Category Archives: China

Report: Three Parallel Rivers plagued by unregulated mining

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Image: Greenpeace

One of Yunnan’s most famous natural landscapes is under threat from unsupervised mining, according to a new report. A study published by non-governmental environmental organization Greenpeace claims industrial activity in the Three Parallel Rivers of Yunnan Protected Areas is seriously damaging China’s most biodiverse region.

The report, issued July 27, contends that through both satellite and on-the-ground research, it is clear mining operations in northwest Yunnan are leading to deforestation, water pollution and habitat loss. Of particular concern, says Greenpeace, is the destruction of what are termed ‘intact forest landscapes’ (IFL) — tracts of “existing forests which show no signs of significant human activity [that] are able to maintain their native biodiversity”.

These green belts are extremely rare in China, comprising less than four percent of the country’s total forest cover. The most complete IFL’s sit clustered in high alpine regions in Sichuan, Tibet and Yunnan, and are known to harbor the vast majority of China’s endemic plant and animal species. However, this biodiversity — especially in Yunnan — is increasingly under threat.

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Image: Wikipedia

Greenpeace researchers found that “over the past 13 years, a total of 490,000 hectares of IFL in China have been lost”. More than half of the lost forest is in northwest Yunnan, where the upper reaches of the Salween, Mekong and Yangtze rivers flow side by side for 300 kilometers through spectacular mountain scenery. The area — which covers 1.7 million hectares — was declared a UNESCO World Heritage Site in 2003.

Despite its protected status, the sprawling wilderness and surrounding buffer zones are home to widespread and unregulated mining. Over the course of their research, Greenpeace representatives found two-dozen illegal mines in a region containing half of China’s total fish and animal species, reporting:

In total we uncovered 24 mines operating in the IFL region, three of which were in the UNESCO site. It also seems likely that some of the mines never applied for the obligatory environmental impact assessment before they began operations, presumably because they knew it would be refused.

The environmental group ends its report with the demand that the “Yunnan government immediately halt all mining operations” in the region. And while stringent environmental enforcement is not particularly strong in the province, there is hope increased national supervision will help. Earlier this year Beijing announced mining and hydroelectric development would be suspended along the Nu river — the westernmost of the Three Parallel Rivers — in favor of tourism industry development. Perhaps this will serve as a model for the entire region.

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Filed under China, Mekong River, SLIDER, Sustainability and Resource Management, Yunnan Province

On the Rocks: China’s expected response to tribunal decision threatens to undo soft power gains

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The Permanent Court of Arbitration is set to rule tomorrow on a case brought by the Philippine government over China’s attempts to claim almost the entire South China Sea as sovereign territory. Beijing has boycotted the tribunal and betting the odds are that the verdict will not be in China’s favor.

Whatever happens tomorrow at the tribunal, Chinese state media is going to claim victory. But within the walls of Zhongnanhai, there ought to be some soul searching. This assumes of course that anyone who works in Zhongnanhai still has something approaching a soul.

Should the tribunal rules against the PRC — as it is expected to — and if the Chinese government chooses to use the tribunal’s ruling to, for example, wipe the ass of the nearest stray dog — as they will almost certainly want to do — the repercussions will ripple far past the rocks and reefs of the South China Sea.

Internationally, China has worked hard over the previous two decades to present itself as a good global citizen. As the US and their allies engaging in what many around the world see as reckless military adventurism, China positioned itself as a semi-sane alternative to the failed — and sometimes disastrous — policies of the West.

Choosing to ignore the tribunal’s ruling jeopardizes this concerted effort at image building. China can point all it wants to the way the US especially routinely ignores these sorts of hearings and decisions, but if the Chinese government is serious about being the voice of reason in a world gone mad they have to better than the US. Caesar’s wife must be above reproach. “You did it first” isn’t going to fly.

The second issue is domestic. Chinese media routinely demonizes the United States and the West for their actions around the world. Implicit in this coverage is the idea that most of the world — those countries who don’t burn summer palaces and invade Middle Eastern nations for sport — see China as the good guy in world affairs.

The Chinese government wants to present every issue as China (and by extension, the rest of the world) versus the West. It’s the US and their allies who are the odd ones out in the world. In some ways, that might be true. But it doesn’t mean that China’s neighbors see China as any less of the threat.

