The Hole at the Heart of China’s Silk Road

A seething and repressed East Turkestan can’t become a hub for trade.

By Mihir Sharma
The western colony has become a police state. 

 
Nobody pretends the People’s Republic of China is a benign power, least of all its leaders in Beijing. Yet, even by the standards of what continues to be a horribly repressive state, the stories that are emerging from behind the Great Firewall about the crackdown on East Turkestan’s Uighur Muslim population are deeply disturbing and deserve more of the world’s attention.
The one country on earth which should best understand the danger and futility of such efforts has set up “reeducation centres” across the length and breadth of its largest colony, where political prisoners are instructed to repeat mantras about the greatness of the Chinese state and of its dictator Xi Jinping. 

They write self-criticisms late into the night. 

Observant Muslims are forced to drink alcohol.
Persistent dissenters are subject to torture, including in a terrifying device known as a “tiger chair.” 

One recent academic study warns that anything between several hundred thousand and over a million residents of East Turkestan may have been sent to the camps. 

The Chinese government has repeatedly denied the existence of any reeducation camps, saying that the people of East Turkestan "live and work in peace and enjoy development and tranquillity.” 

It has also argued in the past that the “tiger chair” is “padded for comfort.”
Now, you could be outraged by these stories and demand, as some countries have done, that Chinese leaders respect the human rights of all their citizens. 

But fewer and fewer governments want to take the risk of offending China. 

And, after all, more than half the people of East Turkestan are Muslims – and who today would really go out on a limb and speak out against the “reeducation” of faithful Muslims? 

So in East Turkestan, as in Tibet, the world is likely to give China a pass.
But there’s another question that Chinese leaders, and the rest of us, should be asking. 

And that is: What does this repression mean for China’s ambitions in Central Asia and beyond?
After all, East Turkestan may today be a distant border colony. 

But it occupies a very different position on the map of the world as Xi would remake it. 

The Silk Roads of the past went through East Turkestan and, if the Belt and Road Initiative ever takes off, it is East Turkestan that will be its hub and heart. 

The Chinese colony is intended to connect Central Asia, the China-Pakistan Economic Corridor and Siberia to the densely industrialized Chinese heartland.
China’s crackdown is meant at least in part to pacify the region, which has seen fluctuating waves of resentment and separatist sentiment over the years. 

But can a colony so tightly controlled by the authorities become the crossroads of a continent’s trade?
Uighurs are now forbidden to travel abroad – and even those who leave the province for other parts of China are suspect. 

Visa requirements for visitors from places like Pakistan have been tightened. 

Fewer will visit; others have found that wives and children across the border have vanished into camps.
Trade is more than a few sealed trucks rolling up to a checkpoint set amid walls and barbed wire. Trade cannot happen without people – without the coming and going of traders, without bustling border cities and entrepots where deals are made and demand is weighed.
Perhaps China’s planners imagine that East Turkestan need be nothing but usefully located real estate, a barren land through which trains will thunder, shipping their products west. 

That is, however, unlikely to happen. 

For one, East Turkestan does not stand in isolation. 

Many of its people are part of a larger Central Asian cultural network. 

The case of an ethnically Kazakh Chinese woman who fled after working in one of the camps, for instance, has become a cause célèbre in Kazakhstan.
The government in Astana is already having to deal with increasing popular anger about the East Turkestan crackdown and is quietly complaining to China. 

The louder the discontent at home, the less polite its complaints will be. 

Do Chinese leaders imagine that the Belt and Road can be laid down without the cooperation of Central Asia’s governments or of its people?
Perhaps China imagines instead that continued mass settlement of the colony by ethnically Han Chinese migrants from elsewhere in the country will solve the problem. 

The government has, after all, ensured that the colony’s residency rules are the most liberal in China. 

But that will merely create a social tinderbox that no “smart” police state, such as is being piloted in East Turkestan’s cities, can truly control.
It’s not yet too late for China to realize its errors and to seek reconciliation with East Turkestan’s Uighurs. 

If the land-based economic corridors of Xi’s imagination are to become a reality, then China will need to build a peaceful and secure East Turkestan that’s integrated effectively with its neighbors. 

A police state full of brutal reeducation camps will merely provoke a terrifying backlash – and the Belt and Road will be among the casualties.

Chinese Peril

China’s Silk Road Plan Facing Problems

VOA
In this Dec. 22, 2017, photo, a Pakistani police officer stands guard at the site of Pakistan China Silk Road in Haripur, Pakistan. From Pakistan to Tanzania to Hungary, projects under Xi Jinping's signature "Belt and Road Initiative" are being canceled, renegotiated or delayed. 

China’s plan for a modern Silk Road linking Asia and Europe hit a pothole recently in Pakistan.
Pakistan and China have good relations; some Pakistani officials even call China their “Iron Brother.” China has played an even bigger role in the country since U.S. President Donald Trump decided last week to suspend security assistance to Pakistan.
Yet, plans for the countries to build a $14-billion dam on the Indus River were put in doubt, after Pakistan’s water authority announced China wanted to own part of the project.
China has denied making the demand. 

However, the water authority rejected China’s demand as against Pakistani interests, and withdrew Pakistan from the dam project.

Belt and Road Initiative
From Pakistan to Hungary to Tanzania, projects under Xi Jinping’s “Belt and Road Initiative” are being canceled, renegotiated or delayed. 

Host countries have disputed costs and benefits that they would receive.
The “Belt and Road Initiative” is a plan to build projects across 65 countries, from the South Pacific through Asia to Africa and Europe. 

Such projects include oil drilling in Siberia, new ports in Southeast Asia, railways in Eastern Europe and power plants in the Middle East.
In this Dec. 22, 2017, photo, a Pakistani motorcyclist drives on a newly built Pakistan China Silk Road in Haripur, Pakistan.

The United States, Russia and India view the Belt and Road initiative as a way for China to expand its influence.
Many countries have welcomed plans to build infrastructure that would keep their economies growing. 

Nations such as Japan have given or lent billions of dollars for development through the Asian Development Bank.
China, however, remains the largest or only source of money for many projects.​

Many projects cancelled or delayed
In November, Nepal canceled plans for Chinese companies to build a $2.5-billion dam. 

Officials said building contracts for the Budhi Gandaki Hydro Electric Project violated rules that require offers from numerous bidders.
The European Union is also looking into whether Hungary awarded contracts to Chinese builders for a high-speed railway to Serbia without competing bids.
In Myanmar, plans for a Chinese oil company to build a $3-billion refinery were canceled in November because of financing problems.
In Thailand, work on a $15-billion high-speed railway was delayed in 2016 following complaints that not enough business went to Thai companies.
In Tanzania, the government has reopened negotiations with China and the gulf state of Oman over ownership of a planned $11-billion port in the city of Bagamoyo. 

Tanzania wants to make sure its people get more than just taxes collected from the port.
Even Pakistan, one of China’s friendliest neighbors, has failed to agree on key projects. 

Among them are a $10-billion railway in Karachi and a $260-million airport for Gwadar.
A general view of Gwadar port in Gwadar, Pakistan Oct. 4, 2017. The port is at the heart of the $50 billion Chinese investment in the China-Pakistan Economic Corridor (CPEC).
Limited success
There is no official list of all Belt and Road projects. 

However, BMI Research has created a list of $1.8 trillion worth infrastructure investments across Asia, Africa and the Middle East.
Christian Zhang is with BMI Research. 

