U.S. Faces Tough ‘Great Game’ Against China in Central Asia and Beyond

Former Soviet republics in the heart of Asia are critical battlegrounds in the struggle with China over global influence.
By Edward Wong

The historic town of Khiva, Uzbekistan, has been revitalized with China’s help.

KHIVA, Uzbekistan — Inside the ancient walls of the Silk Road oasis town of Khiva, China has put down a marker of its geopolitical ambitions. 

A sign promotes a Chinese aid project to renovate a once-crumbling mosque and a faded madrasa.
Outside the town’s northern gate, a billboard-size video screen shows clips of President Shavkat Mirziyoyev of Uzbekistan meeting with world leaders. 

Xi Jinping features prominently, but there are no shots of President Trump.
That China is advertising its aid efforts so boldly in this remote outpost linking Asia and Europe — where camel caravans once arrived after crossing the Kyzylkum and Karakum Deserts — is the kind of action these days that sets off alarm bells among American officials. 

The Trump administration is trying with greater force to insert itself into the political and economic life of Central Asia to counter China’s presence. 

American officials see the countries in the heart of the continent’s vast, arid steppe as critical battlegrounds in the struggle with China over global influence.
“Whenever we speak to countries around the world, we want to make sure that we’re doing what the people of those countries want,” Secretary of State Mike Pompeo said last week at a news conference in Tashkent, the capital of Uzbekistan.
The Uzbeks want a “good, balanced relationship,” he said.
“They have long borders,” he added. 

“They sit in a region where China and Russia are both present.”
Leaders of the five Central Asian nations that became independent republics after the breakup of the Soviet Union in 1991 — Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan — are used to walking a regional tightrope. 

The area was contested during the so-called Great Game of the 19th century, when the British and Russian empires competed to establish influence and control.
Now a new game is underway. 

And officials in Central Asia, like many of their counterparts around the world, are hedging their bets when it comes to aligning with Washington or Beijing.

President Shavkat Mirziyoyev of Uzbekistan, left, with Xi Jinping last year in Beijing.

“I’d like to once again note that we want to see Central Asia as a region of stable development, prosperity and cooperation,” said Abdulaziz Kamilov, the foreign minister of Uzbekistan. 

“And we would really not like to feel on ourselves unfavorable political consequences in relation to some competition in our region between large powers.”
The State Department released a Central Asia strategy document on Feb. 5 that said the top priority was to “support and strengthen the sovereignty and independence of the Central Asian states” — a reference to warding off the influence of China and Russia.
It is a tough mission for the United States. 

The nations are in China’s and Russia’s backyards, and there have been decades of close interactions among them. 

Xi has made multiple state visits to the countries since he took power in 2012, most recently last year.
The Trump administration has hit major setbacks in its attempts to build a global coalition against projects by the Chinese government and by Chinese companies. 

In fact, Britain said on Jan. 28 that it would not ban technology made by Huawei, a Chinese telecom giant, from its high-speed 5G wireless network, despite intense pressure from American officials.
Mr. Pompeo made London his first stop on a recent six-day trip to Europe and Central Asia, and he said there on Jan. 30 that the Chinese Communist Party was “the central threat of our times.” 

The next day, he spoke about China with leaders in Ukraine.
But words go only so far. 

The Americans fail to present an economical alternative to Huawei. 

And the Trump administration is discovering that its belligerent approach toward allies has a cost when it comes to China strategy. 

Withdrawing from the global Paris climate agreement, starting trade conflicts with friendly governments make those nations less likely to listen to Washington’s entreaties on China.
A recent policy report on China by the Center for a New American Security said “critical areas of U.S. policy remain inconsistent, uncoordinated, underresourced and — to be blunt — uncompetitive and counterproductive to advancing U.S. values and interests.”

Muslims praying at a mosque in Bukhara, Uzbekistan. Secretary of State Mike Pompeo urged the Central Asian nations, which are predominantly Muslim, to speak out about China’s Uighur concentration camps.

Some analysts say the hawkish talk on China by Mr. Pompeo and other American officials paradoxically could make the United States look weak.
“And that last point is just the core of it for me. A central problem of US foreign policy today, not just in Central Asia, is that it feels increasingly reactive to me — back footed and on defense, not least in the face of Chinese initiatives,” Evan A. Feigenbaum, a deputy assistant secretary of state on Central Asia and South Asia in the George W. Bush administration who is now at the Carnegie Endowment for International Peace, wrote on Twitter.
“To wit, the secretary of state just made the first visit by America’s top diplomat to Central Asia in five years — five! — but spent a hefty chunk of it talking about China,” he wrote.
“The challenge for the US is to get off its reactive back foot and be proactive and on offense.”
The United States did not pursue serious partnerships in Central Asia until after the Sept. 11, 2001, attacks, when the Pentagon needed regional bases for the war in Afghanistan.
China has taken a different approach.
Beijing says it will help build up the region under what it calls the Silk Road Economic Belt, which is part of the larger Belt and Road Initiative, a blanket term for global infrastructure projects that, according to Beijing, amount to $1 trillion of investment.
The projects are potential debt traps, but many countries have embraced them.
The economic liberalization of Uzbekistan under Mirziyoyev, who took power in 2016 after the death of a longtime dictator, has resulted in greater trade with China.
China is Uzbekistan’s largest trading partner, and trade totaled almost $6.3 billion in 2018, a nearly 50 percent increase from 2017, according to Xinhua, the official Chinese news agency.
Chinese goods, including Huawei devices, are everywhere in Samarkand, Bukhara, Tashkent and other Uzbek cities.

The subway in Tashkent, the Uzbek capital.

Uzbekistan is also committing to being part of rail and road networks that China is building across Central Asia.
Since 2001, China has worked with Central and South Asian nations as well as Russia in a multilateral group, the Shanghai Cooperation Organization, to address security issues.

China’s People’s Liberation Army has gained a new foothold in the region, in the form of a base in Tajikistan’s Pamir Mountains.
For at least three years, Chinese troops have quietly kept watch from two dozen buildings and lookout towers near the Tajik-Chinese border and the remote Wakhan Corridor of Afghanistan.
The Afghan corridor is a strategic strip of land whose borders were drawn by Britain and Russia during the original Great Game as a buffer zone.
The United States had hundreds of troops at an air base in Uzbekistan that it operated with the Uzbeks.
But it wants to move the relationship well beyond the military.
“We want private investment, American private investment sector, to flow between our two nations,” Mr. Pompeo said.
He added that the United States had committed $100 million to programs in Uzbekistan last year, and that it would give $1 million to help develop financial markets and another $1 million to increase trade and “connectivity” between Uzbekistan and Afghanistan.
On his trip, Mr. Pompeo also made a demand regarding human rights in China as he met with officials in Tashkent and Nur-Sultan, the capital of Kazakhstan.
He raised the issue of China’s internment camps that hold one million or more Muslims and urged the Central Asian nations, which are predominantly Muslim, to speak out against the camps.
In Nur-Sultan, he met with Kazakhs who have had family members detained in the camps.

This month in Nur-Sultan, Kazakhstan, Mr. Pompeo met with Kazakhs whose family members have been detained in Chinese camps.

