CHINAMacroReporter

'Rivers of Iron': Changing the Face of Asia

‘But what's happened now is that Southeast Asia is rich enough to contemplate such infrastructure and that the Chinese have the technology, money, and high-speed rail industry so that they can both finance or help finance and build it.’
by

|

CHINADebate

October 7, 2020
'Rivers of Iron': Changing the Face of Asia

Mike Lampton's full interview – fascinating and important.

‘This is going to change the face of Asia.’

Malcolm Riddell: ‘Mike, great to have you here today, and I am very excited about your new book Rivers of Iron.’

  • ‘Could you lay out what it's about and what the purpose is?’

Mike Lampton: ‘Well, the book is about an enormous effort that China in conjunction with eight Southeast Asian countries is making to build a high speed and conventional rail system that will knit China, particularly Southern China, into the Southeast Asian economic network.’

  • ‘China's talking about building three trunk lines from Southern China – Kunming - down to Singapore by three routes.’
  • ‘These would cross seven countries directly in Southeast Asia.’
  • ‘Different components of the different lines will have somewhat different speeds, but they will all have a consistent standardized system.’
  • ‘Each of these trunk lines would be longer than the U.S. transcontinental railroad.’

‘We’re talking about seven countries plus China, and also there's another project that China has with Indonesia.’

  • ‘So you could say eight countries plus China, and each country is its own story.’

‘Laos will have the railroad through to the Chinese border by 2021.’

‘The big question mark now is the line from Kuala Lumpur to the Thai border.’

  • ‘By probably 2026-2027, it will extend to the Thai border with Malaysia.’
  • ‘So I'm, I'm almost a 100%sure there’s going to be a line to the Thai border.’

‘I'm 90%+ sure that it won't be too long before it gets at least to Bangkok.’

  • ‘I think it will be to Bangkok easily by 2027.’
  • ‘Bangkok sees itself as sort of the equivalent to the Chicago's role in America, sort of a hub and for both transportation East-West and North-South.’

‘At the same time, they'll also be building up from Singapore towards a Kuala Lumpur.’

‘Each country is its own complex story.’

  • ‘But each linkyou build makes building the next flank more valuable.’
  • ‘This is one of those things where momentum gathers at each stage.’

Origin of the Idea

‘It would be easy to think that this idea came from Xi Jinping and his promotion of the Belt and Road Initiative [BRI],but actually that's not the case.’

  • ‘This idea of connecting Southeast Asia to China by railroads was actually a French colonial and British colonial undertaking in the late 1800s and early 1900s. And later the Japanese wanted to do it too.’

‘But what's happened now is that Southeast Asia is rich enough to contemplate such infrastructure and that the Chinese have the technology, money, and high-speed rail industry so that they can both finance or help finance and build it.’

  • ‘So this is not an imposition of a Chinese idea on Southeast Asia, but a Southeast Asian idea that the Chinese have sort of jumped on the train that Southeast Asia started.’

‘This is going to knit togetherSoutheast Asia’s major cities.’

  • ‘It's going to direct the flow of people, capital and goods North-South.’

‘It's part of a conception China has of itself as the economic hub and the goods and people and ideas and information are going to flow North-South.’

  • ‘The overall conception from China's viewpoint is to build a flow of goods and people, and pathways for these flows that lead to China.’

‘It includes not only the railroads, but highways, maritime routes, cyber routes, and so forth. It’s a very comprehensive vision.’

  • ‘This book looks at the just railroad component.’

‘This undertaking is a lot farther along than many people recognize.’

  • ‘While it might take decades for this to be fully realized, by 2027 there will be at least one line that reaches Singapore.’

Reactions from Southeast Asian Countries

Malcolm: ‘That’s amazing. You said it goes across a number of Southeast Asian countries.’

  • ‘How are each of these countries dealing with the project politically?’

Mike: ‘That’s one of the core questions in the book.’

  • ‘Not all of these seven Southeast Asian countries respond the same way.’

‘On one end of the continuum is Vietnam.’

  • ‘Vietnam is the most skeptical because they are very worried about the security implications of knitting themselves too closely with China, with which they have current maritime conflicts and historic problems in dealing with each other.’
  • ‘And Vietnam is afraid of being overwhelmed by goods coming in from China.’

‘On the other end of the continuum, you have countries like Thailand, which has better relations with China. The United States until very recently was putting pressure on Thailand because of its military government, and Thailand was turning to China for support.’

