Author Archives: Brian Eyler

About Brian Eyler

Brian Eyler is Deputy Director of the Southeast Asia program at the Stimson Center in Washington, DC. Prior to moving to DC he lived and worked in China and Southeast Asia for 15 years. His research and consulting focuses on trade, infrastructure development, and transboundary environmental issues between China and Southeast Asia.

Mekong lessons: Reflecting on October trip to Southeast Asia

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I’ve just returned from my first business trip to Southeast Asia with the Stimson Center’s “Team Mekong.”  Below are a few lessons learned and brief observations from our visits in Bangkok, Kunming, Phnom Penh, Can Tho, Hanoi, and Saigon.

Good ideas gain currency

Before I joined the Stimson team in June, I must confess that my outlook on the future of the Mekong region was not filled with optimism. I cannot begin to describe how refreshing it is to join a team that is developing pragmatic and innovative solutions to some of the region’s toughest issues. Moreover, it’s extremely satisfying to watch the deployment of an idea gain momentum among decision makers and begin to take on a life of its own. Simply put, ideas work. At public forums in Bangkok, Kunming and Hanoi and in meetings with regional government officials Stimson’s “Team Mekong” launched a more refined version of the concept of the need for a “New Narrative” on Mekong hydropower development first mooted by my colleagues, SEA Program Director Rich Cronin and Research Associate Courtney Weatherby this March. The New Narrative challenges the current narrative that the construction of 11 dams on the Mekong’s main stem is a prevailing ‘domino theory’ of inevitability based on an emerging body of evidence. Stimson’s most recent report and its main argument can be found here, but it was encouraging to hear the idea confirmed when well informed hydropower experts placed their bets on no more than five dams, all of them above Vientiane excepting Don Sahong.

So if the Lao PDR government is banking on income generated from the construction of eleven main stem dams but only gets five in the end, shouldn’t it consider alternatives? Considering the known and unknown costs of downstream effects on fisheries and livelihoods, it seems prudent for Laos to give the entire basin development plan another look.  As a sustainable, one-country alternative to relieving the pressure of hydropower development on the Mekong’s main stem along with the unbearable downstream costs related to impacted fisheries and livelihoods, the Stimson team is continuing to develop the concept of a Laos national power grid designed for both the export of hydropower and national electrification as an alternative to Laos’ current economic development plan.

The grid would be designed to optimized trade-offs related to the food- water-energy nexus on a basin wide scale. On this trip, we received much encouragement for the national power grid concept from regional government officials, but challenges still remain in convincing Laos as to why national electrification will provide more benefits than the current plan.  As a suggestion, Vietnam, as a most concerned state in regard to downstream impacts can, share the story of the benefits of rural electrification with its neighbor through the history of its own development.  Further, Vietnam’s electricity demand is increasing at 12% year-on-year prior to the TPP and could act as a major purchaser of power generated from a Laos’s national grid.

No clear trends on the China Factor.

I see no clear evidence that China’s state-owned enterprises are trending toward improving practices in Southeast Asia or that there is a concerted move from policy-motivated concessional projects to those based on financial viability. A few firms might be making improvements here or there, but even these firms are not willing to release the details and data supporting these so-called improvements. In the case of Hydrolancang’s Lower Sesan 2 project in Cambodia, the developer claims its fish passages will be successful in protecting vulnerable fish species, but will not release the research or plans for those fish passages for public observation or scrutiny. The message for Hydrolancang and other similar Chinese dam developers hasn’t changed: “We’ve conducted 100% of research relevant to these projects, and we’re confident that all problems will be solved. You only need to trust us.” But trust is built on results and transparent public relations. China simply runs a poor track record on these factors in the Mekong region.

A surprising development is that China’s firms are playing the victim when discussing their Southeast Asian projects. Officers of these firms claim Beijing put them to task on these projects while the firms have to bear the risks and interact with prickly civil society groups, unwarranted Western criticism, and unstable host governments – the Myitsone dam serves as a case in point. Yet they fail to acknowledge the unbalanced stream of benefits granted by concessional contracts or the processes through which these benefits are gained.

Further, these firms often claim to strictly follow the laws and regulations of host countries related to environmental and social impacts. Yet weak states like Laos, Myanmar, and Cambodia have promulgated little to nothing in terms of environmental or social safeguards, so these claims of being responsible legal investors are interpreted as trite and non-persuasive.

Lastly, some anecdotal evidence points to Chinese money earmarked for overseas infrastructure development drying up in this latest round of China’s economic downturn. This discovery supports emerging conversations that Chinese firms are investing in more commercially viable or “bankable” projects. However, at the same time China’s One Belt One Road initiative appears to be creating a pool for free money given out on soft terms to any firm interested in constructing a project vaguely related to the objectives of the One Belt One Road whatever they may be. When weighing whether or not China’s upcoming investment on Mekong main-stem dams in the pipeline will be based on strategic motivations or sound financial decision making, this last point is particularly concerning.

New institutional frameworks are forming to coordinate regional policy making.

It’s becoming increasingly clear that the Mekong River Commission is NOT the institution to solve the big issues rising the Mekong region, though it still constitutes the only treaty-based intergovernmental organization in the region, and its technical review of the Xayaburi dam and its anticipated critique of the Don Sahong project have caused both developers to delay the projects and spend hundreds of millions on significant engineering changes and additional fisheries research. But in terms of actual governmental engagement, other institutions and bilateral arrangements are beginning to fill this gap. The US-led Lower Mekong Initiative (LMI), for instance, in its still nascent form aims to promote higher standards on water resource management and assessment of infrastructure development within the region. The LMI brings together the line ministries of the four MRC countries and Myanmar several times a year in working groups both on functional “pillars” and cross-cutting issues like the water-energy-food nexus, and the prime ministers of the LMI countries meet in the wings of the annual ASEAN-US Leaders Meeting, where transboundary issues and impacts from hydropower dams and other major infrastructure projects can be raised to the extent that the leaders are willing to engage on them.

In response to both the US-led LMI and the waning power of the MRC, China is assembling a multi-lateral organization for joint river basin management called the Lancang-Mekong Dialogue Mechanism (LMDM). Mekong watchers should pay attention to the outcomes of the first vice-ministerial meeting of the LMDM on November 12. Further, Cambodia is negotiating a transboundary environmental impact assessment treaty with Laos and Cambodia, Laos, and Myanmar are authoring new sets of environmental and social safeguards related to infrastructure development.

These frameworks are all coming together quite quickly. Yet even the US led LMI is said to be underfunded, uncoordinated, and unsure of its product. China’s forming of its own river basin organization is a welcomed foray into multi-lateral diplomacy, a realm often eschewed by the Chinese, but the intent and purpose of this organization is unclear. Serious cooperation on the use of the water and hydropower development will be highly limited so long as China refuses on national security grounds to provide downstream countries with the results of its hydrological and water quality studies, or the operation of its dams and other water releases from its monster reservoirs.  And whether or not new safeguards in the Mekong’s weakest countries will have teeth or just pay green-washing lip-service is unknown.  These developments all deserve our close attention.

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Lao National Assembly Approves Don Sahong Dam

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Regional media and NGOs in Southeast Asia are calling the controversial Don Sahong dam on the Mekong River a “time bomb,” and the project’s recent approval by the Lao PDR government has initiated a ticking countdown. Daovong Phonekeo, director general of the Energy Policy and Planning Department at the Lao Ministry of Energy and Mines said in an email statement released earlier this month that the National Assembly approved a concession agreement for the Don Sahong Dam with Mega First Corp, a Malaysian developer which has never built a hydropower project.

This legislation gives the green light for the project’s construction, which is now planned to commence by the end of the year. While the project’s 260MW hydropower capacity is small and intended for local use, its impacts will be felt region-wide as researchers believe the dam will block off the only channel accessible during the dry season for the yearly migration of hundreds of fish species endemic to the Mekong River. The Mekong is the world’s largest inland fishery with millions of people living along its banks who rely on daily fish catches for food consumption and income.

“The Don Sahong Dam will certainly negatively impact migratory fish moving between Laos and Cambodia, Thailand and Vietnam. The question is, to what extent, and how much might it be possible to mitigate impacts?” said Ian Baird in an interview with ExSE. Baird is a geologist from the University of Wisconsin with decades of experience researching fisheries and communities in the Don Sahong area. “The risk is high because the Khone Falls area is so important for long distance fish migrations, and because it remains highly uncertain how efficient the measures being developed will be. Many uncertainties remain, but the stakes are high, and this makes the project risky.”

don sahong

The dam is located less than 2 kilometers from the Cambodian border in the Siphandon area of southern Laos. Siphandon, literally “four thousand islands,” is one of the earth’s most unique land and waterscapes. Here the Mekong navigates mazes of rocky channels, creating a throng of islands, and expands to more than 15 kilometers wide at some parts.  A fault line runs through this area creating picturesque waterfalls which attract many thousands of tourists from the region and around the world. . The Sahong channel, where the dam will be built, is the only major channel without a rocky cascade and thus is the only channel accessible by seasonal fish migrations.

Mega First, the dam developer, has conducted research on fish migration over the last 18 months to identify fish species and determine migratory patterns, hoping that findings reveal migratory fish are using other minor channels close to the Sahong channel for migration. A 2014 Mega First study by Kent Hortle, a respected Mekong fisheries expert, suggests China’s damming of the Mekong has regulated the river’s dry season level to permit fish passage through channels previously unavailable to fish.

Increased pressure from civil society groups, international NGOs, and academic research has prodded Mega First to widen and deepen these minor channels, but the effectiveness of these mitigation efforts will not be known until the dam’s construction is completed. Peter Hawkins, the main fisheries consultant for Mega First is on record for saying, “’if these passages do not prove to be sufficient they will continue to work on them to create the best bypass possible.”

The new legislation means dam construction will likely begin before Mega First’s fish mitigation research is complete, making the project a risky gamble. International Rivers’ Southeast Asia director, Ame Trandem called for a two year moratorium on the Don Sahong Dam until more research can be done on impacts to fish migration.

“The Don Sahong Dam is not a done deal,” Trandem wrote in a statement on the International Rivers website. “Until the project developer can prove that [the dam] will not harm the Mekong River’s rich fisheries and the unique ecosystem services it provides to millions of people in the basin, it is in the best interest of Laos and the region to give the Mekong River a much needed reprieve.”

Meanwhile, Laos pledges to maintain productive economic and diplomatic ties with the neighbors that surround the landlocked state.  One must then question Laos’s calculus for pushing forward the dam’s approval process when stakeholders ranging from the official to grassroots levels in Thailand, Cambodia, and Vietnam all have voiced opposition to the project.  However, neighboring governments have yet to comment on the dam’s recent approval.

Moreover, Laos gave only nominal consideration to the regional notification and consultation process mandated by the Mekong River Commission, an inter-governmental organization of which Laos is a charter member. More critically one must question whether or not the dam’s approval includes a regional or geopolitical calculus at all, since most evidence indicates that the dam serves as a pet project of a powerful Lao political family with prospects and license to develop the Siphandon area for investment and tourism.

Regardless of Siphandon’s development trajectories, waiting until Mega First’s own research is published and vetted by stakeholders is the most pragmatic course forward for the Don Sahong Dam. Any other pathway could gravely impact regional food security, including Laos’s own food supply, and place Laos further at odds with its downstream neighbors.

 

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No Recourse: Upper Mekong Dam Spells End for Tibetan Village

Cizhong village in the background along the west bank of the Upper Mekong in Yunnan.

Cizhong village in the background along the west bank of the Upper Mekong in Yunnan.