Yet, as in other predominantly Muslim nations, Central Asian leaders have remained silent on this. (Mr. Trump himself has said nothing, and Mr. Pompeo has been accused of hypocrisy by excluding Taiwan, the democratic island that China threatens, from a religious freedom alliance.)
Trump administration policies perceived as anti-Muslim undermine trust in Washington.
On Jan. 31, Mr. Trump added Kyrgyzstan and five other nations, all with substantial Muslim populations, to a list of countries whose citizens are restricted in traveling to the United States.
In an interview in Nur-Sultan, a Kazakh television journalist, Lyazzat Shatayeva, asked Mr. Pompeo, “What do you think that signals to the other countries and other governments in Central Asia on why it happened?”
Mr. Pompeo said Kyrgyzstan must “fix” certain things: “passport issues, visa issues, visa overstays.”
“When the country fixes those things,” he said, “we’ll get them right back in where they can come travel to America.”

China's Belt and Road Plan Is Destroying the World

All Chinese-financed, coal-fired power plants built overseas use low-efficiency, subcritical coal technology, which produces the highest emissions of any form of power generation. Thus, China is destroying the environment.

By Sagatom Saha


China has continually assured the world that its Belt and Road Initiative (BRI) is a green project. 

At the first BRI forum in May 2017, Chinese dictator Xi Jinping touted BRI as a “vision of green development and a way of life and work that is green, low-carbon, circular and sustainable.” 

Similar promises were made at this year’s forum in April. 

However, China has long been the world’s largest exporter of coal power equipment, exporting twice as much as its nearest competitor. 

At the same time as the first forum, Chinese companies were building an estimated 140 coal plants abroad, including in countries like Egypt and Pakistan that previously burned little to no coal. 

At the current rate, Chinese coal plant developers will drive energy investments that make it impossible to limit global warming to safe levels. 

If Chinese development banks continue their current practices, then pollution will inevitably worsen around the world.

The Belt and Road’s Dirty Truths
Much of what Beijing touts as development assistance for power projects worsens pollution. 

Nearly 40 percent of Chinese Development Bank (CDB) and Chinese Ex-Im spending on electricity generation has gone toward coal. 

As a result, the amount of coal-fired generation Chinese policy banks are directly responsible for between 2013, the year that BRI was announced, and 2018 could generate enough electricity to power Norway or Poland.
This surge in coal-fired generation will come with a drastic emissions increase. 

Chinese development finance flows between 2013 and 2018, by conservative estimates, will contribute to annual emissions equivalent to that of the Netherlands. 

Overall, projects backed by Chinese development banks will produce more coal-fired power globally than clean energy generation, setting the path ahead in the wrong direction. 

If it were not for government support, then Chinese coal power suppliers almost certainly would not be as successful and global emissions would be fewer.
The CDB and Chinese Ex-Im financed power plants in thirty-eight countries since 2013, nearly half of which are fossil fuel-based. 

Most Chinese-financed, coal-fired power plants built overseas use low-efficiency, subcritical coal technology, which produces some of the highest emissions of any form of power generation. 

In more than one-third of countries, projects funded by the Chinese development banks increase national emissions intensity. 

That is, Chinese foreign aid makes those countries’ power sectors higher emitting than before.
The picture is even worse in countries where China has concentrated efforts. 

In Pakistan, where Beijing has focused massive amounts of BRI spending through the China-Pakistan Economic Corridor, China has financed so much coal that its power investments are more than twice as emissions heavy as Pakistan’s electric grid was in 2012. 

Overall, as Chinese development finance in a country’s power sector increases, it becomes harder for that country to lower emissions.
Beijing did not finance fossil fuel projects in more than half of the thirty-eight countries, but China’s non-fossil fuel projects constitute one-off investments over the six-year period. 

Moreover, nearly all those non-fossil fuel projects are not wind and solar but hydroelectric dams, which carry their own environmental damage. 

China’s hydroelectric projects portend ruin for millions of farmers and fishermen.

Better Alliances and Best Practices
The United States should not allow China to freely and falsely claim the mantle of global environmental and clean energy leadership. 

BRI marks a new era of U.S.-China global competition, in which Chinese funding for development and infrastructure projects could bring Beijing economic and strategic benefits at America’s expense. Take Southeast Asia, for example—Cambodia, Indonesia, Laos, and Vietnam all receive Chinese development finance for power generation projects. 

The region is home to the Straits of Malacca, the second largest oil trade chokepoint after Hormuz, several U.S. military installations, and the world’s fastest-growing economic market.
As it stands, Beijing is leveraging environmentally and socially harmful infrastructure projects for diplomatic capital that blunts America’s Indo-Pacific military presence and gives it a competitive advantage over the United States in an important emerging market. 

On the other side of Asia, Beijing-backed coal projects are, in part, helping the Chinese Communist Party deepen defense cooperation with Islamabad while worsening air pollution that already causes tens of thousands of premature deaths annually.
The State Department should highlight these environmental and social costs and the comparative advantage of U.S. power projects under Indo-Pacific Strategy initiatives, which seek to grow the region’s energy markets while minimizing environmental impact. 

If the United States firmly communicates the environmental and social costs of Chinese development finance, then Beijing’s reputation should suffer accordingly amid a growing global backlash to BRI.
Further, the United States should cement ongoing partnerships with Australia, India, and Japan—some of America’s strongest allies in the Indo-Pacific region—to internationalize new standards on “quality infrastructure.” 

Even with the creation of the new International Development Finance Corporation (DFC), the United States cannot compete dollar for dollar with BRI. 

This burden-sharing strategy will help pool and coordinate funds competing with Beijing.
The United States will find it difficult to sway countries away from Chinese development finance and China away from financing low-quality coal projects. 

That China has been supporting coal abroad while canceling coal projects at home is simple self-interest: Beijing sees coal equipment exports as a solution for excess industrial capacity. 

Beijing must keep legacy coal manufacturers afloat because the Chinese coal industry and steel industry, which depends on coal, supply roughly twelve million Chinese jobs. 

The United States should consider the important role that domestic concerns play in Beijing’s development assistance plans and pursue strategies that help assuage them. 

The Energy Department could facilitate projects to transition coal and steelworkers in both the United States and China into roles in the clean energy economy, such as the production and installation of solar panels and wind turbines.
Despite repeated claims of “green development,” Xi Jinping tacitly admitted BRI’s first phase has been an environment failure. 

After the second Belt and Road Forum, the Chinese Ministry of Foreign Affairs released a list of deliverables that include many efforts to make BRI greener. 

The United States can independently verify and communicate widely whether China is making progress toward these goals. 

Unless the United States challenges Chinese claims and competes with Chinese development projects, Beijing will continue to diplomatically benefit from asserting leadership with little cost.
Chinese development finance has an even more harmful impact than visible, given the low quality of Chinese coal technology. 

More transparency would allow the United States to engage China on BRI’s true environmental and social impact. 

If the United States can successfully push China to become a more responsible provider of development assistance, then global prosperity would grow, emissions increases would slow, and Beijing’s ability to deploy foreign aid at America’s expense would diminish.