He said, “it’s probably too early to say at this point how much of the overall initiative will actually be implemented.”
Kerry Brown is a Chinese politics professor at King’s College London. 

He said China has faced and may continue to face “a lot of disagreements and misunderstandings.”
Brown added, “It’s hard to think of a big, successful project the ‘Belt and Road Initiative’ has led to at the moment.”
Despite the setbacks, Chinese officials say most Belt and Road projects are moving ahead with few problems.
The state-run China Development Bank announced in 2015 it had set aside $890 billion for more than 900 projects across 60 countries in gas, minerals, power, telecommunications, infrastructure and farming. 

The Export-Import Bank of China said it would support 1,000 projects in 49 countries.
And last November, deputy commerce minister Li Chenggang said that work on pipelines to deliver oil and gas from Russia and Central Asia is making “steady progress.”

Chinese Peril

What the World’s Emptiest International Airport Says About China’s Influence
By BROOK LARMER 

Illustration by Andrew Rae

The four-lane highway leading out of the Sri Lankan town of Hambantota gets so little traffic that it sometimes attracts more wild elephants than automobiles. 

The pachyderms are intelligent — they seem to use the road as a jungle shortcut — but not intelligent enough, alas, to appreciate the pun their course embodies: It links together a series of white elephants, i.e. boondoggles, built and financed by the Chinese. 

Beyond the lonely highway itself, there is a 35,000-seat cricket stadium, an almost vacant $1.5 billion deepwater port and, 16 miles inland, a $209 million jewel known as “the world’s emptiest international airport.”
Mattala Rajapaksa International Airport, the second-largest in Sri Lanka, is designed to handle a million passengers per year. 

It currently receives about a dozen passengers per day. 

Business is so slow that the airport has made more money from renting out the unused cargo terminals for rice storage than from flight-related activities. 

In one burst of activity last year, 350 security personnel armed with firecrackers were deployed to scare off wild animals, the airport’s most common visitors.
Projects like Mattala are not driven by local economic needs but by remote stratagems. 

When Sri Lanka’s 27-year civil war ended in 2009, the president at the time, Mahinda Rajapaksa, fixated on the idea of turning his poor home district into a world-class business and tourism hub to help its moribund economy. 

China, with a dream of its own, was happy to oblige. 

Hambantota sits in a very strategic location, just a few miles north of the vital Indian Ocean shipping lane over which more than 80 percent of China’s imported oil travels. 

A port added luster to the “string of pearls” that China was starting to assemble all along the so-called Maritime Silk Road.
Sadly, no travelers came, only the bills. 

The Mattala airport has annual revenues of roughly $300,000, but now it must repay China $23.6 million a year for the next eight years, according to Sri Lanka’s Transport and Civil Aviation Ministry. 

Over all, around 90 percent of the country’s revenues goes to servicing debt. 

Even a new president who took office in 2015 on a promise to curb Chinese influence succumbed to financial reality.
To relieve its debt crisis, Sri Lanka has put its white elephants up for sale. 

In late July, the government agreed to give China control of the deepwater port — a 70 percent equity stake over 99 years — in exchange for writing off $1.1 billion of the island’s debt. (China has promised to invest another $600 million to make the port commercially viable.) 

When the preliminary deal was first floated in January, protests erupted in response to the sell-off of national sovereignty, a reminder of Sri Lanka’s colonial past under British rule. 

“We always thought China’s investments would help our economy,” says Amantha Perera, a Sri Lankan journalist and university researcher. 

“But now there’s a sense that we’ve been maneuvered into selling some of the family jewels.”
As the United States beats a haphazard retreat from the world — nixing trade agreements, eschewing diplomacy, antagonizing allies — China marches on with its unabashedly ambitious global-expansion program known as One Belt, One Road. 

The branding is awkward: “Belt” refers to the land-bound trading route through Central Asia and Europe, while “Road,” confusingly, stands for the maritime route stretching from Southeast Asia across the Indian Ocean to the Middle East, Africa and Europe. 

Still, the intentions are clear: With a lending and acquisitions blitz extending to 68 countries (and counting), OBOR seeks to create the ports, roads and rail and telecommunications links for a modern-day Silk Road — with all paths leading to China.

Illustration by Andrew Rae

This is China’s long game. 

It’s not about immediate profits; infrastructure projects are a bad way to make money. 

So why is Xi Jinping fast-tracking OBOR projects amid an economic slowdown at home and a crackdown on other overseas acquisitions? 

Economics is a big part: China wants to secure access to key resources, export its idle industrial capacity, even tilt the world order in its favor. 

But there is also a far greater political ambition. 

For centuries, Western liberalism has ruled the world. The Chinese believe their time has come. 

“China sees itself as a "great" civilization that needs to regain its status as leader of the world,” says Kadira Pethiyagoda, a fellow at the Brookings Institution Doha Center. 

“And America’s retreat gives China the space to do that.”
It’s tempting to see OBOR as a muscled-up Marshall Plan, the American-led program that helped rebuild Western Europe after World War II. 

OBOR, too, is designed to build vital infrastructure, spread prosperity and drive global development. Yet little of what China offers is aid or even low-interest lending. 

Much OBOR financing comes in the form of market-rate loans that weaker countries are eager to receive — but struggle to repay. 

Even when the projects are well suited for the local economy, the result can look a bit like a shell game: Things are built, money goes to Chinese companies and the country is saddled with more debt. 

What happens when, as is often the case, infrastructure projects are driven more by geopolitical ambition or the need to give China’s state-owned companies something to do? 

Well, Sri Lanka has an empty airport for sale.
Sri Lanka is a harbinger for debt crises to come. 

Many other OBOR countries have taken on huge Chinese loans that could prove difficult to repay. 

For example, Chinese banks, according to The Financial Times, recently lent Pakistan $1.2 billion to stave off a currency crisis — even as they pledged $57 billion more to develop the China-Pakistan Economic Corridor. 

“The projects China proposes are so big and appealing and revolutionary that many small countries can’t resist,” says Brahma Chellaney, a professor of strategic studies at New Delhi’s Center for Policy Research. 

“They take on loans like it’s a drug addiction and then get trapped in debt servitude. It’s clearly part of China’s geostrategic vision.”
This charge conjures the specter of colonialism, when the British and Dutch weaponized debt to take control of nations’ strategic assets. 

Unlike Western countries and institutions that try to influence how developing countries govern themselves, China says it espouses the principle of noninterference. 

If local partners benefit from a new road or port, the Chinese suggest, shouldn’t they be able to “win,” too — by securing its main trade routes, building loyal partnerships and enhancing its global prestige?

The last time China was a global power, back in the early 1400s, it also sought to amplify its glory and might along the Maritime Silk Road, through the epic voyages of Zheng He. 

A towering Ming dynasty eunuch — in some accounts he stands seven feet tall — Zheng He commanded seven expeditions from Asia to the Middle East and Africa. 

When he came ashore on Ceylon (present-day Sri Lanka) around 1406, his fleet commanded shock and awe: It was a floating city of more than 300 ships and some 30,000 sailors. 

Besides seeking tributes and trade — the ships were laden with silk, gold and porcelain — his mission was to enhance China’s status as the greatest civilization on earth.
After Zheng He’s death at sea in 1433, China turned inward for the next six centuries. 

Now, as the country has become a global power once again, Communist Party leaders have revived the legend of Zheng He to show China’s "peaceful" intentions and its historical connections to the region. 