Cizhong, a remote Tibetan village in China’s Yunnan province, has no recourse against the onslaught of impacts from the construction of the Wunonglong dam on the Upper Mekong River.

This year has seen no pause in activity from civil society organizations and community level stakeholders in the Lower Mekong targeting criticism at the Xayaburi and Don Sahong dams in Laos, both high-profile projects on the main stem of the Mekong River. Moreover, evidence shows how efforts of these groups are actually delaying the construction of these projects and raising the costs associated with their completion. Dual influences of economic uncertainty in China and Southeast Asia and the unavoidable effects of climate change in addition to grassroots efforts are challenging the popular notion of a “domino effect” of inevitable hydropower development on the Mekong.

Yet while the domino effect on the Lower Mekong may be under question, it has prevailed in China’s stretch of the Mekong , silencing activism and subjecting affected communities and local ecologies to the vagaries of unchecked development. The 990MW Wunonglong dam, scheduled for completion in 2019, and the impacts of its reservoir on thousands of households serves as a case in point.

Construction began at the Wunonglong dam site in 2010.

Construction began at the Wunonglong dam site in 2010.

I first heard of the impacts of the Wunonglong dam on the day I walked into Cizhong, a village 40km upstream of the construction site. Cizhong sits on a small plateau 100 meters above the Mekong at the southern end of Deqin county in one of the most remote areas of Yunnan province. I crossed into Cizhong on a bridge that will be inundated by the dam’s reservoir in a few years.  Looming fifty meters above, a half constructed bridge built by the dam developer Huaneng Hydrolancang will upon completion bisect a patch of carefully maintained rice paddies located between the river and the village.

Cizhong is majority Tibetan, and for years both Chinese and foreign tourists have flocked to the village for two reasons.  First, eighty percent of the village’s 115 households are members of the local Catholic church established in the late 19th century by French missionaries. Several times a week, villagers file into the stone Cizhong cathedral, a nationally protected structure, to take part in mass led by Li Fei, a priest from Inner Mongolia.  The prayers sung in unison before mass are to the tune of commonly known Tibetan Buddhist chants.  European tourists typically line the back pews to catch a glimpse of this uncommon marriage of cultures.

Cizhong’s Catholic Church, a nationally protected structure built in the early 20th century.

Cizhong’s Catholic Church, a nationally protected structure built in the early 20th century.

Second, Cizhong is home to a growing cottage wine industry, also introduced by the French missionaries prior to the establishment of the People’s Republic of China in 1949.  The wine boom started in the late 1990s with the resurrection of a Rose Honey grape variety found growing on the cathedral grounds and no longer cultivated in France.  About ten years ago, the local Deqin county government introduced agricultural assistance programs that brought in other kinds of grape varieties as well as technical aid to supply a larger wine making industry in the Shangri-la region.  Currently, most villagers sell their grapes to middlemen each harvest, but some choose to make their own wine to retail at Cizhong’s local wineries and guesthouses.

New neighbors

However, the things that make Cizhong special may not be around for long. The Wunonglong dam threatens not just Cizhong’s local economy that has delivered modest levels of prosperity to the village over the past thirty years, but also the religious harmony between local Tibetan Catholics and Buddhists.

In two years Yanmen, an upstream community with more than two hundred households, will be entirely relocated to Cizhong.  Yanmen sits low along the banks of the Mekong and will be completely flooded by Wunonglong’s reservoir and the only place to transplant Yanmen’s residents is on top of Cizhong’s rice paddies.  Upon hearing the news of Yanmen’s takeover of their rice paddies, Cizhong’s villagers reacted emotionally as the paddies create a critical community space for social interaction. “The village elders cried when they heard the rice paddies would be destroyed.  The paddies were carved with their bare hands in the 1960’s and now the government wants to take them away?” says a local villager. Another villager claimed one rice harvest can feed the village for two years. Without a rice crop, villagers will have to generate income to overcome a critical food security issue.

Part of Yanmen village located below the inundation zone of Wunonglong's reservoir.

Part of Yanmen village located below the inundation zone of Wunonglong’s reservoir.

The day I walked through Cizhong was the last day for the giant walnut trees that lined Cizhong’s only road. To widen the road making way for Yanmen’s relocation, the remains of the trees, which each can produce up to 10000 RMB (1500 USD) of walnuts per year for sale at local markets, were stacked into wrecked piles of limbs and logs. Villagers received 300-10000 RMB in compensation per tree, at most enough to cover one year’s harvest.

The wine industry, as well as walnuts, has suffered as a result of the relocation. “They cut down an entire row of my grapes,” says a villager who also lost walnut trees to the road’s expansion.  “We were only compensated 40 RMB for a healthy vine and 30 RMB for saplings.  One vine produces 40 RMB of grapes per year, and I have no new land to plant on.  They took 100 of my vines.”

Road widening brings down scores of Cizhong’s walnut trees.

Road widening brings down scores of Cizhong’s walnut trees.

No equity, nowhere to turn

Land compensation is an issue of major contention in Cizhong.  More than half of Cizhong’s agriculturally productive land is being claimed for redistribution to the incoming residents of Yanmen and originally villagers were offered 30,000 RMB per mu of land (1 acre equals 6 mu) lost to Yanmen’s relocation.  Currently the local government is offering 100,000 RMB per mu, but Cizhong’s villagers continue to hold out.

“The villagers who moved to the city long ago and no longer live here agreed to 100,000 RMB per mu.  It’s easy for them because they have other jobs and other income, but to us, the taking of our land is taking away our only source of income,” says a villager surnamed Wang. Some villagers will lose all of their productive land. Stall tactics make sense since the local government will take 30% of the compensation and only dole out the agreed upon compensation in monthly installments over 15 years.  At the current offer, with only 3000 RMB per mu in compensation per month, even the most business savvy individuals will not be able to survive.  “We will wait,” says Wang with unsteady confidence.

Yanmen’s residents will rebuild on Cizhong’s carefully cultivated rice paddies

Yanmen’s residents will rebuild on Cizhong’s carefully cultivated rice paddies

I inquired about legal recourse.  “The local mayor only listens to money.  He’s not on our side,” continues Wang.  “I tried to file a petition in Deqin, the county seat, but the official there said the only way he’d review our petition was if the entire village showed up. That’s impossible. We don’t know who to turn to.”

Two hundred meters from the village on the opposite bank of the Mekong, new road construction and a tunneling project carries on day and night. Like the old bridge, the current road to Cizhong will be flooded by the dam’s reservoir. Noise from stone crushing machinery and cement processers pervades the valley.  Last year a landslide created by the road project forced the river to change course and washed away three mu of Wang’s riverside agricultural land. To date he has received no compensation.  Wang claims landslides opposite the village have resulted in the deaths of more than fifty construction workers. He points to cracks in the plaster walls of his traditional home built of wood and earth.  “My house shakes all day long from the construction.”

Highway construction opposite Cizhong has led to landslides and more than 50 deaths.

Highway construction opposite Cizhong has led to landslides and more than 50 deaths.

“Ten years ago we had everything we needed and now life is only getting worse,” continues Wang. Electricity generated by the Wunonglong dam will not be distributed to Cizhong.  In a prelude to Cizhong’s current worries, a small-scale hydropower project adjacent to the village was constructed a few years ago. It sends no power to the village, and to make matters worse, the small scale project cut off access to a local stream and to pasture lands beyond it.  “We let our cows out to pasture in the hills but they came back with bloodied legs because they couldn’t cross the land affected by the small hydropower project. Now there’s nowhere for our cows to graze.” When the small scale project was commissioned, developers promised locals 500 units of free electricity – those promises were never fulfilled.  Not a single Cizhong villager was employed in the construction of the small scale power station, and the price of electricity has been on a steady rise in the village.

Squeezed by national development needs

When Chinese dam developers conduct feasibility studies and first meet with locals affected by projects, they fervently sing praises of hydropower, boasting of how the dam will deliver local communities out of poverty and provide new income sources.  Reality tells a different story as infrastructure development projects in southwest China nearly always fail to provide net benefits to those who live closest to them.  In the case of China’s hydropower development on the Mekong, most power is sent to cities on or near China’s eastern coast. And as China doubles down on its commitments to reducing carbon output, the investment in hydropower projects, particularly in the under-developed southwest is amplified.

In Cizhong as in many other parts of upland southwest China, the Chinese government’s “core interests” of energy dependence and carbon reduction combine forces to turn land held by indigenous ethnic peoples  into a marketable commodity. Individual livelihoods, the social cohesion provided by generational practices and reliance on the land, and local traditions are consistently marginalized.

A few years ago at a village meeting, a former Cizhong mayor berated the villagers shouting “This land, this water, these mountains, they are not yours!  Stop acting like these are yours!  This is the state’s land, and these are the state’s resources.”

From a legal perspective, the Chinese state owns the land and everything above and below it, but villagers who are responsible for the productive economic activities that happen on that land are legally guaranteed compensation at fair market value for land grabbed by developers or involved in relocation efforts. Yet on China’s periphery, even the commoditization process fails. The marginalized nature of Cizhong and distance from the state’s judicial apparatus prevents fair compensation. Further, the law lacks consideration for values attached to various ways upland ethnic peoples use the land.

The Chinese state apparatus sees compensation to and relocation of rural peoples affected by development through standards applied to lowland agriculture, where patches of land are treated as commodities producing an accountable thus taxable yield on an annual basis. In upland China as in parts of Southeast Asia, land use patterns are less standardized and less predictable. Villagers there use mountain slopes as common pasture land for grazing animals, the forests as areas for collecting consumable and marketable products such as the matsutake mushroom and caterpillar fungus, or as in Cizhong’s case, walnuts produced by trees lining its roads and fields. The value of community-building functions created by these shared land use practices often is greater than the cumulative economic value derived from the land.

Sunday mass in Cizhong's Catholic church.

Sunday mass in Cizhong’s Catholic church.

“We are worried about village harmony,” Wang continues, discussing how the daily routines of Cizhong’s Catholics are still deeply entwined with Tibetan Buddhist culture.  “It’s common to see Buddhist monks present to give blessings at Catholic weddings and Christmas and Easter. We’ve achieved this harmony through decades of exchange with our Buddhist neighbors.”  However, all of Yanmen’s residents are believers in Tibetan Buddhism and unfamiliar with Catholic culture. Wang is worried that despite common ethnic heritage, the influx of Buddhists will upset community harmony and social interaction.  He labels Yanmen’s residents as overly superstitious and tells stories of how they are caught up in a spiteful sectoral feud between a local protector deity and the Dalai Lama that divides families in this part of the Tibetan world.

As if matters could not get any worse, when Yanmen village moves in, Cizhong will lose its name. Yanmen is one rung higher in China’s administrative ranking of localities, providing further risk to the interdependent cottage tourism and wine industries that have bet their futures on Cizhong’s name and unique history. The name change coupled with the inundation of Tibetan Buddhist villagers from Yanmen will dilute the uniqueness of Cizhong’s past and have a particular impact on Cizhong’s tourism industry.  With less land available for agricultural production per household, villager’s annual grape yields will decrease having an impact on income.  Villagers might choose to switch to higher value crops, but options for diversification are few in the canyonlands of the Upper Mekong. Alternatively villagers will be pressured to intensify the use of fertilizers to increase grape yields, pushing limits on sustainability and subjecting the local ecology to the effects of dangerous chemicals.