China Retreats Globally

By Milton Ezrati

China has retreated globally – not from its artificial islands in the South China Sea but economically and financially. 

It seems just yesterday that the Middle Kingdom, as China calls itself, resembled an unstoppable juggernaut, cutting constructions contracts and buying properties all over the world. 

That is no longer the case. 

Trade war with the United States gets the credit, but even if Washington and Beijing were to sign a deal tomorrow, China would not regain its old momentum.
Official Ministry of Finance (MOF) figures, not surprisingly, offer a soothing picture of moderate decline, but private sources tell a much more dramatic story. 

According to the American Enterprise Institute’s well-regarded China Global Investment Tracker (CGIT), Chinese overseas investments of all kinds in the first half of this year averaged only $27.5 billion, half the rate averaged during the same time in 2018 and barely a quarter the rate of 2017’s first half. 

This year’s figures are lower than any time since 2008. 

Construction contracts, largely in the third world as part of China’s Belt and Road initiative, have fallen off, too, but less dramatically. 

China clearly has become much less engaged with the world than it was.
Two things have caused this retreat. 

One is a growing hostility among host countries toward Chinese investment. 

Especially developed countries, the United States in particular, have balked over the ugly Chinese practice of stealing technology. 

Suspicions along these lines have held up approvals for Chinese purchases and other direct flows of funds. 

Some familiar with Chinese practice have gone a step further. 

The European Chamber of Commerce has warned against developing a dependence on China and Chinese funds. 

This combination of concerns and suspicions have centered primarily on China’s huge state owned enterprises and less on private Chinese investment. 

But if private investment has fallen off less dramatically, this growing reluctance in the West has had its effect there, too.
More significant is China’s relative shortage of hard currency. 

Despite Beijing’s efforts to make the yuan a global currency, it is little used in currency transactions – no more than 2% of the total in fact – and so is of little use in overseas purchases. 

Meanwhile the trade war with the United States has already begun to cut into Beijing’s supplies of foreign exchange. 

Beijing actually anticipated the problem and in 2017 began to ration foreign exchange even before the White House added any tariffs. 

The first major investment declines occurred in late 2018, when the While House first imposed 10% tariffs on a range of Chinese products. 

The next drop coincided with this past spring’s increased tensions. 

To be sure, Beijing’s foreign exchange hoard remains huge, but officials are wary of how rapidly it has shrunk, falling some 25% from almost $4 trillion at its peak in 2014 to barely over $3 trillion during the first half of this year.  

Beijing’s rationing of these financial resources has affected the state-owned sector in particular. Private companies have a greater willingness and ability to borrow hard currencies abroad.
Within the investment pullback, North America, which historically has accounted for some 17% of China’s overseas investment flows, has seen the biggest drop. 

No doubt, the hostility created by trade friction has played a role. 

But China has also pulled back in Europe, where British and Swiss destinations have long dominated. 

 Australia and Singapore, which historically have accounted for about 10% of Chinese overseas investment flows, have seen less relative shortfall but some nonetheless.
China has concentrated its remaining financial resources on less developed countries. 

The reasons are two fold. 

First, activities in these countries center more on construction contracting than investing. 

Such efforts may require subsidies, but they demand little hard currency. 

Indeed, China collects fees on many of these projects. 

Second, Beijing has clearly made its Belt and Road initiative (BRI) a political priority. 

This effort at land trade routes between China on one side and Europe and the Middle East on the other may not generate the secure financial returns that investments in the developed world offer, but monies spent in these projects pay Beijing huge political dividends by tying these countries to China and by advancing a project that China has touted as an alternative to U.S.-led, mostly maritime trade arrangements. 

BRI historically has captured more than three-fifths of China’s overseas construction volumes with almost three quarters of the monies involved in energy and transportation in such places as Pakistan and Iran, Saudi Arabia and Nigeria. 

Preliminary figures for 2019 show that as all other efforts have diminished, BRI has captured a still larger proportion of China’s efforts.
Even if China and the United States were to sign a trade deal tomorrow, these trends would likely persist. 

Though trade would increase with a new treaty, the terms would no doubt create a more even balance than previously, making it highly unlikely that China could replenish its reserves of hard currency quickly, if at all. 

At the same time, suspicions of Beijing’s agenda and practices, especially China’s state-owned enterprises, will persist, trade deal or no. 

Political imperatives will, of course, keep China focused on BRI and its construction projects. 

For the investment flows, the best to expect is stability. 

It seems that for better or worse, the world has already seen the high water mark of Chinese investment flows.

Rogue Nation

Beware of China’s new colonialism
By Benedict Peters 

America is slowly awakening to the growing menace of China’s plans for economic supremacy.
In 2013 Chinese dictator Xi Jingping launched an international investment program that became known as the Belt and Road Initiative (BRI). 

Under a new mantra to connect the global economy, China began investing heavily in foreign infrastructure projects in over 60 countries that account for 60 percent of the world population and 30 percent of global gross domestic product.
From 2013 to 2018 China made an estimated nearly $614 billion worth of investments in countries participating in BRI. 

Morgan Stanley predicts China’s overall expense from BRI could reach $1.3 trillion over the next decade.
Xi considers BRI an opportunity to share China’s model for economic growth with the developing world. 

Geopolitical rivals are concerned BRI investment programs will deepen China’s political influence and military expansion.
Is BRI a lifeline for the developing world, or economic imperialism?
In Africa, it is clear that China’s campaign of foreign investment is a new form of colonialism. 

The continent, where I live and work, is ground zero.
When BRI launched in 2013, it prioritized regional development projects in Asia, the Middle East, Africa and Eastern Europe. 

Italy became the first major industrialized nation in the Group of Seven to join BRI, despite opposition from the U.S. and the European Union.
U.S. officials are right to be concerned about the expansion of an infrastructure network that leaves crippling debt, faulty construction and project mismanagement in its wake.
The Center for Global Development published a study of 23 countries participating in BRI and found 10 to 15 are in danger of debt distress. 

Other high-profile cases in Sri Lanka and Pakistan are examples where BRI projects left the local governments in severe debt and incentivized officials to appeal to China for debt forgiveness.
When countries fall deep enough into debt, China will offer to renegotiate the terms of the debt in exchange for strategic assets or preferential treatment.
Last November, Moody’s Investor Service warned that nations benefiting from BRI are at risk of losing control of strategically important infrastructure, natural resources and other important assets if they fail to pay back their Chinese creditors. 

This is a major concern in Africa, where Chinese financing paved the way for essential infrastructure projects.
When countries fall deep enough into debt, China will offer to renegotiate the terms of the debt in exchange for strategic assets or preferential treatment.
In 2015 China promised $60 billion in grants and commercial loans to finance economic development projects in Africa. 

African leaders were eager to accept the financial assistance and as a result, China holds 14 percent of sub-Saharan Africa’s total debt stock and is the largest owner of public debt in Africa.
Public financing programs can often be a useful tool for local governments to build projects that generate economic growth. 