His goal, they say, was not to conquer but to establish friendly trade and diplomatic relations. 

In Sri Lanka today, Chinese tour groups often traipse through a Colombo museum to see the trilingual stone tablet the admiral brought here — proof, it seems, that China respected all peoples and religions. 

No mention is made of a less savory aspect of Zheng He’s dealings in Ceylon. 

On a later expedition, around 1411, his troops became embroiled in a war. Zheng He prevailed and took the local king back to China as a prisoner.

The unsanitized version of Zheng He’s story may contain a lesson for present-day China about unintended consequences. 

Pushing countries deeper into debt, even inadvertently, may give China leverage in the short run, but it risks losing the good will essential to OBOR’s long-term success. 

For all the big projects China is engaged in around the world — high-speed rail in Laos, a military base in Djibouti, highways in Kenya — arguably its most perilous step so far may be taking control of the foundering Hambantota port. 

“It’s folly to take equity stakes,” says Joshua Eisenman, an assistant professor at the University of Texas at Austin. 

“China will have to become further entwined in local politics. And what happens if the country decides to deny a permit or throw them out. Do they retreat? Do they protest?” 

China promotes itself as a new, gentler kind of power, but it’s worth remembering that dredging deepwater ports and laying down railroad ties to secure new trade routes — and then having to defend them from angry locals — was precisely how Britain started down the slippery slope to empire.

Han Paranoia

China's Bridge to Nowhere
By Joel Moser 

In the aftermath of the Cold War, the Soviet “Evil Empire” appeared to be more myth than reality—a public relations stunt perpetrated by USSR leadership to appear strong. 

In fact, the pace of Soviet expenditure on its military, at a quarter of its GDP, was unsustainable and its economy was headed to collapse. 

Are we witnessing a similar public relations stunt in China’s plan for world domination via infrastructure development instead of military might?
In its Belt and Road initiative, China has laid out plans to spend as much as US$8 trillion dollars on infrastructure intended to connect the Eurasian land mass as well as Africa to create the 21stCentury equivalent of the Silk Road, reestablishing China as the center of the globe and cementing global economic ties. 

At first look, this is a masterful plan as it proposes to create lasting bonds through transportation and energy links. 

A closer examination raises a series of questions.
First, can China, as big as it is, actually afford this build-up? 

The plan calls for incremental expenditures in an amount close to the total GDP of the country. 

True, China’s GDP will grow over time and the plan does not have very specific timeframes for completion, allowing for affordability pacing. 

However, big-ticket projects tend to grow in cost at a rate far in excess of inflation.
Next, consider the regions and countries intended to be connected by the plan. 

These include some of the most politically complicated states on the planet such as Iran, Pakistan and Saudi Arabia, as well as China’s frequently unmanageable neighbor Indonesia where a court in the capital city Jakarta recently convicted its ethnically Chinese former Governor of blasphemy and sentenced him to two years in prison. 

These are nations which are not likely to easily fall in line from the soft power of trade links, and China may come to see investment in these countries as misadventures akin to the United States’ failed attempts to insert itself in the affairs of several South American countries and elsewhere in the heady days after World War II.
Trillions of dollars of cement and steel may be more influential than covert CIA plots, but the United States, other NATO countries and the World Bank have also seen trillions of dollars of infrastructure spending in complicated places around the world quite literally blown up as politics rapidly shifted on the ground.
In the late 1960s through the early 1980s, the United States planed, funded and constructed numerous infrastructure projects, including in some of the very countries that are to be part of the Belt and Road initiative. 

Many were implemented by USAID in Iran, Laos, Syria and Lebanon. 

Through ensuing revolutions and wars, many of these projects, though completed, subsequently were literally destroyed, bombed out of existence.
What these experiences demonstrate is that poured concrete alone will not cement trading routes, trading routes alone will not create economic opportunities and infrastructure development, however massive, is not permanent in the face of civil unrest and political turmoil. 

Big infra assets like bridges, power stations and refineries are often the first targets of precision bombing raids when armed conflicts break out.
In calculating its return on $8 trillion of investment, has China factored in the political risk of violent regime change or civil unrest? 

Furthermore, how are they hedging these massive investments against the risk of disruptive technological shifts such as localized commercial scale 3D printing, advanced distributed solar power generation, or even solar powered air travel that may make heavy land and sea based transportation systems and midstream energy links largely obsolete?
Infrastructure is expensive and there are good reasons that most market driven investors will only put capital into stable countries and into projects with long-term off-take or use agreements. 

A country can make these forms of investment for policy reasons or with longer time horizons, but they are nonetheless subject to the same political and economic risks. 

Presumably China is aware of all of this and must understand how much of a gamble this capital deployment would be.
Why plan such an undertaking if it may be a giant bridge to nowhere? 

Because it plays well politically now, and the fulfillment of the plan will fall to the leaders of the future. 

Because Chinese builders need projects to stay busy at a moment in which the country has overbuilt its own infrastructure and there are few mega projects left to undertake—you can build only so many ghost cities.
Finally, because it’s a show for both internal and external audiences. 

The world has seen wasted infrastructure spending in unstable regions and a seemingly rising power spend itself to death in an effort to project a larger image on the world stage. 

Now it’s China’s turn to make the same mistakes.

Chinazism: We should be worried about China's new Silk Road

Xi Jinping’s global infrastructure investment programme threatens the west with more than economic dominance. He’s playing a serious political game.

By Tom Miller

Illustration by Thomas Pullin
Earlier this year the first direct freight train from China to the UK arrived at a depot in Barking, east London, carrying containers loaded with consumer goods. 

Named East Wind, it took 16 days to travel 7,500 miles across eight countries, halving the time it would have taken by sea. 

A few months later the train made its first return journey, delivering Scotch whisky, pharmaceuticals and baby products to the gargantuan wholesale markets of Yiwu, on China’s east coast. 

Last year 1,702 freight trains from China arrived in Europe, double the total in 2015, and more services are being added.

China train rolls into London
The train is named after some famous words of Mao Zedong. 

“Either the east wind prevails over the west wind or the west wind prevails over the east wind,” Mao declared in 1957. 

Sixty years on, China’s current leaders are doing their best to ensure the east wind prevails. 

The trains trundling their way across Eurasia are part of their attempt to build a new Silk Road, inspired by the ancient caravan routes that once crisscrossed the remote desert and steppe of central Asia. 

They are motivated today by the quest for economic power and national glory. 

By building and financing highways, railways and ports, China’s leaders literally want all roads to lead to Beijing.
The new Silk Road is broader in both geographical and economic scope than its ancient namesake, which was mainly land-based and all about trade and commerce. 

On land, it involves building new transport infrastructure and industrial corridors stretching across Central Asia to the Middle East and Europe. 

On water, it encompasses new ports and trade routes across the South China Sea into the South Pacific, and through the Indian Ocean all the way to the Mediterranean. 

Beijing talks of 65 or so countries belonging to the initiative, but there is no definitive list. 

It is diplomatic shorthand describing Chinese financing, investment and construction across much of the developing world.
The initiative is being pushed hard by Xi Jinping, who has spent five years trying to bolster China’s international clout. 

It is central to his “Chinese dream”, unveiled in his first public act as Communist party chief, when he visited the National Museum of China in Tiananmen Square. 

