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 22, 2021
How American Free Trade Can Outdo China
‘When it comes to trade, a critical dimension of the U.S. and China competition, America is ceding the field. At the same time, China has expanded its trade footprint. When it comes to trade and investment agreements, China isn’t isolated. The U.S. increasingly is. Now we have to make up for lost ground. America can out-compete China, but first it needs to get back in the game.’
keep reading
February 21, 2021
China’s ‘two sessions’: why this year’s event is so important for Xi Jinping’s vision for the future
‘The ‘Two Sessions,’ the annual meeting of the National People’s Congress, the country’s legislature, and the top political advisory body, the Chinese People’s Political Consultative Conference, begins on March 5 and runs for about two weeks.’
keep reading
February 20, 2021
‘The Future of China’s Past: Rising China’s Next Act'
‘By the Party’s own acknowledgment, Deng’s initial arrangement has run its course. It is therefore time to develop a new understanding that will do for the Party in the next 30 years what Deng’s program did in the previous era.'
keep reading
January 13, 2021
Kurt Campbell & Biden Asia Policy
In today’s issue: 1. Kurt Campbell: Biden's 'Indo-Pacific Coordinator' / 2. 'How America Can Shore Up Asian Order' by Kurt Campbell
keep reading
January 9, 2021
'Matt Pottinger resigns, but his China strategy is here to stay'
‘Even though Pottinger’s name was largely unknown to the public, his influence on U.S. foreign policy will be felt for years to come.’
keep reading
January 9, 2021
'The Relevant Organs' Pro Tip: 'You Definitely Need a Show Trial'
Spitballing here, GOP friends, but Josh Hawley, Ted Cruz, Ron Johnson and Marjorie Taylor-Greene would make an excellent Gang of Four, if you need a show trial.
keep reading
January 9, 2021
How the Chinese reacted to the incident at the Capitol
In this issue: 1. China Reacts / ‘On Double Standards’ - 'Chinese netizens jeer riot in US Capitol as "Karma," say bubbles of "democracy and freedom" have burst' - 'A Few Tweets from Hu Xijin 胡锡进, Editor of The Global Times' / 2. ‘Architect of Trump China Policy Resigns’ - 'Matt Pottinger resigns, but his China strategy is here to stay' / 3. A Pro Tip from 'The Relevant Organs' - 'Dealing with Insurrectionist Leaders the Chinese Way'
keep reading
January 9, 2021
'On Double Standards'
‘Besides, facts are there, beyond anyone's denial, regardless of whether they came up in the Chinese media reports or not.’
keep reading
January 6, 2021
'Mo money, Ma problems - Chinese trustbusters’ pursuit of Alibaba is only the start'
'Chinese trustbusters long resisted hobbling an industry seen as world-beating, and backed in Beijing. Now, as in the West, they fret that a few giants control indispensable services—e-commerce, logistics, payments, ride-hailing, food delivery, social media, messaging.’
keep reading
January 6, 2021
'Mo Money, Ma Problems'
In today’s issue: 1. Eurasia Group| ‘Top Risks of 2021’ / 2. Biden & the EU-China Investment Agreement / 3. The EU-China Investment Agreement: Pro & Con / 4. China's Antitrust Investigation into AliBaba
keep reading
January 6, 2021
PRO | 'The Importance of the EU, China Investment Deal'
‘But we should not have waited for the Biden administration to sort things out. Wait for what? We don't know if China will be more responsive if the three parties sit together. We don't have a timeline. Shall we wait another two or three years?’
keep reading
January 6, 2021
'China and E.U. Leaders Strike Investment Deal, but Political Hurdles Await'
‘China appeared eager to reach an agreement before Mr. Biden takes office in January, calculating that closer economic ties with the Europeans could forestall efforts by the new administration to come up with an allied strategy for challenging China’s trade practices and other policies.’
keep reading
January 6, 2021
'China’s Pro-Monopoly Antitrust Crusade'
‘But Chinese regulators are unlikely to stop at Alibaba; China’s entire private sector has a target on its back.’
keep reading
January 6, 2021
‘Top Risks of 2021’: CHINA
'Overall, this year will experience an expansion of a high level of US-China tensions.'
keep reading
January 6, 2021
CON | 'Europe has handed China a strategic victory'
“We’ve allowed China to drive a huge wedge between the US and Europe.”
keep reading
January 6, 2021
'With Concessions and Deals, China’s Leader Tries to Box Out Biden'
‘Mr. Biden has pledged to galvanize a coalition to confront the economic, diplomatic and military challenges that China poses. China clearly foresaw the potential threat.’
keep reading
January 5, 2021
'Sansha City in China's South China Sea Strategy: Building a System of Administrative Control'
‘Sansha City, headquartered on Woody Island in the Paracel Islands, has created a system of party-state institutions that have normalized administrative control in the South China Sea. This system ultimately allows China to govern contested areas of the South China Sea as if they were Chinese territory.’
keep reading
January 1, 2021
Competition With China Could Be Short and Sharp
‘The bad news is that over the next five to ten years, the pace of Sino-American rivalry will be torrid, and the prospect of war frighteningly real, as Beijing becomes tempted to lunge for geopolitical gain.’ / ‘Historically, the most desperate dashes have come from powers that had been on the ascent but grew worried that their time was running short.’
keep reading
October 7, 2020
'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.’
keep reading
August 27, 2020
Why China's Economy is Growing Faster than Others
‘First is China's relatively aggressive and decisive measures on the COVID public health crisis itself that managed to get the pandemic under control much faster than the other large economies.’ ‘The relative success in controlling the pandemic translates into how much people are willing to go back to their normal lives, to their jobs, and the like.’