But an over-reliance on Chinese financing is saddling Africa with greater debt, leaving the continent at a strategic disadvantage in the future.
Developing nations of the world are understandably attracted to China’s deep pockets and “no strings attached” political doctrine for infrastructure investment.
U.S. National Security Adviser John Bolton has called attention to China’s strategic push in Africa and around the globe, but the U.S. must do more to re-establish itself as an alternative to China.
More specifically, America must present developing nations with a viable alternative to BRI.
Congress bolstered the development finance capabilities of the U.S. through the BUILD Act, which authorized the creation of the U.S. International Development Finance Corporation (USDFC).
The USDFC will consolidate the existing U.S. development finance institutions and provide new investment capabilities and financial tools to promote U.S. investment in the developing world.
The timing of the BUILD Act could not be more appropriate. 

The financial downsides of BRI are coming to light, just as China’s expansion reached the United States’ doorstep with major investments in the Caribbean.
The USDFC will be operational in the coming months. 

The new agency has an opportunity to expand the footprint of U.S. investors by positioning America as a more attractive option for infrastructure investment support.
As a businessman working in all parts of Africa, I can assure you that business leaders in Africa are eager to partner with the U.S. to provide a better model for the developing world.
China is running a rampant campaign of new colonialism through the developing world. 

The U.S. must do something more to present a viable investment alternative for government leaders participating in BRI.
The American people and government policymakers are waking up to this growing problem. 

I just hope it is not too late.

China will build string of military bases around world

Locations include Middle East, Pakistan, and western Pacific to protect Belt and Road Initiative
The Guardian

Beijing currently has just one overseas military base, in Djibouti. 

The US Defense Department expects China to add military bases around the world to protect its investments in it ambitious One Belt One Road global infrastructure program, according to an official report released on Thursday.
Beijing currently has just one overseas military base, in Djibouti, but is believed planning others, including possibly Pakistan, as it seeks to project itself as a global superpower.
“China’s advancement of projects such as the ‘One Belt, One Road’ Initiative (OBOR) will drive military overseas basing through a perceived need to provide security for OBOR projects,” the Pentagon said in its annual report to Congress on Chinese military and security developments.
“China will seek to establish additional military bases in countries with which it has a longstanding friendly relationship and similar strategic interests, such as Pakistan, and in which there is a precedent for hosting foreign militaries,” the report said.
That effort could be constrained by other countries’ wariness of hosting a full-time presence of the People’s Liberation Army, the report noted.
But target locations for military basing could include the Middle East, Southeast Asia, and the western Pacific.
The report came as the Pentagon also warned that deepening Chinese activities in the Arctic region could also pave the way for a strengthened military presence, including the deployment of submarines to act as deterrents against nuclear attack.
The assessment is included in the US military’s annual report to Congress on China’s armed forces.
The Pentagon report noted that Denmark has expressed concern about China’s interest in Greenland, which has included proposals to establish a research station, establish a satellite ground station, renovate airports and expand mining.
“Civilian research could support a strengthened Chinese military presence in the Arctic Ocean, which could include deploying submarines to the region as a deterrent against nuclear attacks,” the report said.

US commits to aiding Philippines in South China Sea.

China has already established well-armed outposts on contested atolls it build up in the South China Sea.
Last year, there were reportedly discussions on a base in the Wakhan corridor of northwest Afghanistan.
In addition, The Washington Post recently identified an outpost hosting many Chinese troops in eastern Tajikistan, near the strategic junction of the Wakhan Corridor, China, and Pakistan.
Chinese dictator Xi Jinping has sought to project the country’s power beyond its immediate “back yard” in east and southeast Asia.
This includes strengthening the country’s presence in international institutions, acquiring top-flight technology and establishing a strong economic presence worldwide.
It also includes projecting the country’s military force on land, sea and in space, the report notes.
“China’s leaders are leveraging China’s growing economic, diplomatic, and military clout to establish regional preeminence and expand the country’s international influence,” the report said.
Beijing in particular increasingly see the United States as becoming more confrontational in an effort to contain China’s expanding power, it said.

The forgotten victims of China’s Belt and Road Initiative

By Aaron Halegua and Jerome A. Cohen

World leaders will soon gather in Beijing for the second forum on China’s Belt and Road Initiative — the $1 trillion plan involving China’s bilateral agreements with more than 100 countries to enhance “connectivity” by building infrastructure projects and deepening economic ties. 

In the run-up to the event, critics have highlighted the projects’ negative impacts on host countries, such as debt traps, land seizures, corruption and environmental degradation. 

Some have pointed out the difficulties of establishing fair methods for resolving the many disputes that are arising between China and its new partners. 

A few have criticized the failure of certain projects to create adequate jobs for locals.
But one group of victims is often overlooked: the Chinese workers dispatched overseas to build these projects. 

If discussed at all, these migrant workers are generally demonized as the infantry “invading” the host country and “stealing” local jobs. 

In reality, they are extremely vulnerable to exploitation by their employers, sometimes even more so than their local co-workers.
The International Labor Organization reports that there are 14.2 million people in forced-labor situations worldwide and that indebted migrant workers are particularly vulnerable. 

Overseas Chinese workers are no exception.
The recent federal criminal conviction of a Chinese construction firm executive for subjecting workers in New York to forced labor is a case in point. 

According to trial testimony, prior to leaving China, the workers signed contracts promising to not interact with locals, to not leave their residence without permission and to return to China after completing their multi-year assignment — at which point the bulk of their salary would be paid. 

Each worker was required to post a security deposit of more than $20,000 to guarantee his compliance. 

Once in New York, workers’ passports were seized and they were required to work long hours and live in unsafe conditions. 

Fear of losing their security deposit and not collecting their earned wages essentially handcuffed them from escaping this exploitation.
This case is not unique. 

Official statistics reported there were nearly 1 million overseas Chinese workers in 2018 (excluding the large number of undocumented Chinese migrants), and researchers studying Chinese projects in places such as Asia, Africa, the Middle East and the Pacific Islands have found abhorrent labor conditions for foreign workers.
Incurring significant debts to pay large recruitment fees based on inaccurate job information is quite common. 

Federal authorities found that each of 2,400 migrant workers hired by Chinese firms to build a casino in Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands, paid recruiters, on average, $6,000 in fees, and that they were cheated out of millions of dollars in wages.
In Belarus, hundreds of Chinese workers were unpaid for three months after working “like slaves.” 

Chinese companies failed to pay proper wages, provide protective equipment and conduct safety training in the Bahamas, Ethiopia and Vietnam, respectively. 

A Chinese construction worker in Israel recently died on the job. 

And, for those employees working for smaller Chinese subcontractors, labor conditions can be even worse.
Deep in debt, without passports, and lacking access to transportation and independent advice, Chinese workers are often left to endure these conditions without recourse. 

Those lacking proper visas are subject to quick deportation and are thus even more vulnerable. Language barriers make effective complaining to the host government difficult, and the Chinese embassy or consulate may be hours away. 

Those workers who are courageous enough to protest their maltreatment have been beaten by their employers or arrested and deported by local authorities.
So why should China care? 

Aside from a duty to protect its citizens, these conditions frustrate China’s broader objectives for the Belt and Road Initiative, such as building “win-win” projects, “people-to-people” connections and soft power. 

