The news is in: Pakistan has just been taken over

China’s strategy of economic colonisation of its regional neighbours has just been laid bare

Gwadar Port in Balochistan … in southern Pakistan, rather

… A restaurant owner is visited by representatives of a certain organisation that wishes to invest in his business. This is an offer he cannot refuse. Soon the “investors” are there every day, walking out sides of meat and crates of wine and liquor through the back door while the owner frets and worries about his vanishing profits. Eventually, when there is nothing left to take, the investors burn down the premises for the insurance money. Hence the old joke: “Sorry to hear about the fire, Lenny.” “Shh! Tomorrow.”

Well, it appears a “restaurant” that we might call “The Taste of Lahore”, or something similar, perhaps “The Karachi Grill” or “Memories of Rawalpindi”, has just been invested in by a certain powerful organisation. Let’s see whether anything is being walked out the back door, and whether there are any suspicious jerry cans of gasoline stacked in the alley out back.

We all know by now about China’s charitable and selfless “Belt and Road Intitiative” (BRI), the Silk Road du jour that is to unite the eastern side of the globe in prosperity and economic brotherhood. Apparently it’s a $10 trillion too-hot-to-miss opportunity (“The $10 Trillion Investment Plan to Integrate the Eurasian Supercontinent”).

Who could afford to turn it down?

Certainly not the Pakistanis, or should I say certain Pakistanis. I’ve written before about the generous Chi-Coms (I use this term purposely to exclude ordinary Chinese citizens suffering at the hands of their one-party State). The Chi-Coms are apparently interested only in amity, and are happy to advance huge sums of money to their regional neighbours, enabling them to complete major infrastructure projects that will allow these countries to share in the forthcoming bonanza of wealth the BRI promises. But it seems (gasp!) that the Chi-Coms are also happy (beaming, nodding) to place their neighbours deep in debt at ruinous rates of interest and scandalously unequal terms of trade.

But that’s just me being negative, I’m sure. Or at least I thought it was until last week, when the actual terms of China’s development investment in the massive Gwadar port were published. Or perhaps one should rather say that the details were at last wrenched from the reluctant grasp of the politicians and bureaucrats of “The Taste of Lahore” who had secretly agreed them with the Chi-Coms.

It apparently led to uproar in the toothless Pakistani parliament.

The “China Overseas Port Holding Company” (COPHC—but the good old Communist Party of China, or CPC, to you and me) will take a massive 91% share in gross revenues from Gwadar port, in southern Pakistan (soon to be in independent Balochistan, but let’s not go there just now …). It will also take 85% from the surrounding “free zone,” under a 40-year deal finalized by Pakistani authorities (those certain Pakistanis), reveals F M Shakil writing in the Asia Times. And why not, since if the port wasn’t there, neither would  the economic development in the surrounding area, correcto?

Of course it would be indelicate to ask the related question: that if Pakistan had not allowed in the Chinese, there would be no Gwadar port and a much skinnier BRI, so why not a fairer split more nearly approaching 50/50? Ah—not with this kind of organisation, remember?

The problem for Pakistan was that it grabbed—sorry, accepted—$16 bilion in loans from the Chi-Coms to develop the port, as part of the (total $56 billion Chi-Com-funded) China-Pakistan Economic Corridor (CPEC), the northern section of which runs illegally through Indian territory and is pretty much doomed long-term—but let’s not go there just now …

Being suddenly so fabulously deep in debt to the Chinese, and with a shrinking, terrorist-led “economy”, Pakistan was in a pretty weak bargaining position, which is maybe why in addition to giving up 90% of the profits from Gwadar, Pakistan is also paying a 16% coupon on those $16 billions. That’s some mighty expensive credit card, right there.

Minister for Maritime Affairs Mir Hasil Bizenjo, speaking in the Pakistan Senate, described, or finally came clean about, how the Chi-Coms will operate the port for the next forty years. It’s called a build-operate-transfer (BOT) agreement. Basically it makes Gwador and its environs a patch of Chinese sovereign territory in south Pakistan. Then, when all the plant is worked out and in need of overhaul and renewal four decades down the road, at last authority and financial responsibility will revert to Pakistan. If Pakistan can afford it … and if not, I daresay some typically generous terms will be on offer from the Chi-Coms once again.

It’s just beautiful—if you are Chinese; if you’re Pakistani, not so much.

