Paw Tracker newsletter (Week of Oct 25)

In China the story goes that “African brothers carried the People’s Republic back into the hall of the United Nations”. This refers to the UN’s 1971 admission of the PRC as a permanent member by a historic vote wherein “Third World” countries played a big role. As China celebrates the 50th anniversary of that event, it adds a new element to the story: China did not just return to its rightful place in the global system, it is now actively maintaining that very global system, about which a preoccupied and weakened West is now less enthusiastic. The Belt and Road Initiative is a crucial part of this new narrative and will likely be shaped by it too.

Talk of the Town

Oct 25 marks the 50th anniversary of the People’s Republic of China’s admittance to the United Nations as “the rightful representative of China.” The PRC’s return to the international stage in 1971 was part of a grand geopolitical realignment in the middle of heightening Cold War tensions. Today, China wants anything but a new Cold War and presents its newfound global role as transcending narrow ideological divides.

The anniversary gives China the platform to elaborate on how it envisions its global role today. In his video address to the United Nations, President Xi Jinping offered his view on how genuine multilateralism centered around the UN should help drive “balanced, coordinated and inclusive development” and respond to myriad global challenges. In the speech, he not only signalled the centrality of development outcomes as the ultimate source of legitimacy for a nation state and a global system, but also rebuked the approach that puts ideology above world prosperity and the UN’s multilateral rules.

The development-centered tenet of Xi’s speech at the UN is a reflection and extension of the Party’s performance-based legitimacy at home. It also provides a political underpinning for China-driven global initiatives such as the BRI. China News noted that the concept of “provider of global public goods” found its way into Xi’s address. Zhang Guihong, a professor at Fudan University, explained that “global public goods” are non-exclusive and non-competitive products shared across borders, communities and generations. A stable global financial system, an open global trade system, and a free international navigation system are all examples of such public goods.

“Western powers and international organizations have been the main suppliers of global public goods since the Cold War,” wrote the report. “But the high cost of providing and maintaining them has dampened their interest.” 

Zhang used the BRI as an example of China stepping up to the occasion, presenting it as a platform that delivers outcomes beneficial to everyone. The establishment of AIIB (filling the gap of infrastructure financing), holding the International Import Expo (plugging developing countries into global value chains) and offering Covid vaccines (increasing accessibility and affordability of vaccination) are also recent examples of public goods creation. A number of these public goods concepts were also present in Xi’s video address at the G20 summit over the weekend.

Economic growth and social stability have long been seen as the root of CCP legitimacy domestically in the post Reform and Opening era. As international ideological divides deepened over the past few years, it is now striving to lay the foundation for its legitimacy internationally that is again centered around development outcomes. The recognition China receives for its global role may also feed back into the domestic sphere as a new source of legitimacy at a time when economic dividends begin to dwindle. An interesting space to watch for the long run.

This week's highlight projects

Greece: Piraeus back in the news as Chinese state-owned shipping firm deepens its stake in BRI-critical port 

On 25 October, China’s largest state-owned maritime freight company, COSCO Shipping, raised its stake in Greece’s largest port to 67% from its previous 51%, the BRI’s official web portal reports. This comes after the Greek Court of Audit approved the equity sale in August and the Greek Parliament ratified it in September.

COSCO bought a 51% majority stake in the port in 2016 for 280 million euros from a financially beleaguered Greece, which privatized and auctioned the port off to finance debt. The deal saw COSCO commit to a further investment of 294 million euros over a five-year period to purchase an additional 16% stake in the port. It won an initial contract to manage the port’s container terminals in 2009.

Under COSCO’s management, Piraeus has become one of the world’s fastest growing container ports, rising from 93rd largest port in the world in terms of container volume in 2010 to 26th in 2020. 

Why it gets our attention: China has emphasized the importance of Piraeus to its Belt and Road hopes in Europe and the Middle East. President Xi has referred to it as the initiative’s “dragon head”. China’s ambassador to Greece, Xiao Junzheng, echoed the sentiment at a ceremony celebrating the sale in Beijing last Wednesday. 

COSCO’s investment in Piraeus has also inspired controversy. Greece has been referred to as a “backdoor” into Europe for China, with critics pointing to Piraeus as exemplifying the security threat that Chinese state-led investment in Western countries poses – criticism which seems to bother everyone but the Greeks. Greece’s Ambassador to China, George Iliopoulos, praised China’s close economic relationship with his country at the Wednesday ceremony, and former Greek Prime Minister Tsipras himself has promoted Greece as a “gateway into Europe.”

Other project & corporate updates

Morocco: Dongfang Electric sign contract to build Safi gas plant 

Mid last month, Dongfang Electric signed a contract with Jordan’s Arab Potash Company (APC) to construct a gas-fired combined power and heating plant in Safi on the Moroccan coast. APC is Jordan’s largest industrial company and one of the largest in the Arab world. It is also a major exporter of potash to China.

Why it gets our attention: One of the questions raised since Xi Jinping’s pledge in September that China will stop the construction of new coal fired power plants overseas is what business China’s power EPC companies will move into. Dongfang Electric, a company that has been very active in building coal power plants along the Belt and Road, signing of an EPC contract for a gas-fired power plant may be an indication of where constructors are looking to continue to expand their business. 

The construction of gas infrastructure in the developing world is accelerating rapidly, particularly as countries scale down their previously planned reliance on coal. A recent report from Global Energy Monitor estimated that under-development gas infrastructure in Asia alone includes US$189 billion worth of gas-fired power plants, US$54 billion of gas pipelines, and US$136 billion of LNG import and export terminals.

Indonesia: MCC International Corporation to build a new nickel and cobalt facility

On 25 October China’s MCC International Corporation won a tender to develop a wet smelting facility of nickel in Sulawesi, Indonesia. The project is planned to produce at least 50,000 tons of nickel and 4,000 tons of cobalt every year and adds to China’s already huge presence in the Indonesian nickel sector.

MCC is one of the major Chinese metallurgical companies operating in Indonesia, where it has had a presence since the 1990s, when it established a local subsidiary.

Why it gets our attention: An article on GoalFore states that the project will “help... meet the global new energy sector’s strategic demand for low cost, high quality nickel” while also “consolidating China MCC International Corporation’s competitive strength in the global nickel smelting sector.” Here is an example of a Chinese company’s overseas operations being portrayed as a dovetailing of corporate interests and the provision of public goods.

Worth your time

According to a Ministry of Commerce statistics release last week, the number of EPC contracts signed for projects in 60 countries “along the Belt and Road” in the first three quarters of 2021 fell 10.6% compared to the same period last year. Non-financial direct investments increased 5.7%, however, reaching a total value of RMB 96.2 billion. The main destinations for investments include Singapore, Indonesia, Vietnam, Malaysia, the UAE and Kazakhstan.