Paw Tracker newsletter (Week of Mar 7)

Though mostly focused on the domestic agenda, Belt and Road was present at the Two Sessions, China’s annual gatherings of top legislators and political advisors in Beijing, which ended last Friday. Premier Li Keqiang’s Government Work Report contained a number of references to the initiative, emphasizing the need for “high quality” development of the initiative and highlighting the BRI’s role as a vehicle for trade and investments into, as well as out of, the Chinese domestic economy. The speech laid out the priority work areas for BRI and trade-related affairs for the year ahead.

Just up on the Panda Paw Dragon Claw website, an analysis of investment data from 2021 by Fudan University’s Dr Christoph Nedopil Wang provides another lens on the development of the BRI over the last year.

Last week we also spotted an unusual exchange between Chinese and Lao power sector players that revealed tension between the two sides on the utilization of hydropower in Lao PDR. The situation is a reminder of the treacherous politics and economics of power infrastructure investments along the Belt and Road. 

Talk of the Town

Premier Li Keqiang’s Government Work Report delivered on March 5 - his final Work Report after his two five year terms in the job - made a number of references to the Belt and Road and official media coverage in the days following Li’s speech showed a number of ways Belt and Road - broadly interpreted - is being understood in the context of the government’s priorities for 2021.

Though the Government Work Report is primarily domestic focused, BRI received mention in both the review of 2021 and look ahead to 2022 sections of the report. In total it received three direct mentions, very similar to 2021 and 2020. A firm focus in this year’s report was on “constructing a high quality Belt and Road”, which, according to Li, achieved “steady progress” in 2021 and remain a major focus for 2022. This has been a consistent focus and framing of the Belt and Road since the 2nd Belt and Road Forum in Feb 2019, though was more strongly referenced in this year’s report than in the past two years.

This year’s Work Report also saw reference to a new initiative, the Global Development Initiative (GDI), launched by Xi Jinping at the UN General Assembly in September last year. As we have noted previously, the GDI has been cropping up in almost all of China’s major foreign relations related moments since then and, though details remain scant, is worth keeping an eye on.

In terms of specific BRI work results in 2021, Premier Li mentioned five main achievements: the “deepening of practical cooperation” on BRI; the “stable performance in foreign trade and investment”; the successful holding of a number of trade related events such as the China International Import Expo and the Canton Fair; the addition of four new comprehensive trial projects for the services sector; and the launch of the Hainan Free Trade Zone.

Readers will notice that most of these achievements are in fact much more relevant to the domestic than external sphere, and are focused more on attracting investments than investments “going out”. This is an indication both that China’s priorities in 2022 are the stability of the domestic economy, for which trade and foreign capital are sorely needed, and that the Chinese government's definition of BRI is far broader than just the investments and infrastructure projects overseas that receive the lion’s share of media attention. In many ways, Belt and Road encompasses China’s vision of globalization in the 21st century, and the country’s own place and role within that process, including its own economic development.

Looking forward to 2022, Premier Li highlighted as priority work areas on the BRI:

• “We will promote high-quality cooperation under the Belt and Road Initiative. We remain committed to the principle of achieving shared growth through consultation and collaboration.”

• “We will deepen multilateral and bilateral economic and trade cooperation…We will encourage enterprises to make good use of preferential tariff treatment, cumulation of origin, and other rules under the RCEP framework to expand cooperation on trade and investment.”

• “We will…expand the coverage of export credit insurance for micro, small and medium foreign trade firms, strengthen export credit support, refine foreign exchange services, expedite the process for export rebates, and help foreign trade enterprises receive orders and maintain production.”

• “We will make greater use of foreign investment. We will see that the negative list for foreign investment is fully observed and ensure national treatment for all foreign-invested enterprises. We will encourage foreign-invested enterprises to move into a broader range of sectors, and support more foreign investment in medium- and high-end manufacturing, R&D, and modern services, as well as in the central, western and northeastern regions.”

This week's highlight project

Lao PDR: Rare exchange highlights tension in hydropower utilization

At the second China-Lao PDR Energy Cooperation Working Group meeting held virtually on March 9, China Southern Power Grid, which operates grid systems in 5 southern provinces, signed an MOU with Electricite du Laos (EDL) to advance the interconnection of grid systems in both countries with a view to build a “common power market for the Lancang-Mekong region.” But most interesting about this meeting was the other item on the agenda, the uptake of hydropower generated by Chinese companies in Laos. 

In the generally celebrative readout of the conference by the Chinese Embassy, the grievance from the Chinese side is palpable. “Lao PDR has rich hydropower resources and over 10GW of hydropower capacity. And yet its grid development is clearly lagging behind with severely limited dispatching capabilities, leading to serious wastage as result of hydropower curtailment.” 

China has a massive stake in the Laos hydropower market, wherein Chinese firms such as PowerChina build and operate major projects such as the 1.2GW Nam Ou River cascade dams (7 units), and Chinese think tanks provide advice to the country’s power planning. But the apparent failure of the Laos grid to absorb and utilize all that power must be putting pressure on the revenue streams of those hydropower companies. In the press release, there was not-so-veiled finger pointing at Lao state-owned utility company EDL: “We hope that the Lao side, particularly EDL, can firmly implement the arrangements of the government… It should not just focus on building up an asset for itself, but should also create new space for the whole power sector.” 

From this exchange, it appears that the Lao vision of building the “Battery for Southeast Asia” has run into a problem of having too many batteries (built by China) and too little infrastructure or motivation to utilize them to generate economic returns for the batteries’ owners. The resolution of such tension may well inform how China pursues power sector investments in other countries in the future.

Other project & corporate updates

Ghana: Huawei partners with Meinergy to build Africa’s largest solar storage project

On 10 March, Huawei Digital Power Technologies, a subsidiary of Huawei, signed a strategic cooperation agreement with Meinergy, a Ghanaian power company, to build a 1 GW solar project with 500 MWh of electricity storage capacity in Ghana. With less than 100 MW of installed solar capacity, Ghana aims to increase the mix of electricity generated by renewable sources to 10% of its total energy capacity by 2030. The Huawei-Meinergy funded project may be the largest solar storage project in Africa upon completion.

Why this gets our attention: The project marks another step forward for China-Africa cooperation on green technology. China and the 53 attending African nations of the 2021 Forum on China-Africa Cooperation signed the first Declaration on China-Africa Cooperation on Combating Climate Change last December, in which China pledged “to further increase investment in Africa on low-emission projects including photovoltaic, wind, and other renewable, energy-saving technologies, high-tech industries, and green and low carbon industries.” Though, as we discussed at the end of last year with Dr Shen Wei of the Institute of Development Studies, obstacles to realizing this ambition remain.

Worth your time

Just published on Panda Paw Dragon Claw, an analysis of investment data from 2021 by Fudan University’s Dr Christoph Nedopil Wang provides a useful snapshot of the development of the BRI over the last year, highlighting a few trends that are worth keeping an eye on.