Senate chairman Raza Rabbani finally “bowed to pressure from lawmakers and directed the Senate Standing Committee on CEPC to look into whether Pakistan’s national interests are undermined by financial obligations entered into via the agreement with China,” says Shakil. I wonder if they’ll find anything. Presumably the signatories to the Chi-Com deal are all, already, perfectly well rewarded and protected.

One also wonders whether under-the-table deals such as this one are being replicated in other needy neighbour territories where the Chi-Coms can walk in shaking wads of “free” (i.e. ruinously expensive) cash around. Think of all those ports, airports and railroads that countries of Asia will be on the hook for in this enormous move of industral/political colonisation and invasion.

Incidentally, Vladimir Putin is looking kindly on an offer by the Chi-Coms to “invest” in Russian roads. In this case I wouldn’t be worried that the Chinese are going to come out on top. Putin must surely be wondering what they could do if Russia sooner or later reneges on the terms of the deal. Will the Chi-Coms come and take their roads back? They would no doubt be welcome to try, heh heh.

Meanwhile in benighted Pakistan, whose future (what with Trump in the Whitehouse) looks daily more cadaverous, it also turns out that the COPHC has been granted immunity from income and sales taxes relating to Gwador for 20 years, and double that time period for “imports of equipment, material, plant, appliances and accessories for port and special economic zone.”

It really is nothing less than a licence for the Chinese to print money at Pakistan’s expense. Poor Pakistan. Actually, no: it’s hard to have any sympathy, to be honest.

China’s new $100 billion metropolis: Is Forest City a Field of Dreams?

In Johor Bahru did Kublai Khan/A stately pleasure dome decree …

China’s getting good at building islands. So far their method of dredging up sand for gun-platform berms in the South China Sea has been for strategic and military purposes, in other words to claim more territory. Recently, though, a massive real estate project has dwarfed all previous efforts by the Middle Kingdom to impose its presence on Nature.

Before I begin to describe what’s going on just off the south coast of Malaysia, let me say why I am interested in the subject.

I’ve written a few times before, here, here  and here, about how and why India should transform its neglected territories, the Andaman Islands, into a new ecological Hong Kong/Dubai with tri-services military presence and a deepwater shipping port for freight and luxury liners.

The geographical position of Port Blair, on South Andaman Island, is almost unrivalled in strategic terms—holding the fort, so to speak, at the north end of the Malacca Straits, and having also a commanding position over the other, more southerly sea-route route from Australia around the west of Java and Sumatra. Perfect for trade, tourism and above all, security. I suggested a fabulous, futuristic—which is to say sensitive and ecological—enhancement/terraforming of Port Blair and its environs, and imagined it would be a very big project, probably at least $20 billion for the first stage and $100 billion plus overall. Above everything, I said that it could transform India’s regional heft as a trading and defensive security power, and add at least a percent or two to India’s GDP performance as it directly rivals China for South Asian-Western trade.

So now it appears that China has had a similar idea and is spending—wait for it—$100 billion on creating an island city of its own.

Forest City

On the southern tip of Malaysia is Johor Bahru, a city (incorporated in 1994 with a population of half a million) and an economic development zone, presided over by the all-powerful Sultan Ibrahim Ismail, the local Kublai Khan. The east-west Johor Straits, at the southern end of the roughly north-south Malacca Straits, narrows into a channel that follows all the way around the north and north-east shoreline of Singapore. At the Westerly mouth of the channel, where the E3 freeway bridge connects Singapore with mainland Malaysia, an enormous new development is being built.

It is constructed on four massive artificial islands that will contain 500,000 apartments, together with offices, hotels and so on, and be home to around 700,000 people. All this from scratch, where before there was simply a wide expanse of water: seagrass meadows waving gently under a clear tide and reclining on the littorals, picturesque fishermen’s villages. The peaceful currents flowed back and forth between the two neighbours, Malaysia and Singapore, in and out of the mouth of the waterway, as they had done since time immemorial.

But Forest City, as the new settlement will be known, is like a giant cork in the mouth of the straits, a dam, effectively, that will raise the water-level, narrow the flow and therefore increase the velocity and power of the water. But we’ll come to the ecological aspects later.

Forest City is not a Chinese government project—or at least, it is as private as private enterprise can get in China. The idea is to make a killing by selling apartments to prosperous Chinese. In fact if you buy an expensive apartment in Shanghai, you will be given another one in Forest City for free. Nonetheless, it is again a projection of Chinese presence and power. This is the creation of a Chinese city, provocatively, smack in the middle of the territory of two other sovereign states. Malaysia agreed to it but Singapore, which the project directly abuts, is not very happy.