In the case of the South China Sea, Beijing is opposed by countries, like the Philippines, Malaysia, and Vietnam, who ought, by virtue of geography and a shared history as victims of colonialism, have common cause with China.

One reason the Chinese government has been so insistent on the US being the real impetus behind the decision to take the South China Sea case before the tribunal is that it helps soften an awkward truth: China isn’t as beloved around the world — and particularly in asia — as the Chinese state media wants people to believe.

Talking with folks in Beijing, there is the persistent belief that the Philippines and the other countries opposed to China’s territorial grab in the South China Sea are being hoodwinked into becoming the pawns of the usual suspects: The United States and Japan.

The Chinese government has made the South China Sea a core strategic interest. But one wonders if Chinese leaders have thought through the downfield implications of digging in on this issues. Maybe they have and have decided that they are fresh out of fucks to give about what Vietnam thinks of them.

The callous cynic in me might suggest that while China’s actions in the South China Sea represent a challenge to America’s leadership and strategic position in the Western Pacific, Beijing’s refusal to accept the tribunal’s decision could be seen as an opportunity to undermine some of the gains China has made in global public opinion over the past two decades.

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Filed under China, FEATURES, SLIDER, South China Seas, USA

Yuxi begins experiment as one of China’s ‘Sponge Cities’

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The city of Yuxi in central Yunnan province. Image: Sina

The city of Yuxi (玉溪) in central Yunnan is one of several municipalities across China to implement a green infrastructure pilot program meant to alleviate urban flooding while also curbing future water shortages. The so-called “Sponge Cities” (海绵城市) initiative is a three-year undertaking studying how urban areas can most effectively be redesigned and retrofitted to capture and effectively reuse rainwater.

Yuxi was chosen in 2015 alongside much larger cities including Chongqing, Xiamen and Tianjin. A multidisciplinary panel formed by China’s ministries of Finance, Housing and Water Resources carried out the the selection process. Committee members stressed the need for variety in their choices of participating cities, choosing Yuxi because it features a unique set of circumstances. The prefectural level city of 2.4 million sits at a relatively high elevation — 1,600 meters above sea level — and over the past several years has built a series of urban reservoirs meant to stave off drought.

By merit of its selection, Yuxi stands to receive an estimated 1.2 billion yuan (US$180 million) inSponge City funding over the next three years. The money will be put toward the construction of what the Chinese press is fond of calling “a more ecological civilization”.

Such strategies acknowledge the need to make municipal areas far more adaptive in the face of climate change. In the words of Yu Kongjian, dean of Peking University’s College of Architecture and Landscape Architecture, “The rate of flooding is a national scandal. We have poured more than enough concrete. It’s time to invest in a new type of green infrastructure.” What that means specifically covers a huge range of endeavors.

In Yuxi and other pilot program cities, updating rainwater collection systems, and in some cases rebuilding them entirely, will play an enormous and costly role. Much of the water captured during rainstorms will then be funneled toward newly built or existing parks and wetlands. These areas are planned to serve the dual purpose of providing residents with more green space options during dry seasons, while serving as collection points during the summer monsoon months. The parks and wetlands will feature plants that can withstand sporadic flooding, as well as the ability to help filter impurities out of rainwater runoff.

At their most ideal, Sponge Cities can be thought of as a closed system, capturing nearly all rainwater and utilizing it in some manner. In certain instances — such as with the construction of permeable roads and sidewalks — this may simply include mild filtering before runoff soaks into the ground and replenish groundwater supplies. However, the collected water can also be channeled to underground cisterns, used to irrigate rooftop and vertical green spaces, or supplement nearby agriculture areas.

Over the next four years, according to Yuxi mayor Rao Nanhu, urban planners expect to equip 30 percent of the city with drainage upgrades and gray water systems, as well as build new and adaptable green spaces. This percentage is expected to grow to 80 percent by the end of 2030. In 2015, when the Sponge City initiative began to gain national momentum, Qiu Baoxing, former vice-minister of housing and urban-rural development told The GuardianA sponge city follows the philosophy of innovation — that a city can solve [its own] water problems instead of creating them. In the long run, sponge cities will reduce carbon emissions and help fight climate change.