  • ‘Malaysia, under Mahathir and now under the current government - and indeed the government even before Mahathir - was very much hopeful that they could kickstart their economy by hooking up to China.’
  • ‘Singapore wants to hook up with China even more than it already does, but it also wants to keep its military ties to the United States for security purposes.’

‘Each of these Southeast Asian countries is balancing its security fears with its economic desires to hook into the Chinese economic juggernaut.’

East-West Versus North-South

Mike: ‘Countries like India, like Japan, and indeed like Singapore itself would like to balance this North-South dependence on China with East-West connectivity.’

  • ‘India is talking with Thailand, Myanmar, Cambodia, and Vietnam about building East-West connectivity to the coast and then up the Pacific Ocean to Japan and Korea.’

‘The larger game is who's going to build out the North-South connectivity versus the East-West.

  • ‘So there's a very interesting geopolitical game going on.’

‘The Southeast Asians would like to get all the money they can from China to do this.’

  • ‘And they would also like to get all the security and investment they can from Japan, the United States, and from the involvement of India.’

Financing

Malcolm: ‘How are these projects going to be financed?’

  • ‘We've heard so much about Chinese financing methods and the kinds of deals that have been cut. Is there a concern about “debt-trap diplomacy”?’

Mike: ‘That’s been the outcome in some cases with China's building railroads in Africa and trying to build them in Latin America. So this concern isn't limited to Southeast Asia.’

  • ‘There've been some unhappy experiences of too much debt and too little revenue-flow to poor countries.’

The seven countries I'm looking at are at very diverse economic levels.’

  • ‘Singapore has no problem financing its relatively short link in this ultimate chain.’
  • ‘Thailand originally wanted to borrow money from China, but China was charging them more interest than China charged Indonesia. So Thailand said, well, we'll just do it ourselves rather than pay your exorbitant interest.’

‘On the other hand, a country like Laos with only 7 million people and a very small GDP is in effect undertaking a project that is half its GDP.’

  • ‘It is indebted in ways that are not entirely clear to outsiders. It's not very transparent.’
  • ‘The Laotians express a very great deal of worry about the degree of debt and obligation they've undertaken.’

‘But, from their viewpoint, they don't really have a choice.’

  • ‘If China doesn't go through Laos, it's going to go through Myanmar to the West or Vietnam to the East.’

‘And the worst fate for Laos is to be left out of the whole thing.’

  • ‘So they've just sort of taken a leap of faith and borrowed and hope it's going to pay off.’

‘Each of these countries is an interesting story. Each has different capabilities.’

Balanced Connectivity

‘In the long run,I think the U.S. should not be of the mind that this is a bad development. Look at what the transcontinental railroad did for the U.S.’

  • ‘It built up the cities along the pathways.’
  • ‘It opened up our midriff of our country to export goods - agricultural and industrial - to the Pacific.’
  • ‘It made us a Pacific power.It allowed us to move across the Pacific.’

‘This connectivity idea is a driving force in development.’

  • ‘And rather than oppose, we ought to be figuring out how we can participate in it.’

‘I don't mean participate necessarily in BRI.’

  • ‘But we can work with the Japanese and the Australians and the Koreans, and probably the EU countries to build what I would call balanced connectivity in this region.’

‘Southeast Asia has a rapidly growing middle class. Per capita GDP going up quite substantially. A growing population of young, dynamic people. This is really a frontier area for the global economy.’

  • ‘I wouldn't want to just cede this to China because we're either unaware or not sufficiently entrepreneurial.’

Malcolm: ‘Why do you think the U.S. is not participating in the ways you're talking about?’

Mike: ‘First of all, of course, there is the difference that China has an industrial policy enforced by a strong central government.’

  • ‘It can in effect tax its own people and invest money where it wants.’
  • ‘China made a determination to make itself a regional power, and they can direct investments through their state enterprises into such infrastructure.’

‘The U.S.,of course, for the most part, is a private economy.’

  • ‘The central government can't tell shareholders where they ought to want to put their money. And so that's a problem.’

‘China controls the banks and therefore the allocation of credit in China to a substantial degree.’

  • ‘That's, generally speaking, not true in the United States.’

‘China's government is forcing on its people a priority for developing infrastructure in, say, Laos, rather than meeting the health care needs of Chinese people.’

Pushback in China

Malcolm: ‘I've heard there's some pushback there in China because of this.’

  • ‘How is that going to have an impact?’