Spring grapes in Cizhong

Spring grapes in Cizhong

With no avenue for legal recourse and no one coming to aid the villagers, Cizhong’s days are numbered. The demoralizing effects of the Wunonglong dam are obvious and with nowhere to turn to for assistance or relief, Cizhong’s villagers can only passively wait to absorb the next shockwave. Censorship and the tightening of restrictions on NGOs under Xi Jinping’s government discourages civil society groups from intervening in cases like Cizhong’s making this unfortunate village just one of many caught up in the inevitable leviathan of energy infrastructure development in southwest China.

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Who’s afraid of China’s One Belt One Road Initiative?

A month ago China unveiled an action plan for China’s controversial One Belt, One Road initiative. The action plan introduces a series infrastructure development projects and trade related agreements along three Silk Roads emanating from China and reaching as far as Europe, Africa, and South America. It undoubtedly will be the subject of scrutiny as analysts and pundits on both sides of the Pacific chime in to make hasty comparisons to China’s 14th century maritime expansion and the more recent U.S. led Marshall Plan.  Some may even go as far to equate the One Belt, One Road to Japan’s pernicious WWII era East Asia Co-Prosperity Sphere – this analogy, to the Chinese, is ultimately insulting.

Scrutiny and false comparisons aside, China and the world will be made economically better off by a successful implementation of the One Road, One Belt initiative.  China estimates the total benefit stream for investors and firms that participate in the initiative to reach an astronomical USD 21 trillion. Moreover, the prospects of such benefits are particularly timely at a time when global aggregate demand is on a downslide.   During a series of fall 2013 visits to Asian neighbors, China’s president Xi Jinping first announced the One Road, One Belt proposal as an umbrella concept describing three economic belts extending westward from China toward Europe and Africa.  The three economic belts roughly follow historical trade routes linking China with the West and are known as the New Silk Road, South Silk Road, and the 21st Century Maritime Silk Road (See map).

One Belt One Road

According to the Chinese Foreign Ministry, the initiative seeks to strengthen economic collaboration, improve road connectivity, promote trade and investment, promote currency conversion, and bolster people-to-people exchanges.  The timing of the initiative is critical.  China’s current development trajectory requires an infusion of economic growth emanating from its under-developed interior using an outward focused plan to export its finished products abroad while importing much needed raw materials and foodstuffs from the rest of the world.

The catchword among the planners of the Belt and Road system is youwai zhinei (由外至内) or ‘to bring the outside in.’ This concept reveals the actual logic of the plan as an outward looking plan that fills domestic economic needs first. Xi Jinping is betting his political future, and by extension, the continued legitimacy of the Chinese Communist Party, on this plan to solve China’s economic woes and deliver successful reforms.  Thus, criticism should not pontificate on how the initiative is China’s grand strategy for global domination, but rather focus on assessing the efficiency of the various related project and prognosticating whether Xi can drive the initiative’s benefits home in time to stave off an economic slowdown.

To address current criticism, pundits are quick to draw historical comparisons to when Ming dynasty Admiral Zheng He, a court eunuch whose naval fleets, sailed as far as the east African coastline collecting tribute and expanding China’s sphere of influence.  To be sure, Zheng He’s ships were equipped with soldiers and were not simply diplomatic missions.  However, historian Jeremiah Jenne Executive Director of The Hutong in Beijing says, “Zheng was not trying to conquer or colonize in the name of the Ming Court. China gets into a lot of trouble in contemporary diplomacy because there seem to be elements in the foreign policy and military establishments and a whole swath of the general population who have trouble separating tributary arrangements from actual control and sovereignty.”

Jenne’s comments are generally made in reference to China’s historical claims to most of the South China Sea, many of which are based on Zheng He’s naval explorations.  However, on equal measure, Western detractors of the One Belt One Road plans should also not claim Zheng He as a world conqueror or challenger to the status quo.

Some analysts suggest the cheap financing and aid packages attached to the One Belt One Road plan are part of a political strategy for China to placate its neighbors over territorial disagreements with trade incentives and cash.  China indeed ill-advisedly attempted this strategy in the mid 1990s with its economic cooperation strategies vis-à-vis mainland Southeast Asia, but its track record with this strategy, particularly with Vietnam and Indonesia is spotty and has not produced desired results.

Yun Sun, resident fellow and Chinese foreign policy expert at the Stimson Center in Washington D.C. does not quite agree with the view that One Belt, One Road is motivated primarily by strategic and political calculations. She says, “The plan is primarily an economic campaign designed to serve China’s economic restructuring and export needs. It will benefit the region, as well as China.”  She admits the initiative will inevitably have a political impact and Beijing conceivably sees the political benefit as a part of the package.

“Using the counter-factual approach,” continues Sun, “China would still pursue One Belt, One Road without South China Sea disputes, so we can’t really say that the South China Seas or mending ties due to disputes there is the cause of China’s One Belt One Road.”

The post-WII Marshall plan which successfully lifted both the US and Europe out of its post-WWII economic woes and acted as the keystone to US led global restructuring models such as the Bretton Woods system indeed serves as a useful comparison to the One Belt, One Road initiative.   While we should be mindful that there is no guarantee the plan will deliver the local and global economic benefits that China hopes for, we should be more mindful that unlike the Marshall Plan, China has no economic restructuring model to offer the rest of the world, its stock of soft power is not necessarily improving, and this plan, still in its proposal stage, will be no easy sell.

To provide a comparison, China’s scorecard in regard to economic belt and road development in mainland Southeast Asia is murky and has contributed much to its current reputation rising regional power with unclear intentions.  Vietnam has stringently followed China’s export-led growth model and as a result is currently heading toward dire and inexorable economic straits unless it considers other alternatives.  Even in poor countries like Laos, where mid-to-high-value Chinese exports are not preferred to Thai or even Vietnamese products, scant evidence exists to demonstrate the “Made in China” image is improving.

The record of Chinese firms abroad in regard to environmental protection and labor practices is abysmal in countries like Laos, Myanmar, and Cambodia with no evidenced improvement in corporate social responsibility practices. Tied to this, Xi Jinping’s anti-corruption crackdown will reveal deep corruption and graft in many of China’s overseas infrastructure development projects.  Moreover, Xi Jinping is pledging to break-up the monopolies of many of China’s powerful state firms – construction and energy firms are already in his sights – thus, it is unclear who will build the One Belt, One Road projects.

To reiterate, these are the issues that deserve scrutiny and attention rather than the high-level rhetoric of China’s grand strategy.

Liu Jinxin, regional logistics expert and chief architect of the Bangladesh-China-India-Myanmar Corridor (a westward stretching leg of the South Silk Road – see map), says that the greatest challenge facing the One Belt, One Road strategy is in China’s public relations strategy.  “Too many out there misunderstand China’s intentions, and factions, particularly within democratic countries, will misinterpret the benefit flows that this plan will deliver.”  Liu also cites the need for harmonizing legal structures between cooperative partners in sectors related to trade, commerce, and logistics.  “China will learn the most from this process, specifically through interaction with countries in Europe where the rule of law is strong.  However, since China’s legal system is not based on rule of law, it will be difficult for China to emerge as a conversation leader on this initiative.  In many ways China’s role is passive.”

Thailand’s refusal to pass a regional cross-border transportation agreement sponsored by the Asian Development Bank (which China and other mainland Southeast Asian states have ratified) is reflective of Liu’s commentary.  The ratification of this agreement would require the break-up of many entrenched factions within Thailand’s customs and inspection agencies as well as the military – a move these powerful groups are unwilling to budge on despite Thailand’s overall enthusiasm for economic cooperation with China.

When applying a critical eye to the One Belt, One Road initiative, its best to begin with a consideration toward the feasibility of such a project and looking at China’s real capabilities. Many worthwhile questions arise amidst such an inquiry, and certainly no one should take for granted that China can pull such an endeavor.  The functionality of the initiative is to push China successfully through its next wave of economic reforms promising further stability to East Asia and delivering a substantial contribution to global economic growth.

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Liu Weigao: The Developer Behind Qiu He’s Curtain

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Jiangsu businessman Liu Weigao at a meeting of the National People’s Congress in Beijing.

 

The following translation is a detailed exposé of Liu Weigao, the Suqian businessman whose exploits brought down Qiu He, the Vice-Party Secretary of Yunnan  Province.  The smartly crafted article written by Southern Weekend reporter Liu Jun was published on March 19 on the Phoenix News site.  The author is careful not to directly connect Qiu He to Liu Weigao, but the implications are extremely salient.  Moreover, the report links both Qiu and Liu to the deaths of two villagers.  After Qiu was placed under investigation on March 15, word passed quickly around Kunming that villagers died in the demolition of a village overseen by Qiu’s team.  A keen reader will note the usage of citations from the Kunming Daily that ridiculously support the work of the Kunming leadership demonstrating government control of the local media.

In Suqian, Liu Weigao went by the nickname “Half the City.” Others,  in private quarters, called him the “Godfather of Urban Construction.”

Li Xiong, a villager from Hongren village who protested his village’s demolition was severely beaten by three unidentified assailants one night while returning home.  At the local village department overseeing the demolition of Hongren village, an itemized account log reads: November 2010, hire people to take care of Li Xiong, spent 30000 RMB.  These notes were handwritten.  A line on May 16, 2010 shows “Purchased two wooden coffins, 1200 RMB.”

On March 17, 2015, Zhonghao (中豪) Commercial Group’s official Weixin account posted a notice saying its board chairman Liu Weigao (刘卫高) resigned from his position. Ever since the March 15 announcement of Vice-Provincial Party Secretary Qiu He’s (仇和)arrest, the media has been paying high attention to the name Liu Weigao.

Many signs of Liu’s demise appeared before the March 15 announcement.  Liu Weigao was a Jiangsu provincial representative to the National People’s Congress, but he was absent from this year’s recently concluded meetings in Beijing.  Many sources told to Southern Weekend reporter Xiu Lu that long before this year’s Spring Festival, Liu had already been taken away for official investigation.  Meanwhile in Suqian (宿迁), Jiangsu, many had noted that most of Liu’s real estate and investment projects had already come to a standstill.

Thirty years ago Liu Weigao got his start in Yiwu, Zhejiang.  He then slowly made the transition from northern Jiangsu to southwestern Kunming.  He started with a small company with registered capital of 5mn RMB (800,000 USD) which he then transformed into an empire of ten major firms valued at over 1bn RMB (150mn USD).  This empire went by the name of Zhonghao, and now Zhonghao will forever be associated with the name of a fallen official.

 

Designs for the X square kilometer New Luosiwan International Trade City

Designs for the 8 square kilometer New Luosiwan International Trade City

A Key Project

Among Zhonghao’s empire, the Zhonghao Luosiwan International Trade City (中豪螺蛳湾国际商贸城) is Liu Weigao’s magnum opus.  Luosiwan International trade city is a golden line of connected buildings stretching for hundreds of meters and is located 15 kilometers from downtown Kunming.  The locals prefer to call it Luosiwan (螺蛳湾).

New Luosiwan’s first and second phase buildings are five meters high with banners sporting the lofty slogans “Go Out into the World” and “Face the Future” hanging on its outer walls. Its entryways are cluttered by delivery companies and cargo trucks continuously drive in and out. Alongside of the complex are countless banks and hotels showing that “Asia’s top comprehensive commercial firm” (the slogan printed on Zhonghao’s stationery) was not built on the waves of a false reputation.

But this is only a small part of Luosiwan’s territory.  According to Liu Weigao’s plans, Luosiwan’s final size reached 12000 mu or more than 8 square kilometers.  It’s important to note that Kunming city’s area is only 98 square kilometers with Luosiwan accounting for 8% of that space

luosiwan

New Luosiwan’s main entrance

 

Five years ago, Luosiwan’s site was a barren farmer’s field located on the eastern banks of Dianchi, in Kunming’s outer reaches.  Now with more than 5.8bn RMB (935mn USD) invested around Luosiwan, it’s more like a new city in the midst of development.  Some praise Liu Weigao’s capabilities, but others look at him with disdain suggesting that without the government’s support behind him, he wouldn’t have such capabilities.

