Chitchat EU deals blow to Xi Jinping's silk road wet dreams! LOL!

EU backs away from trade statement in blow to China's 'modern Silk Road' plan

The EU has dealt a blow to Chinese president Xi Jinping’s bid to lead a global infrastructure revolution, after its members refused to endorse part of the multibillion-dollar plan because it did not include commitments to social and environmental sustainability and transparency.

Xi made his latest bid for global leadership on Monday, telling leaders including Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdoğan that the world should reject protectionism, embrace globalisation and pull together like a skein of geese.

Xi’s comments came on the second and final day of a high-profile summit in Beijing about his Belt and Road initiative, a multibillion-dollar infrastructure spree that China claims will kickstart a new era of trade and development. The scheme’s ultimate aim – encompassing pipelines and a port in Pakistan, bridges in Bangladesh and railways to Russia – is to create what China calls a “modern Silk Road”.

However, in a snub to Xi’s rallying cry for cooperation, the Guardian understands that the EU’s 28 member states decided not to support a statement about trade prepared by Beijing to mark the end of the summit.

“We made clear that, for Europe, the Belt and Road initiative can only be a success if it’s based on transparency and co-ownership,” said one high-level EU diplomat, who spoke on the condition of anonymity. “Apparently to Chinese surprise, the EU was united on this.”

The rejected statement related to a trade panel held during the Beijing summit that was attended by representatives of countries including Belgium, Estonia, Germany, Hungary, Italy and Spain. China had hoped that all EU member states, as well as other nations attending the conference, would support the text, one of three prepared to mark the end of the convention on Monday.

Eleven Jinping can always hire Huo An, who should be available for a fee.

Xi's Big Road Is Going to Be Bumpy

The most visible symbol of Xi’s ambitions is what’s now known as the “Belt and Road” initiative. The term is something of a catchall, encompassing a set of land and sea trade routes facilitated by new highways, railways, ports, power grids and other infrastructure to better connect China to Europe, Africa, the Middle East and South and Southeast Asia. A two-day summit starting this weekend is meant to highlight the grandeur of the scheme, with an impressive guest list of heads of state and other international dignitaries from numerous countries.

It’s far too soon to pop the champagne, however. While its economic rationale remains at best uncertain, the Belt and Road program will embroil China in the tangled affairs of other countries to a degree unparalleled in its modern history. That’s an area where China’s strengths -- its financial clout, skill at building infrastructure and top-down management style -- aren’t likely to be much help.

As with most things involving China, the numbers surrounding Xi’s initiative are staggering. Lan Shen, an economist at Standard Chartered, recently figured that China has so far inked $926 billion worth of projects tied to the scheme. Not all will materialize, of course, nor is it even clear exactly which projects fall under the rubric.

In theory, whatever roads, rails and ports do end up getting built could boost the potential for growth in many underdeveloped regions. But there’s good reason why countries along the planned routes need so much infrastructure in the first place: No one has been willing to build it. Many of the countries involved are unstable and corrupt, which means operating in them is especially treacherous. Gavekal Dragonomics analyst Tom Miller has said Chinese officials privately expect to lose 30 percent of their investments in Central Asia, and up to 80 percent in Pakistan.

Alexander Cooley, director of the Harriman Institute at Columbia University, has taken a close look at China’s earlier experiences in Central Asia. He notes that Chinese mining and construction projects in Pakistan have been attacked by rebels and dragged into separatist struggles against the government, while in Tajikistan, local political elites profited off a Chinese-backed highway by turning it into a toll road -- with the cash streaming into their pockets. Cooley’s conclusion: The Belt and Road initiative “risks stirring domestic political competition, fueling networks of graft and rent-seeking, and not fulfilling its transformative potential.”

Though sold as a “win-win” program for all involved, the scheme is ultimately meant to further Chinese economic interests by generating new business for Chinese companies, especially in sectors like steel and construction that suffer from excess capacity, and by promoting Chinese finance on an international stage. Participating governments could find themselves loaded down by debt from Chinese banks – all to pay Chinese companies and import Chinese workers to build infrastructure designed to expand Chinese exports. That could spark local resistance and complaints that China is unfairly hoarding the benefits of the projects it sponsors, as has happened already in Africa and Sri Lanka.

And while new pipelines and power plants may win China friends, especially among the poorer nations along its periphery, the fact that Belt and Road is a Chinese state initiative will create new frictions. India, for instance, has so far given the program the cold shoulder, despite Chinese pleas. Indian officials have objected to a key segment of the plan that runs through Kashmir territory held by Pakistan but claimed by India. Naturally, they’re also wary that the roads and rails built by China could facilitate the projection of Chinese military power and political influence well beyond its borders.

Chinese leaders aren’t blind to these hurdles. They’ve been at pains recently to emphasize the mutual benefits the scheme could produce, and have encouraged participation by the U.S., multilateral lending institutions and large institutional investors who could lend a degree of professionalism to the deals being struck.

Ultimately, though, the success of the program will depend on how transparent and inclusive China can bring itself to be. Its leaders will have to be willing to share not just the costs, but the benefits of these projects. They’ll have to bring locals into the decisionmaking process, be more attuned to their concerns and strive to meet high environmental and legal standards.