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Filed under China, SLIDER, Sustainability and Resource Management, water, Yunnan Province

Not a Repeat, but an Echo: ASEAN’s Retracted Statement and the Specter of the 2012 Joint Communique Failure

Chinese Foreign Minister Wang Yi and ASEAN foreign ministers at special foreign ministers' meeting in Kunming / AFP PHOTO

Chinese Foreign Minister Wang Yi and ASEAN foreign ministers at the special China-ASEAN foreign ministers’ meeting in Kunming / AFP PHOTO

The South China Sea was anticipated to be one major topic of discussion during the Special ASEAN-China Foreign Ministers’ Meeting in Kunming on June 14, but the outcome—the retraction of an ASEAN statement only three hours after being sent to the media—has made divisions over the South China Sea the only talking point emerging from the meeting on broader ASEAN-China bilateral relations. The statement was stronger than most previous commentary from ASEAN, including specific references to land reclamation and an implied reference to the Philippines’ ongoing legal case at the Permanent Court of Arbitration. The statement also notably confirmed that the issue is relevant to ASEAN-China bilateral relations, countering the long-time stance of China that South China Sea disputes are a bilateral issue between claimants. Since the retraction, there have been a plethora of contradictory statements and no revised statement has been released.

While divisions over the South China Sea are not new to ASEAN, the lack of a coordinated response raises serious questions about ASEAN’s ability to effectively respond as tensions over the South China Sea continue to rise. The emergence of numerous reports that consensus on the statement was withdrawn after-the-fact due to China pressuring Laos appears to many observers a repeat of ASEAN’s failure in 2012 to reach consensus on a joint statement during the ASEAN Summit in Cambodia.

Cambodia’s failure to cajole consensus from the group in 2012 was also due to disagreement over how to handle the South China Sea disputes, the first time that such a thing happened in ASEAN’s then 45-year history. The failure was blamed squarely on Cambodia’s for allowing its close relationship with China to challenge ASEAN centrality and interfere with ASEAN policy decisions. The question moving forward is whether this will be a repeat of 2012’s failed joint communique or whether Laos as ASEAN Chair for 2016 will be able to successfully coordinate a joint statement from this year’s ASEAN Summit.

The differences in China and ASEAN’s characterizations of the meeting are stark. Where China’s Minister of Foreign Affairs Wang Yi noted in his public remarks that “this [the South China Sea dispute] isn’t an issue between China and ASEAN” and emphasized that there had been few disagreements, the ASEAN statement was clear that “[ASEAN] also cannot ignore what is happening in the South China Sea as it is an important issue in the relations and cooperation between ASEAN and China.” Singapore’s Foreign Minister Vivian Balakrishnan, who co-chaired the meeting in Kunming, failed to appear alongside Chinese Foreign Minister Wang Yi at a planned press release in Kunming and instead echoed the retracted statement’s language in a separate press release in Singapore. On June 16, spokespeople for Indonesia and Vietnam stated that there had been consensus over the contents, though Indonesia noted that the statement was intended to be a media guidance statement rather than an official joint statement. The Philippines seconded that there had been consensus among ASEAN foreign ministers when their meeting ended and that Malaysia’s release of the statement had not been in error.

Like Cambodia and Myanmar, Laos is a least-developed country and is considered one of the region’s most vulnerable to Chinese pressures over the South China Sea given its non-claimant status and relative economic dependence on Chinese investment, trade, and loans. And unlike Myanmar, Laos has not recently received an influx of economic assistance from other countries that provide it with development alternatives if China’s assistance were taken away due to political disagreements.

At first glance, it seems that China has “won” by once again disrupting a unified ASEAN statement on the South China Sea. Prashanth Parameswaran’s excellent Diplomat piece on the fiasco correctly questions this conclusion, pointing out that the statement’s release and the following media frenzy show that China successfully blocked an official statement but failed to establish its preferred narrative framework for debate on the issue. Blocking a unified ASEAN statement is not as ideal for China as preventing ASEAN from forming a consensus in the first place, but it may be good enough to prevent action on the issue for the rest of Laos’ ASEAN Chairmanship.

