Friday, April 29, 2011

China Political Memo: April 29, 2011

From Stratfor:
Created Apr 29 2011 - 07:56

STR/AFP/Getty Images

A Chinese high-speed train leaves Shanghai on Oct. 26, 2010, after the launch of the Shanghai-Hangzhou line

Over the past seven-odd years, China has tremendously expanded its railway network, particularly through the development of high-speed rail (or HSR, defined in China as any railway with speeds exceeding 200 kilometers per hour). Most of the growth occurred during the tenure of former Minister of Railways Lin Zhijuan and has been achieved by upgrading existing lines rather than building new ones.

During this period, China’s domestic HSR coverage has reached 8,358 kilometers, the longest high-speed network in the world. Meanwhile, China’s railway technology has become an increasingly important part of its foreign diplomacy, extending the country’s regional influence as well as addressing its growing energy demands.

On April 27, China and Myanmar signed a memorandum of understanding (MoU) for a joint railway construction project connecting the eastern Myanmar border town of Muse, the main gateway between Myanmar and China’s Yunnan province and the starting point of the Sino-Myanmar oil and gas pipeline, to the western port city of Kyaukphyu in Myanmar’s Rakhine state. The 61-kilometer Muse-to-Lashio line is the first scheduled phase of the project, all of which is slated for completion within three years. To be built parallel to the Sino-Myanmar pipeline, which began construction in June 2010, the railway will significantly enhance pipeline security and provide access to the sea from southwestern China.

While not strictly an HSR line, the Sino-Myanmar railway is an integral part of China’s vast international-railway expansion plan. Over the past year, overseas orders for equipment and technology from China’s major railway company, China South Locomotive & Rolling Stock Corp. (CSR), have more than doubled and now account for 10 percent of the company’s overall sales, or about $800 million. Though China’s railway expertise is based on technology introduced from other countries and the domestic industry has reached maturity only in the last three years, much of its technology is less expensive to produce and therefore strongly competitive.

The central government staunchly supports exports of China’s railway technology, often attaching attractive financing terms and other economic or political perquisites, particularly for less developed countries. Since 2010, Chinese railway technology has also seen a significant breakthrough into developed markets, including the United States and Europe.

But the Sino-Myanmar railway represents Beijing’s most ambitious railway project yet, designed to expand China’s links to the outside world. And similar projects are on the drawing board. According to a source within the China Railway Tunnel Group with knowledge of the plans, China is currently planning three more HSR networks, all heading in different directions – Southeast Asia, Central Asia and Russia. The source says negotiations are under way with a number of countries and progress is being made. Beijing hopes to complete the three new networks by 2025. Most of the HSR in the domestic portions of the networks will be designed for both passenger and freight transport.

Southeast Asian Network

China’s Southeast Asia railway network plan would largely realize the pan-Asian railway proposal introduced in 1995 by then-Malaysian Prime Minister Mahathir Mohamad in the fifth summit of the Association of Southeast Asian Nations (ASEAN). The original proposal, to connect Singapore to China through Malaysia, Thailand, Vietnam, Myanmar and Cambodia, was widely supported by ASEAN countries and China but was never implemented because of financial, technological and political constraints. In 2010, diplomatic efforts between Beijing and ASEAN countires to revive the plan accelerated. The network consists of different sections, which Chinese state-owned companies and governments are looking to take on, and it has been incorporated into China’s Mid- to Long-Term Railway Network Plan.

The Sino-Myanmar railway constitutes the western portion of the Southeast Asian network. Considerable progress also has been made regarding the middle section. The Chinese and Laotian governments have agreed to establish a joint venture to construct an HSR line connecting Kunming, the capital of China’s Yunnan province, to the Laotian capital Vientiane. Beijing and Vientiane signed an MoU in April 2010 and the Laotian parliament approved the 420-kilometer project in December. Construction was scheduled to begin April 25 and take four years to complete, though groundbreaking has been delayed, probably due to domestic issues on the Laotian side. Chinese companies would finance 70 percent of the $7 billion project.

According to the plan, this middle section will extend into Thailand. One line will connect Nong Khai to Bangkok and then continue eastward to Thailand’s eastern region. Another line will link Bangkok to the southern Thai-Malaysian border region near Padang Basar. Under a draft MoU, construction is slated to begin in 2011 and be completed in 2016. Meanwhile, Chinese companies are also bidding for an HSR project connecting the Malaysian capital Kuala Lumpur to Singapore. Once these missing links are in place, China’s existing railway network will extend south to Malaysia and Singapore.

The Southeast Asian railway network will significantly enhance the degree of interconnection among ASEAN countries and boost China’s regional influence through greater trade and economic cooperation under the ASEAN-China free trade agreement. The Singapore link will give China more direct access to the Southeast Asian trade hub and a greater export market, bypassing the South China Sea and the Strait of Taiwan, while the Myanmar link, by creating an alternate access route for China to the Indian Ocean, will enable it to avoid heavy reliance on the Strait of Malacca. Strategically, the railway network could alleviate any strategic pressure on China from the United States’ re-engagement with Asia and, coupled with Beijing’s “charm offensive,” help contain India’s influence in the region.

Central Asian Network

Beijing is also accelerating negotiations with a number of Central Asian countries to build an HSR network in this region. In February, during Kazakh President Nursultan Nazarbayev’s visit to Beijing, the two countries signed an agreement to construct a 1,050-kilometer, 350-kph line from Kazakhstan’s capital Astana to Almaty, the country’s largest city. The railway will terminate 300 kilometers from the Chinese border (further negotiations are expected to fill in this missing piece). Meanwhile, China is actively promoting a China-Kyrgyzstan-Uzbekistan HSR connection.

From the Chinese perspective, the Central Asian railway network will serve as a modern-day complement to ancient China’s Silk Road, intensifying transportation between China and Central Asian countries and facilitating trade. With China’s growing interest in the region, driven largely by its energy demand, the railway line will also reduce the cost of energy shipments and further diversify China’s energy routes and supply chains. These routes, combined with Beijing’s strategy to develop the country’s western buffer region, will also boost bilateral exchange. Beijing is talking with a number of other countries, including Russia, Nepal, Pakistan, Vietnam and India, about constructing railways for them. And it has even proposed a rail project for Latin America that it believes would rival the Panama Canal by linking Cartagena, Colombia, to the Pacific coast (This plan won’t reach maturity any time soon, given the technological difficulties that arise from negotiating the geography and consolidating existing rail tracks in Colombia using Chinese standards).

More important for China is the expanded regional influence exercised through this railway diplomacy. China is building HSR railways in neighboring countries to within a few miles of its border, then filling in the gaps at a later date. This is an effective strategic template for moving people, goods and potentially even materiel. The strategy is already realizing its potential to facilitate Beijing’s foreign-policy agenda.
Source URL:

No comments:

Post a Comment