If Chinese executives are eventually jailed and projects stalled, companies and lenders will lose money. 

Employing flocks of often illegal Chinese migrants housed in Chinese enclaves fuels resentment amongst locals, while subjecting its citizens to abusive and unsafe work conditions inevitably hurts China’s image. 

Rampant immigration and labor violations have already caused officials in some jurisdictions to question lax visa policies that previously welcomed Chinese.
To its credit, China has acknowledged these problems, issuing policies and regulations that prohibit the collection of recruitment fees or security deposits, ban the hiring of workers on tourist visas and instruct companies to safeguard labor rights. 

But policies and regulatory standards are usually vague and not legally binding, and the legal provisions in place are routinely violated.
China should announce plans to address this issue at this month’s forum. 

The policies governing overseas conduct by Chinese firms — particularly those regulating subcontracting — should be translated into detailed, binding domestic laws with real penalties that are rigorously enforced. 

China’s banks should require projects they fund to adhere to and report on fair labor standards and practices. 

Complaint mechanisms must be established, and workers taught how to access them. 

Chinese embassies and consulates should assist in monitoring labor conditions. 

And China should demonstrate its commitment to labor rights by finally ratifying the International Labor Organization’s conventions on forced labor.
If China hopes to persuade host countries that it respects the rights and interests of their citizens, the best place to start is by showing how seriously it takes the welfare of its own.

Chinese Trap

Countries should not be duped into borrowing from China

“We are being duped, and we have to negotiate better for our own interests,” said Karim Raslan, the founder of ASEAN-focused political risk consultancy firm KRA Group about China’s Belt and Road Initiative.
By Shirley Tay

Countries should not be “duped” into borrowing from China through the Belt and Road Initiative, and should be looking for opportunities in India instead, says one firm critic of Beijing’s flagship infrastructure project.
”The BRI is all about Chinese strategic objectives; it’s not about the host countries,” said Karim Raslan, founder of political risk consultancy, KRA Group.
“We are being duped, and we have to negotiate better for our own interests,” he told CNBC’s Nancy Hungerford at the Credit Suisse Asian Investment Conference in Hong Kong on Tuesday.
Sometimes referred to as “One Belt, One Road,” the mega-project is a Chinese investment scheme which aims to create a vast global infrastructure network connecting China to more than 60 countries across Asia, Europe and Africa.
Controversy surrounding the strategy was highlighted in 2017 when Sri Lanka handed over its Hambantota port to Beijing for 99 years after the South Asian nation failed to pay back the money it owed Chinese firms.
The BRI is a “debt trap,” said Raslan. 

China is “not investing — they’re lending us money, for projects which have very little economic value to the host countries,” he added.
Borrowing nations need to “look more to India,” Raslan said. 

“We have got to focus there.”
He explained that “India, at the end of the day, (has)1.3 billion people. It’s growing very fast — they will be sucking in imports.”
India’s economy is poised to grow at 7 percent in 2019, expanding more than China’s projected growth of 6 to 6.5 percent the same year.

Italian Horse

Italy is playing with fire when it comes to China

• Italy is to be the first major European economy to join China’s Belt and Road Initiative
• The move exacerbates tensions between Italy and its neighbors.
• France wants a coordinated, united approach to China.

By Holly Ellyatt

Italian Premier Giuseppe Conte meets Chinese dictator Xi Jinping before to sign trade agreements on Belt and Road Initiative, on March 23, 2019 in Rome, Italy.

Italy’s decision to be the first major European economy to join China’s massive investment and infrastructure project, the Belt and Road Initiative (BRI), can only exacerbate tensions between Italy and its neighbors.
On Saturday, Xi Jinping and the Italian government signed a non-binding agreement for Italy to join China’s trade route and inked a total of 29 deals worth 2.5 billion euros ($2.8 billion) across an array of sectors. Italy hopes the project will boost its sluggish economy but the deal raised more than just eyebrows in Europe and the U.S. with officials criticizing the move.
The BRI is something of a 21st century Silk Road with the sea and land route stretching from Asia, the Middle East, Africa and now into Europe — with Italy being the first Group of Seven (G-7) country to sign up to the global infrastructure and development project.
China sees the BRI as a way to export more of its goods to lucrative markets; its critics see the initiative as a vanity project that increases indebtedness among its participating countries. 

The BRI gives Chinese companies unfettered access to other markets and economies, but that its own is still largely closed to foreign investment.
At the heart of concerns is that the BRI is seen as a way for China to spread its geopolitical influence — an acute concern for a Europe increasingly uncertain of its place in the world.
As such, Italy’s latest move has been seen as undermining Europe’s ability to compete with China’s economic might. 

Italy’s bilateral deal with China also came a day after French President Emmanuel Macron called for a coordinated European approach to the superpower.
Italy’s anti-establishment coalition government has already clashed with Brussels over immigration and its spending plans. 

Its deal with China is likely to be another source of tension.
“It’s clear that this does undermine Europe’s and the West’s ability to stand up to China,” Federico Santi, senior Europe analyst at Eurasia Group, told CNBC Tuesday. 

“This will be another source of friction between Italy and Europe which, ultimately, will be to the detriment of Italy itself,” he added, although he noted that the terms of the agreement between Italy and China remained to be seen.
Italy and China have played down concerns. 

Italy’s Deputy Prime Minister Luigi Di Maio told CNBC that the accord was “nothing to worry about” and Xi tried to assuage concerns in Europe too, saying on Tuesday during a visit to France that “cooperation is bigger than competition between China and Europe.”
Other EU leaders like French President Emmanuel Macron are keen for the EU to have a tougher approach to China and stress the need for reciprocal commercial ties. 

On Tuesday, Macron said while he wants the EU to deepen its ties with China, there must be a united European front when it comes to the superpower.
To emphasize this point, he invited German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker for talks with Xi in Paris on Tuesday. 

There, Macron urged China to “respect the unity of the European Union and the values it carries in the world.” 

Juncker stressed that European companies should find “the same degree of openness in the China market as Chinese ones find in Europe.”
Merkel, for her part, said that Europeans wanted to take part in the Belt and Road Initiative but that “must lead to a certain reciprocity, and we are still wrangling over that bit.”
As Macron said in Brussels last week, “the time of European naïveté is ended” as he called for the EU. For many years we had an uncoordinated approach and China took advantage of our divisions.”
With Italy pursuing its own deal with China regardless of its neighbors’ concerns, China could be able to make the most of those divisions again.

"Italy joining China’s Belt and Road project is geopolitically unwise", former prime minister says

Italy’s government provoked controversy as it joined China’s Belt and Road Initiative, becoming the first EU and Group of 7 country to do so.
By Natasha Turak

Ex-Italian PM: Important to pay attention to Belt and Road initiative
Italy’s former prime minister doesn’t approve of the current government’s newly inked partnership with China, calling the decision “unwise” during a conversation with CNBC Monday.
“Politically, geopolitically, I deem (it) really unwise from the Italian government to take such a decision without coordination with the European Union and our allies,” Paolo Gentiloni, who served as prime minister from 2016 to 2018, told CNBC’s “Squawk Box Europe.”
“Europe is showing its divisions toward China, and this is not something that will strengthen our position even on trade.”
The Italian government stirred up fresh controversy over the weekend as it officially agreed to join China’s massive Belt and Road Initiative (BRI), becoming the first EU and Group of 7 country to do so.
Chinese dictator Xi Jinping’s visit to Rome saw a total of 29 deals signed, altogether worth 2.5 billion euros ($2.8 billion). 

