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Plenty of bumps on Xi’s New Silk Roads, on both land and sea

Chinese President Xi Jinping’s Belt and Road Initiative is an ambitious program to build infrastructure across 60-plus countries on four continents. There is an overland component that links China with Western Europe by rail. The sea component links coastal China with East Africa and Europe. This month, an additional proposal linked Europe and eastern Canada via three proposed Arctic routes.

There is no overarching master plan or public list of all BRI projects.   Lead investors tend to be large state-owned Chinese companies that have an interest in building the project. Projects typically are financed primarily by Chinese state-owned banks, with some participation from such agencies as the Asian Infrastructure Investment Bank.

Belt and Road is not an aid program, it is a business proposition that predominantly facilitates funding of projects through sovereign loans from China that are, in turn, used to contract state firms for infrastructure projects. No obvious effort is made to ensure that the infrastructure projects mesh well with one another, or leverage off each other beyond sharing the overarching program name.

Incompatible rail networks

Belt and Road is a collection of musicians, but it is not a symphony. As an example, there are at least six different rail gauges widely in use in Eurasia. At present, trains have to go through a laborious process of converting wheels or transferring cargo when transiting different jurisdictions in Eurasia (such as between former Soviet republics and China). Within Western Europe, there is an even broader proliferation of rail gauges.

It is not a simple matter of converting wheels (or having adjustable wheels), but the load-bearing capacity of rail lines, and overhead, tunnel or bridge clearances, are major hindrances to any “superhighway” belt either by rail or road. No effort is being made to align BRI projects to a compatible standard at this very basic level.

Additional factors, such as incompatible signaling systems, conflicting requirements for a host of rules and regulations and laws for everything ranging from safety to the environment, customs and excise, import-export controls, varying climate, etc all add to the burden as a rail shipment moves across the “belt.” Sanctions on countries such as Russia along the route add to the problem.

Cutting shipping time from roughly 40 days by sea to about 16 by rail is a major advantage over sea shipping. Rail shipment is competitive with air shipment, which is nearly double the cost.

BRI relies heavily on local security

However, the major problem glossed over by supporters of the land component of the BRI is that it is dependent on the competence and capacity of local authorities to maintain order and security along the entire route. Higher-value cargo is an attractive target for routine pilferage, hijacking, or other misfortunes that have long plagued many less-than-stable countries. Quite often, local authorities are unable to maintain security, which means the shipper must turn to those who can, potentially at high cost.

Many Belt and Road projects are already impaired by the security environment that they operate in. For example, the China-Pakistan Economic Corridor was originally to feature three road projects that China agreed to fund but then unilaterally withdrew from when security and political problems in Pakistan converged. Infrastructure projects are favored targets of insurgents, and not only during the construction phase – this is likely to be a long-term problem.

The problem of providing adequate peace and security is a modest issue in most parts of China and Russia, but along many parts of the BRI land and sea routes, it is not a given. There are many Lawrence of Arabias and Sherif Alis lurking in the shadows ready to attack infrastructure projects such as railroad, roads and ports, or cargo shipments.

Xi’s China has by and large relied on its ability to make deals with national authorities and compensate them well in exchange for assuming the sovereign debt burden so Chinese companies can handsomely profit from Belt and Road projects. What potentates do to secure orders is not a concern of China as long as the money cycles back to state-owned Chinese firms.

Freedom of navigation need US support

At sea, the Belt and Road program explicitly relies on the US and its allies to provide protection and ensure freedom of navigation. China’s rejection of its obligations under the United Nations Convention on the Law of the Sea in the South China Sea and other “near abroad” bodies of water have set the stage for other powers similarly to withdraw the benefits of UNCLOS from Chinese shipping and trade elsewhere. If that were to happen, it would impair the ability of the maritime Belt and Road routes and force a fallback on to land or air routes at considerable expense, resulting in a severe curtailment of trade.

China’s naval and expeditionary capabilities are growing, but should it be required to defend its own sea lanes and protect its trade routes without the cooperation of the US and its allies, or in the worst case, become belligerent to the US alliance, it is hard to see how the military capabilities projected for China in the next decade can be adequate to defend all but the most essential trade routes.

China’s unacknowledged dependence on the liberal internationalist order is the biggest hurdle to the Belt and Road program – a  consideration that is largely beyond the control of Beijing.

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Danny Lam is an analyst based in Canada. The opinions expressed are personal views and do not represent any organization the author may be affiliated with. At the time of publication, there are no known conflicts of interests unless expressly disclosed: The author does not hold a position in any securities mentioned at the time of publication, though this may change at any time after publication.

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News credit : Atimes

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