In 2008, Zhonghao entered Kunming amidst the frenzy of a major building phase where the new Kunming Party Secretary Qiu He called for the demolition and rebuilding of 300 urban villages.

In February 2008, a group of twenty-five businessmen from Yiwu, Zhejiang arrived in Kunming to survey commercial opportunities. This group was led by Liu Weigao.  In May of the same year the group decided to begin to replicate the Suqian model of economic development, and set Kunming in its sites as its priority testing ground.  Ground was broken on September 2008, and in April of the following year the roof was finished on the 1.2mn square meter marketplace which opened for business the following November.

“Within one year, an investment miracle happened in Kunming. Kunming’s investment efficiency is very high.” This is how Zhonghao’s board chairman, Liu Weigao appraised Kunming’s investment atmosphere at the May 9, 2009 annual meeting of Zhejiang investors.

This type of speed was not made possible without the “kind efforts” and support of the Kunming government.  According to a report in the Kunming Daily, to promote the development of Luosiwan International Investment City, the Kunming municipal government set up a leading small group to hold regular meetings to follow up on the progress of related projects and to assist with problem solving when the project came across difficulties and challenges.

A farmer tends his fields near the New Luosiwan site.

A farmer tends his fields near the New Luosiwan site.

For the three years after 2008, Zhonghao “attacked the city and seized territories” repeatedly grabbing extremely cheap land with extremely low effort. Public reports show on September 23, 2008, the Kunming municipal land bureau auctioned off seven parcels of state land totaling 877 mu (58 hectares) at a value of 780mn RMB (125mn USD).  Within five minutes the only bidder at the auction, incidentally from Zhonghao, purchased the land.  The construction of New Luosiwan’s first phase was secured.

A portion of this was farmland belonging to Hongren village.  Li Zhaorong, a villager from Hongren, recalled in a Southern Weekend report that at that time the government told villagers the use of the sold land was for public purposes.  The government did not mention the construction of Luosiwan.  At that time the standard for land compensation was 160,000 RMB  (25,800 USD) per mu, but in the end villagers in Hongren only received 60000 RMB per mu (9677 USD).

Zhu Xiaoyang, a professor from Peking University’s sociology department, conducted long term research on Hongren village and was a witness and participant in the resistance movement inside of Hongren.  She claims that at the time villager were compensated, surrounding land was valued at least 1.5mn RMB (241,000 USD) per mu.

When New Luosiwan opened for business, the old Luosiwan market in downtown Kunming announced its closing.  There was only one reason for closing –for the betterment of the New Luosiwan.  The official explanation was to “comprehensively direct vendors in their transition to the new Luosiwan.”  According to a Kunming Daily report, the Kunming Municipal government put on a special closing event for the Old Luosiwan market on November 17, 2009 two weeks before its official closing date.  At the event, the government head of Xishan district (where the old market was located) proclaimed the completion of the New Luosiwan Market.  He urged the vendors still operating at the old market to positively support and follow the directives of the Kunming municipal party and government organs.  He displayed confidence in the future of New Luosiwan.

But this only one side of reality, as many vendors resisted the forced relocation.  Yet their efforts had little effect.

Former Yunnan CCPCC Vice-chairman Yang Weijun remembers receiving the vendors’ petitions.  From the perspective of an old Kunminger, the demolition of the old Luosiwan market entirely was a mistake of the sitting municipal leadership.  “The old Luosiwan market had more than twenty years of history and received more than 200,000 customers per day.  It was the largest distribution center for everyday commodities in all of Yunnan and perhaps all of Southwest China.  How can you just shut a place down with business as good as that?  And then move 15 kilometers out into the suburbs?” he told Southern Weekend reporters.

The Hand Behind the Curtain

No outside protests were going to stop Liu Weigao’s New Luosiwan project. In fact, the deeper his steps, the larger the project grew.  In March 2010, a land sale’s sole bidder, again representing Zhonghao, grabbed four parcels of land for 1.07bn at 1.8mn RMB per mu (290,000 USD per mu) to be used in the Luosiwan’s second phase.  One year later at another land auction, the only bidder, also from Zhonghao, bought up twenty-seven parcels of land totaling for 6.4bn at 3.5mn RMB per mu (564,000 USD per mu). That auction lasted less than three minutes.

A Southern Weekend report revealed during the construction of New Luosiwan’s 2nd and 3rd phase, not all of the land was used to build the commercial space. A portion of the land was used to build private real estate.  For example, in the 3rd phase among the twenty-seven parcels of land purchased, only eight were used for commercial purposes.  Eleven were used for residential space.  Taking commercial land and illicitly converting it for residential purposes has been an unspoken rule of the real estate industry for years.  Zhonghao is known to exploit this rule to the extreme.

On Luosiwan’s grounds, Southern Weekend’s reporters observed that Zhonghao’s real estate projects occupy the periphery, and possibly in aggregate outsize Luosiwan’s commercial space.  In February, 2010 Liu Weigao established the Zhongwang(中望) real estate company with a registered capital of 250mn RMB (40mn USD) with Zhonghao as the majority shareholder.  Zhongwang’s first project was the 1500 mu (100 hectare) Zhongwang City (中望城) – across the street from New Lousiwan.

Zhongwang City’s first phase construction was unsurprisingly smooth. In August of 2014, Zhongwang purchased the largest parcel of land for sale that year at 1.79bn RMB (288mn USD).  The land is located in Yiliu subdistrict’s Wula village in Guandu District and was comprised of nine parcels of land totaling 569.47mu (38 hectares).  Because of this purchase Zhongwang was named Yunnan’s land king.  The auction was the same as previous years – only one bidder from Zhongwang was present.

Luosiwan 2007

Google satellite image of future New Luosiwan site, 2007. Tami, Wula, and Hongren villages occupy the periphery.

Luosiwan 2015

Google satellite image of New Luosiwan site, 2015. Only Hongren village remains near the upper left corner.

 

The land grabbed by Zhonghao has been done so entirely in the name of demolishing Kunming’s urban villages (城中村). A Kunming Daily report said it is out of step for a major commercial port of China to be surrounded by urban villages.  “This is an effective project for integrating the rural and urban areas and to improve residential environment and transportation.  It has great significance for improving the image of the city.”

But surveys conducted by Southern Weekend discovered that Tami village, Wula village, and Hongren village, all affected by the New Luosiwan project were in fact not zoned as “urban villages.”  They were only torn down after the Yiliu sub-district applied to the Guandu district government for demolition.

An internal document from Guandu District reads that on November 3, 2009 the Guandu office responsible for speeding up urban village demolition approved the request of Ailiu sub-district and agreed to proceed with the destruction of the three villages.

The Guandu district government has always been responsible for taking the lead on demolition related to the New Luosiwan project.  Zhonghao, from beginning to end, has never been at the front of the action.  Li Zhaorong says he’s never seen Zhonghao talk directly to the Guandu government, but in actuality Zhonghao has always been behind the curtain providing support.

According to many documents acquired by Southern Weekend, Zhonghao’s people have participated in the entirety of the planning related to demolition in Guandu district.  The minutes of meetings regarding demolition related to the New Luosiwan project show that Chen Hongbing, Wang Zaizhang, Xu Dingsheng, Chen Qianfei (陈红兵、王存章、徐定生、陈钱飞)were in attendance.  All four are upper management at Zhonghao.

In another internal document procured by Southern Weekend, eleven Zhonghao employees were listed on the roster of Hongren Village’s demolition team.  They were sent from Zhonghao’s finance, cartography, and office departments.

The demolition progress hit a snag when it reached Hongren village.  Among 1300 families that lived there, only sixty agreed to move.  Hongren village had just been built according to regulations related to the construction of China’s new socialist countryside program.  Those living there had only recently moved in, yet now their homes faced immediate demolition.  The villagers were not interested in an extra cent of compensation to coax them to pick up and move again.

The demolition of Hongren village was to be carried out by its own government office. On May 20, 2010 at 9:00am, forceful demolition of Hongren village was begun. Headed by the demolition team from Hongren village government – more than 500 chengguan, guards, and policemen were on hand.  Zhonghao had five employees on site to oversee maintenance and provide material support.  Amidst the chaos, one villager was blinded.  Li Zhaorong was one of the “Five heroes who resisted demolition” (抗拆五君子). He recalled to Southern Weekend reporters that one of the other “heroes” Li Xiong was beaten by three unidentified persons in the middle of the night.  Three others were sent to the local jail and not released until the next morning.

Southern Weekend also procured handwritten documentation from the Yiliu sub-district demolition command center, “November 2010, hired people to take care of Li Xiong’s, spent 30000 RMB.  On May 16 2010 a line showed “Purchased two wooden coffins, 1200 RMB.”

Not only did Zhonghao grab the homes of villagers. It also swallowed land previously purchased by other real estate developers.  Sources close to the situation have told Southern Weekend that it was industry owners and government officials who blew the whistle on Liu Weigao.

The Liberator’s Realm of Fortune

Many people are clear that the completion of New Luosiwan was a replication of Liu Weigao’s investment experience in Suqian, Suzhou. Looking back at Liu Weigao’s journey, Yiwu was where he got his start, but Suqian was his realm of fortune.

Media reports suggest that Liu Weigao is from Suqian’s Shuyang county, but there is no certainty to this information. Southern Weekend can report that Liu Weigao was born in Qingyanliu village in Zhejiang’s Yiwu City. Interestingly Qingyanliu Village is famously known as the “Number one village for online vendors” (网店第一村).

With only a high school education, Liu Weigao got his start selling socks.  After a ten year struggle, his Zhejiang Suli company registered in 2003 with an initial startup capital of 160mn RMB (25.8mn USD).  In that year, Zhejiang province stopped the approval of new industrial land and Liu’s sock industry faced the risk of losing his supply of capital.  This shock forced Liu Weigao to Suqian and ultimately is responsible for his rise.

This time was also a positive period for Suqian’s fortunes.  In 1996, Suqian was the poorest of Jiangsu’s thirteen cities.  That year Suqian’s leadership began to attract investment by promoting the city for economic development to outside investors.

Liu Weigao traveled from Yiwu to Suqian to conduct investment surveys two days after receiving an invitation from Suqian officials.  He decided to invest in the city’s economic development zone and expand his sock industry.  Three years after settling in Suqian, he began to search for other investment opportunities.

At that time Suqian was home to an old wholesale market established in 1997 with an area of 130,000 square meters.  Its market base was weak, product selection narrow, and was lacking in both customers and vendors.  Although the Suqian government provided numerous policies to promote commercial activity, in 2005, the market’s commercial sales were less than 500mn RMB (80mn USD).

Then Liu Weigao proposed to build a new market on the site of the old one, but this plan would restrict the scale of the market’s potential.  Later, the city government sold him a parcel of land in which Liu Weigao invested 2.6bn RMB (420mn USD) to build a brand new, bigger market.  This market was a direct copy of Yiwu’s successful small commodities market.  Liu Weigao was eager for the world to know of his new project.

Ground was broken on August 1, 2005 on the Suqian-Yiwu International Trade City (宿迁-义乌国际商贸城)more familiarly known as the Suqian Small Commodities City (宿迁小商品城).  Liu Weigao’s efforts were promoted with high praise from the Suqian government.  In June of that year, the Suqian Party headquarters held a meeting to promote the construction of Liu’s market.  The saying at the time was “Building a big market and opening big development will expand accumulation” and “Work hard to create a large market, strengthen the attraction of Suqian’s markets.”