They were focused on agricultural, finance and energy sectors, and opened up new access to the Chinese market for major Italian energy and engineering firms.
Gentiloni, who himself visited China in 2017 to discuss the Belt and Road initiative with Beijing’s leadership, echoed the analyses of many observers who described the deals signed as largely symbolic and not an economic paradigm shift for Italy.
“The agreements signed in Italy are not so relevant from an economic point of view,” he said.
“We will not change the mood of our economy with these agreements, and my guess is that perhaps we will not even change the balance of trade between Italy and China, which is unfortunately a balance of deficit on the Italian side.”
But politically, he stressed, “I am worried that we are not showing EU unity, and for this reason I think that the MOU (memorandum of understanding) that was signed from the Italian government was not a wise decision.”
Gentiloni is a founding member of Italy’s Democratic party, whose stances are largely described as a social democratic, center-left and Europeanist. 

Italy is currently led by a euroskeptic coalition whose largest parties are the anti-establishment Five-Star Movement and the right-wing Lega party.

‘Italy is not an African country’
Western critics warn of Chinese debt traps and describe the initiative as a ploy to expand geopolitical and strategic influence, while Beijing pursues links to Europe and Africa via South Asia and the Middle East to expedite and increase the export of Chinese goods.
German foreign minister Heiko Maas criticized Italy’s decision on Sunday, telling local media: “If some countries believe that they can do clever business with the Chinese, then they will be surprised when they wake up and find themselves dependent.”
Still, in defense of his country, Gentiloni dismissed concerns that Italy would become economically beholden to China in the way that some African and South Asian nations have.
“Italy is not an African country … We will not have a Chinese invasion after these agreements,” he said, pointing out that Italy has less Chinese inward investment than the U.K. or Germany.
“We have to be very cautious especially in issues connected to security, telecommunications, but I don’t think these agreements economically will change much in the framework we have.”
Indeed, Italy is not an African country — it has a higher debt-to-GDP ratio and far lower growth than most countries on the African continent. 

Its economy dipped into recession at the end of last year, and the deadly collapse of its Genoa Bridge last August cast a stark spotlight on its dire need for infrastructure investment.

China and 5G: Avoiding ‘dangerous situations
Gentiloni stressed caution toward China when it comes to sensitive sectors like telecommunications, an issue dominating headlines recently amid the U.S. government’s global campaign against Chinese telecoms giant Huawei. 

Washington says Huawei’s role in building 5G internet infrastructure around the world is a security threat and will allow the Chinese government to spy on users, a claim Beijing rejects.
“I think we have to be very cautious and careful, exactly in this subject,” the former prime minister said.
“Strategic infrastructure and telecommunication infrastructure, and this means now 5G ... We have a very modern infrastructure for mobile phones in our country, we don’t particularly need foreign investment, and in any case we have a law — the golden power law — that allows the Italian government to avoid any form of control in our telecoms infrastructure.”
Italy’s “golden power” legislation refers to state powers designed to protect strategic industries, which it says it plans to extend to 5G technologies. 

This would entail requiring Italian companies in both the private and public sectors to declare to the government any 5G technology purchased from non-European countries.
“I hope that the new government will use these means, these tools, to avoid dangerous situations,” he added.

Italian Horse

Italy takes a shine to China's New Silk Road
BBC News

China has bought up a majority stake in the Greek port of Piraeus - and Italy might be next

China's president lands in Rome on Thursday, where he is expected to sign a landmark infrastructure deal that has raised eyebrows among Italy's Western allies.
Xi Jinping's project is a New Silk Road which, just like the ancient trade route, aims to link China to Europe.
The upside for Italy is a potential flood of investment and greater access to Chinese markets and raw materials.
But amid China's growing influence and questions over its intentions, Italy's Western allies in the European Union and United States have concerns.

By land and by sea
The New Silk Road has another name -- the Belt and Road Initiative (BRI) -- and it involves a wave of Chinese funding for major infrastructure projects around the world, in a bid to speed Chinese goods to markets further afield.
It has already funded trains, roads, and ports, with Chinese construction firms given lucrative contracts to connect ports and cities -- funded by loans from Chinese banks.
The levels of debt owed by African nations to China have raised concerns in the West -- but roads and railways have been built that would not exist otherwise:

• In Uganda, Chinese millions built a 50km (30 mile) road to the international airport
• In Tanzania, a small coastal town may become the continent's largest port
• In Europe too, Chinese firms managed to buy 51% of the port authority in Piraeus port near Athens in 2016, after years of economic crisis in Greece

Italy, however, will be the first top-tier global power -- a member of the G7 -- to take the money offered by China.
It is one of the world's top 10 largest economies -- yet Rome finds itself in a curious situation.

The collapse of the Genoa bridge in August killed dozens of people and made Italy's crumbling infrastructure a major political issue for the first time in decades.
And Italy's economy is far from booming.
The country slipped into recession at the end of 2018, and its national debt levels are among the highest in the eurozone.
Italy's populist government came to power in June 2018 with high-spending plans but had to peg them back after a stand-off with the EU.
It is in this context that China's deal is being offered -- funding that could rejuvenate Italy's grand old port cities along the Maritime Silk Road.
Italian Prime Minister Giuseppe Conte has mentioned the cities of Trieste and Genoa as likely candidates.
"The way we see it, it is an opportunity for our companies to take the opportunity of China's growing importance in the world," said Italy's undersecretary of state for trade and investment, Michele Geraci.
"We feel that amongst our European partners, Italy has been left out. We have wasted a little bit of time," he told the BBC.
So what's in it for China?
Italy's move is "largely symbolic", according to Peter Frankopan, professor of Global History at Oxford University and a writer on The Silk Roads.
But even Rome admitting the BRI is worth exploring "has a value for Beijing", he said.
"It adds gloss to the existing scheme and also shows that China has an important global role."

"The seemingly innocuous move comes at a sensitive time for Europe and the European Union, where there is suddenly a great deal of trepidation not only about China, but about working out how Europe or the EU should adapt and react to a changing world," Prof Frankopan told the BBC.
"But there is more at stake here too," he added.
"If investment does not come from China to build ports, refineries, railway lines and so on, then where will it come from?"
Ahead of his arrival, Xi declared that the "friendship" between the two nations was "rooted in a rich historical legacy".
"Made in Italy has become synonymous with high quality products. Italian fashion and furnishings fully meet the taste of Chinese consumers; pizza and tiramisu are liked by young Chinese people," he wrote in an article published by Corriere della Sera.Explorer Marco Polo's travels along the Silk Road were immortalised in the "Book of Marvels"

That "made in Italy" label carries a reputation for quality worldwide, and is legally protected for products items processed "mainly" in Italy.
In recent years, Chinese factories based in Italy using Chinese labour have been challenging that mark of quality.
Better connections for cheap raw materials from China -- and the return of finished products from Italy -- could exaggerate that practice.

