The Maritime Silk Road – China’s High Seas Ambitions

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By Bernhard Zand

With its Maritime Silk Road, China is tapping the world’s oceans for its own strategic purposes. It’s a bold plan that is causing unease in India and the United States — and also has implications for Europe.

The powerful Yangtze River winds its way for more than 6,000 kilometers (3,700 miles) through China, from the barren highlands of Tibet to the densely populated plains on the east coast where, shortly before it flows into the Pacific, a large waterway forks off. It is the Huangpu, Shanghai’s river.

Ships carrying ore, cement and coal, freighters loaded with containers and loose cargo toil their way up the Huangpu until, at its tightest turn, one of China’s most spectacular vistas opens up before them: to the left, the skyscrapers of the Pudong financial district; to the right, the palatial buildings and towers along the Bund, the historic Shanghai waterfront promenade.

Yan Jun, the 56-year-old head of the Port of Shanghai, resides on the 20th floor of one of these towers. He likes to take first-time guests to the next floor up, to the hall where executives of his company, the Shanghai International Port Group, usually meet. Inside the room is a massive, 10-meter long wooden table made out of planks from old quay walls; in front of the window is a globe as high as a person.

If the trading and naval powerhouse of China had a single command bridge, it could be located here. And Yan Jun, a large, elegant man with a deep voice, would be its captain. China’s major industrial provinces, with their megacities on the left and right banks of the lower Yangtze, are like the two wings of a dragon, he says, “and Shanghai is the dragon’s head.” No other port in the world delivers as many products to the global market as Shanghai. China exports goods valuing over $2 trillion a year.

Yan recently spent a few weeks in Europe. His company, like many others in his industry, is on a shopping spree. It is looking at entire ports and individual terminals all over the world, from Jakarta to Djibouti, Pakistan to Panama.

It’s all part of a plan that China’s leadership calls the Maritime Silk Road. Three years ago, Chinese President Xi Jinping announced that his country wanted to revive not just the trade route from antiquity that led from China’s western provinces through Central Asia to the Middle East and Europe, but also a new sea route to match the one on land. It would be comprised of a network of ports and naval bases connected by canals, roads and trains, built and operated with Chinese participation.

As with the land route, there’s also a historical precedent for the Maritime Silk Road. At the beginning of the 15th century, legendary Chinese explorer Zheng He began the first of seven sea expeditions that would lead him through the Indian Ocean to Ceylon on the east coast of Africa, and onward to present-day Saudi Arabia. Zheng left carrying silk, brocade and porcelain. He came back with spices, rare woods and giraffes. Almost 100 years prior to Christopher Columbus’ trip to America, China was the world’s most important sea power. It’s a tradition that modern China wants to rekindle.

There are three key differences between the resurrection of the maritime and the land-based Silk Roads. First, there the number of countries along the sea route to Europe is much greater, not to mention to the size of their markets. Countries on the Indian Ocean alone are home to a greater number of people than all of sparsely settled Central Asia. Plus, China’s leadership has left open just how far the Maritime Silk Road will go. Panama, where a Chinese company recently bought a port, is “probably a little too far,” says Tan Jian, a senior official with the Chinese Foreign Ministry. “But we will probably add Australia to it.” In 2015, the same firm signed a 99-year lease on the Port of Darwin.

Second, in contrast to Kazakhstan and Croatia, where numerous Chinese projects are still in the planning stage, Beijing has already invested billions in the sea routes to the West and proceeded with construction projects. From an industrial park in Kuantan, Malaysia to a container terminal the Shanghai International Port Group has taken over in Zeebrugge in Belgium, dozens of projects are already in operation and dozens more are under construction.

Third, whereas Beijing’s efforts on Central Asia and the former Eastern Bloc countries are raising eyebrows in Russia and Europe, its growing influence from the Western Pacific to the Middle East has caught the attention of two other major powers: India and the United States.

Both the place and the circumstances under which Xi Jinping informed the world about his plan turned out to be symbolic. For the occasion, he chose a visit to Indonesia, the country where his American counterpart Barack Obama grew up. The leader of the United States, the self-proclaimed “Pacific Nation,” was unable to attend the subsequent summit meeting of Pacific leaders in Bali for scheduling reasons. A budget crisis had kept him held up in Washington.

“That was just a coincidence,” says senior official Tan Jian, who helped to draft Xi’s speech in 2013. “We didn’t plan that. We are not imperialists and we do not want to colonize the world. The Maritime Silk Road is a concept of peace and economic cooperation. Those who participate will benefit from it.”