Half a million new apartments, at an average price of less than $300k, means that the much pricier property in Singapore will likely crash. (And it’s more houses than have ever been built in the city-state.) And while $300k is cheap for Singapore, it is astronomical for most Malaysians across the straits to the north, with the result that most of the new population in Forest City will be foreign (that is, Chinese), despite it being in Malaysian territory.

Still, money’s what counts, ain’t it?

A new five-star hotel is already up and running to accommodate prospective buyers. The artificial causeway in the straits that’s used to haul the millions of tons of sand needed onto the new islands has already impacted the daily harvests of seafood the locals depend on. (For a brilliant assessment of the local impact of the building see this article in The Diplomat. The authors have used pseudonyms in an attempt to avoid prison or nine grams of lead.)

It’s not altogether clear, from what I’ve been able to find out, whether there will be hospitals, schools and other necessary facilities included on the islands, which seem overwhelmingly residential. Will the new inhabitants use the mainland and Singapore for their essential and emergency needs? It will be interesting to see whether an entirely artificial city—in contrast to the expansion of a well-established one such as Port Blair—can become socially successful.

What looks like large-scale ecological destruction on the ground is being relentlessly spun by the constructors (and their influential investors) as some sort of innovative clean-air project, due to the fact that there will be small trees on the balconies of the hundreds of condo towers. The Western mainstream media, no surprise, is lapping up the good news.

Forbes: China’s New Forest City Will Make You Rethink Urban Cities

BBC: China’s forest city

CNN: China unveils plans for pollution-eating “Forest City”

The Guardian: Forest cities: the radical plan to save China from air pollution

But as one anonymous local put it, “Trees on balconies won’t help with shoreline erosion.”

In truth, Forest City is the opposite of what Port Blair could become. It’s in shallow water, so no paramax port is possible; there’s no security angle either, except to insert a piece of China as a foreign body into the arteries connecting two other countries—the world can make of that tactic what it will, but if it’s OK with the Sultan …

I cite Forest City to show the scale of what is now possible, not just in terms of physical infrastructure (and the sheer speed of its deployment), but financial infrastructure as well. Forest City is a $100 billion real-estate punt. Port Blair, for similar money, would be simply epoch-making.

China: and another thing …

Beijing’s One Belt One Road initiative is anything but innocent, and China tried it already – 2000 years ago.

Apologies for my absence: vacations and other writing assignments are to blame; but the lousy weather has returned and it’s back to the routine as autumn approaches. I meant to write something about the Modi cabinet reshuffle that took place last week, but I found I was thinking about China and feeling a bit browned off about it. Don’t misunderstand me: I love the Chinese people and Chinese culture and all that, but I think I hate crony communism even more than I hate crony capitalism. And dopey authoritarians, too. Hate them here, hate them there.

As usual, Minhaz Merchant says the important stuff about the Modi reshuffle best, so if you want to know, go here.

Anyway, China:

  1. Kim Jong Who?

I’m heartily sick of reading acres of useless journalism about North Korea and what the USA might or might not do about the nuclear threat. It’s very simple, as Steve Bannon told David P Goldman a few weeks ago: the USA cannot realistically do anything about North Korea. Were they to try, half of South Korea would be vapourised and clouds of fallout would be floating everywhere to nobody’s benefit. China could deal with North Korea any time it likes, but it is just tapping the USA along because North Korea is its creature and everything North Korea does suits China very well, strategically speaking. Were this not so it would not happen. North Korea keeps the USA occupied, for example, while China gets on with all the things it wants to do relatively unobserved – at least in the media.

I’m sick of journalists writing that, ooh, 90% of North Korea’s trade is with China: if only Beijing would impose sanctions, Kim would cave in, and so forth. What nonsense. Why would China do that and hurt its own economy when North Korea is already doing everything commanded or condoned by China? Look: that pudgy little demon Kim Jong Un is the only one in the room who thinks he is in charge. As for those generals always standing around him with the shit-eating grins and stupid hats? That’s Beijing. If the Chinese had had enough of Kim then five minutes later his bullet-riddled corpse would be lying on the floor. The shit-eating grins would still be standing there, but holding smoking Makarovs (that’s not a cigarette, by the way). While we are on the subject, read Peter Zeihan’s funny and cruel take down of North Korea here.

