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Deutsche Welle: German Federal Minister Reminded Emerging Countries about China Related Debts

Deutsche Welle Chinese Edition recently reported that Gerd Müller, the German Federal Minister of Economic Cooperation and Development, warned emerging countries about loans from China. He advised that borrowers should avoid developing any dependency on China provided loans. Such loans have had a lot of transparency issues regarding actual debt level and loan conditions. Gerd used Sri Lanka as an example. Sri Lanka lost control of the Port of Hambantota to China under a “rental” agreement, (in effect, a 99-year lease). This was the result of the high debt level Sri Lanka had with China. Gerd reemphasized his point during his recent visit to Africa, where he mentioned the high debt level of Zambia and its loans from China. One of the primary parties was the Zambia Power Supply Company (Zesco) that provided a guarantee. In the past few years, China invested a large amount money in African infrastructure. These investments were often China-backed loans, which were used to fund Chinese companies to deliver construction. Natural resources were often used to serve as the payment of the debt. In addition, these contracts often lacked transparency.

Source: Deutsche Welle Chinese Edition, January 16, 2019

China’s Attempt to Relaunch Myitsone Dam Project Met with Strong Opposition from Myanmar Local Political Parties

A recent statement from the Chinese Embassy in Myanmar has caused great controversy. Leaders of several political parties in the Kachin State of north Myanmar expressed strong opposition. Some observers believe that if the confrontational situation continues to expand, it is possible to reignite the wave of anti-Chinese investment that was sweeping across Myanmar a few years ago.

Hong Liang, the Chinese Ambassador to Myanmar visited Kachin State at the end of 2018. Hong met with the heads of the local five political parties and a religious organization. Topics discussed included the peace process in Myanmar, the resettlement of refugees, drug control, and the economic and trade cooperation with China.

Hong’s meeting was not well received. Gumgrawng Awng Hkam, leader of Kachin Democratic Party (KDP), and Rev. Hkalam Samson, pastor from Kachin Baptist Churches, said in an interview that the attitude of the Chinese ambassador at the meeting was somewhat arrogant. Hong warned these leaders not to establish friendship with Western diplomats and not to oppose China’s investment projects in Kachin State, including the Myitsone hydropower station that has been on hold for more than seven years.

A week before the Chinese ambassador’s visit, the US and British ambassadors also visited Kachin. They also met with leaders of local political parties and discussed the peace processes, refugee resettlement, education and medical care, and fair and free elections. Kachin’s political leaders suggested that the two ambassadors set up liaison offices in the state capital of Myitkyina to strengthen their ties.

More than 90 percent of the Kachin people believe in Christianity. Local religious groups and political parties have maintained close ties with Western churches and political circles. Gumgrawng Awng Hkam believes that the warning that the Chinese ambassador made to the Kachin people “felt like a threat.”

On January 13, the Chinese Embassy in Myanmar issued a statement. The statement said that the Myitsone hydropower project has been put on hold for seven years and is one of the difficulties that China-Myanmar cooperation faces. If this problem cannot be resolved after a long delay, it will seriously damage the confidence of Chinese entrepreneurs in investing in Myanmar. The economic and social development of Myanmar and the construction of the China-Myanmar Economic Corridor require an adequate electricity supply. To this end, China and Myanmar have conducted close consultations on the Myitsone hydropower project in an effort to find a solution acceptable to both parties as soon as possible. The support of the Kachin State people will be highly valued.

The statement also said, “The people of Kachin State did not oppose the Myitsone project. It is some individuals and some foreign organizations that opposed the project.”

In response to the statement from the Chinese Embassy, on January 14, Kachin State’s three main political parties – the Kachin National Congress (KNC), the Kachin State Democratic Party (KSDP), and the Kachin Democratic Party (KDP) issued a joint statement. The statement declared that the Kachin people represented by the three political parties have the same desire, which is to completely stop the construction of the Myitsone hydropower project.

The three political parties, which all attended the meeting with Chinese Ambassador Hong in December, are applying to form a unified political party to participate in the 2020 Myanmar election.

After the publication of the joint statement, Gumgrawng Awng Hkam showed a strong attitude in the interview. “From the beginning, we have been against the project of Myitsone. Our people disagree with it and our political parties also oppose it. However, China refuses to give up and continues to work hard to advance it. They said that due to the failure of Mysone Chinese investors are hesitant to make new investments in Myanmar. I want to tell the Chinese ambassador and China again that our party and I totally disagree with this project.”

The Myitsone Hydropower Project, with a planned total investment of US$3.6 billion, was launched in 2009, but the local people and people in other parts of Myanmart quickly opposed it. Then President of Myanmar, Thein Sein, stopped the project in September 2011. After Aung San Suu Kyi’s National League for Democracy (NLD) government took office, an investigation team was formed to investigate the feasibility, environmental impact and immigration issues of the Myitsone project. The team has completed two investigation reports so far, but the NLD government has not made the reports public.

The project’s investor, China’s State Power Investment Corporation (SPIC), has not given up the project. In September 2018, media reported that the SPIC project leader organized meetings in the villages of Kachin to promote the project to the local people. According to SPIC, due to the shelving of the project, the Myanmar government has to pay the Chinese side US$50 million in compensation every year. Once the project is completely cancelled, Myanmar is facing a payment of up to US$800 million for breaching the contract.

Sweden’s Burmese expert Bertil Lintner wrote in the Asia Times that Aung San Suu Kyi had to seek more support from China because of the pressure and sanctions imposed by the Europeans and Americans on the Rohingya refugee issue. At that point, China intensified its efforts to lobby Myanmar to restart the Myitsone hydropower station, and it asked for a high return from Myanmar. He believes: “China’s new push for the Myitsone dam represents a gamble, one that could reignite the popular anti-China movement that swept the country in 2011, and one that even Suu Kyi would be hard-pressed to stop once started.”