Mike: ‘You’re seeing the Chinese already get tougher on their deals and more selective because they're getting criticized at home for spending money on, let's say, economically unsound projects.’

  • ‘Or ones that are built, like in Pakistan, that are insecure in physical security.’
  • ‘I've heard the Chinese have even mentioned they've thought about hiring Blackwater to protect their workers on some of these projects.’

‘In U.S.,if we’re going to have money to spend on these sorts of projects, we have to tax either current taxpayers or pass bonds that tax future generations.’

  • ‘And we're more limited in our capacity either to direct the companies or to finance the operations.’

‘This having been said, the U.S. in 2018 passed what was called the Build Act, which has empowered a new version of the Overseas Private Investment Corporation.’

  • ‘I think they've thrown about $60 million in this direction - a lot more than we used to, but it's so little that it’s just kind of irrelevant.’

‘The U.S. is also working with what's called the Blue Dot Network.’

  • ‘That includes Australia and Japan to try to build a kind of concerted effort to at least get involved in the infrastructure game in Asia.’

Problems

Malcolm: ‘What problems are these projects encountering?’

Mike: ‘There are and are going to be legion problems.’

  • ‘You already have huge corruption problems in Malaysia – in part involving land development relevant to where the railroad would have a terminus.’
  • ‘The Chinese bring in workers, and then they don't always get along very well with the locals. Or locals resent local labor not being hired and Chinese being brought in instead.’
  • ‘Environmental problems, big; displacing local people, big.’
  • ‘So you're going to read a litany- you can already read it a litany of all the problems - and that's true.’

‘But if you look at the building of the transcontinental railroad, there were all sorts of problems there to.’

  • ‘Probably the biggest corruption scandal the U.S. ever had.’’

‘My point is that is happening, and it's going to be transformative.’

  • ‘It's going to be messy. It is messy. It's going to be ugly. People are going to get hurt.’

‘But this is going to change the face of Asia.’

Conclusion

Malcolm: Anything else you want to tell us about your book or about the project?’

Mike: ‘No, but I just hope people enjoy it.’

  • ‘We’ve tried our best to make it very readable and user friendly.’

‘It's based on interviews. So there are lots of opportunities to hear what people from all of these countries have to say about this project - and it's not all great praise.’

  • ‘On balance,I think readers will get a sense of the texture and forward movement that's ongoing.’

‘And as the U.S. deals with all its problems domestically and abroad, we’ve got to keep our eye on the ball, on the big forces changing the world. And this was one of them.’

Malcolm: ‘From the parts I've read, it's terrific.

  • ‘Mike, thank you so much for taking the time to talk to us.’