  1. About that Silk Road plan …

I love this. It turns out that the whole bait-and-switch One Belt One Road scheme –or the ‘Belt and Road Initiative’ (BRI) as we are now supposed to call it – has been …. tried by China before! 2000 years ago! In fact it might not be going too far to say that certain Chinese high-ups came across the original scheme, dusted it off and decided to duplicate it.

I learned about this via Raoul McLaughlin, who is a fabulously good scholar, digging away at uncovering all the history of ancient trade and commerce – a much-underdeveloped area of research that I predict will soon be very visible and popular because of all the useful things it can tell us regarding our situation today. Anyway, I came across this in his book, Rome And The Distant East: Trade Routes To The Ancient Lands Of Arabia, India And China, and it explains how and why China’s OBOR scheme has been put in place, and what Beijing secretly aims to achieve by it (my italics):

In the ancient world, the struggle for supremacy was not always decided by invasion and war. In lands remote from Rome, imperial agents were using economic strategies to bring foreign peoples into positions of subservience. In the Far East, the Han set in motion subtle long-term schemes to undermine their foreign enemies and damage any ability to resist, or make war, on China. The Han encouraged a market for Chinese foodstuffs and fashions amongst foreign peoples including the Xiongnu hordes of the Mongolian Steppe. The eventual aim was to make these populations dependent on Chinese foods and manufactured goods so that these items could be withheld, or offered in diminished amounts, to inflict economic damage on these foreign communities. A Han official outlined how this strategy should be implemented, advising, ‘Every large border market we establish must be fitted with shops … and all shops must be large enough to serve between one to two hundred people … The Xiongnu will then develop a craving for our products and this will be their fatal weakness’. The Xiongnu were beguiled through thousands of trade exchanges that collectively reduced their resources and weakened their economic independence. As another Han official reported, ‘A piece of plain Chinese silk can be exchanged with the Xiongnu nomads for articles worth several pieces of gold. By these means we can reduce the resources of our enemy’. With calculated foresight the Han slowly, but surely, gained an economic stranglehold over their most dangerous opponents.

As I wrote in my earlier piece, OBOR: China’s bait-and-switch debt trap strategy, what China is doing is lending its neighbours the development funds to build infrastructre that China will end up owning and using to push Chinese products and interests into other countries, rendering them vassals in the process. In a generalised way China has been doing this across the world, and America’s uneasiness about how many dollars have been ending up in China due to the importation of its cheap goods, indebting the economy and destroying American jobs, surely contributed to the election victory of Donald Trump.

Today it’s cheap rebar and flat-screen TVs; in ancient times the Romans agonised over the high levels of luxury imports from China in the form of expensive silks that Roman women especially doted on (‘Our wealth is transported to alien and hostile countries because of the promiscuous dress worn by men and women – especially women,’ opined Emperor Tiberius.)

The writer Seneca worried about the political intent of these distant foreign merchants he suspected were looting the Roman empire and weakening it. Pliny the Elder wrote in his Natural History of how the ‘Silk People’ (the Chinese) were effectively pillaging Roman bullion on purpose for nefarious strategic ends. He wrote that they ‘take 100 million sesterces from our empire every year – so much do our luxuries and our women cost us.’ That was probably an eighth of Roman annual expenditure.

Note well the two primary reasons cited by the ancient Chinese planners for their OBOR scheme back then:

  1. Foreign nations ‘will then develop a craving for our products and this will be their fatal weakness.’
  2. ‘By these means we can reduce the resources of our enemy.’

With this track record in mind, I submit that it is far-sighted by Modi to have India resist the commercial blandishments emanating from Beijing towards the countries of the region (and to those even as far away as Europe).

China has just backed down from the confrontation over Doklam and the Siliguri Corridor – and they did back down because the road-building equipment has been withdrawn. Standing up to China over their ultimately damaging and aggressive ‘trade’ plans may likewise produce positive results.

 

Indian futures part 2: the luxury strategy

How can India counter the industrial giant on its doorstep?

In the previous post I briefly looked ahead to the relationship between India and the UK over the next few decades: it is only going to become deeper and more intertwined to the mutual benefit of both countries.

But India is also in the position now of crafting its own future as a “new” country, as Modi leads it out of the retardation after the Congress corruption of the last seven decades. What sort of culture and economy will India follow as part of its growing identity and prosperity? I suggest it will be determined partly by the political realities surrounding India and partly by the artisanal DNA that India possesses and must now cultivate anew and capitalise on.