After all, China’s activities in the South China Sea are only partly about changing the short-term narrative; the more central goal is to slowly alter the status-quo in China’s favor. This is visible in China’s establishment of military bases on created islands and regular presence of its Coast Guard vessels in the region, which change the on-the-ground calculus and make it increasingly hard for other claimants to push back against Chinese intrusions.

This episode has shown us two things: first, that China’s aggressive behavior has in fact pushed countries in the region that previously preferred to stay away from conflict, such as Singapore and Indonesia, to take a stronger stance against disruptive behavior and in favor of international law. Second, that China is still fully capable and willing to use its role as a regional financier, trading partner, and neighboring behemoth to ensure that the ASEAN bloc cannot effectively act against its interests even in the face of growing regional discomfort over China’s behavior.

The most important question moving forward is not which side has “won” or “lost” in this round of discussion over the South China Sea, but what will happen during the latter half of Laos’ ASEAN Chairmanship in 2016.

Prior to this incident, indications were that Laos would follow the steps of Malaysia (Chair in 2015) and Myanmar (Chair in 2014) in balancing between meeting Chinese pressures to avoid the issue and meeting pressures inside ASEAN from other claimant states to address it. Laos Prime Minister Thammavong indicated to US Secretary John Kerry in January 2016 that he sought a unified ASEAN stance and would seek to counter Chinese militarization and assertiveness on the South China Sea issues.

Earlier ASEAN statements expressed concerns over recent developments on the South China Sea issues without being overly specific. The outcome of the US-ASEAN Sunnylands Summit—while failing to specify concerns over China’s activities—hinted at China’s role by highlighting the principle of ASEAN centrality and the need for countries to respect diplomatic processes in the peaceful resolution of maritime disputes. China’s announcement in April 2016 that it had reached consensus with Laos, Cambodia, and Brunei, while criticized due to Laos’ role as ASEAN Chair, was ultimately not a great departure from Laos’ previous statements on the issue.

Laos has many motivations to balance between ASEAN and China: for one, Laos’ recent leadership transition led to the ouster of leaders viewed as particularly pro-China, likely linked to numerous investment deals with China that are now recognized as having few benefits for the country as a whole. The installation of Prime Minister Thongsing Thammavong, who is considered to be relatively pro-Vietnam, opens the door to a foreign policy that will better balance China’s influence. Second, there is significant pressure from other ASEAN claimants to avoid giving China’s position too much deference. Cambodia’s failure in 2012 reinforced outside views of the organization as a talk-shop unable to stand up to pressure from China and raised serious questions about the region’s real commitment to ASEAN Centrality.

Despite being (by most measures) less developed than Laos and having only recently emerged from being a regional pariah, Myanmar was fairly successful at maintaining the balance during in its 2015 Chairmanship. For Lao elites’ who are seeking to graduate beyond the label of a least-developed country and who are eager to avoid being viewed as less capable than their neighbors, Myanmar’s success poses an additional motivation for Laos to avoid a similar failure.

Based on the ire poured on Cambodia after its 2012 failure to get a joint communique, it is likely that the emerging debate over the retracted media guidance statement will only add to the pressure on Laos to ensure that there is a joint communique from the ASEAN Summit later this year. By flexing its muscles to force a retraction after the Special Meeting and raising the specter of its influence over individual ASEAN states, China may well have primed other ASEAN members to spend more time and diplomatic capital fighting for the inclusion of something similar in the ASEAN joint statement later this year.

The recent statement fiasco raises questions about how effectively Laos can stand up to pressure from China, but the leadership transition means that greater engagement from Vietnam and other ASEAN countries on controversial issues ahead of time may be welcome. China may have attained its goal to dissuade a joint ASEAN statement critical of China’s behavior emerging from a meeting hosted on its own ground, but in doing so it may have reminded ASEAN countries of their need to stick together in the face of powerful neighbors and made it harder to win future battles on the subject.

