I remain fascinated by the potential for a resumption of land transport between Asia and Europe. It won’t happen overnight, but the gradual rebalancing of China’s growth further inland argues in its favor. A reader has alerted me to more research on the subject.
This report by the Central Asia Caucus Institute has a particularly interesting chapter on China. I wrote earlier about the potential for trucks to travel through Kazakhstan, before turning north towards Russia, Ukraine, Poland, and, finally, Germany. But it seems that trucks might also turn south towards Turkey. The proposal is for goods to travel by road through Kazakhstan, where they would be sent onwards by ferry to Azerbaijan, and then by rail to Turkey, and, finally, Europe.
Azerbaijan is certainly keen on the idea. The Azerbaijan Diplomatic Academy is studying the prospects for turning Baku into a transportation hub, not unlike Hong Kong or Singapore, as part of its “Azerbaijan 2025” project. The results will be worth a look.
Why use the Trans-Asia rather than the already established Trans-Siberia route? Trans-Siberia is definitely more efficient and requires fewer border crossing. But, as the Central Asia Caucus Institute’s report notes, it’s also 1,300 kilometers longer.
China’s foreign policy is at an inflexion point. The country is emerging as a major power, but that will require tough choices.
The toughest choices are usually found in the Middle East. The region doesn’t like major powers sitting on the fence, and it’s only time before China will be forced to climb down.
It is Iran that will likely force a decision. China has so far maintained its policy of non-intervention─as one Beijing-based policy advisor said to me, “if we intervene in Iran, it would set a bad precedent for our relations with other countries”.
Fair enough. But so would a failure to intervene. It would suggest that China isn’t concerned about its other regional partners, especially Saudi Arabia. Let’s not forget. Iran might supply 13% of China’s oil supply, but Saudi Arabia supplies an even larger 20%.
So what are the chances that China agrees to sanctions?
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I‘ve early written that Somalia‘s pirates may be the accidental spark for greater Chinese military intervention in the region. Here‘s another spark. This article from China Energy Web worries that unrest in Yemen may threaten China‘s oil imports from the region.
The author says “The United States recognizes Yemen‘s geographic ability to choke China‘s oil import life lines“. He then hints that the United States may bring the war on terror to Yemen, and “strangle China‘s oil imports and strangle China‘s economy“. The rest of the article carries on in a similar tone.
Now, the author is a reporter, not an official. But the fact that he is considering Yemen in this manner raises the possibility that officials are as well. China certainly has strong commercial interests in Yemen, as I‘ve written about here and here. Many of its top Arabic-speaking diplomats have also served in the country.
More please. I found this article today and it illustrates a trend I’m hoping will develop further. The article talks of a Chinese home electronics company, Haixin, which has built a factory making air-conditioners in a suburb near Cairo. It’s targeting markets in East Africa, North Africa, the Middle East, and Europe. Haixin says it’s trying to take advantage of Egypt’s low-costs and its customs union agreements with neighboring countries.
I’m expecting a growing number of low-cost Chinese manufacturers to follow Haixin abroad to places like Egypt. Why? In part, because rising manufacturing costs are gradually eroding the country’s competitiveness for certain low-cost goods. But, and most importantly, also to escape growing trade protectionism. Chinese manufacturers have captured market share rapidly in most emerging markets over the past few years. It’s unsustainable, and there are growing complaints from New Delhi to Sao Paulo.
I’m not suggesting that all low-cost Chinese manufacturers will move abroad. Far from it. There’s still compelling reasons to stay at home. But it only takes a few to make a difference in a country like Egypt. China’s exports to Europe were worth $240 billion in 2009. That’s more than Egypt’s annual economic output of $160 billion. Egypt just needs to capture a small share of that trade to have a useful impact on growth. Here’s hoping.
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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China’s commercial relations with Algeria are among the strongest in the Middle East owing to the size of the construction projects and large number of construction workers. This first article, by Chris Zambelis for the Jamestown Organization, provides a good review. I’m a big fan of analysts getting their hands dirty, and it seems that Zambelis has actually visited Algeria for the research. I would only add that there appear to have since been efforts to tighten restrictions, as I’ve written earlier in this post. This second article by the Associated Press covers similar ground.
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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I’m intrigued by this editorial in the Arabic-language Al Sharq Al Awsat. It’s written by Jaafar Karar Ahmad. I haven’t heard of the author before, but he’s reportedly associated with a University in Shanghai. He’s also on record as working for Qatar’s Embassy in Beijing. Either way, he seems to know China. The editorial is largely a review of Arab-China relations over the past sixty years and is generally positive. But what grabbed me was his comment in the final paragraphs “that a mentality of profit rules over Chinese officials charged with developing trade between China and the Arab world”, and that for all China’s talk about increasing its imports from the Arab world, little has been achieved. He writes that this mentality has helped turn China into a major economic power, but that it’s time for China to open its own markets to the Arab world. I’ve argued in earlier blogs, and an editorial, that unless China starts to share some of its economic gains it might find popular sentiment towards it turns. Here’s hoping Karar’s views get some traction in Beijing.