More

CHINAMacroReporter

February 19, 2021
‘No, China is not the EU’s top trading partner'
‘This week the media seized on a report by Eurostat, the European Union’s statistical agency, to declare that China surpassed the United States in 2020 to become the EU’s main trade partner. This is simply not true.’
keep reading
February 18, 2021
‘China faces fateful choices, especially involving Taiwan’
'Should Mr Xi order the People’s Liberation Army to take Taiwan, his decision will be shaped by one judgment above all: whether America can stop him. If China ever believes it can complete the task at a bearable cost, it will act.’ ‘
keep reading
February 18, 2021
'An Unsentimental China Policy'
'Jake Sullivan, wrote in Foreign Affairs in 2019, “The era of engagement with China has come to an unceremonious close.”Yet it is worth remembering what engaging China was all about.’ For most of the past half century, efforts to improve ties with the country were not about transforming it. Judged by its own standards, U.S. engagement with China succeeded. It was only after the Cold War that a desire to change China became a prominent objective of U.S. policy.’
keep reading
February 18, 2021
'Like It Or Not, America Is Still A Superpower'
‘The twentieth century was littered with the carcasses of foreign leaders and governments that misjudged the United States, from Germany (twice) and Japan to the Soviet Union to Serbia to Iraq. Perhaps the Chinese, careful students of history that they are, will not make the mistake that others have made in misjudging the United States.’
keep reading
February 16, 2021
'Is China experiencing an advance of the state sector?'
‘The value-added produced by state-owned enterprises has usually been in the range of 25-30% of China’s GDP. And what’s really striking about those numbers is that they just haven’t changed very much over the past 25 years. The share of China’s economic output being produced by SOEs today, under Xi Jinping, is not significantly different than it was under Hu Jintao, or even in the later years of Jiang Zemin.’
keep reading
February 16, 2021
‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’
‘Behind layers of opaque investment vehicles that own stakes in Ant Financial are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle. Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’
keep reading
February 14, 2021
How to Keep U.S.-Chinese Confrontation From Ending in Calamity
'The two countries need to consider something akin to the procedures and mechanisms that the United States and the Soviet Union put in place to govern their relations after the Cuban missile crisis—but in this case, without first going through the near-death experience of a barely avoided war.'
keep reading
February 14, 2021
The United States, China, and Taiwan: A Strategy to Prevent War
‘We believe that a crisis is building over Taiwan and that it is becoming the most dangerous flashpoint in the world for a possible war that involved the United States of America, China, and probably other major powers.'
keep reading
February 13, 2021
Why China Will Go Green - Really
‘To Communist Party leaders, greenery increasingly aligns with their economic and political interests. China, a populous country that is cruelly lacking in clean water and arable farmland, and which hates having to rely so heavily on imported energy, has a selfish interest in embracing what President Xi Jinping calls “ecological civilisation”.’
keep reading
February 11, 2021
'The Biden Team Wants to Transform the Economy. Really.'
‘Biden and his more activist advisers hope to modernize key industries and counter an economic threat from China, swiftly emerging as the world’s other superpower. “The package that they put together is the closest thing we’ve had to a broad industrial policy for generations, really,” says Scott Paul, the president of the Alliance for American Manufacturing.’
keep reading
February 10, 2021
‘What the ‘Hong Kong Narrative’ gets wrong'
‘For a significant cohort of the [“pro-democracy”] protesters, the more accurate label would be “anti-China activists.” The one thing that seems to unite them is not a love of democracy, but a hatred of China.'
keep reading
February 8, 2021
Why the Anglosphere sees eye to eye on China
‘Some of America’s European allies are very wary of what they fear will be a new cold war with China. By contrast, the US is getting more support from the UK, Australia and Canada.’
keep reading
February 7, 2021
' "Longer Telegram" | To Counter China’s Rise, the U.S. Should Focus on Xi'
A strategy that focuses more narrowly on Xi, rather than the CCP as a whole, presents a more achievable objective.'
keep reading
February 7, 2021
'The Sources of Soviet Conduct'
'The main element of any United States policy toward the Soviet Union must be that of a long-term, patient but firm and vigilant containment of Russian expansive tendencies.’
keep reading
February 7, 2021
'Remarks by President Biden on America's Place in the World'
“We’ll confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance.”“But we are ready to work with Beijing when it’s in America’s interest to do so. We will compete from a position of strength by building back better at home, working with our allies and partners, renewing our role in international institutions, and reclaiming our credibility and moral authority, much of which has been lost.”“That’s why we’ve moved quickly to begin restoring American engagement internationally and earn back our leadership position, to catalyze global action on shared challenges.”
keep reading
February 7, 2021
'In Search of Today’s George Kennan'
‘Kennan provided a framework to break through the bitter divide between those who believed America should return to its prewar isolationism, and those who believed the USSR was itching for a dramatic showdown with the capitalist west.’
keep reading
February 7, 2021
' "Longer Telegram" Sets Off Fierce Global Debate'
'The fierce global debate set off this week by a thought-provoking paper - “TheLonger Telegram: Toward a New American China Strategy” – has underscored the urgency and difficulty of framing a durable and actionable U.S. approach to China as the country grows more authoritarian, more self-confident and more globally assertive.'