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Filed under ASEAN, Cambodia, China, Current Events, FEATURES, Regional Relations, SLIDER, South China Seas

China’s Impressive Clean Energy Progress Confronted by Emerging Challenges

Severe pollution levels in China are complemented by the rapidly growing presence of renewable energy infrastructure

Severe pollution levels in China are complemented by the rapidly growing presence of renewable energy infrastructure

The energy landscape in China is evolving rapidly. Dire environmental conditions throughout the country are complemented by the growing presence of renewable and efficient energy systems. This trend offers the vivid juxtaposition of a nation desperate to overcome its troubling present development stage through forward-thinking sustainable planning. The world’s second largest economy has also earned the status of the world’s worst polluter. Facing surmounting challenges, China seeks to revise its environmental trajectory, determined to smoothly and successfully transition from an overdependence on fossil fuels—particularly coal—to an embrace of clean energy.

Ambitious energy production and carbon reduction targetsoutlined in the recently released 13th Five-Year Plan indicate China’s serious desire to achieve a practical path to sustainability. With these goals in mind, the PRC government seeks to incorporate energy efficient technologies and investments into forthcoming urban development—an effort to withstand a slowing economy through innovative and sustainable systems that provide power for the masses at a reduced cost.

Beijing’s evolving reform of the Chinese economy intends for energy demands to sharply decline over the coming 20 years. This includes a concerted effort to significantly reduce dependence on coal—curtailing coal consumption to 0.2 percent annually during that period, following two decades of 12 percent annual demand growth. These plans vary by locality, as Eastern Chinese economic zones such as Beijing-Tianjin-Hebei (JingJinJi), Yangtze River Delta, and Pearl River Delta target major cuts, while lesser-developed regions in Central and Western China seek to control demand and accommodate gradual urban growth.

China’s NDRC and NEA recently announced the government has postponed construction of new coal-fired plants, while halting approval for new plants

China’s NDRC and NEA recently announced the government has postponed construction of new coal-fired plants, while halting approval for new plants

The government has demonstrated its commitment to these goals, as the National Development and Reform Commission (NDRC) and National Energy Administration (NEA) announced recently that China has halted plans for new coal-fired plants and postponed the construction of about 200 planned generatorsthroughout the country—forgoing roughly 105 gigawatts of environmentally unfriendly power production. This type of trend, though increasingly common in the US as a result of the Obama Administration Clean Power Program, is very new for China. The measures would suggest that Beijing has begun to take more thoughtful action around addressing the country’s egregious environmental situation—degradation that has had far-reaching global climate implications.

Meanwhile, China’s surging emphasis on clean energy offers accelerated natural gas production and imports, and will increase hydropower capacity by 60 million kilowatts. Nuclear power plants are under construction up and down China’s coasts, which will provide 30 million kilowatts in total capacity. China’s total wind power generation is expected to triple to 495 gigawatts of installed power capacity by 2030, compared to only 149 gigawatts in 2015. Already the world leader in solar capacity production, China added 15 gigawatts of new photovoltaic capacity in 2015.

China has also risen as a world leader in new energy vehicles, accounting for 40 percent of global sales in 2015

China has also risen as a world leader in new energy vehicles, accounting for 40 percent of global sales in 2015

Renewables, however, are only part of China’s growing efforts to incorporate efficient technologies into the broader national energy landscape. China has recently established itself as a world leader in new energy vehicles, as 2015 electric car sales reached 330,000—40 percent of the global total. Sales figures for the first quarter of 2016 are already double that of the year before, suggesting a continued surge in this trend. Seeking to reach five million electric vehicles by 2020, China’s local brands have invested nearly $6 billion over the past five years. During this period, manufacturers will strive to improve car battery durability and affordability, while increasing the number of charging stations, in a push to make new energy vehicles more accessible and desirable to the masses.

In addition to new electric vehicles, China is making strides in a variety of other clean energy technologies. A recent United Nations Environment Program (UNEP) report noted that China had built 10.5 billion square meters of energy saving buildings in urban areas through 2014. Last year, China began to require that at least 50 percent of new real estate projects comply with energy efficiency standards. Beijing, Shanghai, Tianjin, and Chongqing and other east coast provinces are promoting newly introduced green building standards, which focus on lighting, air conditioning, water heating, and other appliances—part of China’s broader eco-cities initiative.