keep reading
May 20, 2020
The Chinese Communist Party Fears Ending Up Like the Soviet Union
‘The propaganda ministry - within four to six weeks - managed to turn China into a problem for Europeans. China’s standing in Europe is eroding by the day.'
keep reading
May 13, 2020
The Party is Infallible
'The Hong Kong demonstrations can never be because of policy mistakes by the Communist Party itself.’ During our interview, Tony Saich of the Harvard Kennedy School told me: ‘Hong Kong, with its responses to the demonstrations, and the Coronavirus are both illustrative examples of how the culture of the Communist Party and the traditions it's built up over almost a hundred years reflect the way it behaves when it's confronted by certain crises.’
keep reading
May 6, 2020
The Phase One Trade Deal
‘The good news is that 80% of our members said they thought the Phase One agreement was a good thing.' 'But only 19% said it was worth it.' 'What the 80% said they are happy about was that there no more new tariffs were coming immediately.’
keep reading
May 2, 2020
South China Sea & Taiwan
'It would not be accurate to say China claims the entire South China Sea as its sovereign territory because the Chinese are unclear about what exactly their claim is and what it is based on.'
keep reading
April 29, 2020
Why Inflation Should Not Be A Problem
‘This is a crisis where the first chair is held by the public health officials, and the second chair is held by the fiscal authorities. We at the Fed have the freedom to be able to move relatively quickly, but we're the third chair here, trying to help out where we can.’
keep reading
April 25, 2020
China, America, & the 'Jaws Syndrome'
‘Both Trump and Xi have a fundamental political divide problem that the COVID-19 epidemic has exposed and made more apparent – and made substantially worse.’
keep reading
April 22, 2020
Why We Need Stronger Global Institutions
‘The trade war was actually about the dissemination of knowledge, knowledge transfer, technological transfer.’ ‘A great irony. We need global institutions or arrangements to deal with trade, technology, and health because individuals, corporations, and national governments cannot.’
keep reading
April 18, 2020
The Pandemic's Impact on Trade
‘There are some people who would say that there was already a retreat from globalization underway.’ ‘The tools of globalization - enormous reductions in the cost of transportation and communication - remain.’ ‘But the marginal utility actually of further advances is declining – that would be one way to put it.’
keep reading
April 11, 2020
The Pandemic May Increase China's Economic Strength vis-à-vis the U.S.
‘Well, I think people around the world are rightly suspicious of the Chinese as they are probably equally suspicious of the Americans.'
keep reading
April 30, 2018
'Big lessons from the faulty analysis that spiked the Shanghai stock market'
ProTips from Andrew Polk, Trivium China On April 24, equity analysts interpreted a phrase used in a Politburo meeting readout to signal a new round of economic stimulus. And, the Shanghai stock market, one of the world's worst performers, spiked 2%. On April 25, having much earlier advised and protected clients, Andrew Polk of Trivium China published an analysis in Trivium's daily (and free) Later, Andrew and I talked about how he reached his conclusions. His explanation is a masterclass in how experience, discipline, and some tedious slogging, combined with a sound analytical framework, lead to good China analysis.
keep reading
April 18, 2018
New super-agency, National Supervision Commission—and China's massive government restructuring
'With government restructuring, the biggest thing is the creation of an entirely new branch of government: the National Supervisory Commission. Its entire job is to overlook every single public official in China. It is an institutionalization and deepening of the corruption crackdown that we've seen over the past few years.'In all, Andrew highlighted four major actions from the Two Sessions: 1.Chinese government restructuring 2.The policy roadmap 3.Personnel 4.The legislative agenda + the constitutional amendments
keep reading
April 16, 2018
The Chinese Government’s 9 Economic Policy Priorities in 2018 (and beyond)
[China Econ Observer] 1.Supply-side Structural Reform 2.Innovation 3.The “three critical battles” 4.Deepening reforms 5.Rural revitalization 6.The regional development strategy 7.Increasing consumption and improving investment 8.Opening up 9.People’s wellbeing
keep reading
April 10, 2018
U.S.-China trade dispute: Will China Weaponize the RMB and U.S. Treasury bonds?
U.S.-China trade war: collateral damageConsider the soy bean. 'China is threatened retaliatory tariffs on U.S. soybeans. The U.S. is one of the largest producers of soybeans. If China's not going to buy them, we're going to have an excess capacity.'' So, last week, we saw a soybean selloff.''But there was a complete dislocation in whole soybean supply chains. Downstream products, like soybean oil, didn't move at all in the same way.'
keep reading
April 5, 2018
Behind the U.S.-China trade dispute: 'The West's China gamble has failed.'
What's the root cause of the current friction between the U.S. and China? The West's disappointment that China did follow the western model but its own, argues Ed Tse, CEO of Gao Feng Advisory Company (a member of the China Analyst Network). [Ed's solution] look to the similarities between China and the West, especially in the tech sector, and be alert to China's evolution toward better IPR, market access, and other contentious issues, not just the remaining shortcomings. Below is a video of my discussion with Ed and excerpts from both the interview and his South China Morning Post op-ed, 'Chinese innovation with US characteristics? Maybe China and the West aren’t that far apart, in business at least.' Ed presents insights that differ greatly from the China Echo Chamber in the U.S. Let me know what you think.
keep reading
March 8, 2018
How Trump's tariffs impact China's trade/currency relations with Japan & Korea
[China markets update with TRACK's Bob Savage] 'The currency markets are embroiled in trying to figure out whether the Trump tariffs on steel and aluminum are good or bad for the U.S. economy and the U.S. stock market.'
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.