But is that really true? Is the focus of Beijing’s Maritime Silk Road really trade and not politics? Can the two even be separated in a project of this magnitude?

A car bridge spans the Huangpu a further bend upriver from Yan Jun’s office. The road leads for a good hour to the coast, where it transforms into a bridge that extends for 30 kilometers over the open sea to the Yangshan Deep Water Port, the world’s largest container terminal.

More than 36 million standard containers are processed each year at the port, around four times as many as in Hamburg, Germany’s largest port. The containers are stacked up to the horizon like Lego bricks and as many as 16 ships can be docked at any given time, including the largest ships currently sailing the seas, with a draft as much as 16 meters deep.

It’s from ports like Yangshan that the “world’s factory” sends its products around the globe each day. But the reconstruction of the Chinese economy has begun and its view of the world is changing. Wages in China have risen and an enormous amount of excess capacity has developed. China is no longer content just exporting manufactured goods — it also wants to send abroad the steel, cement, workers and engineers that it no longer requires itself.

At the same time, as its power and prosperity has grown, so too has China’s ambition to have a greater say in the world.

Colombo, Sri Lanka

When Zhang Xiaoqiang visited Colombo for the first time, he was afraid. “There were armed personnel in front of the airport, the city was full of checkpoints and there was a curfew after sundown,” he recalls. Sri Lanka was in the midst of a civil war between government troops and Tamil rebels in the country’s northeast. It was a shock to the young Chinese engineer.

The war has since ended and Zhang is now managing Sri Lanka’s biggest construction project, Colombo Port City, a multi-billion dollar real estate project being built by the state-owned China Harbour Engineering Company, based in Shanghai.

From his smoky office high above the Indian Ocean surf, Zhang has a view of the entire construction site. “First we expanded the harbor,” he says. “Now we are reclaiming two square kilometers of land from the sea where we will build apartments, office towers and shopping malls.” The plan is technically challenging: The ocean on Sri Lanka’s west coast is rough, the environment is sensitive and the port-side development must be able to withstand a rise in sea levels over the next 100 years of up to two meters.

But Zhang’s company has experience with complicated commissions. It has constructed hundreds of piers, bridges and wharves in China and Zhang himself has worked on many of the projects. “But in China, large construction companies like ours are now under stress,” he says. Most of the ports, train lines and roads have been built, demand is sinking, wages are increasing and the competition is getting fiercer.

This has led China Harbour, traditionally a construction firm, to add real-estate to its portfolio, looking for potentially profitable projects around the world. Because Beijing’s state-owned companies are specialized in megaprojects, they are also competing with each other abroad for major commissions — and that can at times lead to political turmoil.

When the opposition won the election in 2015 in Sri Lanka and suspended the port city contract, the project’s future became uncertain. “You have to be prepared for things like that — and you have to have good lawyers,” Zhang Xiaoqiang says. After several rounds of negotiations, the new government reversed its decision. Zhang’s company will not own the land it is reclaiming, but it will be granted a 90-year lease.

“The Chinese are so strategic,” says Dushni Weerakoon of the Colombo-based Institute for Political Studies. That can be seen in Africa, but also in the countries along the Indian Ocean like Pakistan, Bangladesh and Burma — and in Sri Lanka.

Sri Lanka has traditionally had two sponsors, India and the United States. But when the government in Colombo decided in 2008 to expand the fight against the Tamil separatists into a full-fledged war, Washington and New Delhi pulled back, as did the European Union. “It was around that time that the Chinese engagement in Sri Lanka increased significantly,” says Weerakoon. “Beijing didn’t ask uncomfortable questions — it simply invested, which our government liked better than being lectured by the Americans or Europeans.”

Since then, Chinese companies have invested more than $5 billion in roads, power plants, hotels and ports in Sri Lanka alone. At times, as many as 30,000 Chinese workers were in the country — and they made sure that the individual projects were completed on deadline.

But observers have posed questions about some of the projects, asking whether they make sense from an economic perspective — such as the port at Hambantota built by Zhang’s company on the southern tip of the island, where a boat only docks every few days.

“The economic logic behind this project is obvious,” Zhang Xiaoqiang says, rejecting such criticism. “One of the world’s busiest sea routes is located just 10 nautical miles south of Hambantota.” His company is now planning to build an industrial park next to the port.