Source: Voice of America, January 17, 2019

Chinese Foreign Ministry on Sino–Russian Relations: “No End to Their Friendship and No Restrictions on Cooperation”

When speaking of Sino-Russian relations at a press conference on January 16, Russian Foreign Minister Sergei Lavrov said that the volume of Russia-China trade reached a new high in 2018. On international affairs, Russia and China supported each other under multilateral frameworks. Russia and China are so friendly because they are neighbors and strategic partners. The two countries share many common interests and both sides believe that the world needs to be more stable and safe.

Hua Chunying, the spokesperson for Chinese Foreign Ministry, said that China highly appreciates Lavrov’s positive comments on Sino-Russian relations. In 2018, under President Xi Jinping and President Putin’s strategic guidance, Sino-Russian relations achieved unprecedented development and have gained fruitful results in every field.

Hua Chunying emphasized that there is no end to the deepening of the friendship between China and Russia and there are no restricted areas for expanding their cooperation. Statistics from the General Administration of Customs of China show that the bilateral trade volume between China and Russia reached a record high of US$107.06 billion in 2018, surpassing US$100 billion for the first time, with a growth rate of 27.1 percent. The main exports to Russia include mechanical and electrical products; the main imports from Russia are concentrated in energy resources such as crude oil, coal and sawn timber.

Source: Sputnik News, January 17, 2019

Leaked Railway Contract with China Poses a Risk to Kenyan Sovereignty

According to Kenya’s largest independent newspaper, the Daily Nation, the Kenyan government is trying to cope with the news that a multi-billion dollar contract with China may jeopardize its sovereignty.

On Sunday, January 13, 2019, the newspaper published part of the details of a contract between the Export-Import Bank of China and the Republic of Kenya, which was generated in  2014. It revealed the details of the Standard Gauge Railway (SGR) loan. SGR is the country’s largest infrastructure project since Kenya’s achieved independence.

A clause in the contract regarding the scope of assets that would be confiscated in the event of a loan default raised the greatest concern. Clause 5.5 of the Preferential Buyer Credit Loan Agreement on the Mombasa-Nairobi SGR reads as follows: “Neither the borrower (Kenya) nor any of its assets is entitled to any right of immunity on the grounds of sovereignty or otherwise from arbitration, suit, execution, or any other legal process with respect to its obligations under this Agreement, as the case may be in any jurisdiction.”

In the deal, Kenya is also compelled to import goods, technology and services from China.

The confidentiality clause reads, “Without the prior written consent of the lender (China), the borrower shall not disclose any information hereunder or in connection with this agreement to any third party unless required by applicable law.”

The disclosure of these details provides the most convincing evidence to date that the Chinese government may adopt “debt-trap diplomacy” to force a country to surrender land, minerals, or strategic assets in the event of a default.

The wording in the document fits well with the contract for the “Belt and Road” project in Serbia, Kyrgyzstan and Guyana, as Voice of America revealed earlier. The “Belt and Road” is China’s multi-trillion dollar global infrastructure project. This suggests that the terms of the Kenyan loan – from asset confiscation and confidentiality provisions to the requirement to use Chinese suppliers – may be a reflection of the Beijing’s model of lending in Africa and in other places.

Another worrisome aspect is a clause that states that any disputes on the loan would only be resolved in Beijing through the China International Economic and Trade Arbitration Commission (Cietac).

The agreement says, “The arbitration award shall be final and binding on both parties. The arbitration shall take place in Beijing.”  This effectively blocks other international commercial dispute resolution avenues.

Source: Voice of America, January 16, 2019

Lianhe Zaobao: Seventy Percent of Southeast Asian Organizations Concerned about One Belt One Road Debts

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that Singapore’s research organization, the ISEAS-Yusof Ishak Institute, just completed a survey among 1,008 ASEAN (Association of Southeast Asian Nations) organizations including companies, academic institutes and government branches. The released report shows that around 70 percent of the entities surveyed expressed the belief that their governments, in order to manage the risk of shouldering high debts, should take a very careful and conservative attitude when discussing the One Belt One Road initiative with China. The organizations in Malaysia, The Philippines, and Thailand are especially concerned about this risk. One third of those surveyed complained about the (lack of) transparency of the One Belt One Road plan, and 16 percent predicted the plan will eventually fail. Around half of the people surveyed recognized that China has a more superior regional influence than the U.S. Sixty percent of the sample expressed the belief that the U.S.’ global power has declined in the past year. One third actually thought the U.S. has completely lost its influence in the region.

Source: Lianhe Zaobao. January 7, 2019

China Times: German BDI Asked EU to Take a Tougher Position against China

The major Taiwanese newspaper China Times recently reported that The Federation of German Industries called on the European Union to take a stronger economic position against Mainland China to help EU companies fight against unfair competitive methods like product dumping, compulsive technology transfer, and inequality in financial backing. The BDI published its official announcement on January 10 with 54 requests for the German government and the EU to provide assistance. The announcement emphasized that, while German companies need the Chinese market, the Chinese government has refused to provide necessary market access. The BDI also called for establishing a stronger economic framework to regulate companies from non-market economies. The announcement highlighted the requests to stop subsidizing products not manufactured in the EU and to increase EU investments on EU infrastructure and innovation. The German BDI is the joint organization of 36 industrial associations. It is the most important lobbying organization representing the German Industries.

Source: China Times, January 10, 2019