Emerging from an exhibition that detailed how six decades of Communist rule had brought prosperity to China after a “century of national humiliation”, Xi vowed “to realise the great rejuvenation of the Chinese people”. 

Communist-speak for “make China great again”.
Leaders will meet at the 19th party congress next month to determine who will rule China for the next five years and beyond. 

Already anointed China’s “core” leader, Xi looks set to tighten his grip on power. 

Under his leadership, China has become a more fearful and repressive place – but Xi can claim that his nation is both stronger than it was when he took command. 

Emboldened by the weakening position of the United States under Donald Trump, he is using China’s economic brawn to restore its historical position as the region’s dominant power.
The new Silk Road is at the heart of Xi’s nationalistic vision, as Beijing flexes its economic muscles for strategic ends.

By funding and building transport infrastructure, pipelines and power grids, it aims to weave a web of economic dependency and draw other countries ever tighter into its embrace. 

China’s interests clearly come first, but few underdeveloped states feel they can ignore its promise to deliver much-needed infrastructure. 

The one exception is North Korea, where China’s economic leverage as the hermit kingdom’s biggest trade partner by far appears no match at the moment against Kim Jong-un’s nuclear threat and autarkic ambitions.

East Wind freight carriages arrive in Barking in January. 

Key pieces of the new Silk Road, such as the overland freight routes from China to Europe, are already in place. 

Direct investment along the road was $30bn in 2015-16, according to Beijing’s records, while Chinese firms signed construction contracts worth $189bn and earned $145bn in 60-odd countries. But there are doubts over its security and commercial feasibility. 

Pakistan has reportedly deployed 14,500 security personnel to ensure the safety of some 7,000 Chinese nationals working on the economic corridor. 

The danger was evident in May, when two Chinese language teachers were kidnapped and killed by armed men in Quetta, a remote but important section of the corridor. 

Freight trains from China to Europe may not prove profitable, however much time they save. 

Countries with a history of enmity with China, such as Vietnam and India, fear the strategic implications of China’s expanding tentacles. 

New Delhi has condemned China’s port-building in the Indian Ocean, especially in Sri Lanka and Pakistan, as a platform for military expansionism – a “string of pearls” around the neck of Mother India. 

This summer’s military standoff with China along the contested border in the Himalayas has only added to India’s concerns.
The threat of conflict between Asia’s giants has overshadowed the ninth annual summit of the five Brics countries – Brazil, Russia, India, China and South Africa – starting in the Chinese port city of Xiamen on Sunday. 

The meeting between Xi and India’s prime minister, Narendra Modi, may ease tensions, but the strategic competition will remain.
In other parts of Asia, China’s infrastructure diplomacy is paying dividends in the Philippines – whose president Rodrigo Duterte returned home from Beijing late last year with an investment and trade package worth $24bn after announcing his country’s “separation” from the United States – and Malaysia , whose prime minister Najib Razak declared himself a “true friend” of China after securing deals worth $34bn. 

And small countries such as Cambodia and Tajikistan are also heavily reliant on China to provide vital public goods.
China’s geopolitical leverage is growing. 

Since the end of the second world war, the US has been the dominant power in the Asia-Pacific – but Trump’s diplomatic missteps are playing into China’s hands. 

His decision to bin the Trans-Pacific Partnership, a 12-nation trade pact that pointedly did not include China, has diminished Washington’s regional clout. 

TPP was designed by the Obama administration to anchor the US’s economic and diplomatic presence in Asia at the expense of China. 

Instead, Beijing is pushing for an alternative deal that includes China but not the US.

Construction on the Zhuhai-Macau border last week. 

As the US under Trump turns inwards, a newly self-confident China is attempting to replace it. Earlier this year, Xi urged delegates at a forum about the new Silk Road in Beijing to reject protectionism and embrace a version of global trade that China’s publicity machine is spinning as “Globalisation 2.0”. 

Much of this is bluster, but Xi is playing a serious diplomatic game. 

Thirty heads of state attended the forum – not as many as Beijing hoped for, but a sufficient showing for Xi to present himself as an international statesman of substance.
China’s leaders know there is still much diplomatic work to be done, as few countries yet buy its diplomatic mantra about delivering “mutual benefits”. 

Simply put, it is not trusted. 

But its hard-headed economic diplomacy is far bolder, more forward-looking and more practical than any of the alternatives. 

Under Trump, the US does not have a coherent Asia policy and is no longer viewed as a reliable partner, even by its regional allies. 

Japan is still a big source of investment in Asia, but its economy is dwarfed by China’s and it cannot compete as a financier.
From a British perspective, China’s Asian power play looks remote. 

If the new Silk Road delivers a few extra containers of cheap consumer goods, so much to the good. 

But it matters to us all if China’s economic diplomacy succeeds. 

As the outcry this summer over Cambridge University Press’s decision to uphold Beijing’s request to delete 300 politically sensitive articles shows only too clearly, economic leverage buys political power. 

Only an international outcry forced Britain’s oldest academic press to backtrack on its decision. 

The economic pressure on the west to comply with illiberal demands from Beijing will intensify.
In Asia and beyond, China’s rise will bring many economic opportunities, but it could have politically devastating consequences. 

Mao predicted that the east wind would eventually prevail over the west wind. 

If he is proved correct, we will all feel its force.

Chinese hypocrisy is a pleonasm

China jails its citizens as it touts global benefits of ‘new Silk Road’ 

By Nathan Vanderklippe

The curtains closed on China’s moment of international glory with leaders from 29 countries agreeing to a joint communiqué, an act of symbolic support for Beijing’s vision of building a more prosperous global future around a “new Silk Road.”

But as those leaders placed their signatures on a document pledging, among other things, “to be more responsive to all the needs of those in vulnerable situations,” hundreds of Chinese people were being kept inside a black jail on the outskirts of Beijing, many of them with long histories of complaining about mistreatment they had endured. 

They remained there for the duration of the Belt and Road Initiative forum that brought crowds of foreign dignitaries to China.
On Tuesday, after the Presidents had left, police transferred several dozen people out of the black jail, the unofficial Jiujingzhuang detention centre where people who petition the government are often held. 

They were loaded onto a single car on a slow train to Shanghai, with men in uniform barring anyone else from entering or leaving for the 19-hour trip.
The gap between their treatment and the ideals put forward in the communiqué is one indication of the contradictions that lie at the heart of China’s ambitious new desire to position itself as a new global leader, one at the forefront of a new era of common trade, security and peaceful relations.
The joint communiqué also pledges signatories, which include Russia and Turkey, to expand “peace, justice, social cohesion, inclusiveness, democracy, good governance, the rule of law, human rights, gender equality and women empowerment.”
But to those in China who complain that their rights have been violated, “they treat us like enemies. They believe that while their meeting is on, we should not appear. We should disappear,” said Mao Hengfeng, a long-time protester and human-rights defender who has been jailed multiple times since she was forced to have an abortion in the late 1980s.
Ms. Mao arrived in Beijing on Sunday, the first day of the Belt and Road forum. 

When she and a group of other petitioners reached a bus stop near the meeting site, police checked their identification and quickly took them away, depositing them first in what she described as an unused military warehouse, then taking them to a black jail, before evicting them from Beijing.
“It does call into question some of the high-sounding rhetoric in the joint communiqué,” said William Nee, China researcher at Amnesty International.
Elsewhere, too, there are inconsistencies between the rhetoric and practice of China’s bid to fill the leadership vacuum left by a more inward-focused United States.
China has said the world needs more connectivity, even though it is a leader in fencing off the Internet. 