In 2006 Suqian celebrated its tenth anniversary as a municipality.  Liu Weigao’s market was complete with a physical area of 1.46mn square meters.  In August 2006, China’s most popular television show “One Song”(同一首歌) came to Suqian.  At the Suqian taping Liu Weigao spent an estimated 8mn RMB (1.3mn USD), and because of this he shot to stardom gaining the reputation of the wealthiest businessman in Suqian.

From 2002 onward “Attracting financing and investment” was the top priority for economic development according to Suqian municipal government.  The taping of “One Song” was a perfect way to hit the government’s objectives.  After airing on China Central Television, Suqian’s image received a major boost.

One month after the taping, Liu Weigao was honored as a “Top Minister for City Construction” (建市十大功臣) at the municipality’s year-end meeting.

Liu Half-the-City

After “One Song” Liu Weigao’s reputation climbed to its zenith.  In January of 2007 Liu Weigao was elected head of the Suqian Chamber of Commerce in a landslide victory. He represented Suqian at the annual Jiangsu provincial meeting of top commercial investors.  There he proclaimed “When I chose to invest in Suqian, I fell in love with its openness and tolerance.”

Moreover, the license plate number, N00000, on his ostentatious Rolls Royce suggested that he did not simply enjoy a typical relationship with the local government.  He was the talk of the town.

From here, Liu Weigao’s investment in Suqian expanded.  He began to expand his scope of real estate investments and won contracts to build many government and public buildings.  He easily bought up parcels of land in Suqian’s most valuable downtown areas, particularly those close to Xihu Road (西湖路).  Here he built the giant Zhonghao International Market (中豪国际广场) and Zhonghao International Mall (中豪国际星城) and afterwards began construction on Phoenix City(凤凰美地), a giant real estate project, in addition to other projects.

After he invested in Kunming, Liu Weigao returned once again in 2010 to invest in Suqian.  This time his proposed project was even bigger: the 11 square kilometer Canal Cultural City – a mixed commercial residential site with a large exhibition center and more than twenty tourist sites.  It was known as China’s largest Grand Canal themed project.

On November 29, 2010, Suqian government leaders proclaimed “After construction the Canal Cultural City will be Suqian’s international calling card.”

In Suqian, Liu Weigao went by the nickname “Liu Half the City” (刘半城).  Others in private quarters called him the “Godfather of Urban Construction”(城建教父 ).

According to the report of an anonymous high-level Suqian official, Liu Weigao’s motivations for returning to Kunming were unclear, but one can assume his endeavors in Kunming had reached high levels of success.  Otherwise he would not have been able to make such an enormous investment in the Canal Cultural City.

When the Tree Falls, the Monkeys scatter

In August 2014, Zhonghao’s annual commercial income reached 35bn RMB (5.6bn  USD) ranking it as the top private firm in Yunnan province.  Zhonghao was also in preparation to list its holdings on the Hong Kong stock market.  But last October Kunming Municipal Land and Resources Bureau (国土局) issued a list of twenty-five firms which owed money on land deals.  One of those firms was Zhonghao.  It is critical to note that prior to this announcement, Kunming’s top leadership had been reshuffled in Xi Jinping’s anti-corruption drive.

Zhonghao was not prepared for days like this.  Vendors at New Luosiwan still held Liu Weigao with much contempt as a rude and arbitrary businessman.  One vendor recalled to a Southern Weekend reporter that originally vendors were required to pay five year’s rent up front, but now were required to put up six year’s rent.  Some vendors in the New Luosiwan’s first phase zone engaged in physical altercations with Zhonghao’s management because Zhonghao forced them to move to the recently opened third phase zone to improve the atmosphere.  They refused, saying, “With business this good, on what basis are they forcing us to move?”

Opposite from his Kunming experience, back in Suqian, Liu Weigao continued to rein in honors and political resources.  In 2013 he was selected as a Jiangsu Province representative to the Chinese National People Congress.  Liu was one of only six representatives from Suqian.

On October 1, 2013 Liu Weigao’s theme park, Canal Paradise (克拉嗨谷), opened on the grounds of the Grand Canal Cultural City.  With a total size of 450,000 square meters, it is known as northern Jiangsu’s largest theme park.  After an initial positive reception, the interest in the park has gradually lessened.  Tickets cost 150 RMB per person and many in Suqian remark that the park is too expensive.

Canal Park

Google satellite image of a portion of the Canal Cultural Park. Liu Weigao’s Canal theme park is center bottom with the Tianxi real estate developments bordering above.

 

In addition, most of the commercial space for rent at the park’s entrance is empty.  Those who do conduct business there are barely getting by.  A manager of a local restaurant told Southern Weekend reporters that rent for a 100 square meter space is 30000 RMB (4830 USD) per year.  But she has less than three or four customers per day with some days attracting no business at all.  A nearby shop posted a “for rent” sign on its doors only after doing two months of business.  To date, no one has responded to the offer.

Across from the Grand Canal Park, sits the Grand Canal Tianxi(天玺) real estate project.  Construction stopped here earlier this year.  Barren and grey, the half-finished buildings show off huge advertisements “Grand Canal City gives you a piece of blue sky and green pastures”  In addition another advertisement sports a promise unlikely to be kept, “Buy in the spring, and move in this fall.”

Only ten or so guards watch the empty construction site.  The doors and walls of the site are pasted with banners saying “Because of Grand Canal City’s major violations, the construction on this project terminated on February 1, 2015.”

Kunming’s New Luosiwan Market is equally quiet.  The deeper you walk into it, the more you discover it’s a ghost town.  Inside New Luosiwan’s second phase building, Southern Weekend reporters discovered that most of the stalls above the third floor are empty.  One of the stall owners said he’s losing money daily, not even making enough to pay rent.  The finished sections of phase three are even more barren.  Surrounding phase three are real estate projects as big as several football pitches.  Some have finished work while some are still under construction.  Very few people are moving in.

At the end of 2014, word on the Suqian’s streets was that Liu Weigao’s capital flow was on the rocks. A source close to the situation told Southern Weekend reporters that banks were tightening their debt structures and forced Liu Weigao to pay back a portion of his own debt.  They had no further loans to issue him as well.  Another source close to Liu Weigao told Southern Weekend reporters that at this time Liu Weigao’s capital was drying up.  Liu realized at meetings in both Kunming and Suqian that he was being treated differently and was caught weeping several times.

A reliable source also told Southern Weekend reporters that early in January 2015, Liu Weigao had been taken away for investigation by Zhejiang’s Commission on Discipline and Inspection.  At that time, Suqian municipal government began to find other firms to finish a portion of the construction projects previously started by Liu Weigao.

Another source told Southern Weekend reporters that in the last two years Liu Weigao’s capital flow began to dry up as Kunming’s pace of development slowed. Many of Liu Weigao’s cooperative partners defaulted on their debt payments.

In Zhonghao’s Suqian headquarters, an employee told a Southern Weekend reporter that Liu Weigao’s troubles will not affect the business of the company.  Everything is normal here at the company.  He said, “This company doesn’t solely belong to Liu Weigao, rather it belongs to its board. And there are many board members.”

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China’s Maritime Silk Road is all about Africa

Thailandriceexport-1

Rice bound for Africa is loaded onto a cargo ship in Bangkok, Thailand

A recently signed agreement between China and Thailand sheds light on the dynamics of the Maritime Silk Road.

Amid all the fanfare and media buzz about China’s re-envisioning of its two Silk Road projects, the New Silk Road and the Maritime Silk Road, admittedly little is known about the details, the mechanics, and the functions of the new routes.  For example, this interactive graphic published by Xinhua suggests the Maritime Silk Road’s prime focus is to facilitate trade between Asia and Europe when in actuality the focus of the Maritime Silk Road is to support and facilitate booming trade growth between Asia and Africa.  To put this into perspective, from 2011 to 2013, trade between China and the EU showed no increase, keeping steady at around USD 530bn.  This was outpaced by trade growth between China and Africa which expanded at an average of 10% per year over the same period of time and is projected to increase 15-20% per year over the next five years.  In 2013 total trade between China and Africa reached USD 210bn – five years ago China’s total trade with Africa was less than half of what it is now. Continue reading

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The Red Line, Bottom Line, and Direction of State-Owned Enterprise Reform (translation)

China's president Xi Jinping discussing State-sector reform in December 2013.

China’s president Xi Jinping discussing State-sector reform in December 2013.

Translators note: This essay was first published in Qiushi’s online journal Red Flag in early June and then recirculated on various CCP and government websites/publications including the official CCP News website, SASAC website, and most recently SinoPec’s  official site.  Its analysis provides key insight into the both the nature of China’s coming state-owned enterprise reforms and challenges to launching reforms.  

The author, Zhu Jidong, first outlines that the reforms will not be a massive sell-off or a granting of private and foreign firms access to state assets as many pundits have suggested, but rather a reform that re-introduces corporatization and mixed-ownership structures to China’s state-owned firms.  The essay continues with a discussion of the connection between the importance of state-owned industries and the survival of the Chinese state and Communist Party.  It touches on the dangers and risks of reform going off in a wrong and misguided direction and hints that power currently is unevenly distributed in the state-owned sector and that managers of state-owned industries could continue to use their power to make arbitrary decisions, engage in corrupt practices, and take advantage of reform.  The author calls on the Party and governments from the central to local level to promote the supervisory powers of various societal sectors to ensure the coming reform process is fair and transparent.  He encourages Party commissions and local governments to set up hotlines using various forms of social media for observers and whistle-blowers within the state-sector to utilize in reporting malfeasance and corrupt practices that occur during the coming round of state-owned enterprise reform.

 The timing of this essay’s release is critical as state-owned enterprise reform should be a key issue discussed at the coming 4th Plenary Session of the 18th Party Congress this fall. To date this is the essay’s only known English language translation.

 

 The Red Line, Bottom Line, and Direction of State-Owned Enterprise Reform

Deepening state-owned enterprise reform is a major undertaking and is a major issue gaining attention and controversy around the future fate of the party and the state.  During the “two sessions” of 2014, General Secretary Xi Jinping stressed that state-owned enterprises cannot be undercut but rather must strengthen.  State-owned enterprises must absorb the experience and lessons of past reforms and state assets cannot turn into an opportunity for speculative profiteers amidst the wave of reform.  The underlying spirit of this essay is to further advance the definition of state-owned enterprise reform’s red line, identify the bottom line, and clarify its direction.

Drawing the red line: Speculative profiteering opportunities cannot be made in the name of State-owned enterprise reform

“Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform,“ the document produced during the CCP’s Third Plenary Session of the 18th Party Congress clearly states for the positive development of a mixed ownership economy.  There are those who advocate the position that the development of mixed ownership economies will serve as a big push to advance privatization, to permit more private and foreign enterprises to control the shares of state-owned enterprises while at the same time allowing state-owned enterprises to retreat away from competitive sectors.  This has created a certain mindset of confusion throughout society.  Looking back at more than 30 years of Reform and Opening, the loss of state assets during the process of state-owned enterprise reform has been a controversial topic which triggered many problems.

Some people say that the purpose of reform is to sell state-owned enterprises, as if success is only delivered through wholesale sell-offs and the price of the efforts of privatization is the laying off of large quantities of employees. A sentiment exists that not only can state employees not share fruits of this kind of reform, but they also serve as the sacrifices of reform; further the state must shoulder the welfare burden of this heavy issue.  Correspondingly a minority state-owned enterprise upper management who once carried the torch of reform have become billionaires.  Now there are even those who advocate “To mix is to sell, if you don’t sell you can’t mix.” If the name of reform is to forcibly make state-owned enterprises sell off rights and assets to private and foreign enterprises, then state-owned enterprises are not strengthened, rather they are weakened..

