Paw Tracker newsletter (Week of Aug 23)

As the crisis of the US pullout from Afghanistan continues to unfold, bringing new geopolitical uncertainties in Central Asia and the Middle East, China’s approach toward the region is put under more scrutiny. Jonathan Fulton, an expert of China-Middle East relationship, once pointed out in his interview with Panda Paw Dragon Claw that China’s interest-based, rather than threat-based approach to the region gives it more maneuvering room. In this week’s newsletter, we take a look at the China-Arab States Expo, which shows how business ties and strategic collaborations are being formulated under this “interest-based” relationship.

Talk of the Town

The 5th China-Arab States Expo ended on Aug 22 in Ningxia, with 277 deals signed and planned investment and trade amounting to over RMB 156 billion. The Expo, a biennial event starting from 2013, is to promote economic connections between the landlocked Ningxia, a province with large Muslim populations, and the Arab world under the framework of the BRI. Other provinces in west China may also benefit from such strengthened economic ties.

Due to the pandemic, this year’s Expo was held in a hybrid fashion with a combination of online and offline activities (this year's FOCAC is rumoured to be planning a similar approach). The event featured two “main guest countries” (主宾国), Morocco and UAE, that set up special corners at the Expo to present investment and trade opportunities. 

Besides the usual deal-making and contract-signing that are generally seen in such events, two themes in this year’s Expo are worth noting.

Firstly, technology transfer featured prominently in Chinese media reports about the event. “We welcome China to set up an agriculture technology research and transfer center in Jordan,” said Jordanian ambassador to China through a video address at the Expo. In Mauritania, technical assistance in animal husbandry, supported by Chinese foreign aid, has enabled the country to breed cows using embryo transfer technology. The arid province of Ningxia is also a hub for water saving technologies, which has huge demand in Arab states, and will be a big area of cooperation, according to Li Guofeng, director of the China-Arab States Technology Transfer Center.

A second major theme was digitalization. Huawei’s participation in Saudi’s oil and gas sector (5G+oil&gas) is celebrated as an example of the digital Silk Road. At the Expo, a side-event was dedicated to the “Online Silk Road'', with topics ranging from digital infrastructure to “Silk Road e-commerce.” Ningxia has been the base for the China-Arab States Online Silk Road Economic Cooperation Zone, which involves the construction of telecommunication facilities linking China and Arab states and data centers. In this regard, the province has some advantages as its arid, desert environment has already been hosting major data centers, including one for Amazon. 

An important application of such infrastructure is for cross border e-commerce, which has seen tremendous growth in the pandemic era. We will likely see more developments along the lines of mutual acceptance of electronic documents, paperless transactions and regulatory frameworks for data management. The last item is probably a thorny issue when it comes to the digital Silk Road, which concerns personal data protection and data localization requirements. Will buyers in Dubai be happy with their data being stored in the desert of Ningxia and potentially accessible by the Chinese state? The China-Arab States Joint Declaration on Data Security Collaboration in March this year provides some hint of the thinking on this issue. One of its key principles is to respect host country sovereignty and its jurisdiction over data security within its own borders, while it also opposes to the “illegal collection of personal data” from citizens of other countries.

This week's highlight projects

Colombia: Metro Bogota enters construction

At 8am local time on Aug 17 construction began on Line 1 of the Bogota Metro. Chinese overseas infrastructure news portal, GoalFore, called the moment the “realisation of a dream for people of Bogota”. The international consortium building the metro line consists of China Harbour Engineering Company (CHEC), Xi’an Metro Company and Canadian transport company Bombardier. The project is the largest urban public utility ever undertaken in Colombia and, according to Chinese media, comes with strict environmental and social governance (ESG) requirements, including the “migration” of flora and archaeological elements.

The twist: Despite the involvement of two Chinese state owned companies, no Chinese finance is involved, however. The vast majority of finance is being put up by the Bogota and Colombian governments themselves - USD 2.4 billion and USD 5 billion, respectively - with smaller contributions from a host of multilateral development banks, including the International Bank for Development and Reconstruction, the European Investment Bank, and the Inter-American Development Bank. The involvement of MDBs is reportedly one of the reasons for the “strict” ESG standards.

Other project & corporate updates

Tongwei Group: Company receives USD 200 million in international green loans for overseas projects

On Aug 20 Tongwei Group, a Chinese conglomerate that operates in agricultural feeds, chemicals, food processing and new energy, among other sectors, signed to borrow USD 200 million under a global green loan initiative run by a consortium of 17 major banks, making it the first Chinese solar company to receive certified green loans from international financiers. The loan period is three years and the borrowing partner is Hong Kong based subsidiary, TW Solar. The funds will primarily be used for the conglomerate’s overseas solar project operation costs and re-financing. 

The green loan, led by Standard Chartered, involves 17 banks from mainland China, Hong Kong, Macao, Korea, Singapore, Thailand, France, Holland and Belgium. According to a GoalFore article, the initiative has received the strong support of China’s National Development and Reform Commission (NDRC) and the People’s Bank of China (PBOC).

Why it gets our attention: As we have noted on Panda Paw Dragon Claw, renewable energy projects along the Belt and Road - a key component of “greening” the BRI” - face significant financial barriers as renewable energy projects tend to find it harder to acquire loans and insurance from China’s big banks. The availability of international green funds to Chinese renewable energy companies trying to “go out” along the Belt and Road could give the sector a boost. Accessing such finance may be tricky for Chinese companies, however. GoalFore note that Tongwei was able to secure the USD 200 million green funds due to its strong reputation and influence in overseas financial markets. Not all Chinese renewables companies occupy such a globally influential position. Nonetheless, Tongwei’s access to international green loans sets a new precedent and it will be interesting to see if more international green financing for Chinese companies and their overseas projects becomes available.

Worth your time

A Saferworld report released earlier this month on public perceptions of Belt and Road in Myanmar, Kyrgyzstan and Uganda, three fragile and conflict-affected countries, is well worth a read. Through surveys and interviews in the countries, the study shows the diversity of attitudes towards Chinese projects, often shaped by internal divides such as rural and urban and gender, or simply geographic proximity to projects. In general, however, it is clear that the “win-win” viewpoint promoted by Chinese government and corporate entities is not held by everyone, and more often than not one reserved for political and business elites. Saferworld make a series of recommendations to Chinese companies, host governments and Chinese government bodies on how to strengthen community relations. Their recommendations include a strong focus on boosting gender sensitivity in community engagement and project impact assessments.