China has called for removing obstacles to trade and investment, despite maintaining protectionist barriers at home and pursuing a national import substitution program to privilege its own manufactured goods. 

Xi Jinping has urged the creation of “a big family of harmonious co-existence,” while at home Chinese authorities urge the reporting of foreigners who might be spies.
“When they are dealing with globalization, they are not actually doing it in the way the term has previously been understood,” said Steve Tsang, director of the China Policy Institute at the University of Nottingham. 

Xi “instead is emphasizing the kind of globalization the Chinese government wants to promote.”
That may affect China’s ability to assume the global primacy it has sought since the election of Donald Trump as U.S. President.
“Leadership has two sides. You have to be willing and able to assert your leadership and you need other people willing to accept your leadership,” said Prof. Tsang. 

China’s willingness to expend vast funds in building new roads, rail lines and power plants on its One Belt, One Road initiative has won it supporters around the world, he said.
With Beijing “prepared to put an absolutely enormous amount of money behind it, you are not going to have a lot of people coming out openly to challenge you. And therefore you are going to be successful in the short-term, officially,” he said.
And it’s clear that globalization as it is currently constructed has run into problems, in Western countries and elsewhere. 

China is providing an alternative. 

Beijing says it is focused on trade and economic matters, and that it has no desire to meddle with the affairs or political systems of other countries.
What’s not clear is how much those who back Belt and Road are prepared to cede China a durable position of influence, such as the U.S. has managed to achieve.
With China, “all they are offering is the greatest-ever gravy train,” Prof. Tsang said.
“If the Chinese economy does not stay on the current trajectory, then the game is changed. And if that money isn’t there, then the gravy train becomes a train of sand, and you don’t get the same reception.”
Those aboard the slow train to Shanghai, meanwhile, questioned why China is spending so much time and money addressing issues outside its borders, when their own complaints remain unresolved.
Fei Aizhong has protested since her Shanghai home was demolished in 2002. 

To draw new attention to her case, she came to Beijing with others during the Belt and Road forum. Some of them slept under bridges because hotels barred them from staying during the event.
“For so many years, they robbed us of our house and property,” Ms. Fei said.
“One Belt, One Road is beneficial to people all over the world,” she said. 

“But they haven’t solved our problems. Instead, they treat us like class enemies.”

Germany wants more guarantees from China over 'Silk Road' trade plan

Germany has warned that EU countries are not yet prepared to sign a joint statement on China's "Silk Road" trade initiative. Economy Minister Brigitte Zypries has called for more free trade guarantees from Beijing.
DW

German Economy Minister Brigitte Zypries on Sunday warned that Germany and other EU countries would not sign a joint trade statement at China's Belt and Road Forum unless they received more guarantees from Beijing on free trade, environmental protection and working conditions.
"So far, the demands of the EU countries in areas such as free trade, setting a level playing field and equal conditions have not been met," she said in a press briefing on the sidelines of the summit in Beijing. 

"If these demands are not met, then we cannot sign. We'll see what happens tomorrow."
A communique is expected to be published on Monday at the end of the forum, at which China is seeking support for a new "Silk Road": a trade and infrastructure project linking China with countries in Central and Southeast Asia, Europe, the Middle East and Africa.
Officials from more than 100 countries are attending the two-day forum to promote the initiative. Those present include Xi Jinping, Russian President Vladimir Putin, Turkish President Recep Tayyip Erdogan and UN Secretary General Antonio Guterres.Zypries: "There is still a problem between our states"

European misgivings
However, western European countries have tended to send ministers or lower-ranking officials to the forum in a sign of their unease about the plan, which some see as an attempt to promote Chinese global influence. 

Western diplomats also have reservations about the initiative's lack of transparency and formal structure.
Zypries on Sunday called for more transparency in tenders for projects related to the initiative, and insisted that it should conform to international trade standards.
"Germany does want to take part, but tenders need to be open to everyone; only then will German companies take part," she said. 

"It must also be clear what is actually going to be built. At this point, it's not clear."
A draft of the communique that is meant to be issued on Monday says the initiative intends to uphold "the rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system with the WTO (World Trade Organization) at its core."
India has boycotted the forum to indicate its displeasure that part of a planned China-Pakistan corridor will run through the disputed Kashmir region.

"This will be the death of the Mekong"

China's Silk Road push in Thailand may founder on Mekong River row

By Brenda Goh and Andrew R.C. Marshall | KHON PI LONG, THAILAND

A Chinese boat, with a team of geologists, surveys the Mekong River at border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017.

A boat navigates along the rapids, at the Mekong River, at the border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017.

A sticker is seen at the Thailand side of the Mekong River, at the border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017.

A Chinese boat with a team of geologists surveys the Mekong River, at the border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017.

A Chinese team of geologists surveys the Mekong River banks, at the Laos side, at the border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017.

A protest banner demanding to stop rapids blasting at the Mekong River, is seen at the border between Laos and Thailand April 24, 2017. Picture taken April 24, 2017.

Thailand's Professor Niwat Roykaew, Chairman of Rak Chiang Khong Conservation Group, poses during an interview with Reuters, by the Mekong River, at the border between Laos and Thailand April 23, 2017. Picture taken April 23, 2017. 

China's plan to blast open more of the Mekong River for bigger cargo ships could founder on a remote outcrop of half-submerged rocks that Thai protesters have vowed to protect against Beijing's economic expansion in Southeast Asia.
Dynamiting the Pi Long rapids and other sections of the Mekong between Thailand and Laos will harm the environment and bring trade advantages only to China, the protesters say.
"This will be the death of the Mekong," said Niwat Roykaew, chairman of the Rak Chiang Khong Conservation Group, which is campaigning against the project. 

"You'll never be able to revive it."
Niwat said blasting the Mekong will destroy fish breeding grounds, disrupt migrating birds and cause increased water flow that will erode riverside farmland.
Such opposition reflects a wider challenge to China's ambitious "One Belt, One Road" project to build a modern-day Silk Road through Asia to Europe.
Second Harbour Consultants, a subsidiary of state-owned behemoth China Communications Construction Corp (CCCC) said it was surveying the Mekong for a report that China, Laos, Myanmar and Thailand would use to decide whether blasting should go ahead.
It added that it was not tasked with the blasting work, which would need to be tendered.
The company said in an e-mail it had held meetings with local people "to communicate, build confidence and clear doubts."
China's foreign ministry did not immediately respond to a request for comment.
Clearing the Mekong for bigger ships is not officially a part of One Belt, One Road, a project announced in 2013; China blasted sections of the river in Laos several years earlier.
But some Chinese engineers involved in the survey speak of it as a part of the broader plan, and it is consistent with Beijing's Silk Road objectives.
Even in its Southeast Asian backyard, where it has sympathetic governments and ancient historical ties, China sometimes struggles to convince ordinary people that One Belt One Road will benefit them.
Thailand, Laos and Myanmar have approved the survey work, which is funded by China, but further studies and approvals are needed before blasting.