Developing a mixed ownership economy calls for open and transparent principles. Some people stress that the process of developing mixed ownership is to allow private enterprises to participate in the affairs of state-owned enterprises.  But if upper management of some state-owned enterprises take up this slogan and combine it with the efforts of private managers, then the possibility of “state assets becoming opportunities for private exploitation in the wave of reform” will arise. The crux of reform is openness and transparency and it is a reform to be carried out under the supervision of the masses.

The basic policy of developing a mixed ownership economy is already clear and its essence, as well as its success and failure, is in the details of regulation.  It is imperative for the transfer of state ownership and assets to be an open and transparent process.  Financial assets should be made known to exchange markets.  Transfers should be public knowledge.  State-owned enterprises should engage in open, fair, and just exchange.  The state should establish an institution with the sole purpose of managing, supervising, and quickly establishing a platform for the transfer of state ownership and assets and mandate all state-owned enterprises regardless of reputation to openly, fairly, and justly execute the transfer of state assets.  The private transfer or third party management of the transfer of state assets is impermissible. At the same time, this platform must be built to be as transparent as a glass window in order to put a stop to end all under the table dealings.

In order to develop mixed ownership economies it is necessary to guard against foreign capital controlling the pulse of the Chinese economy.  In accounting for the livelihood of the Chinese people, China’s state-owned industries not are not only the key sector for economic stabilization and boosting the economy, but these firms also bear the load of fending off the control of International monopolistic capital controlled by multinational corporations.  They take on the heavy task of protecting the security of the national economy, and because of this, frequently are a target in the eyes of Western countries and multinational corporations.  If foreign capital and foreign firms are to enter the reform of the state sector, we must first consider the question of the security of the economy and the security of the entire country.  Otherwise after foreign capital and foreign firms enter this sector, it is possible they will spy on the state sector’s confidential policies and strategic decisions.  One can easily imagine that this will influence the security of China’s economy.

A 2006 report issued by the State Council’s Development Research Center expressed that among industries already open to foreign capital investment, each of the top five firms in those industries were nearly completely under the control of foreign capital.  Particularly among twenty-eight major industries, foreign capital exploits the controlling rights to multiple forms of assets of twenty-one industries.  It can be said that foreign capital controls these twenty-one industries.  Today this data should be even more shocking.  Because of this, we must guard against foreign capital from taking advantage of mixed ownership economies to control the lifeline of the Chinese economy and threaten China’s economic stability.   We must take strict precautions against foreign capital from seizing the opportunities of national defense, railways, energy resources, telecommunication, public industries, and those that are associated with national security and major industries associated with the economic pulse of the state and people.

The development of mixed economies needs to allow for the participation and supervision by the masses.  We must appeal for the positive activation of the masses to supervise the whole process of the development of mixed ownership economies and absolutely cannot allow for the invaders to embezzle from and take advantage of state industries.  The party committees and governments at the central and local levels have all installed hotlines, mailboxes, and websites and are positively ready to receive reports on neglect, malfeasance, and corrupt activities associated with state enterprise reform. We will positively investigate and make public the clues reported by the masses pertaining to the loss of state assets.  Toward the actions and behavior of those who embezzle state assets, we will investigate resolutely and severely punish. Through dissecting case studies involving the loss of state assets, we will establish and strengthen the institutions to protect state assets and the benefits of workers during the process of state sector reform.

In the development of mixed ownership economies, we must prevent the torchbearers of this reform from carving up state assets for their own purpose.  The selling of shares to managerial levels and to employees is a topic that will attract much attention during this round of state-owned enterprise reform.  Some locals are already implementing models for share distribution, so this direction has already been established. State assets are legal assets owned by the people of the socialist state of China, and the spirit of state assets cannot be violated. No one has the right to turn these assets into the private assets regardless if they are at the managerial level or a common employee.  Importantly the leaders and employees of state-owned enterprises cannot grant distribution of shares to themselves or transfer all of the people’s assets into private assets.  To permit or even encourage employees and managerial levels to hold shares or to institute models for the holding of shares is a means to permit these people to buy enterprise shares using their own money –  not to carve up state assets for their own usage.

Identifying the bottom line: State enterprise not only cannot weaken, but it must strengthen

In the Communist Manifesto, Marx and Engels pointed out that: “The question of ownership is the fundamental issue of the movement.” The common means of production is the economic base of the socialist system and state-owned enterprises are the principal part and pillar of the common means of production.  The Constitution of the People’s Republic of China clearly stipulates common ownership economy is the guiding power of the economy of the Chinese people and the state.  The state must guarantee the strengthening and development of the state economy.  The development of a strong state economy is assured by the state economy’s controlling the economic lifeline of the people and the state.  In order to express the superior characteristics of the socialist system as well as provide national defense and social cohesion, it is critically important to strengthen the power of China’s economy.

Through controlling the economic lifeline of the people and the state, the state-owned economy can keep the entire national economy running and serve as the engine of development.  The state-owned economy is the effective means for macro-economic adjustment, adjusting market inefficiencies and for realizing the prerequisite conditions of national strategic planning.  Because of this CCP General Party Secretary Xi Jinping has emphasized, “State owned enterprises not only must not weaken, but they must strengthen.” Regardless of the manner of reform, we cannot go beneath this bottom line, otherwise we will end up on the wrong road.
Even after if the many years of privatization and liberalization in Europe, the state owned economies of many countries in many still occupy dominant positions in key sectors and state-owned enterprise investment takes up approximately 20% of total national investment.  For example, state-owned enterprise investment is more than 27% in France.  Moreover the French national government owns more than fifty-one enterprises and employs 838,000 people.  The income of these enterprises contributes approximately 15% of France’s GDP ranking sixth in Europe.  Norway’s government owns forty-six firms which employ 230,000 and contribute about 9.4% of national employment, levels these firms’ incomes comprised nearly 70% of Norway’s 2008 GDP, an increase of 10% from 2004.  Although post-Soviet economies went through a spurt of privatization, by and large, the state-owned sector of many powerful former Soviet states is extremely large.  Russia’s state-owned fixed assets account for 40% of total state assets and state-owned enterprises control nearly 50% of the economy, and state-owned enterprises account for 31% of total employment.  Moreover, the state owned economy comprises more than 70% in Belarus.  Perhaps this is the reason why Russia and Belarus have the confidence to not fear the West and even dare to stand up to Western hegemony.

A few foreign friends have also provided advice for the reform of China’s state-owned economy. On February 15, 2012, German Prime Minister Schmidt reminded China in an interview that the question of ownership reform is one of hundreds of trillions of RMB. Currently most state enterprises are monopolistic and relate to state security.  These firms should develop in the interest of long-term stability and are not for the purpose of profit-seeking as top priority.  The profits of state-owned enterprises are the profits of the people; if these state-owned enterprises privatize, they will not necessarily become more competitive, and they will not necessarily provide more benefit.  Schmidt used the railway system as a case in point: some of China’s western railways are seriously bearing too much weight and collecting too little in fees.  If the railway firms privatize, these railways might halt transportation or raise their price.  This will bring major (negative) impacts to the development of the country’s interior.  If foreign friends can clearly see the danger, should their words fall on deaf ears?

China’s 2012 GDP was 51.9322 trillion RMB and per capita income 38,354 RMB.   This is already higher than 6000 USD.  This makes China the world’s second largest economy.  Moreover the rapid development of China’s state-owned economy was the major guarantor of China’s reaching the rank of the world’s second largest economy.  It is also the major motivational fountainhead of China’s economic development.  The CCP’s “Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform” calls for the transitioning of a portion of state-owned capital to enrich social welfare funds, improve the budgetary system of state capital operations, improve the rate of contribution of state-owned enterprises to public finance.  The decision sets the goal of 30% contribution to public finance by 2020 in order to guarantee welfare benefits for the people.  Further, this reveals how state capital relates to all people, and it is only through the strengthening of enterprise that the broad masses can enjoy the benefits of state capital.

Let me ask, can the state enrich social welfare funding through foreign capital and private capital?  Can foreign capital and private capital act without conditions, not seek return on investment, invest in the infrastructure of impoverished areas or fend off earthquake, floods, and other natural disasters? The answer is obviously no.  Because of this, if China is to strengthen and is to allow the people to better enjoy the fruits of reform and development, it must demonstrate the guiding function of the state-owned economy, continuously increase the state economy’s vitality, controlling capabilities, and influence, and make this bottom line clear to the world.

Many people think of the selling off of state production rights and assets when they hear of mixed ownership economies and envision the single possibility of private enterprises and foreign enterprises entering into state-owned enterprises.  Actually the development of mixed ownership in no way should be or is a one-way concept.  Moreover, the development of mixed ownership is two-directional and even multi-directional.  Private and foreign enterprises can enter the state owned sector by purchasing production rights and assets, and state-owned enterprises can also purchase the production rights and assets of private and foreign enterprises and even control the shares of some private and foreign enterprises.  This is the true meaning of mixed ownership economy.

If the development of a mixed ownership economy means only the selling-off of state production rights and assets then the obvious result is the weakening of state-owned enterprises and not their strengthening. Because of this we certainly need to clarify that the development of a mixed ownership economy is not for the purpose of weakening state-owned enterprises and surely is not to privatize.  We need to promote dual directional and multi-directional mixed ownership structures of state-owned enterprises, private enterprise, and foreign enterprise and not simply sell off the production rights and assets of state-owned enterprises to private and foreign enterprises.

Setting the Course: Continuously strengthen the vitality, controlling abilities, and influence of the state economy

In order to promote national modernization, guarantee power the mutual benefit of the people, the continuous development and strengthening of state-owned enterprises is the major force that supports the rise of the Chinese economy. It is also the guarantor of the endurance, strength, and perfection of the party leadership.  “To continuously strengthen the vitality, controlling abilities, and influence of state-owned economy” is the direction set forward for reform in the state sector by the CCP’s 18th Party Congress.

State-owned enterprises should take steps of self-improvement and like a phoenix rising from the ashes take on social responsibilities, establish a proper image, and increase the degree of promoting the processes of reform.  This requires us take a serious look at  the existing challenges to the current development of state-owned enterprises and persevere to strengthen and perfect the party leadership and realistically strengthen the positive characteristics which promote the working class as masters of society.  We should take action in accepting the supervision of multiple levels of society, severely punish graft and corruption, and in the deepening of state-owned enterprise reform promote the continuous improvement of modern enterprise system.

At the high strategic level we must prioritize and continuously strengthen the vitality, controlling abilities, and influence of state-owned industries. As the corporatization of state owned industries attracts strategic investors and key groups, state owned property rights are diversified, and the vitality, controlling abilities, and influence of the state economy continuously strengthens.  But at the same time we can see that the existing problems within state-owned industries are many.  The salary differences in some state-owned enterprises are comparatively large even to the point of great disparity. Disparities exist in the execution of corporate social responsibility programs within some state owned enterprises.  The management method of some state-owned enterprises is careless and accidents have occurred, some state-owned enterprises’ modern enterprise systems are just for show or have large degrees of patrimony.  Some leaders of state-owned enterprises make arbitrary decisions, their lives are extravagant and degenerate, they practice nepotism, and even will sell off state interests for their own personal benefit.