For a government accustomed to ordering around companies and banks, the diplomatic nuance and cooperative spirit necessary to make the Belt and Road work presents a steep challenge. And with so much of Xi Jinping’s international prestige now wrapped up in the program, China could feel compelled to press ahead, no matter what disputes and financial losses ensue. Xi may be better off proceeding with more caution and less bombast. A little humility now could save Chinese leaders headaches later.

Actually China was courting 3rd world countries and old allies it's obvious the EU being a U.S. Stooge would reject China's initiative. Nothing to do with what bs social or environmental issues. Were it chaired by the U.S. They would join in a heart beat even if the u.s. Doesn't give a fuck about any crap issues

Can China Afford Its Belt and Road?

China's just-completed conference touting its Belt and Road initiative certainly looked like a triumph, with Russian President Vladimir Putin playing the piano and Chinese leaders announcing a string of potential deals and massive financial pledges. Underneath all the heady talk about China positioning itself at the heart of a new global order, though, lies in uncomfortable question: Can it afford to do so?

Such doubts might seem spurious, given the numbers being tossed around. China claims nearly $900 billion worth of deals are already underway, with estimates of future spending ranging from $4 trillion to $8 trillion, depending on which Chinese government agency is doing the talking. At the conference itself, Chinese President Xi Jinping pledged another $78 billion for the effort, which envisions building infrastructure to link China to Europe through Asia, the Middle East and Africa.

From no other country in the world would such pledges be remotely plausible. Yet even for China, they'll be difficult to fulfill without clashing with the country's other objectives.

The first question is what currency to use for all this lending. Denominating loans in renminbi would accelerate China's stated goal of internationalizing its currency. But it would also force officials to tolerate higher levels of offshore renminbi trading and international price-setting. So far, they've shown little appetite for either.

Additionally, countries along the Belt-and-Road route would need to run trade surpluses with China in order to generate the currency needed to repay such loans. In fact, as Bloomberg Intelligence economist Tom Orlik has noted, China ran a $250 billion surplus with Belt-and-Road countries in 2016. It will be mathematically impossible for Sri Lanka and Pakistan to repay big yuan-denominated loans when they're running trade deficits with China close to $2 billion and $9 billion, respectively.

Financing projects in dollars is no panacea either. Unless China conducts U.S. dollar bond offerings to fund these investments, it'll have to tap its official foreign-exchange reserves. Those now hover around $3 trillion.

That sounds like a lot. But outside estimates suggest anywhere from a few hundred billion to nearly $1 trillion of that money is illiquid. China needs nearly $900 billion to cover short-term external debt and another $400 to $800 billion to cover imports for three to six months. Pouring additional billions into Central Asian infrastructure projects would only tie up money China needs to defend the yuan.

And, borrowers would need to run significant dollar surpluses in order to repay dollar-denominated loans. Obviously, not every country can do so, or undervalue its currency to try and build up a surplus.

Beyond the specific mechanisms, it's unclear whether China has the financial capacity to lend at these levels to borrowers of dubious creditworthiness. As French bank Natixis S.A. has noted, in order to finance $5 trillion in projects, China "would need to see growth rates of around 50 percent in cross-border lending.” This would wreak havoc on Chinese creditworthiness and raise external debt from a “very comfortable" level (around 12 percent of GDP) to "more than 50 percent" if China can't bring in other lenders.

There are a couple ways around these difficulties. First, China could use this as an opportunity to liberalize the renminbi fully, allowing yuan to flow out of the mainland into countries targeted for investment. However, given Chinese leaders' worries about a plunge in the currency and the impact on a rickety domestic financial system, this seems unlikely.

Second, China could opt to bring in other countries and multilateral institutions to share in the task of financing projects. Chinese leaders say they support this (just as they favor internationalizing the yuan); Xi has even welcomed involvement by rival Japan. But in the past they've refused to co-finance projects with international institutions such as the Asian Development Bank and have been prickly about working with other countries, even supposed friends like Russia, on overlapping projects.

Meanwhile, European countries refused to sign the final statement at last weekend's conference after it omitted language on corruption and governance; the U.S., too, has been standoffish. Enticing Western countries and banks to finance projects that haven't been suitably analyzed and vetted will be an uphill task.

There are two more likely, if less appealing outcomes. China could stretch public finances even further to fund projects its leaders admit will likely lose money. For the moment, they seem willing to lend in dollars even if it ties up hard currency.

But it's almost certain that the amount of money that makes its way into Belt-and-Road projects will be significantly lower than advertised. Grand in ambition but short on details, Xi's sweeping initiative may be better thought of as a “philosophy” or “party line," rather than a fixed commitment. One thing's for sure: It's going to be a lot harder than putting on a conference.

So Singapore wants to broker and lend to these loss making projects? Well I guess the madam had a few disciples in the craft.

US and EU is just jealous their broke ass cannot even afford a 13 billion dollar wall.

I think what we are seeing is economic warfare.

china does not need EU approval. EU is delusional, and they are going to be breaking up soon. Brexit was just the beginning. If China can get the Silk road into Eastern Europe, that is already mission accomplished. All their crap will be shipped on via local transportation modes all thru Europe.

One major benefit to China: Jobs for millions of infrastructure construction workers.

China one belt one road can end in turkey and russia and from there, to europe on their own steam.