Common Cents

Easy Money, Hard Times

Ralph Murphy

(1/18) Washington remains officially quiet or non committal toward action relative to last years further integration of Europe with the far eastern Belt and Road Initiative (BRI) of The people’s Republic of China.. What was initially billed as infrastructure project money expanded to include political and even military objectives sourced to Beijing but seemingly supported by other western groups including financiers and secondary defense contractors who could suddenly wield exposure in high profile programs under treaty protection otherwise impossible to levels. The land and sea routes linked to the BRI and Maritime Silk Road are no longer western funded but the Beijing Group treaties do endure. Amid nationalization’s and non funding compliance of its sovereign foreign hosts the program likely needs rational review to objective and purpose as it has fallen apart upon project completions.

The BRI and it’s sea component Maritime Silk Road (MSR) were announced as overseas infrastructure project aid and trade credit financing by Chinese officials in 2013 at a conference in Indonesia. It was a heady era of huge money access linked to western bankers who for whatever reason raced out of New York to the mysterious Orient or Shanghai facilities where trillions of dollars were then stored . The accounting was vague or disguised, the assets attributed to China and projects if restricted by funds alone. 60 nations became host to the initiative’s projects that were used to build or improve existing infrastructure as rail links, roads, bridges and dams. There was also a corporate substitution or investments in commercial programs linked to utilities or basic industry which added to their appeal.

The land routes connected China to Russia, veered south from northerly rail and road corridors to include South and Central Asia as well as Indochina which was complemented by the MSR port and commercial projects under varied treaty accords. There were several issues involved that are worth exploring in policy review to the program purpose or objectives. They include the finance terms with the infrastructure mostly completed to meet policy objectives but the original expected return at estimated $1 to 8 trillion depending on what they could make plausible to the public. Payment of the hoarded funds settled at less than $10 billion and Beijing doesn’t seem able to even leverage that back in the current climate as they lack access to real strength leverage of those restored western markets.

A parallel program that became the Asian Infrastructure Development Bank was announced by Chinese officials of 75 member nations in 2013 to help fund the projects. It also envisioned " concessionary loans" at low or no interest to the host nations who would have to pay for the program of their own national source money. In some cases as especially with road or rail projects the BRI did enable or speedup programs which domestic politics couldn’t gain consensus or accord. The problem with that settlement regimen seems lingering debt obligations but also the treaty concerns as Beijing was able to access those foreign regions and set up exclusive control to Special Economic Zones where the host lost control of production, tax policies and foreign trade at very low cost project money. They retained only sovereign control and it included areas on land as well as the ports.

The port aspect is very unique in that of ten nations listed as signing individual BRI or MSR linked treaties all are very lengthy. Pakistan’s Gwadar port and SEZ projects are signed for forty year Chinese rule, There are others like Myanmar which agreed to a 50 year concession, Brunei 60. Malaysia a 99 year term seven others for the port deals . Original project money was very difficult to peg to a relative market value as for example the Pakistani projects part of a Chinese- Pakistan Economic Corridor (CPEC) was still expecting over $60 billion in 2017 but now can’t get the actual billion the projects ran on completion without a contended value settlement.

There’s a tactical aspect that does play into the program with several standing organizations to include the Chinese Development Bank enjoying major roles. They had been used for their domestic programs or Import Export Bank of China foreign ones but were enhanced by the western gift funds for external use. That import export bank was active prior to BRI and its recent role severely downgraded by sudden western cash transfers withdrawn from that region by 2017. It affected world and regional politics or programs that had attributed a relative perception of political strength to the host based on their ability to access the funds. Programs promised to include an airport near Mexico City or Philippine finance groups that supported impossibly minority even radical left wing non performers collapsed. Their politics should have returned to normal or relatively moderate at the same time, but they are retained probably by force at this point. Many older Import Export banks attributed to BRI are actually extensions of its prior commitments

What’s unbelievable is Europe’s reaction, with new treaties last year signed in or implemented to for example the Greek Piraeus or Belgian Zeebrugge ports for terminal ownership by state owned China's Cosco Shipping at undisclosed lease terms. The port controls there and elsewhere do affect up to 10% Europe’s trade balance by shipping attributed to a credible report. Africa’s Djibouti just nationalized a contended Doraleh container port then Chinese owned by Presidential decry. The military base adjacent to it is contended and part of" string of pearls" military program tying ports from China to Africa along the MSR based on their sudden emergence again with western funds and expertise. The BRI as militarized replaced many port agreements that had been strictly commercial as once brokered by a Port authority of Singapore. It’s probably penetrated but could prove a relative improvement if reference is needed to less politicized trade links by that method is required.

Monetary strength affords tangible realization of otherwise hypothetical programs and ideas. It is rare for program longevity to be divorced from the earning source and still able to control it easily over a lengthy time period beyond some hidden or lower key relationship as a vassal dependent. It’s impossible for the projection of earner when actually dependent as with that Chinese group. Government programs on very rare occasion need infrastructure payments and they have to be well defined, finite or identified as completed.

I was in Germany a couple years ago and even there, a nation known for its autobahns, roads built by ancient Romans are retained and very common. High profile low technology fixed capital programs like the road and rail ones are inexpensive, routinely over charged and used as pretense for other source income like tolls. They also provide policy officials tangible proof of purpose since private groups routinely can’t coordinate the needed projects should identifiable need direct their construction. If the government entertains a market type project it’s guaranteed to be very low complexity likely otherwise subsidized by alternate private sector producers and outweighed by cost as postal, mining, energy, or utility links testify. China’s a central planning farce with all those attributes

BRI treaty obligations prove as testimony to diplomacy strength but if the west had stayed attached to that derailed corporate structure we wouldn’t have survived-as the same polity It’s with that understanding the China lobby has to be contained, are understood now to be so by finance groups if not their UN party circuit and redirected to conventional mooring on a more realistic market and exchange plain.