Predatory investment
The non-binding deal being signed by the two countries on Thursday comes amid questions over whether Chinese firm Huawei should be permitted to build essential communications networks -- after the United States expressed concern they could help Beijing spy on the West.
That is not part of the current negotiations in Italy.
But a little over a week before the deal was due to be signed, the European Commission released a joint statement on "China's growing economic power and political influence" and the need to "review" relations.
As Xi tours Rome, EU leaders in Brussels will be considering 10 points for relations with China.
While they include deepening engagement, they also involve plans to "address the distortive effects of foreign state ownership" as well as "security risks posed by foreign investment in critical assets, technologies and infrastructure".
In March, US National Security Council spokesman Garrett Marquis pointed out that Italy was a major economy and did not need to "lend legitimacy to China's vanity infrastructure project".

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Italy is a major global economy and a great investment destination. Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people.
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Members of Italy's ruling right-wing League party have their owns concerns about national security
Interior Minister Matteo Salvini warned that he did not want to see foreign businesses "colonising" Italy.
"Before allowing someone to invest in the ports of Trieste or Genoa, I would think about it not once but a hundred times," Salvini warned.

Setting the scene
Italian officials are keen to point out that the deal being signed is not an international treaty, and is non-binding.
"There are no specific projects," Mr Geraci said.
"It is more of an accord that sets the scene."
Other European nations already accept Chinese investment through something called the Asian Infrastructure Investment Bank, he said -- something the UK was the first to sign up to.

"And then one by one, France, Germany, Italy and everyone else also followed suit," Mr Geraci said.
Similarly, he believes Italy's neighbours will soon follow it into the Belt and Road initiative.
"I do believe that this time Italy is actually leading Europe -- which I understand may be a surprise to most," he added.

Public Enemy Number One

China’s Xi Jinping most dangerous to free societies, says George Soros
By Joe Miller

The billionaire philanthropist George Soros has used his annual speech at the World Economic Forum, in Davos, to launch a scathing attack on China and its dictator Xi Jinping.
Mr Soros warned that artificial intelligence and machine learning could be used to entrench totalitarian control in the country.
He said this scenario presented an "unprecedented danger".
But he said the Chinese people were his "main source of hope".
"China is not the only authoritarian regime in the world but it is the wealthiest, strongest and technologically most advanced," he said, noting concerns too about Vladimir Putin's Russia.

Security risk
"This makes Xi Jinping the most dangerous opponent of open societies," he said.
Mr Soros, a prominent donor to the Democratic Party in the US, also criticised the Trump administration's stance towards China.
"Instead of waging a trade war with practically the whole world, the US should focus on China," he said.
He urged Washington to crack down on Chinese technology companies such as Huawei and ZTE, which he said present an "unacceptable security risk for the rest of the world".
More broadly, Mr Soros cautioned that repressive regimes could utilise technology to control their citizens, in what he called "a mortal threat to open societies".

The 88-year-old Hungarian-born Jewish businessman, who survived Nazi occupation by forging identity documents, became infamous for his involvement in the devaluation of the British pound, known as Black Wednesday.

But it is his philanthropic and political activities that have made him a divisive figure in the US, Europe and beyond.
He has spent billions of his own money funding human rights projects and liberal democratic ventures around the world, and has become a frequent target for criticism by right-wing groups due to his support for liberal causes.
Much of the criticism aimed at him has been criticised as having anti-Semitic undertones.
Last year, a suspect package was found in a post box at his home in New York.
Mr Soros used his Davos speech last year to lambast tech giants such as Facebook, and what he considered to be their corrosive effect on democratic systems.
But this year, he directed his wrath towards Beijing, and particularly its controversial "Belt and Road" investment plan, which pays for road, rail and sea links to boost trade with countries around the world.
"It was designed to promote the interests of China, not the interests of the recipient countries," he said.
"Its ambitious infrastructure projects were mainly financed by loans, not by grants, and foreign officials were bribed to accept them."

China Offered to Bail Out Troubled Malaysian Fund in Return for Deals

The secret discussions show how China uses its  financial clout to corrupt and bolster its position overseas
By Tom Wright and Bradley Hope

Former Malaysian Prime Minister Najib Razak, third from left, in 2017 reviewed a model of a railway China agreed to build. Current PM Mahathir Mohamad has suspended the $16 billion project. 

Senior Chinese leaders offered in 2016 to help bail out a Malaysian government fund at the center of a swelling, multibillion-dollar graft scandal, according to minutes from a series of previously undisclosed meetings reviewed by The Wall Street Journal.
Chinese officials told visiting Malaysians that China would use its influence to try to get the U.S. and other countries to drop their probes of allegations that allies of then-Prime Minister Najib Razak and others plundered the fund known as 1MDB, the minutes show.
The Chinese also offered to bug the homes and offices of Journal reporters in Hong Kong who were investigating the fund, to learn who was leaking information to them, according to the minutes.
In return, Malaysia offered lucrative stakes in railway and pipeline projects for China’s One Belt, One Road program of building infrastructure abroad. 

Within months, Najib signed $34 billion of rail, pipeline and other deals with Chinese state companies, to be funded by Chinese banks and built by Chinese workers.
Najib also embarked on secret talks with China’s leadership to let Chinese navy ships dock at two Malaysian ports, say two people familiar with the discussions. 

Such permission would have been a significant concession to Beijing, which seeks greater influence across contested waters of the South China Sea, but it didn’t come to pass.

A Journal examination of the China-Malaysia projects, based on documents and interviews with current and former Malaysian officials, offers one of the most detailed accounts to date of the political forces at work behind China’s Belt and Road program, a signature initiative of building ports, railways, roads and pipelines in some 70 countries to generate trade and business for Chinese companies.
China is using the program to increase its sway over developing nations and trap them in debt while advancing its military aims. 

Several countries, including Pakistan and the Maldives, have been reviewing One Belt, One Road projects amid allegations deals unfairly advanced Beijing’s interests.
American national-security officials regard the Chinese efforts in Malaysia as Beijing’s most ambitious attempt to leverage the program for geostrategic gain, said a person familiar with U.S. discussions.
Minutes of the Chinese-Malaysian meetings say that although the projects’ purposes were political in nature—to shore up Najib’s government, settle the 1MDB debts and deepen Chinese influence in Malaysia—it was imperative the public see them as market-driven.
The Chinese government information office didn’t respond to requests for comment.

China's Infrastructure Initiative
China is building and financing a global network of trade and energy links to fill gaps in existing infrastructure spanning Asia, Europe and Africa.

China has said its Belt and Road projects promote development that benefits all sides. 

Nations wouldn’t welcome the program as they have if it carried the financial and geopolitical risks asserted by critics, China’s Foreign Ministry has said. 

It has denied that money in the program was used to help bail out the troubled Malaysian fund.
Documents reviewed by the Journal show Malaysian officials suggested that the infrastructure projects be financed at above-market values, generating excess cash for other needs. 