Weerakoon says that India, especially, is concerned that Beijing could one day use the strategically well-positioned port at Hambantota as a naval base. Chinese warships have been spotted several times in the waters near Sri Lanka and in 2014, two Chinese submarines docked at the new port in Colombo built by China Harbour. Officials did not inform India in advance. “That’s the kind of thing that fuels suspicion,” says Weerakoon.

A Double Standard When Judging China’s Intentions?

Mal é, Maldives

One and a half hours by air southwest of Colombo is Malé, the capital of the Maldives and one of the most densely populated cities in the world, with about 130,000 people living in an area of only about six square kilometers.

Two years ago, 20 additional residents moved to Malé — all Chinese diplomats. China became the first country outside the Commonwealth to send a permanently stationed ambassador to the Maldives. A short time later, Xi Jinping visited Malé. The president of the world’s most populous country visited a nation that has a total population not much larger than a single small neighborhood in Shanghai.

Xi’s visit wasn’t without repurcussions. Joining the 20 diplomats, several hundred Chinese engineers and skilled workers have since moved to the country. A subisdiary of China Harbour is now building a bridge between Malé and the island where its airport is located. Meanwhile, the Beijing Urban Construction Group is reclaiming land in order to build a new runway. A third Chinese consortium is erecting 1,500 apartments, while a fourth is building hotels and a fifth is connecting the islands of the Laamu Atoll, 250 kilometers to the south, with a highway. They are the largest construction projects in the history of the small country, with a total investment sum of more than $800 million.

To Wang Fukang, Beijing’s ambassador to the Maldives, it is only logical that China engage itself in the expansion of the Maldives. The country is poor, its economy is fragile and its need for infrastructure huge. At the same time, the number of Chinese tourists visiting the country has risen rapidly in recent years. They now make up one-third of all Maldives travelers. “We had to do something,” says Wang.

But Malé is located around 6,000 kilometers from Beijing. The Indian coast, on the other hand, is only 500 kilometers away and the US Air Force’s Indian Ocean base at Diego Garcia is only 1,300 kilometers distant. Do leaders in Beijing not understand that, at a time when they are massively expanding their maritime power in the South China Sea, their activity in the Indian Ocean is going to alarm other larger nations?

“We know that India is watching us very closely,” says Ambassador Wang. “But India is a superpower and doesn’t need to worry. Our exclusive interest in the Maldives is economic cooperation.”

Civil engineer Lin Shukui, 40, who is managing construction of the airport bridge, stands on scaffolding 10 meters above the turquoise-colored ocean, his shirt soaked with sweat. He says his main problem is the porous limestone he has to drill through to get to the bedrock, necessary to install around 100 piers without causing too much damage to the reef.

He becomes self-conscious when it comes to one question: What kind of profit will his company be making on this project? Lin exchanges glances and a few words with his colleagues before they agree on an answer: The “Bridge of Chinese-Maldivian Friendship” is not a commercial project, but rather serves the purpose of the name it has been given.

Some hotels being built by private Chinese firms may ultimately be profitable, but most of the other Chinese projects on the islands appear to be similar to Lin’s friendship bridge: They are favors being provided by Beijing, which may one day be called in. When, for example, the country seeks international support for its own controversial island policy in the South China Sea.

Dubai, United Arab Emirates

Management consultant Cong Hongbin, 55, is sitting inside the Dubai International Financial Centre wearing a wrinkled linen suit. He hails from the imperial Chinese city of Xi’an, once the starting point of the legendary Silk Road, but for the past few years, he’s been living in Dubai, the economic hub of the Arab Middle East.

Cong is a Chinese patriot, but he has also lived abroad for long enough to be able to translate the Communist Party’s “understanding among nations” jargon into understandable words.

Of course, Cong says, China is pursuing strategic goals with some of its projects. A look at the map — indeed, the port construction in Colombo, in Gwadar in Pakistan and, as announced last year, in Djibouti on the Horn of Africa — leaves room for no other interpretation. In the case of the new base in Djibouti, Beijing is no longer denying the military purpose as it did earlier. The Chinese navy is participating in the battle against pirates off the coast of Somalia and also wants to be prepared for further crises in the Middle East.

“But in the search for a ‘hidden agenda’ on the part of Beijing, I would warn against overlooking China’s primary interest — making money,” says Cong. Increasingly, he says, that also holds true for state-owned companies.

Far from the gold-plated faucets of the Burj Al Arab hotel, the Jumeirah Lake Towers rise into the sky in southern Dubai, a small forest of high rises where Chinese state-owned companies have their Middle Eastern headquarters. One is China State Construction Engineering, China’s largest construction company.

