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 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
August 1, 2021
'Why China Is Cracking Down on Its Technology Giants'
‘Why, you may ask, is China crushing some of its most innovative unicorns? We’re in a new era led by President Xi Jinping, and politics are in command.’
keep reading
August 1, 2021
'The most significant philosophical shift since Deng'
‘Carnage in China's financial markets signals the beginning of a new era as the government puts socialism before shareholders and regulatory changes rip apart the old playbook. According to some analysts, it is the most significant philosophical shift since former leader Deng Xiaoping set development as the ultimate priority 40 years ago.’
keep reading
July 25, 2021
How China's Middle-Class China is Transforming China and the World
‘Among the many forces shaping China's domestic transformation and its role on the world stage, none may prove more significant than the rapid emergence and explosive growth of the Chinese middle-class.’
keep reading
July 22, 2021
Part 2 | The DiDi VIE (as an example)
‘The prospectus has a diagram, above, of the corporate structure, which looks almost normal. But everything below the double arrow — the actual ride-hailing business, etc. — is slightly askew.’
keep reading
July 22, 2021
Part 1 | 'Owning Chinese Companies Is Complicated'
‘ “Variable interest entities”(VIEs): The problem with this is that it sort of sounds like you’re kidding. But this is a standard method for mainland Chinese internet companies to go public, and the market has come to accept it.’
keep reading
July 22, 2021
Part 3 | Revising the Rules
‘The Chinese government could declare “all these VIE contracts are actually a disguised form of foreign ownership, which is not allowed by the rules, so they are all void and your Didi and Alibaba shares are worthless.” ’
keep reading
July 22, 2021
China: Signals Blinking Red & Oops, We Missed the Risks
I had intended to make this issue all about ‘Variable Interest Entities’ (VIEs) and the emerging risks to about $1.8 trillion dollars’ worth of Chinese shares listed on U.S. exchanges – that is, 4% of the capitalization of the U.S. stock markets.
keep reading
July 22, 2021
'Crackdown on US listings: Will China close $1.6tn VIE loophole?'
‘If Chinese authorities start to question “Variable interest entities”(VIEs), amid the crackdown that has already battered ride-hailing company Didi Global -- another VIE user -- the resulting loss of investor trust could send shock waves through global financial markets.’
keep reading
July 18, 2021
Why the U.S. Lacks Leverage over China
During the celebration of the Chinese Communist Party’s Centennial celebration, Mr. Xi stood in the same place on the balcony facing Tiananmen Square where Mao Zedong stood when he announced the founding of the PRC; Mr. Xi wore a gray Mao suit, among a sea of blue western suits; and he centered himself right above the portrait of Mao, who is similarly attired.
keep reading
July 18, 2021
'I will aim for Mao's Status.'
‘There on the gate was Xi Jinping, Chinese president and party general secretary, in a gray Mao suit. Just below his feet was the portrait of Mao Zedong, also dressed in a gray Mao suit.’
keep reading
July 18, 2021
'US warns companies of risk of doing business in Hong Kong'
“In the face of Beijing’s decisions over the past year that have stifled the democratic aspirations of people in Hong Kong, we are taking action,” said Antony Blinken, US secretary of state. “Today we send a clear message that the US resolutely stands with Hong Kongers.”
keep reading
July 18, 2021
'Biden’s Warning on Hong Kong'
‘The pretense of Chinese and Hong Kong authorities is that their crackdown on the rule of law and dissent will have no effect on Hong Kong’s viability as an international center for trade and finance.’
keep reading
July 18, 2021
'China Plans to Exempt H.K. IPOs From Cybersecurity Reviews'
‘China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S.’
keep reading
July 18, 2021
Hong Kong and the Limits of Decoupling
‘The United States’ inability to make China regret—much less reverse—its transgressions in Hong Kong suggests that financial separation, sanctions, and economic barriers are less reliable tools than many in Washington believe.’
keep reading
July 15, 2021
Part 1 | 'Joe Biden is determined that China should not displace America'
‘Biden’s emerging China strategy, while still protean, sounds of a kind with Mr Doshi’s prescription for “blunting and building”.’
keep reading
July 15, 2021
The Biden Doctrine and Its Discontents
President Biden has framed China as a threat both to the U.S. and the liberal world order.
keep reading
July 15, 2021
Part 2 | Joe Biden is determined that China should not displace America
‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
keep reading
July 15, 2021
'What's Wrong with Biden’s new China doctrine'
‘Mr Biden’s aides invariably start any discussion of China strategy with the need to restore American greatness after decades of decline.’
