese and their value was often outweighed by the lavish gifts given in return.

Sham embassies from overseas were rampant too. Many so-called ambassadors were merchants carrying forged mandates. Yet the Chinese were eager to offer hospitality – plus trading permits – because all these public offers of tribute constituted a vanity project for the imperial court.

As such, the expression “Ten Thousand Countries Coming to Court” was coined to describe China’s diplomatic strength as an imperial superpower. The phrase is also the title of a 16th century painting depicting the convoys of foreign merchants arriving at the Forbidden City. The same painting currently graces the entrance of the Gulangyu Palace Museum of Foreign Artifacts, mentioned at the beginning of this article. Meanwhile there was a real-life reprise of the spectacle this week as representatives from nearly 200 countries gathered in the capital for a conference to exalt Chinese President Xi Jinping’s Belt and Road Initiative.

What is Belt and Road?

China has played host to a number of major international conferences in recent times, including the APEC leaders’ meeting in 2014 and the G20 summit last year. But the Belt and Road Forum (BRF) is a first of its kind – being a gathering at Beijing’s behest, with an agenda laid down by the hosts.

Inspired by tales of the ancient Silk Road, the Belt and Road Initiative (BRI) was first proposed by Xi in 2013 to chart out new channels for international trade (see our Focus issue – downloadable from our website – for more details on the ambitious plan). The idea is to build roads, ports, pipelines and other bits of infrastructure linking China to central Asia, Europe and Africa by land and sea.

The Chinese have promised financing for countries that can’t afford the investment. Among the other beneficiaries are the Chinese state firms ready to sell equipment and services in support of the building spree. The Chinese may also hope to put some of their foreign exchange reserves to better use by making Belt and Road loans (rather than buying US Treasuries) and thus grow the renminbi’s global status. In sum: Beijing wants to win friends by helping others to develop their economies but at the same time it may also be exporting some of China’s surplus production capacity.

According to the Chinese foreign ministry, government heads from 29 countries took part in the two-day summit. Russian President Vladimir Putin was the most high-profile attendee, although the thousand delegates also included the chiefs of the International Monetary Fund, the World Bank and the United Nations.

Local newspapers touted it as China’s biggest international event since the 2008 Beijing Olympics.

What deals have been signed?

The guests brought fewer gifts with them than in days gone by, although the Malaysian delegation made a stir by presenting 43 durians to China’s leaders to mark the 43rd anniversary of bilateral trade with the People’s Republic of China. If anything, the sense was that the visitors were there to pay tribute to Xi’s signature policy and the Chinese responded with gifts of their own, pledging at least Rmb540 billion ($78 billion) in additional funding for Belt and Road schemes.

This included Rmb100 billion for the Silk Road Fund and Rmb380 billion in new lending through Chinese banks and the Asian Infrastructure Investment Bank. China said it will also provide Rmb60 billion of investment over the next three years for poverty alleviation in developing countries.

The Chinese delegation was determined to take things beyond the theoretical, presenting a list of “270 concrete results in five key areas”. One example of a “major deliverable” was the “financial connectivity” intended to encourage the usage of the renminbi outside China. Various Belt and Road funds have been set up under this premise. Another area of focus is cross-border trade – for instance, the state planner the NDRC says it will establish a China-Russia Regional Cooperation Development Investment Fund which could top Rmb100 billion, to “promote cooperation between China’s Northeast and Russia’s Far East”.

Sasac, the regulator overseeing about 100 of the biggest state firms, also detailed how busy its SOE bosses have been during the forum. A flurry of deals were signed although most of them were memorandums of understanding at this stage.

In fact, the BRF looks set to become a more regular shindig as Xi also announced that the Chinese will host a second summit in 2019. As part of the effort to boost global trade, China also pledged to import $2 trillion of products from Belt and Road countries over the next five years.

What messages is Xi sending?

“We will not follow the old way of geopolitical games during the push for the Belt and Road Initiative, but create a new model of win-win and cooperation,” Xi proclaimed in his keynote speech, insisting that the Chinese had never been “conquerors with warships, guns or swords” but “friendly emissaries leading camel caravans and sailing treasure-laden ships”.

“China is willing to share its development experience with all the rest of the world, but we will not intervene into other nation’s internal affairs, export our social system and development model, nor force others to accept them,” Xi stressed.

The People’s Daily promulgated the same principles in an op-ed that argued that “China gathers friends and seeks integration”. On the contrary, the “US seeks dominance”, the newspaper warned. How else to explain the Pentagon’s new Asia-Pacific Stability Initiative, which will invest billions in bulking up the American military presence in the region, it asked.