KEEPING A LOW PROFILE
The Mekong River originates in the Tibetan plateau and cascades through China and five Southeast Asian countries.
China has built a series of dams along its stretch of the river that has impacted the water flow and made the regional giant hard to trust.
Chinese flags now flutter from company speedboats, while CCCC Second Harbour has met with Thai protesters three times since December in a bid to avert opposition to their work.
A unit of the conglomerate faced violent protests in January in Sri Lanka, where people objected to plans for an industrial zone in the south.
Chinese engineers on the Mekong said they were worried that Thai protesters would board the rickety cargo ship where they slept, prompting them to moor it on the Laotian side of the Mekong each night.
"We are afraid for our team's safety," one engineer told Reuters, declining to be named because he wasn't authorized to speak to the media.
"We keep a low profile here," he added. 

"We want to do this project well and benefit Thailand, Myanmar, Laos, China, these four countries. This is not just for China."
China wants to remove rocks and sandbanks to allow ships of up to 500 tonnes to sail from its landlocked province of Yunnan to the sleepy Laotian town of Luang Prabang.
That would expedite the shipping of Chinese freight deep into northern Laos, said Paul Chambers, an expert in international relations at Thailand's Naresuan University.
"Luang Prabang may seem sleepy, but northern Laos represents a hub of Chinese influence," he said.

LOCALS REMAIN WARY
Despite reassurances from CCCC Second Harbour, locals still believed the engineers were marking out areas for blasting, said Niwat, who represented campaigners in meetings with the Chinese company.
His group draped a large white banner reading "Mekong Not For Sale" on the bank overlooking the Pi Long rapids, whose name in Thai means "lost ghosts."
"At the moment we're only thinking about the economy and the earning figures without considering the unimaginable value of the eco-system to humanity," he said.
The military seized power in Thailand in 2014 and banned gatherings of five or more people.
But Narongsak Osotthanakorn, governor of Chiang Rai -- the Thai province where the Mekong is currently being surveyed -- said people could "protest freely" against the Chinese plan.
Narongsak said the survey was the first stage in a process that would include an environmental study, public hearings and negotiations between China, Thailand, Myanmar and Laos.

Rogue Nation

Europe’s China Pivot
By Robert Manning

“The future has already arrived,” sci-fi writer William Gibson famously quipped, “it’s just not evenly distributed yet.” 

Few in the United States noticed when a freight train arrived in London in January 2017, completing a 7,500 mile journey from China, yet this train, its route an echo of the ancient Silk Road, just may have offered a glimpse of the future.
China is already the world’s largest trading nation, with some $3.9 trillion in two-way trade in 2016. The European Union, with its $17 trillion economy, roughly the size of that of the United States, looms large in China’s ambitious but still inchoate vision of connecting both ends of the Eurasian landmass with a 21st century version of the old Silk Road. 

And to the degree the United States retreats from the post-World War II multilateral system it created, the China-EU relationship could influence the balance of the emerging polycentric order.
Donald Trump’s “America First” posture, his cheerleading of Brexit, and his swift rejection of the Trans-Pacific Partnership spurred Europe and Asia to rapidly scramble in pursuit of multilateral deals to offset the U.S. retreat. 

In a letter to leaders of the 27 EU member states earlier this year, European Council President Donald Tusk described Trump, along with an assertive China and an aggressive Russia, as one of three external threats to Europe’s future. 

Tusk argued that “[w]e should use the change in the trade strategy of the U.S. to the EU's advantage by intensifying our talks with interested partners, while defending our interests at the same time.”
The United States ($579 billion), the European Union ($529 billion), and Japan ($300 billion) are China’s top three bilateral trading partners. 

China’s predatory industrial policies and various tactics to limit goods and investment in competitive sectors like IT or automobiles with tariffs are leading European governments to rethink trade and investment policies with regard to China. 

But the allure of Chinese investment sets European states competing for renminbi.
EU-China relations, particularly for Europe’s largest economies, Germany and France, have been largely one-dimensional. 

As a 2015 report by a consortium of European think tanks observed, “most, if not all European national strategies toward China are dominated by the logic of economics.” 

This has begun to change as China’s increasingly nationalist economic policies and its assertive foreign policy actions have evoked growing concern among many European governments and the European Union itself. 

This was evident in a comprehensive EU strategy on China released by the European Commission in June 2016. 

The strategy reflects a growing European awareness of their stake in the issues China’s behavior raises, and it articulates guidelines and principles for EU policies toward China.

Nationalism in Globalization’s Clothing
Xi Jinping may champion globalization while in Davos, but at home he prizes mercantilist, industrial policies. 

Yet China demands market economy status in the World Trade Organization even as it strengthens and subsidizes its state-owned enterprises.
The United States, European Union, and Japan have all rejected Beijing’s claim in a rare pursuit of parallel policies. 

Similarly, there is growing unease in the United States and the European Union about Chinese direct investment: Beijing targets tech companies in the West to accelerate its efforts to make a leap in advanced manufacturing (e.g., semiconductors, artificial intelligence, robotics) while blocking reciprocal access for Western firms.
But Beijing is skillful in using the enticement of its markets to divide competitors, and if past is prologue, there will be limits to how much individual European nations follow EU-wide policies.
China’s growing focus on Europe is also heavily weighted toward economics, but it fits into a broader global strategy to position Beijing as a dominant player in a post-American world. 

Though still more aspirational than real, China is pursuing a new connectivity of Europe and Asia with its so-called One Belt, One Road policy, a Eurasian vision that has been generally well received in Europe. 

One Belt, One Road would comprise an overland belt of railways, roads, and bridges and a maritime road of seaports stretching to the Middle East and Africa. 

One Belt, One Road also provides China an outlet for the excess capacity of its state-owned enterprises in sectors such as steel, cement, and aluminum, whose subsidized overproduction has helped sustain China’s economic growth.
It is no accident that 14 EU nations joined Beijing’s Asian Infrastructure Investment Bank when it opened its doors last year. 

The Bank -- membership of which Washington has spurned -- along with China’s large state banks and a new $40 billion Silk Road Fund, are seen as principal financiers of One Belt, One Road infrastructure projects, though its lending is not limited to OBOR-related projects.

China-EU Eurasian Connectivity
Many of the projects now repackaged as part of One Belt, One Road were planned or began in Europe before Xi Jinping announced the initiative in 2013. 

A wide array of infrastructure projects such as a container port in Piraeus, Greece, is being modernized by China’s shipping giant, COSCO. 

Chinese firms are interested in seaports in Belgium, the Netherlands, Croatia, Italy, Spain, and Latvia, among others. 

Chinese firms are also exploring airport construction projects in a number of European cities.
European analysts see China looking to new transport corridors: a trans-Eurasian link from China to Europe via Poland and Germany, and a south-north link from Greece via Central Europe to the Baltics. 

One prominent OBOR project is a planned Belgrade-to-Budapest railway. 

Chinese rail-related firms are also engaged in connecting China with a network of cities from Poland and Germany to France and Spain.
In addition, China has seen London’s financial center as an important hub for accelerating the internationalization of the renminbi as a reserve currency. 

However, it is unclear to what extent that role will continue after the United Kingdom departs from the European Union.

China-EU or China-Europeans?
In a slow-growth Europe, attracting investment is a priority, and clearly many EU nations are responding to China’s economic opportunities. 

But the interest and impact of Chinese economic involvement, from One Belt, One Road and foreign direct investment to renminbi hubs, has varied across Europe. 

Reconciling OBOR with the European Union’s regulatory regime may also limit possibilities. 

The absence of any disciplined EU foreign policy also suggests that European responses to Beijing’s overtures will vary.
While China’s infrastructure investment has been broadly welcomed across Europe, there does exist a growing wariness of China as a global actor in Europe writ large. 