Investigators from the current Malaysian government, which replaced Najib’s last year, believe some of the money helped Najib finance his political activities and cover maturing debts of 1MDB, a fund he set up in 2009 to finance local development.
Najib was aware of the 2016 Malaysian-Chinese meetings, according to people familiar with them. Asked about them, the former prime minister issued a statement saying the rail project would have brought tens of thousands of jobs to Malaysia and stating that under his leadership, the country experienced nine years of continuous economic growth.
Current Malaysian Prime Minister Mahathir Mohamad, who ousted Najib in an election last May, put the Chinese projects on hold. 

Malaysia has since charged Najib with crimes that include money laundering and breach of trust. 

He has denied them, is free on bail and faces trial this year.

A tunnel approach for a $16 billion rail link China agreed to build for Malaysia. The government that took over in Malaysia last year has suspended the project. 

Malaysia, rich in natural resources and on a sea lane, is a prized ally in the U.S.-China contest for influence in Asia. 

The U.S. once courted Najib as it sought alliances in the region.
In July 2015, the Journal reported that $681 million of funds originating with 1MDB, known formally as 1Malaysia Development Bhd., had flowed into Najib’s personal bank accounts. 

Najib’s office said the money was a gift from a Saudi Arabian it didn’t identify and said most of it was eventually returned.
The U.S. Justice Department began investigating. 

Its probe damaged Washington’s relationship with Najib, according to officials in both countries, helping drive Malaysia into Beijing’s arms.
By 2016, Najib was in a bind because the fund had borrowed $13 billion it couldn’t repay. 

He turned to Jho Low—a Malaysian financier the U.S. Justice Department has alleged was the mastermind of a multibillion-dollar theft of 1MDB funds—to negotiate with China to resolve the crisis, according to current and former Malaysian officials.

Jho Low, a central figure in a multibillion-dollar scandal at a Malaysian development fund. A now-suspended Chinese ‘Belt and Road’ project in Malaysia has partially bailed out the fund’s debts. 

Mr. Low faces criminal charges in both Malaysia and the U.S. related to the Malaysian fund. 

The U.S. has sought to seize hundreds of millions of dollars of his luxury assets acquired with the fund’s money. 

He is a fugitive, living in China under Beijing’s protection. 

Chinese officials have declined to comment on that.
Low drew up plans for Malaysian meetings with Chinese officials and attended some of them, according to current and former Malaysian officials.
Malaysia’s new government discovered the documents, including minutes from Chinese-Malaysian meetings over several months, after a sweep of Najib’s offices, according to members of the government. 

The Journal, besides reviewing the documents, interviewed people in position to know the events, among them a former official of Najib’s government.
The documents describe a plan proposed by Malaysian officials for Chinese state companies to build two large projects with funding from Chinese banks. 

One, the $16 billion East Coast Rail Link, would be a railway across Malaysia connecting two ports. 

The other, the $2.5 billion Trans Sabah Gas Pipeline, would be built partly on Malaysia’s portion of the island of Borneo.
Armed with a bottomless supply of cash, Jho Low staged the ultimate extravaganza. Leonardo DiCaprio, Pharrell Williams, Swizz Beatz, Jho Low, Paris Hilton, Kim Kardashian and Kanye West all attended the Vegas party.

The projects would provide “above market profitability” to the Chinese state companies, the documents say. 

The rail link should have cost only $7.25 billion to build, according to an earlier estimate by a Malaysian consultancy, said a Malaysian government official.
The public must believe “all initiatives are market driven for the mutual benefit of both countries,” Chinese official Xiao Yaqing said at a meeting on June 28, 2016, according to minutes of the meeting.
Xiao, chairman of China’s State-owned Assets Supervision and Administration Commission, said he had “cancelled all his key engagements in Beijing to attend” because the matter “has been approved by President Xi Jinping, Premier Li Keqiang” and another senior Chinese official, according to the minutes. 

Xiao’s agency didn’t respond to requests for comment.
At a meeting the next day, Sun Lijun, then head of China’s domestic-security force, confirmed that China’s government was surveilling the Journal in Hong Kong at Malaysia’s request, including “full scale residence/office/device tapping, computer/phone/web data retrieval, and full operational surveillance,” according to a Malaysian summary of that meeting.

Chinese official Xiao Yaqing, seen at a June summit of China’s ‘Belt and Road’ program of building infrastructure in dozens of other countries. 

“Sun says that they will establish all links that WSJ HK has with Malaysia-related individuals and will hand over the wealth of data to Malaysia through ‘back-channels’ once everything is ready,” the summary reads. 

“It is then up to Malaysia to do the necessary.”
It couldn’t be determined whether China provided any information. 

Sun didn’t respond to requests for comment.
A Journal spokesman said, “We employ experts on security and cybersecurity to work with our journalists on safety and secure communications with sources of information.”

Derailed
Malaysia has frozen work on a Chinese-funded project called the East Coast Rail Link amid concerns its cost was inflated to divert money to help pay off the debts of 1Malaysia Development Bhd.
Sun also promised to use China’s “leverage on other nations” to get the U.S. and others to drop their 1MDB investigations, according to the meeting summary. 

The Justice Department investigation continued, as did probes in Singapore, Switzerland and elsewhere.
At one meeting, the Malaysians asked that the Chinese state company that would build the rail link assume $4.78 billion of 1MDB debt, a plan they hoped China would agree to quickly “due to the time sensitive nature” of the fund’s debts, according to the documents.
A Chinese negotiator worried this would be “very noticeable” in financial statements of the builder, China Communications Construction Co. , meeting minutes show.
A month later, the Malaysians proposed that Chinese state companies instead make payments that would “indirectly be used to repay 1MDB debt,” according to meeting minutes.
Notes of a discussion on Sept. 22, 2016, say the sides agreed to move ahead with the infrastructure deals even though “they may not have strong project financials.”
Participants needn’t “waste time studying the actual project financials to see if they can sustain the debt etc.,” because Malaysia’s government backed the deals for "strategic" reasons, the documents say.
Notes from that meeting said Malaysia was working to enhance bilateral ties, citing support Najib voiced for China’s position in the South China Sea during a regional summit in Laos.
Two months later, Najib went to Beijing and signed the deals. 

Together with other projects, they made Malaysia the second-biggest recipient of One Belt, One Road funding after Pakistan.
Money was flowing by the middle of 2017 as the Export-Import Bank of China issued the first loans. By fall the bank had paid out 80% of the $2.5 billion pledged to state-owned China Petroleum Pipeline Bureau to build the pipeline, although little work had been done, according to Malaysian officials.

Malaysian Prime Minister Mahathir Mohamad, center, suspended plans for Chinese companies to build costly rail and pipeline projects in Malaysia. 

When campaigning for Malaysian parliamentary elections began early in 2018, China openly sided with Najib, its ambassador at one point campaigning with members of his coalition. 

Against the odds, Mr. Mahathir, a prominent former prime minister then 92 years old, led his coalition to victory.
Now, Mr. Mahathir is negotiating with Beijing over potential new terms for the railroad project and seeking the return of Low. 

Excavators for the rail projects are idle, and workers’ quarters are vacant. 

Mr. Mahathir is expected to cancel the pipeline deal.