Xinhua was similarly determined to praise Xi’s plan, noting that Western media wrongly has misconceptions about the BRI and sometimes describes it as a “modern-day version of the Marshall Plan” (the post-war programme to support European recovery, promote the dollar and the sale of American goods, and isolate the Soviet Union).

“Unlike the Marshall Plan, no political conditions have been imposed on participants in the initiative. China has always advocated that countries should respect each other’s rights to independently choose their own social system and development path,” the news agency suggested, with terminology that sounded remarkably consistent with Xi’s speech.

The Global Times also rebuffed criticism from international sources that China is too focused on exporting its excess industrial capacity. “China has much more than surplus production capacity to offer. The Belt and Road plan is also about the export of Chinese technology and standards,” it explained. “With the transfer and integration in innovations in areas such as cloud computing, big data and intelligent cities, the 21st Century Digital Silk Road is also in the making.”

How did the Western media view the forum?

The UK’s Guardian newspaper reckons that Belt and Road could turn out to be the biggest ever building project with close to $1 trillion of investment in a masterplan designed “to make China great again”.

But the Financial Times is concerned that some of the infrastructural projects could turn out to be white elephants, clogging up the Chinese financial system with a portfolio of bad debt. It also called for greater transparency in how the progress of the plan is assessed. “How will the world know if the initiative is working as hoped? By looking at the projects. While they are being built, local and global businesses, not just Chinese ones, should be involved,” it urged in an editorial. “Once built, they should be well utilised. If these conditions are not met, it will be a clue that China, instead of contributing to the global recovery, is trying to export its own economic imbalances while buying regional leadership.”

The New York Times notes that the way that the Belt and Road is being presented stands in stark contrast to Donald Trump and his ‘American First’ mantra. While Trump has walked away from the American-led Trans-Pacific Partnership trade pact, the Chinese president has become a cheerleader for globalisation. “Xi is aiming to use China’s wealth and industrial know-how to create a new kind of globalisation that will dispense with the rules of the aging Western-dominated institutions. The goal is to refashion the global economic order, drawing countries and companies more tightly into China’s orbit,” the newspaper observes.

Christopher Balding, an associate professor of business and economics at the HSBC Business School in Shenzhen, raised more fundamental questions in an article for Bloomberg about the financing of the plan. Recipients of Belt and Road loans will need to run trade surpluses with the Chinese to generate the currency to repay their debts, he points out. And he queries how countries like Sri Lanka and Pakistan are going to meet their commitments when they’re running trade deficits with China of close to $2 billion and $9 billion respectively.

Another nagging question is whether the Chinese can afford to fund Belt and Road in the way that they are promising. Yes, they have about $3 trillion in foreign exchange but Balding says that nearly $1 trillion is illiquid and that China needs nearly $900 billion to cover short-term external debt and another $400 to $800 billion to cover imports for three to six months.

Further, a portion of the reserves serves as a buffer in the currency markets, bolstering confidence in the renminbi. “Pouring additional billions into Central Asian infrastructure projects would only tie up money China needs to defend the yuan,” Balding warns.

What was the response from delegates to the forum?

There has been speculation that the Chinese were disappointed that more of the world’s leaders didn’t turn up for the summit. German Chancellor Angela Merkel and British Prime Minister Theresa May were among those not attending, citing commitments at home. Washington did send a delegation but as part of a new trade deal which sees the resumption of imports of American beef into the Chinese market and greater access for US rating agencies and credit card firms.

The Indians skipped the summit altogether after voicing their displeasure at the China-Pakistan Economic Corridor, a project aimed at linking northwestern China to the Arabian Sea.

“India is unhappy that Chinese state-owned companies are working in Pakistan-occupied Kashmir. Indian leaders see that as an endorsement of Pakistani control,” the Hindustan Times explained.

Beijing’s hope was that the BRF would conclude with a joint communiqué extolling free trade and cultural exchange. But several European countries refused to endorse the wording on the grounds that it did not sufficiently address concerns about corruption and governance.

Naturally, China’s state media preferred to play up the successes of the two days, with the China Daily devoting most of its Monday edition to the forum. Its headlines included: “Applause for China’s generous vision is heard around the world”, “Leaders wrap up fruitful forum”, “World loves belt and braces approach”, “Century’s greatest economic plan enriches lives” and “Moving history forward”.

And in case readers hadn’t quite grasped the point, the newspaper’s website released an English language video featuring a father reading his daughter a bedtime story on Xi’s Belt and Road dream. “It’s not just about roads and rail and airports to move stuff. It is also about people and cooperation. Any country can join,” the father says, before adding, “but the United States hasn’t joined…”

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