China’s mercantilism and assertive maritime behavior have drawn public EU responses, such as a 2016 statement condemning Chinese actions in the South China Sea. 

This skepticism is reflected in the European Commission’s 2016 report outlining a new strategy toward China.
The report calls for strengthening cooperation with Beijing, but it stresses the importance of such engagement being based on transparency, global norms and rules, and reciprocity -- a word repeated throughout the report. 

It criticizes China’s industrial overcapacity, its dumping of goods from steel and other sectors into EU markets, and its “Made in China 2025” industrial policy that seeks to create Chinese national champions in advanced manufacturing sectors at the expense of Western competitors.
The European Union is in the process of negotiating trade and investment agreements with China that will test that rhetoric. 

These issues will loom prominently at the upcoming EU-China annual Summit, a gathering spurred by Trump’s economic nationalist views, which have led not just the European Union, but other U.S. allies and partners like Japan, to search for new multilateral trade arrangements.
China’s growing trade with and investment in Europe has economic and strategic implications for the United States. 

EU-China economic ties heighten competition for U.S. firms in what has historically been a close transatlantic relationship, with $609 billion in trade for 2016 and some $1.9 trillion in cross-investment. 

But over time, it could presage a decreasing European reliance on the United States and a fragmenting West with an economically integrated Eurasia shifting power and influence away from the United States and toward China.

Silk Road Fiasco

China's Belgrade To Budapest High-speed Rail Line Is Probed By Brussels
By Wade Shepard

China may be hitting another snag in the fulfillment of its Belt and Road ambitions. 

The much-anticipated Belgrade to Budapest high-speed rail line, which was touted as China’s “express lane” to Europe, is being reviewed by Brussels for potential infringements of the EU’s requirement that public tenders are offered for such large-scale infrastructure projects.
At a 2013 meeting of the 16+1 in Bucharest, China, Serbia, and Hungry signed an MOU to build a $2.89 billion, 350 kilometer high-speed rail line that would go from Belgrade to Budapest, the first stage of a project that would ultimately connect the China-run Piraeus port in Greece with the heart of Europe. 

This rail line was to be a hallmark project of Beijing’s Belt and Road initiative — a shining example that China could carry out massive infrastructure projects in Europe the right way (i.e. the Brussels way).

In this photo taken on August 13, 2015, Indonesian models look at scale models of Chinese-made bullet trains on exhibition at a shopping mall in Jakarta. Chinese and Indonesian state-owned companies on October 16, 2015 signed a USD 5.5 billion deal to build the first high-speed railway in Southeast Asia's top economy, after Beijing beat Tokyo to win the construction project. 

In September 2016, it was looking as if this international HSR line was gaining momentum, and that construction would soon commence. 

But now there is a slight bump in the path that may grow into a roadblock.
According to the Financial Times, Brussels is looking into the possibility that the deal to build the Belgrade-Budapest rail line may have broke the EU rules on public tenders. 

None were offered for this project. 

This probe is mainly directed at Hungary, being a full-fledged EU member, rather than Serbia, whose “prospective member” status shields it from all of the EU’s regulations. 

Hungary’s deal with China had the development of the rail line going to China Railway International Corporation with financing coming from China’s Export-Import Bank.
Hungary and Serbia both have track records of engaging in large infrastructure projects without offering public tenders. 

The former was the recipient of Brussels’s ire in 2014 when it granted a $13 billion Russia-funded nuclear power plant project to a Russian company without making the bidding public, while Serbia has come under a large amount of internal criticism for just giving the Belgrade Waterfront Project to a company from Abu Dhabi without any type of public competition or even input.
While China has proved itself to be the undisputed greatest high-speed rail developer ever, having constructed over 19,000 kilometers of such lines in their own country in under 15 years, actually getting over the legal and political hurdles to take their HSR-building prowess international seems to have been a far more challenging pursuit. 

The Singapore to Kunming HSR line has been replete with delays and funding conflicts, Mexico City to Queretaro imploded, Los Angeles to Las Vegas didn’t happen, Moscow-Kazan is still speculation, and while after many delays Jakarta to Bandung appears to be getting ready to go, construction has not yet commenced.
While physical development across the broader New Silk Road — the pan-Eurasia mega-project that’s increasing infrastructural, economic, and political connectivity between countries from Europe to China — is currently booming, China’s participation via their Belt and Road initiative hasn’t always been very smoothly implemented.

EU sets collision course with China over ‘Silk Road’ rail project

Probe of Beijing-funded Belgrade-Budapest link hits Xi’s hallmark scheme 
By James Kynge in London, Arthur Beesley in Brussels and Andrew Byrne in Budapest

Serbian prime minister Aleksandar Vucic, left, and China's National Development and Reform Commission deputy head Wang Xiaotao launch the Belgrade-Budapest railway project in Novi Sad, Serbia, in 2015

Brussels is investigating a showcase Chinese rail project that aims to extend Beijing’s “One Belt, One Road” initiative into the heart of Europe, potentially putting the European Commission at loggerheads with China.
The commission’s probe is into a planned 350km high-speed railway between Serbia’s capital, Belgrade, and Budapest in Hungary.
The railway is billed as a hallmark scheme under “One Belt One Road”, a $900bn project championed by Xi Jinping, to build infrastructure and win diplomatic friends in Europe, Asia and Africa.
European officials told the Financial Times that the investigation was assessing the financial viability of the $2.89bn railway and looking into whether it had violated European Union laws stipulating that public tenders must be offered for large transport projects. 
“The commission services are assessing the compliance of the project with EU law. The dialogue with the national authorities is ongoing,” said a European Commission spokeswoman.
Any legal setback to China’s first railway project in Europe would be a diplomatic embarrassment for Beijing, which made the railway its cornerstone offering to win support from central and eastern European nations during a summit attended by the countries in 2013. 
At issue for the commission are separate agreements signed by the Hungarian and Serbian authorities. 
But the main focus is on Hungary, an EU member state that is subject to the full rigour of European procurement law. 
As a prospective member of the bloc, Serbia is subject to looser rules.
Failure to comply with EU tender laws may be punished by fines and proceedings to reverse infringements. 
“If push comes to shove and if it turns out that the Hungarians have awarded a public works contract of a particular dimension without tender they will of course have infringed EU legislation,” said a senior EU official.
No contract for the $1.8bn Hungarian section of the railway appears to have been made public. However, a treaty between Hungary and China, dated last year and seen by the FT last week, stipulates that companies designated by each government should “co-operate for the development” of the project.
It adds that two state-owned Chinese companies — the China Railway International Corporation and the Export-Import Bank of China — should act as contractor and financier for the project, which is due to be implemented by the Hungarian State Railways company. 
On Friday, the Hungarian government did not deny the commission’s probe but said it had signed the agreements with China, including an annex explaining how it had complied with EU procurement law, following consultations with Brussels.
Official Chinese media reports have said “a contract” for the high-speed railway between Belgrade and Budapest was signed during a meeting of the “16+1” — which unites China with central and eastern European countries — in Latvia in November.