keep reading
February 7, 2021
The 'Longer Telegram' & Its Discontents
Why everyone wants to be George Kennan‘In 1947 X penned his history-changing “Sources of Soviet Conduct” in Foreign Affairs,’ wrote Edward Luce in the Financial Times in 2018.‘The piece, which crystallised America’s cold war containment strategy, was the making of George F Kennan’s life-long reputation as a master of geopolitics.’‘ As the architect of a doctrine that won the cold war.’
keep reading
February 7, 2021
'Brookings experts analyze President Biden’s first foreign policy speech: Focus China'
'To respond effectively, Biden argued, America will need to rebuild leverage, e.g., by pursuing domestic renewal, investing in alliances, reestablishing U.S. leadership on the world stage, and restoring American authority in advocating for universal values.'
keep reading
February 7, 2021
'Why the ‘Longer Telegram’ Won’t Solve the China Challenge'
‘Perhaps the most problematic aspect of the 'Longer Telegram's' emphasis on Xi—“All U.S. political and policy responses to China therefore should be focused through the principal lens of Xi himself”—is the author’s conclusion that Washington should be seeking to escape from, and even try to effect the removal of, Xi’s leadership because that could restore U.S.-China relations to a potentially constructive path: “its pre-2013 path—i.e., the pre-Xi strategic status quo.” ’
keep reading
February 4, 2021
Why Beijing Is Bringing Big Tech to Heel
‘Beijing’s recent antitrust efforts are motivated less by worries about the tyrannical nature of monopoly power than by the belief that China’s tech giants are insufficiently committed to promoting the goal advanced by the Chinese Communist Party (CCP) of transformative technological innovation—and thus may be undermining the effectiveness of Chinese industrial policy.’
keep reading
February 3, 2021
'Secretary of State Antony Blinken on U.S. Policy Toward China'
‘There’s no doubt that China poses the most significant challenge to us of any other country, but it’s a complicated one.’
keep reading
February 3, 2021
'Burma’s Coup and Biden’s Choice'
‘The top U.S. priority in Asia is limiting Beijing’s ability to control independent states like Burma, which is strategically situated in the Indo-Pacific. The U.S. response needs to take into account China’s regional designs.’
keep reading
February 3, 2021
'Myanmar, Burma and why the different names matter'
‘Unlike most of the world, the U.S. government still officially uses "Burma." '
keep reading
February 3, 2021
'Coup a further complication for tricky Myanmar-China ties'
‘Even if China played no role at all in ousting Suu Kyi, Beijing is likely to gain still greater sway over the country.’
keep reading
February 3, 2021
‘Beijing Won’t Let America “Compartmentalize” Climate Change'
‘‘You want China to take action on climate change?" asks Xi Jinping. "Let’s talk about what you’re going to give to get it.’’
keep reading
February 3, 2021
Burma: At the Center of the U.S.-China Competition
In today’s issue: 1. China Lays Out Its Position / 2. The U.S. Lays Out Its Position / 3. Burma: At the Center of the U.S.-China Competition / 4. Burma or Myanmar?
keep reading
February 3, 2021
'A Conversation with Politburo Member Yang Jiechi'
‘History and reality have shown time and again that these issues concern China's core interests, national dignity, as well as the sentiments of its 1.4 billion people. They constitute a red line that must not be crossed.’
keep reading
February 3, 2021
'National Security Advisor Jake Sullivan on U.S. Policy Toward China'
‘Being prepared to act as well to impose costs for what China is doing in Xinjiang, what it’s doing in Hong Kong, for the bellicosity of threats that it is projecting towards Taiwan.’
keep reading
February 3, 2021
'Coup Puts Myanmar at the Center of the U.S.-China Clash'
‘Chinese oil and gas pipelines snake across Myanmar from China’s landlocked Yunnan province to the Bay of Bengal—a route that Beijing wants to transform into a broader economic corridor with road and rail connections.’
keep reading
February 3, 2021
'Biden's whole-of-National Security Council China strategy'
'National security adviser Jake Sullivan is personally focused on China as a priority, building capacity across departments and agencies and running processes that break down old silos between foreign and domestic policy.'
keep reading
January 31, 2021
'Biden’s Nightmare May Be China'
‘The coming years represent the greatest risks since I began covering U.S.-China relations in the 1980s, partly because Xi is an overconfident, risk-taking bully who believes that the United States is in decline.’
keep reading
January 31, 2021
Opinion | Marco Rubio: 'China is exploiting U.S. capital markets and workers. Here's what Biden should do.'
‘China can finance its industrial ambitions with the deepest, most liquid capital markets in the world — our own.’
keep reading
January 31, 2021
The UK Stands Up, the U.S. Not So Much
“We have honored our profound ties of history and friendship with the people of Hong Kong, and we have stood up for freedom and autonomy—values both the U.K. and Hong Kong hold dear.” British Prime Minister Boris Johnson
keep reading
January 31, 2021
'U.S.-China Capital Flows Vastly Underestimated'
‘And yet, debates around US-China passive securities investment suffer from shortcomings similar to those inherent in the early debates about US-China bilateral FDI and VC: official data do not provide a clear picture for policymakers to understand the scope and patterns of two-way investment flows and stocks.’
keep reading
January 31, 2021
'Why U.S. Securities Investment in China is Vastly Underestimated'
‘The conduits of US securities investment in China that are obscured or ignored in the US Treasury International Capital (TIC) dataset constitute a majority of all holdings, so these figures vastly underestimate the true scope at the end of 2020.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.