keep reading
July 8, 2021
Didi: Xi Surprises Us Again
Beijing shocked the financial world when it pulled the rug out from under Didi days after its IPO on the New York Stock Exchange and also announced new regulations reigning in overseas IPOs and Chinese companies already listed.
keep reading
July 4, 2021
The Chinese Point of View
Here are a few of my thoughts on the importance of Wang Jisi’s ‘The Plot Against China.’ Yuen Yuen Ang’s ‘The Evolution of Chinese Corruption’ speaks for itself - but note especially how Mr. Xi's anti-corruption campaign could hurt China's economy. I have now lived long enough that when a friend complains about his or her spouse, I say to myself, ‘There are no doubt two sides to this story.’
keep reading
July 4, 2021
'How Corruption Powers China's Economy'
‘China has managed to sustain four decades of economic growth despite levels of corruption that even Xi has described as “grave” and “shocking.” Why does it seem to have bucked the trend?’
keep reading
July 4, 2021
'How Beijing Sees U.S.-China Relations'
‘In Chinese eyes, the most significant threat to China’s sovereignty and national security has long been U.S. interference in its internal affairs aimed at changing the country’s political system and undermining the CCP.’
keep reading
July 1, 2021
Five Themes that Point to Where the Chinese Communist Party & China are Heading
As the Chinese Communist Party begins its second century, it’s useful to identify enduring patterns that might aid us in understanding China today and the directions it might be heading.
keep reading
July 1, 2021
From Rebel to Ruler: One Hundred Years of the Chinese Communist Party by Tony Saich
‘In our discussions, you've identified five themes that have been more or less consistent throughout the history of the party but have oscillated between different points on a continuum:’
keep reading
July 1, 2021
'From Rebel to Ruler': Tony Saich on Chinese Communism at 100
‘At so many points during its century-long existence, the CCP appeared to be in its death throes, whether as a result of external attack or self-inflicted internal strife.’
keep reading
June 27, 2021
European Chamber in China: 'Business Confidence Survey'
A mere 9% of European companies are considering moving any current or planned investment out of China, the lowest level on record. Instead, companies are strengthening their positions in JVs, onshoring supply chains and increasing spending to secure market share. The ambition not only to stay but also to expand their China footprint is more than justcapital flooding in due to optimism about growth. Companies are taking action to secure their operations in China and mitigate exposure to geopolitical trends in order to have a better chance of navigating a future that looks to be fraught with risk, at least in the near- to medium-term.
keep reading
June 27, 2021
'How China & America Should Compete'
‘China and the West urgently need a new framework for understanding the state of the world and their place in it. Such a framework must recognize, first and foremost, that properly regulated economic competition is not a zero-sum game.’
keep reading
June 27, 2021
'Jimmy Lai & the Death of Free Speech in Hong Kong'
Jimmy Lai’s tabloid, the Apple Daily, with its peculiar blend of scandal, gossip, and serious political reporting, was Hong Kong’s indispensable voice of free speech. Now that voice has been silenced, and Lai is in prison with others who tried to protect the right of Hong Kong’s citizens to speak and write freely, to be ruled by law, and to vote for their own autonomous government. Their politics are diverse Yet they stand together. When freedom is under siege, people cannot afford the narcissism of small differences that is tearing apart liberal politics in countries where people think democracy can be taken for granted.
keep reading
June 27, 2021
'European Companies in China: Between Decoupling and Onshoring'
‘Instead of leaving the market, European companies are exploring ways to separate their China operations from their global ones.’ ‘Following the Covid-19 outbreak, European companies in China spent the first few months of 2020 solemnly appraising their investment strategies.’
keep reading
June 24, 2021
'Apple Daily closed, but press freedom stays in Hong Kong'
‘Freedom of the press is a good thing. The West's freedom of speech must be consistent with national interests and public security.’
keep reading
June 24, 2021
Bitcoin’s growing energy problem: ‘It’s a dirty currency'
“Bitcoin alone consumes as much electricity as a medium-sized European country.”
keep reading
June 24, 2021
'China steps up crackdown on bitcoin mining industry'
‘China’s latest intervention places further pressure on what was once one of the world’s most vibrant markets for trading and mining digital currencies.’ ‘It comes at a time when many governments are scrutinising the industry’s effect on the environment and determining the types of financial oversight that should be applied to cryptocurrencies.’
keep reading
June 24, 2021
'Congress on China: Then and Now'
‘With the Senate voting on June 8, 2021, to adopt the United States Innovation and Competitiveness Act, it is safe to say that this is the most comprehensive action by Congress on China policy EVER.’ ‘The language of the United States Innovation and Competitiveness Act is about a long-term competition with China as opposed to war with an enemy.’
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.