10th March Highlights

Getting in debt, eating the state, championing rail, Balkanising the internet, and freeing the Indo-Pacific.

Highlights

Waving a flag for European-China railways
Photo Credit: Isabel Infantes/AFP/Getty Images via Reconnecting Asia

Academic exposure: Debt implications 

This is the study making headlines this week. If you’re going to consume anything in PDF format this Sunday, you should probably take a crack at this informative exploration of debt risk along the Belt and Road (BRI), or what US Secretary of State Rex Tillerson might call China’s “predatory finance” arrangements.

The study looks at individual countries and “pipelines” of project lending associated with BRI, identifying eight countries that are at particular risk of debt distress. If you spend a lot of time thinking about BRI, you probably have a good chance of naming these eight (no spoilers), but it’s definitely nice to have the numbers and methodology spelled out in plain English.

There’s also lots of good analysis/well-explained tidbits packed around the research, so it’s a good read. It doesn’t go into any deep political analysis and it doesn’t dwell on the strategic intent behind BRI, which is actually quite refreshing. The recommendations, for greater multilateralism, standard-setting on loan default scenarios, etc., are pretty optimistic without this cynicism – but hey, maybe that’s a good thing too.

Biggest news: the Party is eating the State (a few links)

March 5th marked the beginning of the two sessions (两会), and we’ve still got quite a few days to go before Beijing’s “biggest annual political ritual” (SupChina link to brief intro) concludes, so expect China watchers to be happily watching, tweeting, and commenting for days to come. I’m in no rush, so I’m not going to say much until the dust has settled – but it looks like the “Party-ization” of the state is containing unabated, and of course, as with the 19th Party Congress, Xi’s the man. Here’s a good MERICS article about it.

I’m not going to comment on removal of term limits, because everyone’s probably heard more than enough about that already! If not here’s a good Diplomat podcast on the subject. And if you’re really keen on following events in Beijing, here’s a timetable from the NPC Observer. This China Media Project article by David Bandurski is also really interesting, mingling a look at media trends with renewed talk about the dangers of one man rule.

Expert view: The rise of the railways

I probably link to Hillman too much, but I like the Belt and Road, and he likes the Belt and Road, and also he’s great. So – here’s an article about something that a lot of people talk about without looking much into: railway vs. shipping etc. BRI critics and supporters alike tend to spout statistics about rail being this or that much faster, or shipping being this and much cheaper, so it’s great to have more clarity on the issue. It’s also a nicely balanced article, neither championing or decrying the notion that rail’s the future (although it’s clear to me where sympathies and therefore likely realities lie – the bottom line is that the “rise of rail” is not revolutionary in big picture trade terms, but might still be significant).

Big Ideas: Balkanization of the Internet (Paywall, sorry) and a free and open Indo-Pacific

First off, the Balkanization of the internet (via a great article by Rana Foroohar). I know the “Splinternet” is not a new idea, but it’s not something I’ve heard much about personally. It’s also not something I’ve thought about too deeply, but it’s definitely on my “to think about” list. I picked up on this article through the Trivium newsletter, and considering this is more a retweet than an original thought, I might as well quote them verbatim:

A smart read by Rana Foroohar caughtour eye during this week that is otherwise dominated by the Two Sessions.

Foroohar argues that markets should focus on data – not steel – when it comes to a potential trade war (FT):

  • “China…has…ringfenced most of the tech sector as a ‘strategically important’ area in which domestic companies are given preference, one of the reasons that the US…has launched a “section 301” investigation into how the Chinese tech sector works.”

Her key observation is something we at Trivium/China been thinking about for a while:

  • “A tech-based trade war would likely splinter the US, China and Europe into three separate regions.” 
  • “The EU is already going in a very different direction to the US in terms of regulation of the high-tech sector.”

Get smart: THIS IS A HUGE DEAL. The balkanization of the global internet is a real possibility. It would be a huge headache for global companies and potentially disastrous for the efficient functioning of global markets.

Get smarter: This is where Xi Jinping’s Belt and Road Initiative has huge importance. It seeks to set data and technology standards so smaller countries fall into the Chinese data sphere.

Secondly, Trump’s “Free and Open Indo-Pacific”. Following on from news last week about some sort of quad alternative BRI in the works, I think it’s well worth paying more attention to what the Japanese/US conception of the Indo Pacific means.

The basic question: can the Quad (Japan-US-Australia-India) offer something beyond security cooperation, how might quad-led development work? Clearly, the big multilateral banks, Japan, etc., have led the development status quo for ages, but recent activity suggests that the “liberal order” in the Indo-Pacific is moving to offer a kind of re-branding of the status quo, in order to challenge the Belt and Road and China’s growing influence.

My suspicions are that, from a US angle, renewed activity in the Pacific is still very much about projecting American power. We have to ask – is Trump the right person to lead a grouping that champions the liberal order? If we are going to see leadership on Quad stuff, I think it’s got to come from Japan. Whether Australia can overcome its lack of economic muscle and timidness vis-a-vis China, and whether India can overcome its domestic problems and non-alignment tendencies are other questions to think about.

Here’s another Diplomat podcast on the issue.

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