These issues not only influence the initiative of employees, but also damage the vitality, controlling capabilities, and influence of the state-owned economy.  The report of the 18th Party Congress calls to stimulate new energies in various market sectors and calls for all state-owned enterprises to adopt a specific and realistic focus. Thus the increase, stimulation, and demonstration of these new energies is a major challenge that all state-owned enterprises and their leaders must face directly, and this challenge must be highly respected at the strategic levels.  The issue of how to continuously reform and increase the state-owned economy’s vitality, controlling capabilities, and influence is for the relevant departments, work units, and experts located within the Central level’s  Leading Groups on Comprehensive Deepening of Reform to deepen research and determine the right path, polices, and regulations.

We must clearly see that from the distribution of industries, to date 90% of state-owned enterprise are outside the realm of competitiveness.  A slogan such as “Allow state-owned enterprises to leave the realm of competitiveness” is a covert argument of those who support privatization, and the basic motive of those who support privatization of state enterprises is to destroy our party’s economic base.  We must prioritize at a high degree how to scientifically develop a mixed ownership system while preventing new losses of state assets and guard against people from taking advantage of state assets in a new round of privatization.  To develop mixed ownership economies, we should select a portion of firms within a portion of industries as demonstration sites and expand the scale of development after summarizing experience and learning.  We must act accordingly to the path, policies, and regulations set by the central government in order to orderly develop mixed economies and prevent a mad rush.

We must persevere to strengthen and perfect the party leadership of state-owned enterprise reform.  General Party Secretary Xi Jinping has stressed many times “China is a major power, and we absolutely cannot allow any subversive errors.” What are subversive errors?  It is those errors of directionality which depart from the fundamental characteristics of socialism. And it is on this point that the 3rd Plenary of the 18th Party Congress stresses that comprehensive deepening of reform must strengthen and perfect party leadership.  Serving as the resolute leadership core of China’s socialist cause, the CCP naturally also forms the leadership core of China’s economic construction and serves as the leadership core of state-owned enterprise reform.

During the coming reform of the state-owned sector, we must demonstrate the offensive and defensive functions of party organs and the vanguard and model nature of party members.  Further we must dare to shoulder responsibility and resolutely confront all erroneous words and deeds.  It is only through perseverance in strengthening and perfecting the party leadership that the existing degeneration, extravagant waste, and nepotism within state-owned enterprises can be solved. We must unite and lead the masses the struggle against the activities of those who would embezzle state assets in order to maintain the right direction of state-owned enterprise reform. The nature of mixed ownership economies is decided by who controls shares. This is the central issue. The Central government should not give up shareholding rights in the name of state-owned enterprise reform.  Moreover, the Central government cannot change the characteristics of strategic enterprises.  This is what is meant by persevering to strengthen and perfect the party leadership as a strong base and powerful safeguard.

We must strengthen the master status of the working class.  Strengthening the master status of the working class is to continuously strengthen the vitality, controlling abilities, and influence of the state-owned economy’s solid base.  The working class is China’s leading class.  It is the representative of China’s advanced production force and production relationship.  It is our party’s most solid and most reliable class base and the comprehensive construct of a moderately prosperous society.  Lastly, the working class is the main force of upholding and developing socialism with Chinese characteristics.  To uphold and develop socialism with Chinese characteristics, we must rely on the working class with our whole hearts and whole minds and strengthen the master status of the working class to realize the full function of the working class as a main force.

In recent years the issue of corruption has arisen within state-owned enterprises and within some industries to the point of extreme severity. A contributing factor to this corruption is that the master status of the working class is wrongly viewed.  Some leaders and cadres within state-owned enterprises do not take supervision by the working class and the interest of workers to heart, and for their own personal benefit, these leaders will sacrifice the interests of workers and the state.  Relevant documents have expressed that the gap between actual average salaries of leaders of centrally owned enterprises to their employees is exponentially widening.  This has raised questions and criticisms in some enterprises.  When developing the mixed-ownership structure, state-owned enterprises should consider the raising of employee’s salaries.  Actually many centrally owned enterprises achieved rapid improvement and synergy in increasing industrial efficiency and employee’s salaries when shifting to mixed ownership.

Chen Jieyuan, Party Secretary and Board Chairman of the Shanghai Port Group LLC said, “In recent years, The Shanghai Port Group, through has experience the sweet taste of mixed ownership.  From 2006 when we fully listed on the market, our net assets have doubled, profits have basically doubled, and employees’ incomes have doubled.  These three “doubles” mark the direction in which state-owned enterprise reform should persevere especially in the process of developing mixed ownership, priority should be placed on promoting the distribution of shares to employees, establish a modern enterprise system, and fully raise income of employees.

The data shows that in 2010 the average income of an employee in a state-owned enterprise was 38359 RMB, 5% higher than the national average.  The average income of an employee in a private enterprise was 20759 RMB, 43% lower than the national average.  It is obvious which kind of enterprise serves as a better model for increasing the incomes of workers.  Because of this, the only way to strengthen the master status of the working class is to continuously increase the income levels of employees in the private sector, not the other way around.  Relevant organs at the central level should come up with a proposal for the distribution of shares to employees based on rigorous surveying and research and make this a major breakthrough point for feasibly strengthening the master status of the working class.

We must require state-owned enterprises to accept supervision from many levels of society.  This is the major guarantor for the continuous strengthening of the vitality, controlling ability, and influence of state-owned enterprises. We must open various channels of supervision, promote and accept the supervision of the masses, and accept and participate in supervision of the process of mixed ownership reform.  We must also draw from the concepts and management experience of private enterprises and foreign enterprises. Party committees at the central and local levels and governments should set up whistle-blower hotlines, mailboxes, and websites and accept reporting from all levels of society on malfeasance, dereliction of duty, and corruption during the process of state-enterprise reform. Concerning state-owned enterprise reform these committees should take advice and suggestions from various societal levels, and make use of the body of people’s wisdom and power to make good on state-enterprise reform.

Especially with the rapid development of the internet, online news, Weibo, Wechat, forums, blogs, podcasts, these broadcast formats provide the best arena and platform for the people to supervise government and fight corruption in an ever-strengthening manner.  Relevant organs should organically integrate educational experiences from the mass party line and pure and clean frameworks into the reform of state-owned enterprises.  These organs should positively involve the participation of the masses, make progress in using the internet, and widen and open to the masses channels for reporting corrupt practices.  Anti-corruption departments must especially focus on clues related to the loss of state assets which are revealed through reporting from the internet, and encourage and direct the masses to report on the egregious ways and issues of corruption through legal methods.  Those who would attempt to transfer state assets into personal exploits should be called out and swatted like mice crossing the street. This is the way to uphold the core status of common ownership.

About the author:  Zhu Jidong is a researcher at the Qinghua University Research Center for College Moral Education.  Holds a post-doctorate in Marxism Theory, is Head of China Academy of Science World Socialism Research Center and General Secretary of National Cultural-Security and Ideology Research Center.

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The Coming Downturn of China-Vietnam Trade Relations

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I recently had a conversation with a high ranking officer in Vietnam’s Ministry of Industry and Trade whose work responsibilities include promoting and facilitating border trade and investment between Vietnam and China.  We have been meeting for years and despite past flareups in the South China Seas and the occasional anti-China rally in Hanoi, he has always expressed optimism toward the future of the China-Vietnam relationship. He has believed that cooler heads will always prevail at the upper levels of government and that the increasing flows in border trade and investment overland between China and Vietnam do much to alleviate the tensions brewing on the seas.  But in my recent meeting, the officer expressed a 180 degree interpretation of the future of trade relations between China and Vietnam.  He fears that as a result of China’s aggressive movements in the South China Sea, the two countries will soon adopt isolationist and protective trade policies toward each other, and the goodwill provided by decades of border trade and shared investment projects will soon become undone. Continue reading

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The anti-Vietnam protest that didn’t happen

Kunming’s Nanping Jie Square, the site of Sunday’s non-protest.

The ringtone on my wife’s cell phone abruptly called us awake at 8:30am on Saturday. The caller ID displayed the name of one of my closest friends and colleagues in Kunming, yet I wondered why he was calling my wife. “Comrade, good morning,” rang out his thick Sichuanese accent.  This was a standard greeting among my circle of friends, but calling someone comrade in China has long gone out of fashion.

“There’s something I have to tell you.”

So it turns out he spent the previous day at his workplace, a local university, holding meetings with top administration and security brass discussing how to prevent the university’s students from attending a protest scheduled for Sunday, the next day. He told me that a group of Vietnam war veterans from China’s 1979 punitive invasion of Vietnam received approval from the local civil affairs bureau and the local public security bureau to march on the Vietnamese consulate in downtown Kunming.  The scheduled march was in reaction to the growing movement of anti-Chinese protests in Vietnam that left more than 20 Chinese, Taiwanese, and Vietnamese dead in the previous week.

The starting point was the city’s main pedestrian square at Nanping Street; the march would commence at 9am and finish at 2pm at the consulate.  His call was a warning for me to lay low – for all foreigners to lay low – because foreigners, especially Caucasian foreigners could serve as a potential target for angry, nationalistic protesters.  He was also calling to warn me to stay far away from the protest.  He knew I had a penchant for observing and writing about protests in Kunming, and my actions in the past had landed me and subsequently him only by guilt of association in a little trouble with local security officials.

To help place the gravity of the situation squarely on my shoulders, he told me of how he spent the previous evening having meetings with the students under his supervision, pleading them not to attend the protest – even though it was a legal protest – for fear that it may turn violent or take a turn toward other issues that were suppressed and mulling around in the hearts and on the minds of disgruntled people in Kunming.  In fact, his work group in cooperation with a successful commercial real estate form had arranged a 5 kilometer eco-walk scheduled for Sunday morning, but due to the protest he decided to cancel the event.  His university and the firm apparently poured a good deal of money into the event so he was quite put out by the cancellation.  “Right now, we will do what it takes to ensure stability at any cost.” I had heard those words too many times in the last 18 months living in Kunming.

His parting words before hanging up were also ones familiar to me: “Stay at home and have a good time with your wife.”

This season of South China Sea’s flare-ups and shenanigans is heating up once again.  To provide a quick rundown of the last 10 days: China parks it’s billion dollar oil rig 150 miles off the coast of Vietnam near Da Nang; rams a few curious Vietnamese ships, super soaks other onlookers with high pressure water hoses; foreign ministries respond with sabers rattling; protests broil in Vietnam; Chinese, Korean, and Taiwanese factories burn; people die unnecessarily due to this tricky, inane, orderless, yet extremely critical game of cartography, resource grabbing, and interpretation of the current world order.  And to round out the week, the first organized civil response in China comes from….Kunming?

In some ways Kunming makes sense.  The pathway of China’s 1979 spring invasion of Vietnam cut through southeastern Yunnan province into Vietnam’s Lao Cai province.  The three month war was a tough decision for the newly installed Deng Xiaoping.  He sought to punish Vietnam for its humanitarian invasion of Cambodia to take out the Khmer Rouge and install a new caretaker government, in some ways Deng thought this would help make good on his warming commitment to US-China relations.  Many of the troops sent to Vietnam were stationed in Yunnan, Kunming specifically.  Many did not return.  In total approximately 70,000 soldiers and civilians died in the three month conflict.

Both sides claimed pieces of victory.  In the end, China chalked up fewer casualties and proclaimed the incursion’s main purpose was to scare the Vietnamese before retreating.  The Vietnamese army valiantly as always pushed back most of the encroaching forces as the PLA entered the provinces to the north of Hanoi.  The caretaker government in Cambodia was not handed over to the Khmer people 1979.  Officially the caretaker government left in the early 1990s, and some argue that the pro-Vietnamese caretaker government is still in power.  To me a China’s claim to victory holds little water – just like its 9 dash line that lays claim to the near entirety of the South China Sea (which by the way holds a ton of water, fish, and most importantly energy resources.)

