6 Special reportChina’s Belt and Road The EconomistFebruary 8th 2020
2 drawn up for power plants, roads, railways and the development of
a port at Gwadar, a fleapit on the Arabian Sea, that would, as the
Pakistani planning minister boasted, “benchmark” Singapore.
Yet as China was helping lay the ground for a boom in Pakistan,
it failed to lay the political ground in the region. India in particular
was touchy. (It still has not joined the bri.) Meanwhile, all the talk
of a new “corridor” brought opposition from hawks in Washing-
ton, dc. Since 2017, the administration of President Donald Trump
has developed a pointed narrative: cpec, it says, is driven above all
by China’s long-term strategic objective to link its far western re-
gions to the Arabian Sea, so as to have new energy routes and to
project power into the western Indian Ocean. The scheme, the
Americans say, will leave Pakistan in debt, littered with white ele-
phants, internally divided and under Chinese sway.
The Chinese government also misread Pakistan’s internal poli-
tics, as Imran Khan and his Pakistan Tehreek-e-Insaf (pti) swept to
power having campaigned against corruption, including that in
cpecprojects. Soon, the inexperienced ptifaced a full-blown bal-
ance-of-payments crisis to which the cpecfrenzy had contributed
by pumping up domestic demand, pushing up the value of the cur-
rency and sucking in imports. In 2018 the bubble burst, the Paki-
stani rupee slid and the economy slowed sharply. Mr Khan, cap in
hand, garnered help from China with conditions attached.
In truth, cpecwas always a corridor only in name, says Andrew
Small of the German Marshall Fund of the United States, a Wash-
ington think-tank. Pumping oil or gas over high-altitude passes
would cost too much and was never seriously considered. And
Gwadar port has future strategic value to China regardless of the
hinterland behind it. Rather, cpeccan better be understood as an
investment package of roads, rail and power plants, some of which
were useful but much of which will never come to pass.
Too much is at stake for China to abandon cpec. But ambitions
have been pared right back. Only already agreed projects are likely
to proceed, notably an $8bn railway from Karachi to Peshawar that
the government can ill afford. The all-weather friendship will car-
ry on, but where cpecpromised to take it to new heights, it has
merely defined its limitations.All joined up
South-East Asia has long been important to China’s economy—not
least because of its 30m “overseas Chinese”, many with capital and
management nous. In electronics and other sectors, the ten-coun-
try Association of South-East Asian Nations (asean) is enmeshed
in China-centred supply chains. Three-fifths of China’s computer
imports come from the region, along with a third of its integrated
circuits. In the 12 years to 2017, Chinese investment in South-East
Asia grew almost 30-fold, to nearly $40bn.
Historically China’s intercourse with South-East Asia has been
by sea. That, now, is changing. In recent years China’s industrial
centre of gravity has shifted away from the coast towards the
south-west, centred around Chongqing and Kunming, capital of
Yunnan province. A priority of China’s belt is to improve cross-
border transport. It squares with asean’s desire for regional inte-
gration. As elsewhere, the soft infrastruc-
ture lags the hard, particularly at borders.
Hence a new body called the Chongqing
Connectivity Initiative, set up with Singa-
pore, to seek a single electronic platform
for speeding up customs clearance.
Yet China’s growing presence in South-
East Asia comes at a price. Its grand pro-
jects, such as the high-speed railway under
construction from Kunming to Singapore,
and hydroelectric schemes along the Me-
kong river for exporting power, are of enor-mous importance to the leadership in Beijing. But an obsession
with corridors does not always mesh with the interests of those
who live along them. In tiny Laos, many villagers have been dis-
placed by the railway and dams that bring little benefit to them.
And, though they rarely say so in public, most aseanstates
have long viewed their big northern neighbour with wary caution.
By contrast, Cambodia, under its long-serving strongman, Hun
Sen, opened the door to China. In return for goodies, it has proved
a staunch ally, frustrating asean’s efforts to resist China’s assertive
maritime claims in the South China Sea.
The impact on Cambodia of Chinese involvement has been im-
mense and baneful. Dam-building threatens the once-abundant
fish stocks of the Tonle Sap, Cambodia’s giant, seasonably expand-
ing lake on which 1m fishermen’s livelihoods depend. The haunt-
ing ruins of Angkor Wat now have the feel of a Chinese theme park.
Chinese land grabs for forestry concessions are threatening biodi-
versity. Corruption and Chinese development in the capital,
Phnom Penh, go hand in hand. Chinese plans will up Cambodia’s
carbon emissions by a tenth. And Cambodia’s (dollar-based) econ-
omy helps to get cash out of China: of its ten airlines, most are Chi-
nese-owned and several reckoned to be laundering fronts.
How this all plays out in Cambodia can be seen in the seaside
town of Sihanoukville. It was once a sleepy, beach-flanked city be-
loved of holidaying Cambodian families and Western backpack-
ers. Then the Chinese came. In 2015 Hun Sen’s government desig-
nated the city as one of Cambodia’s flagship bri projects.
Gambling for foreigners (though not Cambodians) was legalised in
Sihanoukville, both online and in new casinos. Firms from China
were welcomed. Some 80,000 Chinese—construction workers, in-
vestors, casino operators and tourists—arrived.
More buildings are in a state of hasty construction than are
completed—last year a high-rise collapsed, killing 28 workers. The
city’s drains cannot cope. Maggie Eno, who runs the M’Lop Tapang
school for street children, shows how monsoon floods turned the
ground floor and playground into seas of raw sewage. Brothels op-
erate out of plyboard shanties on construction sites. Thugs murder
rivals in gangland killings, dumping victims’ bodies out of cars in
the middle of town. And Sihanoukville’s beaches are piled high
with plastic detritus from the Chinese invasion.
Perhaps the worst is over. Last year the Cambodian govern-
ment, reacting to the chaos at last, banned most gambling. In one
of the town’s casinos recently, a Chinese construction foreman
said he was having one last fling before heading home. The bubble
has burst. But it will be many years before the city recovers. 7Going out
WorldwideChineseinvestmentsandconstructioncontracts,$bnSource:AmericanEnterpriseInstitute *ToJune300250200150100500
19*181716151413121110090807062005Asia & Australia Middle East & Africa Europe South America North AmericaMost ASEANstates
have long viewed
their big northern
neighbour with
wary caution