Continue reading “Indian futures part 2: the luxury strategy”

Pakistan and China: India’s strategic challenge in 2017

Examining the tactics India can use to turn the tables on its less-than-all-powerful tormentors

Look at a map of South Asia. I’ve said before that China’s unappealing wingmen are Pakistan and North Korea but luckily North Korea has shown no interest in India, lying as it does to the far east of the Middle Kingdom. China, though, right on top of India, is a threatening presence, while also shaking a fist at all the other countries in its neighbourhood, such as Vietnam and the Phillipines, as the People’s Republic throws its weight around the region. Pakistan is its enthusiastic henchman where India is concerned.

China’s strategy for regional –hemispheric? – domination consists of several elements. Forget for now its economy: nearly all growth in China today and tomorrow is debt-fuelled and will deplete wealth in the long run (Michael Pettis has done the calculations here). In fact it’s exactly because China’s real economic growth is grinding to a halt and its debt load reaching nose-bleed levels that expansion and power must now be projected by additional, alternative means.

Continue reading “Pakistan and China: India’s strategic challenge in 2017”

OBOR: China’s bait-and-switch debt trap strategy

There’s a loan shark prowling in the South China Sea

In an important article for Project Syndicate, Brahma Chellaney says that if there’s one thing China excels at, it’s the use of economic tools to advance perceived geostrategic interests. On a petty level that means dredging sand up into little island berms in the South China Sea and parking machine guns on them. In the grander scheme of things it is what has become known colloquially as ‘The New Silk Road’, or to give the project its proper title and acronym, the One Belt One Road initiative (OBOR). It’s a trillion dollar boondoggle that has as its superficial aim the re-establishment, in the interests of commonwealth and trade, of the ancient merchant route that connected East to West, along which the Romans travelled all the way to India and China two thousand years ago (the Chinese name for the Romans, by the way, is ‘lei jun’ – legion).

Continue reading “OBOR: China’s bait-and-switch debt trap strategy”

China Crisis?

It’s crunch time for China … or for the hedge funds betting against it

2016 is the year when China bites the bullet, the experts say. One way or another the debt is now so large it has to be addressed, no choice – deleveraging, rebalancing of the economy (and much lower growth), or a reckless dash for even more debt-for-growth. The question is, which way will China decide to break?

This matters for India. China is its heavyweight neighbour, used to throwing its weight around. It is a trading rival and a political-strategic competitor, a partner in balancing power – the very definition of a frenemy. India in the old days of fresh independence under Nehru naively believed that China was its best friend: ‘Hindi-Chini bhai bhai’ (India-China best brothers!) was the slogan as the 1960s opened. Then in 1962 Chairman Mao bitch-slapped India when Chinese forces invaded the north-east territories and shredded India’s brave but ill-equipped troops. The country suffered a nervous breakdown it has perhaps never quite recovered from. India even today is still ginger and over-accommodating not only in its dealings with China but Pakistan, too.

Continue reading “China Crisis?”

Loo seats and asparagus

Looking at China’s experience can give us clues about what India should produce in the future

It’s interesting that the more I think about India, the more I find myself reading about China. Bharatiyata! is supposed to be comparative in spirit, so I guess it is natural for me to compare; it certainly provokes many thoughts.

In fact a very thoughtful piece over at Andrew Batson’s China blog concerns itself with the mystery that, for all its export volume, over the years China hasn’t really specialised in any area but continues to make and sell everything to everyone. Why? Or why not?

Most countries specialise by choice or necessity to partake of what economists call ‘comparative advantage’. It means that you can make or do something more efficiently than somebody else or some other country. (Batson quotes Carsten Holz who refers to Taiwan speedily adapting to supply niche markets globally, and South Korea, which aimed for a broad industrial base but quickly specialised). By each party concentrating on what it does best, everybody makes more money.

Continue reading “Loo seats and asparagus”

Fears and weaknesses – comparing India and China #1

India’s fear is that change will destroy its ability to suffer and survive; therefore India fears change.

Although Bharatiyata! Is mostly concerned with India, it is important to compare it with neighbours and competitors. To this end, examining India and China together is interesting, especially because their journeys into the future will run so much more closely together in the political, economic and military fields from now on.

One particular way in which the two countries can be held up to the light, as it were, to see how they differ, is in their weaknesses. What are their Achilles’ heels, psychologically speaking, and how might these affect them in macro terms?

Continue reading “Fears and weaknesses – comparing India and China #1”