But then again there is little about Vietnam’s South China Seas claims that make much sense either.

From my experience interacting with locals, very few Kunmingers, and Chinese people in general, under the age of 50 know the story and context of the 1979 war.   I was not surprised to learn that a group of organized veterans still operated in Kunming given that veteran groups from WWII were still active in Yunnan and much is done in this city to preserve WWII related heritage. But how many were there and how many would show up for the march on Sunday? An organized effort that received government approval and raised the alarms of state related institutions like my friend’s university would likely bring out at least one hundred people. Would they be able to rally more than 1000 Kunmingers under the intense midday sun similar to the anti-PX protests (not government sanctioned) of nearly exactly one year ago?

Would the protesters flip and set cars alight?  Wait, Vietnam doesn’t produce cars.  Would they target people who appeared to be Vietnamese? Wait, I won’t finish that sentence.

On Saturday evening, a crowd of Kunming’s expats gathered for the soft opening of a New York style pizzeria.  The chatter was (sort of) abuzz with talk of the next day’s scheduled march and protest.  Over the previous two days word of the march had spread, for better or worse, among the community via the popular Chinese social media app WeChat, and now the gathering enabled the conversation to go from digital form to the soon-to-be-obsolete vocal communication style characterized by eye contact and hand gestures.

“Did you see how close China’s oil rig is to Vietnam’s shoreline?  It’s totally in Vietnam’s Exclusive Economic Zone.”

“What’s an Exclusive Economic Zone?”

“Yo, this South China Sea shit’s been going on for years.  All these countries play around with each other like they’re still in middle school.”

“That 9 dashed line just showed up in on China’s official maps in 1954.”

“Why Kunming?”

“Maybe the anti-PXers will show up to the protest again and then it could get really ugly.  Wait…maybe the Uighers will plan another attack?  And do you think things will be different now that Kunming’s police forces can carry armed weapons?  What’s happening to our city?  This used to be a really cool place to live!”

“Those Vietnamese love to play games, they learned how from the Soviets.”

“I’m totally going to wear my bright red “Made in Vietnam” shirt with the big yellow star tomorrow.”

“Maybe that’s not the best idea.”

“What’s an Exclusive Economic Zone? And dude, where’s my beer?”

 

Those who watch the Sino-Vietnamese relationship closely know that the situation is not getting any better despite the rosy accolades of year-on-year bilateral trade increases, strengthened cooperation on the (lately not-so-successful) repatriation of illegal Uighur immigrants from Vietnam back to China, and a new high-speed rail and road network connecting Vietnam to China.  Watching the relationship from Yunnan province only amplifies the growing crevasses.

Looking locally and outside of the South China Sea conflict, foreign direct investment between Yunnan and Vietnam is on the decline and according to the Vietnam Ministry of Industry and Trade office in Kunming, several key Yunnanese invested projects in Vietnam have been put on hold.  Last year Vietnam Airlines suddenly cancelled its daily flight from Kunming to Hanoi.  Two years ago you could readily buy Vietnamese Banh My sandwiches from food carts in downtown Kunming, and now none are to be found.  Enrollments of Vietnamese nationals into Kunming’s university level Chinese language programs are on the decline and are eclipsed by students from Thailand and Laos.  This spring, neighboring Guangxi province closed the border to watermelon imports from Vietnam which gouged prices at home in Vietnam and angered many farmers.

The list goes on, but I must mention that the yearly China-Vietnam Friendship Tennis Tournament which traditionally ushers in Kunming’s Southeast Asia Expo has been suspended for the last two years.  Both sides suspect each other of stacking the line-up with semi-pro players and accuse each other of foul play.

Waking on Sunday morning, the day of the march, I pondered the deterioration of this relationship. It was clear that more were losing than winning, but how many of Kunming’s everyday citizens are directly affected by the recent cooling and would the protesting veterans be able to gather enough onlookers into their fold in order to make an impactful statement?

I also pondered my friend’s advice on whether or not to go observe the march – but only for a few seconds.  With my smart phone charged to the max and ready to live-tweet the march as I had done for the past anti-PX protests in Kunming, I mounted my electric motorbike and made way to the protest zone, picking up a concerned friend along the way.  He promised to help navigate the security arrangements citing experience recently gained on a week-long trip to Pakistan.

I’ve learned in the past 18 months that the signals of a protest in China begin to appear well before arriving on site, and given this sanctioned protest site was staged for the same site as last year’s initial anti-PX protest, I had a well developed strategy to lay low and observe from afar lest I be spotted and photographed by the local security apparatus.  As we approached the downtown pedestrian square at 9:15 just after the march was scheduled to begin, we saw very little increased security presence.  From 100 meters away it was easy to see the center of the pedestrian square was cordoned off by local police forces to create a space the size of two football pitches.  Local police mingled in and out of the zone, and some middle-aged men sat in the shade of some trees on the periphery of the zone.

So far no sign of a protest presented itself.  No banners, no t-shirts, no slogans, no face masks, just a nearly empty square.  In fact, the most conspicuous aspect was the plain clothes policemen scattered around the square.  Always slightly overweight, deep tan, same crew-cut, off-color collared polo, and the signature man bag containing who knows what – the uniform of the Chinese plain clothes policeman is always easy to spot.  I also spotted a fellow blogger sitting in the shade inside the protest zone – his blond locks and European pedigree always stand above the crowd at Kunming’s protests in which he often finds himself smack in the middle of.

There still wasn’t any action, so my friend and I ducked into an adjacent shopping mall and rushed up to the a 2nd floor Starbucks to find a seat on a sofa beside a window overlooking the square.  Needless to say the position of our perch made us feel more like spectators at a sporting event than at China’s first anti-Vietnam protest of the 2014 season.  We were free to comment and tweet at will.  No security forces were going to bother us there.  My VPN was on line and the connection was kicking.

From our bird’s eye viewpoint, we observed a line of ten paddy wagons parked on the southern edge of the square. A small platoon of SWAT police in riot gear made rounds of the square.  Still no protesters.  A WeChat message popped up on my cell phone from the blond blogger sitting inside the zone.  “Situation normal, just loads of police presence, no sign of protesters….Another Kunming couldn’t care less story.”

And that was just it.  Kunming really couldn’t care less.  We estimate that fewer than ten veterans showed up.  Their t-shirts with Chinese flags gave them away.  At about 10:30am, the veterans formed a half-circle in the middle of the square and were escorted around half of the square by uniformed police. Their march lasted less than a minute.  A cameraman from the local television station sitting on a shaded bench missed the procession because his boredom turned to a brief chance to catch a nap.

At 10:45am, the cameraman picked up his bags and went home. Nothing to see here folks.  By 11am the temporary fences were removed, and the pedestrian square exposed to the intensity of the midday sun once again filled with local shoppers making their way through Kunming’s commercial downtown.

I was relieved that nothing happened.  Perhaps word came down from high for the veterans to cool their guns since the Vietnamese government was making good on its commitment to control the anti-Chinese movements and violence within its own borders.  The last thing our little city needs is to have its blue sky reputation tarnished by another incident making the international news and filling the Sinosphere and the South China Seas with flotsam and jetsam.

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Filed under China, Current Events, Economic development, Energy, Foreign policy, GMS, Governance, Regional Relations, SLIDER, South China Seas, Uncategorized, Vietnam, water

A Casino at the Khone Falls in Laos?

Khone Falls in Siphandone, Laos.  Image: Corbis

Khone Falls in Siphandone, Laos. Image: Corbis

At the end of March 2014 the Lao PDR government will consider a proposal to build a special economic zone slated for tourism development and other unspecified commercial uses in Siphandone, one of the world’s most pristine and biodiverse areas.  The SEZ will showcase a casino located less than one kilometer from the famed Khone Falls, the largest in Southeast Asia.

“The Siphandone area is set to become a more sought after tourism destination with many more activities to experience,” remarked Buasone Vongsongkhone, Deputy Governor of Laos’ southern Champassak province on Monday, March 17 after a meeting to discuss the proposal.

Vongsongkhone said the plans for the SEZ will include a casino and other facilities in keeping up with developing tourism trends in the Siphandone and Khone Falls area while protecting the environment.

“At the meeting we discussed how to regulate the casino to ensure the zone has proper security.”

What Vongsongkhone did not discuss was the impact of the new SEZ on the relatively untouched ecosystem of the Siphandone area.  Siphandone, translated as “four thousand islands” is where the Mekong River fans out into a waterfall and islet ridden expanse more than 15 kilometers wide.  The sparsely populated area has been described as an environmental oasis and is home to numerous native fish and bird species.  The Khone falls area is the perhaps the last habitat where endangered freshwater Irrawaddy dolphin can be found in the wild.

Satellite image of Siphandone.  Khone falls is the on left side of the image.  Google Earth

Satellite image of Siphandone. Khone falls is the on left side of the image. Google Earth

Laos’ growing reputation of holding some of our world’s last untouched natural areas and idyllic vacation spots has brought increases in international tourists to Siphandone area.  With the increase in tourism, the need for regulation and protection is obvious, but is marking a zone for economic development first and environmental protection second a sustainable approach or is it just another way for local Lao officials and outside investors to gain quick wealth through the exploitation of Laos’ abundance of resources?

Last week in an article in the Vientiane Times, the official English language outlet for Laos’ state controlled media reported “the government attaches great importance to developing SEZs to boost the country’s growth, which is crucial to lifting people out of poverty and enabling Laos to graduate from the list of least developed countries by 2020.”

Mock-up of the That Luang Marsh SEZ in Vientiane.

Mock-up of the That Luang Marsh SEZ in Vientiane.

The track record for SEZs in Laos, often dominated by Chinese and Vietnamese investment, is sketchy at best.  In Vientiane, construction of the That Luang Marsh SEZ (yet to begin commercial activities) has negatively impacted the local urban environment.  The natural wetland filters and holds the capital city’s waste water acting as a terminus of the city’s century-old waste canal system; many of these canals are now blocked by construction.  Much of the That Luang wetland areas has been filled in and long-time residents have noticed an average rise in temperatures as water is removed from the ecosystem. 

In Laos’ northern Bokeo province, the Golden Triangle SEZ dominated by the Chinese owned King Roman Casino complex has a seedy reputation as a conduit for money laundering from China and zone of human trafficking. The SEZ has scarred the scenic views of the Golden Triangle area, also known for its tourism, with open quarry mining and industrial development.

King Roman Casino along the Mekong in Bokeo Province, Laos

King Roman Casino along the Mekong in Bokeo Province, Laos

To make matters worse, the Siphandone area is slated for the construction of the 260 megawatt Don Sahong dam located  on the only of Siphandone’s Mekong channels that allows for the passage of hundreds of species of migratory fish.  In September 2013, the Lao PDR government notified the Mekong River Commission that the Don Sahong dam project would begin construction in 2014 despite years of protest and opposition by local and international environmental NGOs.

Eco-tourism opportunities such as river cruises, dolphin sighting tours, village homestays, and fishing demonstrations have brought sustainable sources of income to local communities in the Siphandone area for years.  Investors interested in building large resorts and casino complexes will likely be majority Chinese and Vietnamese taking more than they provide while leaving a stained and irreversible mark on one of the Earth’s most scenic spots.

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Filed under China, Economic development, Energy, Environment and sustainability, GMS, Laos, Mekong River, SLIDER, Sustainability and Resource Management, water

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