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May 16, 2017 - Comments

XI reasons not to worry over CPEC/OBOR

Thanks to our famous DD newsreader, by now the whole world knows how to pronounce Chinese President Xi Jinping’s name! So here’s our top 11 reasons not to lose sleep over CPEC, OBOR, BARF, BRF, SRI or whatever its most recent name is.

  1. There’s a lot of marketing hype that would put a dotcom bubble company to shame! Words like “game changer”, “new dawn” are used with such regularity, they have almost become pedestrian. Riding on the bandwagon, projects that have nothing to do with belts or roads or China are getting tagged with the label hoping there will be some lucrative contracts or deals (mostly for Chinese companies, of course) or lemons would magically transform into hot potatoes. One example is the Singapore-KL High speed rail project. This not only predates the OBOR initiative, it is mostly bilateral and nothing to with China.
  2. US/Europe sending delegations doesn’t mean a thing. Greece, Germany and other European nations, apart from Australia, reportedly refused to sign the official declarations because there were no assurances of “transparency” in deals – code word for “let me have my share of the meat”. EU that has nothing to lose in territory & is strategically in deep trouble anyway, simply wants its companies allowed to grab some of the contracts. It is not an endorsement of the OBOR or any specific projects. Obviously China’s ideas are something else.
  3. A lot of the connection is already there and hasn’t change any game for anyone. They get a fresh coat of “OBOR” paint for propaganda purposes. For example the much ballyhooed London-China direct train service. This too predates the OBOR by years. Here is a nice article in SCMP that debunks much of the hype about its “game changing” potential. A container ship can carry nearly 300 train loads! To replace that (that is, just one ship) trains have to run every 90m in both directions, something the infrastructure can hardly handle! On top of that it is twice as expensive if not more! Interestingly, this also means China doesn’t really need Gwadar to import or export from EU as it makes zero sense sending goods partly by train or truck & then ship them again when the train goes all the way!
  4. Just look at the rogues gallery of leaders that signed up! Clearly no globally respected, truly democratic & sensible leader has bet his reputation on CPEC/OBOR/BRF. Duterte of Philippines whose foul mouth and anti-US sentiments are well known, Najib Razak of Malaysia reeling from corruption allegations following the IMDB scandal, Hun Sen the long ruling dictator of Cambodia, Jihadi terrorist Pakistani generals and their puppets in the civilian government, Mahinda Rajapakse regime facing human rights questions in Lanka & ignored by the West, Thug-ocracy of Chavez/Maduro in Venezuela…the list goes on. Most of them, if not all, have practically no options worth considering and this pushes them into the laps of Xi Jinping who can pretty much dictate any terms he wants to! Sadly the people in these countries will pay, not the leaders or their cronies.
  5. Projects not bankable! Many of the projects have not taken off all this while because they were not bankable in the first place! That is, no one wants to invest or lend to them. This is precisely what motivates smaller nations and those with dubious records to rush to China. After all, Tata or Birla don’t go to the pawn broker for money. This also means, once they are constructed the chances are they will become white elephants that someone finally has to pay for. That is more likely than not the hapless tax payers of these countries who had zero say on them to start with. Sri Lanka’s Hambantota is a good example. There are more, including a refinery in Kyrgyzstan. Here a refinery was built without tying up oil supplies!
  6. China is simply looking for insurance policies not live alternatives. After all, if Malacca straits are not blockaded by war it makes zero sense shipping from Gwadar via Xinjiang across thousands of miles to China’s industrial heartland which lies in the East! By the way Xinjiang already has good connectivity to Central Asia through numerous initiatives of the past and doesn’t need Gwadar for transit. Nor have they changed any “game” for the nations involved. Myanmar’s new pipeline to Yunnan at least makes some geographical sense, even that has viability concerns!
  7. The doors will not close just because we don’t sign up on Day 1. These veiled threats have been issued both by China’s official media and by its friends in India. Sign NOW or you’ll be a loser forever! But then that is not how world of commerce and diplomacy works. China will be (and is most certainly not) a complete idiot to punish India or burn bridges with a nation against which it is running a huge trade surplus (About $4b a month, that is a lot more than CPEC which is a 10+ year project). India can wait, haggle, raise the price and finally settle for something that makes sense to its own interests as it is not a banana republic run by a tinpot dictator or loose mouthed loonie without any other sensible options on the table.
  8. China is already supplying to India, giving loans, investing! And in billions! CPEC or BRF notwithstanding! This is apart from the trade figures we cited above. But then these projects are going through proper bidding, on commercially sensible terms, and in mutual interest, not grabbed by diktats at crazy predatory prices. Alibaba, Dalian Wanda, Didi Taxi, Haier, Huawei and so many others are investing where it makes sense to them. And they will continue to do so. We don’t need government to government deals certainly not for power, roads etc. May be railways – yes given their long gestation, but here again our needs are vastly different from, say, Philippines or Indonesia who have very little internal expertise, technology, project management skills or funds.
  9. China is not the only game in town. We can and should team up with the Europeans, Japan and many others for select projects where there’s commercial and strategic synergy, bidding is transparent and transactions commercially viable and most importantly, beneficial to the host nation. China has already lost a lot of credibility in a wide range of markets thanks to the greed, corruption, insensitivity and bad quality of its businesses. We don’t have to rush to import more of the same.
  10. China’s credit squeeze is hurting many of the promised investments. This will eventually hurt many so-called OBOR/BRF projects that have nothing to do with the core strategic aims of China and are renamed simply to ride on the marketing hype. The Bandar Malaysia project (see our separate article on that topic) is one. So it is not a smooth pathway to investment nirvana for the receiving nation.
  11. We are big enough to do it ourselves. Need we say more on this? Ironically many of our champion non-aligned, anti-colonial, anti-imperialist, anti-globalisation anti-big business left “progressive intellectuals” have become de-facto marketing agents of China pushing OBOR/BRF with all the naive enthusiasm as a housewife that signed up for latest pyramid marketing miracle drug or slimming plan to hit the town!. Shame on them.

So let us stop whining, worrying, biting our nails off and wallowing in defeatist rhetoric.