Disruption to the rail project could sap the impetus behind the “One Belt, One Road” initiative, which Xi hopes will bind China, Europe, the Middle East and Africa more closely by building roads, railways, ports and other links to recreate the spirit of connectivity that prevailed along the ancient Silk Road.
“This railway is a big part of the ‘One Belt, One Road’ project,” said Tamas Matura, assistant professor at Corvinus University in Budapest.
“The Hungarian section is supposed to serve as a masterpiece to show that the Chinese can build according to EU standards,” he added.
The planned railway, which is supposed to cut journey times from Belgrade to Budapest down to about three hours from the current eight, is also important to China in a practical sense.
It comprises a crucial section of a so-called “Land Sea Express Route”, which China agreed in 2014 to build with Hungary, Serbia and Macedonia.
This route is aimed to link up with Piraeus, a Chinese-owned Greek port on the Mediterranean.
Without the Serbian-Hungarian rail link, China could struggle to realise its aim of being able to export products by rail to Piraeus and thereafter by sea to destinations in Europe, Africa and beyond, analysts said.
The Brussels probe into Hungary’s tender procedures is not unprecedented.
Viktor Orban, the prime minister, attracted EU scrutiny in 2014 for awarding contracts to build a €12.5bn Moscow-funded nuclear project to Russian state-owned energy company Rosatom, also without holding a public tender. 
The commission launched infringement proceedings against Budapest on suspicions that the project breached internal market rules.
But it closed the probe last December, accepting Hungary’s arguments that only the Russian operator could provide the specific technologies required.
The project is still subject to a separate state aid investigation.

China's 'Silk Road' push stirs resentment and protest in Sri Lanka

By Shihar Aneez | HAMBANTOTA, SRI LANKA

Demonstrators react during a clash with police during a protest against the launching of a Chinese industrial zone by China Merchants Port Holdings Company, in Mirijjawila, Sri Lanka January 7, 2017. 

Demonstrators shout at police officers at a protest against the launching of a Chinese industrial zone by China Merchants Port Holdings Company, in Mirijjawila, Sri Lanka January 7, 2017. 

Police clash with demonstrators during a protest against the launching of a Chinese industrial zone by China Merchants Port Holdings Company, in Mirijjawila, Sri Lanka January 7, 2017. 

China signed a deal with Sri Lanka late last year to further develop the strategic port of Hambantota and build a huge industrial zone nearby, a key part of Beijing's ambitions to create a modern-day "Silk Road" across Asia.
The agreement was welcome relief for the island nation of 20 million people. 

As they try to reduce the country's debts, officials in Colombo see China's plans to include Sri Lanka on its "One Belt, One Road" initiative as an economic lifeline.
China has spent almost $2 billion so far on Hambantota and a new airport and wants to spend much more.
But Beijing now faces a new and unpredictable challenge to its presence in Sri Lanka and broader Silk Road project.
Hundreds of Sri Lankans clashed with police at the opening last month of the industrial zone in the south, saying they would not be moved from their land. 

It was the first time opposition to Chinese investments in Sri Lanka turned violent.
Leading the campaign against the latest deal, which is too generous to China, is former President Mahinda Rajapaksa, an influential opposition politician who first allowed Chinese investment in Sri Lanka when he was leader from 2005-15.
The clashes, in which demonstrators threw stones and police used tear gas and water cannon, underlined the depth of resentment at China's expansion felt by local people, who feared they would be forced from their homes.
The Chinese foreign ministry said Beijing was doing what was best for both countries. 

The Chinese embassy in Colombo did not respond to a request for comment on investments in Sri Lanka.
The Sri Lankan protests are not the first sign of opposition to China's One Belt plans to build land corridors across Southeast Asia, Pakistan and Central Asia and maritime routes opening up trade with the Middle East and Europe.
Rail links from China through Laos and Thailand have hit the buffers over resistance to Beijing's excessive demands and unfavorable financing.

"IMPINGES ON SOVEREIGNTY"
Under the original deal negotiated by Rajapaksa during his tenure, the container terminal at Hambantota was to be operated by a joint venture between China Harbor Engineering Co. and state-run China Merchants Port Holdings for 40 years.
The Port Authority of Sri Lanka would retain control of all other terminals in the harbor, as well as a 6,000 acre industrial zone.
But last month, the administration of Rajapaksa's successor President Maithripala Sirisena, who came to office threatening to cancel high-value Chinese contracts on the grounds they were unfair, approved a deal to lease 80 percent of the port to China Merchants Port Holdings for $1.12 billion.
The company also got the lease for 99 years.
Officials said Sirisena's hand was forced by the country's high debt burden and the fact that inflows from countries including India and the United States were less than expected, despite a $1.5 billion, three-year IMF loan program agreed last year.
"A 99-year lease impinges on Sri Lanka's sovereign rights, because a foreign company will enjoy the rights of the landlord over the free port and the main harbor," said Rajapaksa.
"This is not an issue with China or with foreign investors. It is about getting the best deal for Sri Lanka," he told Reuters in an interview.
The government also announced the lease of a much bigger 15,000 acres of land around the port for an industrial zone controlled by China Merchants Port Holdings, which has become a lightning rod for protests.
The demonstrators said they feared eviction from their land to make way for the site, a concern that China put down to a misunderstanding.
China Merchants Port Holdings declined to comment on the protests.

"WE ARE NOT LEAVING"
China has spent $1.7 billion building Hambantota port and the adjacent Mattala Rajapaksa airport, named after the former president, both of which are under-utilized and losing money.
Losses at the port added up to around $230 million in the five years to the end of 2016, according to the Sri Lankan finance ministry.
China's ambassador to Sri Lanka, Yi Xianliang, said the country would invest $5 billion more in the next three to five years and create 100,000 jobs "if everything goes well."
Last week, a policeman stood guard at the foundation stone of the proposed new zone in a forest clearing in Hambantota to prevent protesters from marching on the area.
"We are firmly against this project. We don't want our land to be given to the Chinese. We are not leaving the area," said Upul Dhammika, a farmer whose land is located where the government has tried to survey for the industrial zone.

SLEEPY OUTPOST
Rajapaksa questioned the need for the Chinese to be given 15,000 acres, which he said was more than three times the area of all other economic zones in the country combined.
Isolated from the West over allegations of human rights abuses during the country's civil war, Rajapaksa struck major deals with the Chinese when he was in power, including Hambantota and the nearby airport.
Sirisena, elected two years ago, vowed to review some of those agreements, including a $1.4 billion "port city" in the capital Colombo which was put on hold in 2015.
That, said a Chinese source with knowledge of the recent negotiations, upset Beijing, and so it pushed for the best possible deal on Hambantota.
"They (China) were really angry with the new government, until it agreed (to) an 80 percent port deal," the source said, speaking on condition of anonymity because of the sensitivity of the talks.
The Chinese embassy in Colombo did not respond when asked about that aspect of the negotiations.
Beijing also threatened lawsuits when the new administration sought to review some of the old agreements, an official in the international trade ministry said.
China's position was that it won the contracts on merit and a change of government should not have a bearing on these deals.
Sri Lankan Port Minister Arjuna Ranatunga said Hambantota port was losing money and the government had to go for a debt-for-equity deal to reduce the financial burden on the country.
Sri Lanka's national debt stands at around $64 billion, or 76 percent of gross domestic product, one of the highest among emerging economies. 

It owes China over $8 billion.
For now, Hambantota remains a sleepy outpost. 

Four years after the port and airport were completed, there is one flight a day and barely five to six ships docking each week.
The highway leading to the town is largely deserted, a new conference hall is unused and even a large cricket stadium built by the Chinese is used mainly for wedding receptions.