I have to admit, I wasn’t always excited about Central Asia. The region’s economy is no bigger than Singapore’s, but spread over a land mass the size of Europe. It has oil, but mostly concentrated in Kazakhstan. It’s also land-locked without easy access to ports. For an economist, it isn’t a compelling story.
But that was before I spoke with Umberto De Pretto. We met at last month’s Fikr conference in Kuwait, while speaking on a panel on Arab economic integration.
De Pretto is the Deputy Secretary General of the International Road Transport Union. He naturally spends much of his time thinking about the future of road transport. He is also genuinely excited about Central Asia, and believes that the region might yet resurrect its role as a trade link between China and Europe.
After listening to what he had to say, I can only agree.
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I see China’s Commerce Minister, Chen Deming, was in Riyadh last week. The Saudis might as well leave the red carpet unrolled, so common are visits by Chinese officials. It isn‘t surprising, of course, given China’s thirst for oil.
But I would resist the temptation to claim a special strategic relationship between the two.
I‘ve spent the past few months researching a chapter for a book, sponsored by the U.S. Naval Academy, on China’s relationship with Saudi Arabia. Most of that time has been spent talking with oil analysts─the sort of people who live and breathe this stuff. The conclusion? Market forces rule.
It’s a remarkably simple explanation. Saudi Arabia needs to sell vast amounts of oil every day. China needs to buy much the same. Both countries have large domestic challenges, so they are looking for stable partners happy to sign long-term contracts and, most importantly, not provide any surprises.
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Libya had some harsh words for China at last month’s China-Africa Cooperation. The Foreign Minister, Musa Kasa, was quoted by Al Sharq Al Awsat, an Arabic-language newspaper, as saying that “China’s presence in Africa is neo-colonialism and aims to rule over the continent”.
It isn’t a surprise. I have long argued that China’s foreign policy faces serious challenges.
How so? China’s policy of non-intervention initially made the country many friends. However, a growing number of observers, such as Libya’s Foreign Minister, are arguing that China is in fact intervening, only in economic issues, rather than political.
“True cooperation must include all fields of politics and economics. It must not be reduced to constructing roads or building roads”, Musa Kasa pointedly said.
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I was speaking at the Emirates Towers in Dubai last week. A soft-spoken manager for a large Dubai company waited until the end of my presentation before speaking up. “The Chinese banks are hungrier than the Western banks these days”, he said. “They are prepared to lend when others are not”.
I wonder if they will still have the same appetite after Dubai World’s announcement this week that it will delay payment on its $37 billion worth of debt?
No doubt, there will be concerns, and I expect that Beijing’s bankers are scrambling to assess their exposure to Dubai World. But the Chinese banks aren’t lending to the Middle East for necessarily the same reasons as are the Western banks. The difference is important and will determine the response.
I have heard a number of stories in the past week, in both Dubai and Abu Dhabi, suggesting that Chinese banks prefer to lend to projects contracting Chinese companies. It’s part of a full service package in which China provides the cement, the workers, and the bank loans. A good deal for all.
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In 1947, U.S. Secretary of State George Marshall spoke of a plan for the United States to finance the reconstruction of Western Europe. The plan was to eventually bind Germany tightly to the United States and lay the foundations for Europe’s integration. It was a pivotal moment in the world’s history.
So what to make of China’s proposal for its own “Marshall Plan”? Xu Shanda, an academic, recently raised the idea. But rather than finance the reconstruction of Western Europe, Xu’s proposal targets the emerging world. It has since attracted serious debate from policy heavy-weights.
I have long argued that China’s foreign policy is at an inflexion point. Its exports to the emerging world, in particular the Middle East, have grown rapidly in the past five years and are risk of spoiling sentiment towards the country.
How so? Consumers might be happy. But factory workers are not. Job losses are mounting in traditional manufacturing countries such as Egypt, Syria, and Jordan. One Palestinian lingerie maker was recently reported as saying, Chinese exports are “like a volcano–burning everything in its way”.
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I expect to read a lot more about China’s presence in Afghanistan in the coming weeks. And it will be the type of discussion that gets politicians hot under the collar.
Geologist James Yeager, who served as an advisor to the Ministry of Mines in Afghanistan, will host a news conference on Thursday describing how a lack of interest from U.S. officials allowed China to gain a foothold in Afghanistan’s resource sector.
It’s a topic that was already attracting attention. I received a call from an NBC reporter in Kabul recently to talk about China’s $3.5 billion investment in the Aynak mine. Her report was due to air this week and will only help flag the issue.
I also notice that Robert Kaplan has published an editorial in the International Herald Tribune. In it, he worries that while America sheds blood, it is the Chinese who are profiting from any improvement in Afghanistan’s stability.
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Scrap that idea. I was recently in the United States, and was arguing for a need for policy to start thinking of China and the Middle East as the same policy challenge. What I learnt is that this isn’t going to happen anytime soon.
It seems that the financial sector can look beyond geographical divides. But the military and political sectors are struggling. It’s perhaps not surprising. It’s easy enough to move an investment banker from Dubai to Beijing. Money is, after all, pretty much the same in any country. But it’s far harder asking a Chinese-speaking political analyst, after spending years tracking the activity of China’s Politburo, to think about relations between Iraq’s central government and Kurdistan.
If this seems an obvious point, it shouldn’t. China’s ability to import oil from Iraq may yet play a role in the country’s energy security. And the Iraqi central government’s recent blacklisting of Sinopec, a major Chinese oil company, for dealing in Kurdistan, is an example of how globalization has already changed the way we need to think about the world.
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I am in the U.S. this week, speaking at the State Department, Columbia University and CSIS. I intend to use the opportunity to test drive one of my favourite themes.
In a globalized world it is time to view China and the Middle East as part of the same policy challenge, rather than two distinct challenges.
How so? The growing commercial relations between the two mean that a change in one affects the other. I am thinking specifically about jobs. The rise of China has resulted in a historic shift of manufacturing from the industrialized to the industrializing world. It is a shift that is unlikely to reverse.
However, the consequences have been mixed for the Middle East. A flood of cheap imports to the region has meant factory closures in low-cost countries, such as Egypt and Syria. And that’s a problem given that two-thirds of the region’s population is under the age of thirty. And many are unemployed.
But it could all change, and for the better.
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