Paw Tracker newsletter (Week of Feb 22)

The high-profile celebration of China’s eradication of absolute poverty last week is just the start of a big political year for the Party. This week will see the unveiling of the 14th Five Year Plan and the roadmap to the 2035 socialist modernization vision. All of the above are supposed to set the stage for the celebration of the Party’s 100th birthday in July, when it looks back at its century-old history of “serving the people”. The political importance assigned to 2021 is set to influence all aspects of Chinese action this year, and the BRI is certainly no exception. It will be interesting to observe how the BRI fits into the Party’s centennial narrative.

Talk of the Town

China has “won the war on absolute poverty”, announced President Xi Jinping on Feb 25. The historic victory was achieved through bringing the last remaining 100 million people above China’s official poverty line (about 7.8 RMB/day according to the 2015 definition), therefore eradicating “absolute poverty” as defined legally in China. The battleground will now move to addressing “relative poverty”.
 

The achievement was backed by government statistics released on the same day. In the past year, the National Bureau of Statistics dispatched 210,000 census takers across the country to collect data on poverty alleviation. Their survey found that the average income of rural populations in China’s officially designated “poverty stricken counties” grew 2.3% faster than the national average for rural regions in 2020, indicating the effectiveness of so-called “targeted poverty alleviation”.
 

The 8-year poverty alleviation campaign has been a top domestic priority for the Party, which is set to celebrate its centennial anniversary this coming July. The campaign was unhindered even by the Covid-19 pandemic last year. But beyond its domestic implications on Party legitimacy, it may also have a lasting impact on China’s international development agenda.
 

A Xinhua article published on Feb 25 branded the achievement as a “miracle in global poverty alleviation history” and a “Chinese model” that can set examples for other countries and international organizations. It cited the World Bank as saying that the Belt and Road Initiative has the potential of bringing 7.6 million people out of extreme poverty and another 32 million out of medium-level poverty.
 

The article used a set of photo stories to show the BRI’s positive impact on poverty, covering the Mombasa-Nairobi Railway (“created 46,000 jobs”), a detergent manufacturing factory in Cambodia (“part of the China-Cambodia Poverty Alleviation Demonstration Project”) and primary schools in Benin (“students having rice meals donated from China for lunch”). Interestingly, the article also lists Vietnam’s Yongxin coal-fired power plant as a poverty alleviation example.
 

The inclusion of coal-fired power plants as part of China’s global poverty alleviation effort is in line with how China’s Foreign Ministry spokeswoman Hua Chunying defended China’s coal investment on Feb 19. At the press conference, Hua responded to a question from a Beijing Daily journalist about the outsized role of Chinese finance in supporting coal power around the world, in response to a Politico article published last week claiming China “supplies 70% of the financing for the world’s new coal-fired plants.” That article highlighted the contradiction between China’s green rhetoric and the current flows of money along the Belt and Road into carbon intensive projects such as coal.
 

Hua stated that the BRI is “pro-green development” and that energy poverty is an acute problem across much of the world affecting almost 800 million people, a high proportion of whom live in Belt and Road countries. In order to address this issue, she said, many countries choose coal as an affordable way to generate electricity. Hua also pointed to data on China’s investment in overseas energy projects in 2020, which for the first time saw more money flow into non-fossil projects – of which a large amount supported hydropower – than fossil projects.

This week's highlight projects

Brazil: China’s first UHV project overseas featured by State Council
 

At a State Council press conference on Feb 23, Hao Peng, head of China’s powerful State Asset Supervision and Administration Commission (SASAC) that oversees the performance of state-owned enterprises, announced a total of 18 exemplary development cases by Chinese SOEs overseas. One of them is State Grid’s Belo Monte ultra-high voltage (UHV) transmission line project in northern Brazil’s Para state. The 2500km transmission project, completed in 2019, connects the Belo Monte hydropower plant in Para with Rio de Janeiro and is the world’s longest project of its kind. 
 

Why it gets our attention: The project is hailed as a pioneer in exporting China’s UHV technology, standards and operational experience. Domestic development of UHV in China is critical in redrawing the country’s energy map where massive energy projects in China’s energy-rich and sparsely populated western provinces can transfer electricity to the densely populated coastal provinces. This transformative technology is now being exported to other countries, reflecting the ambition of the BRI to move China up the ladder of global competitiveness. China’s promotion of its high speed rail system along the Belt and Road is long seen as embodying that aspiration. 
 

Croatia: Key section of the Pelješac bridge finished
 

The CRBC-led consortium of Chinese companies has completed a key section of Croatia’s Pelješac bridge, moving construction further towards completion. The project is designed to connect the Croatian mainland with the Pelješac peninsula, without the need to pass through Bosnian territory.

Why it gets our attention: The Pelješac bridge is the first-ever EU infrastructure project awarded to a Chinese consortium through an open tender. 85% of its construction cost is covered by EU Cohesion Policy funds obtained by Croatia. It is regarded as a door-opener and water-tester for Chinese engineering firms in the EU infrastructure market. The lessons learned can become valuable assets for both China, which is keen to advance its relation with Central and Eastern Europe countries, and the EU, which is wary of the BRI’s “corrosive” effect on the region’s economic integration agenda.

Other project & corporate updates

Myanmar: Chinese projects go ahead unperturbed
 

On Feb 18 Power China published an update on their gas-steam combined cycle power station in Kyaukpyu, western Myanmar, stating that the first concrete has been poured and construction has “comprehensively begun”. Without providing specifics, the update emphasized that the construction company, Power China Central China Electric Power Engineering, have taken measures to “overcome various unfavorable factors”, allowing the construction to proceed smoothly.
 

The project is considered an “important fulcrum” in the China-Myanmar Economic Corridor. It is located on the coast of the Bay of Bengal at the site where Chinese companies also plan to construct a deep water port and the terminus of the USD 1.5 billion Myanmar-Yunnan gas pipeline.
 

Why it gets our attention: So far, Chinese companies seem unperturbed by the political upheaval in Myanmar, pressing ahead with important projects such as the Kyaukpyu gas plant, and even signing new contracts. Last week China Gezhouba and renewable equipment manufacturer Sungrow were reported to have recently signed EPC contracts for three solar PV projects totaling 110MW in the Magway Region of central Myanmar.

Worth your time

Data released by the Ministry of Commerce last week show that trade volume between China and BRI countries was worth USD 1.35 trillion in 2020, registering a 0.7% year-on-year increase. That, however, is lower than the overall growth of China’s trade with the rest of the world. At a press conference on Feb 24 Deputy Minister of Commerce, Qian Keming, stated that China will “make great efforts to expand trade with countries along the Belt and Road, especially by increasing imports, thereby allowing more countries to share the dividends of China’s enormous market.”
 

Boosting domestic consumption and increasing imports are at the core of China’s latest economic strategy (“dual circulation”). As indicated by Qian, emerging manufacturing economies (Vietnam, Bangladesh and Cambodia, for example) could win big if they position themselves well to answer the consumption demand being encouraged in China.