From the Emirates to Oman to Saudi Arabia, the company is building five-star hotels, skyscrapers, universities, worker camps, “anything that is profitable,” says Bao Zhao, deputy head of the company’s Middle East business. He lived in Frankfurt, Germany in the 1990s and says that Chinese construction firms are doing today what German and European companies like Hochtief, Strabag or Bilfinger+Berger were doing 30 years ago, when they built everything from cities to highways in countries ranging from Iraq to Nigeria.

Bao doesn’t understand the Europeans’ suspicion that there are somehow sinister intentions behind every major Chinese project. Western governments too, he says, have also occasionally launched unprofitable construction projects out of political considerations. “Believe me,” he says, “China’s large state companies are very conservative. If the interest rates aren’t right, or if we don’t get the permission of a government in question, then we just don’t do it. We aren’t working for charity.”

Tel Aviv, Israel

Around 30 kilometers south of the Lebanese border lies Israel’s largest port, located in the Bay of Haifa. In 2015, Shanghai International Port Group acquired the concession as the sole operator of the port for 25 years. It’s the company headed by Yan Jun in Shanghai.

Israel’s second biggest port is located around 30 kilometers north of the border to the Gaza Strip. The country processes the majority of its commodities exports at Ashdod and the Israeli military also obtains its materiel through this port. In mid-2014, China Harbour Engineering Company landed the winning bid to build a terminal in Ashdod that will be able to process ultra-large container ships.

Israel’s third largest port is located near Eilat on the Red Sea. The Israeli government intends to build a train connection between the port and Ashdod, creating a land bridge that could be used instead of the Suez Canal in the event of another war in the Middle East. In 2012, Jerusalem signed a cooperation agreement with Beijing for the Chinese to co-finance and build the railway line.

Surely, a country that takes its security as seriously as Israel does has carefully considered and held extensive discussions about who it is entrusting three of its most important infrastructural facilities to.

“Not really,” says Oded Eran of the Institute for National Security Studies in Tel Aviv. When the Chinese acquired Israel’s largest dairy products manufacturer, when they considered buying one of the largest insurance firms and when they invested around $150 million to develop a new Guangdong campus of Technion, the Israel Institute of Technology, there was much more public fuss about it.

When it comes to national security, Eran is a knowledgeable man. He served as head of the economics department at the Foreign Ministry and also as Israel’s ambassador to the EU and Jordan. He sees two different doctrines driving China’s plan for a Maritime Silk Road.

In the South China Sea and the Indian Ocean, the strategic approach dominates. In order to secure its coastal waters and its energy and trade corridor, the country has lined up an array of strategically placed ports and trading hubs. Geo-strategists call it the “String of Pearls.” With an export volume of more than $2 trillion, four-fifths of which are transported by ship, he says, it is no wonder that China wants “secure, efficient and inexpensive transport routes.”

In the Mediterranean, where, among others, China operates major container terminals in Port Said, Ashdod and Piraeus, the country is largely following an economic doctrine, he says. So far, there is “no evidence to suggest that China is seeking a solid and permanent military presence in the Mediterranean,” says Eran.

“Still,” he adds, “the countries located along the Maritime Silk Road should take a very close look at just how many of their economic and infrastructural assets they are ceding to China.”

But Eran sees no reason for panic, not even in his own country. China, he says, often generates unease with political steps that wouldn’t raise an eyebrow if taken by other global powers. This may be linked to the lack of transparency in Chinese politics.

So what lessons can be drawn by Germany and Europe three years after Beijing announced the “21st Century Maritime Silk Route Economic Belt”?

One thing stands out: For the most part, it is relatively small coastal countries in which China in investing particularly large amounts of money — and they often have a problem that few would be able to solve aside from Beijing. They are countries with weak infrastructure like Burma, Bangladesh or the Maldives, an incompetent construction industry like Pakistan or major fiscal problems like many countries in the Middle East are currently experiencing — or Greece.

No major power would become a world power without exploiting geostrategic opportunities. It was no coincidence that China got involved in Sri Lanka after former patron India pulled back. Nor is it likely to be a coincidence that it is strengthening its presence in Israel and Saudi Arabia right at a time when these countries are alienating themselves from their protective power, the United States. A disunited or even disintegrating Europe would provide a further political opportunity for China. Still, though, steadfast democracies and economically strong countries have no reason to fear China’s new weight.

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