China has shown strong interest in CCS technology development, as it tackles its vast pollution problems

China has shown strong interest in CCS technology development, as it tackles its vast pollution problems

Preparing for a 70 percent rate of urbanization by 2030, which will add 350 million people to the nationwide urban population, China outlined a wide range of infrastructure upgrades to public utilities, smart grids, smart transport, smart water supplies, smart land administration, and smart logistics in the 13th Five-Year Plan. This includes smart city-focused investments that exceed the $260 billion offered for these initiatives by the 12th Five-Year Plan. The Chinese smart grid market is expected to grow at a rate of 20 percent between now and 2020, the result of significant government investment. This includes plans announced in 2015 for $31 billion-worth of smart grid infrastructure in Xinjiang.

China has also shown leadership with carbon capture and storage (CCS) technology, which acquires carbon dioxide emissions from sources such as fossil fuel power plants and other large industrial plants, and stores this carbon underground. In many cases, these carbon dioxide emissions can be converted and then used to enhance production of oil and natural gas. With a wide range of projects underway, China has risen to number two in the world for CCS technologies. Many believe that China will be the location for the major CCS projects of the future.

China’s impressive efforts to assimilate renewables and other cutting edge efficient technologies into its broader energy expansion plans has demonstrated the ability for economically developing countries to play a prominent role in the global movement to combat climate change. Yet, while these trends are important and should be duly recognized, China’s prospects for accomplishing its lofty energy objectives depend on a number of uncertain factors—including potential obstacles.

Excess coal production in China, enabled by industrial overcapacity, has caused grid system operators to curtail renewables in order to satisfy coal generation quotas

Excess coal production in China, enabled by industrial overcapacity, has caused grid system operators to curtail renewables in order to satisfy coal generation quotas

Though China has risen to become the preeminent world leader in renewable energy investment—having committed $110.5 billion during 2015—limitations to energy infrastructure throughout the country are preventing proper integration of these systems into the larger national grid. Industrial overcapacity challenges continue to favor state-owned factories, as China’s official annual planning process is designed to ensure a minimum number of operating hours throughout the year for coal-fired generators. Seeking to meet this quota, system operators at grid companies most often curtail renewables to offset these coal-fired generation figures. Because generators are paid only when providing energy to the grid—guaranteed through a set price per kWh—there is no capacity payment for these generators. Making up more than 60 percent of total installed capacity and represented by longstanding influencers, the coal industry is resistant to concerted efforts to reform the current operating hour quota system.

These grid inefficiencies are disproportionately impacting the renewable energy sector—exemplified by a 15 percent curtailment in wind energy during 2015. Present challenges toward properly integrating wind, solar, and other renewables into the greater energy grid are illustrating the growing need for more effective energy storage mechanisms and technologies that ensure stronger short- and long-term efficiency.

Despite world-leading renewable investment and installed capacity figures, grid inefficiencies are allowing a large portion of China’s wind and other renewable energy generation to go to waste

Despite world-leading renewable investment and installed capacity figures, grid inefficiencies are allowing a large portion of China’s wind and other renewable energy generation to go to waste

Proving to be a major barrier to seamless grid integration for renewables following years of aggressive expansion, overcapacity has left the Chinese energy sector in more than $16 billion of outstanding debt—with $4.4 billion of those bonds due from renewable companies. This record debt is plaguing China’s largest renewable energy producers, with four companies defaulting on $1.8 billion worth of bonds—including top solar panel producer, Yingli Green Energy Holding Co., which missed payments on more than $268 million of notes. These financial trends are highly concerning, as solar- and wind-power generating plants throughout the country are noticeably lagging behind production of equipment—a potentially destabilizing trend as the Xi Jinping Administration strives to uphold its commitments toward reducing never-ending nationwide pollution problems.

Yet, while these limitations pose fundamental challenges for China in its long-term efforts to realize its energy efficient goals, they remain a technical obstacle within what is proving to be an encouraging stage in the country’s clean energy revolution. China’s impressive investments in renewables are influencing other developing countries to push strongly for similar clean energy development, while simultaneously pressuring leading developed countries—such as the US—to expedite domestic transitions to energy efficient economies. The International Energy Agency (IEA) announced earlier this month its decision to select a Chinese official as a special advisor to the IEA head. This is the first time a Chinese official has filled the role, underscoring growing cooperation between the leading energy agency and the world’s number one polluter and energy consumer.

China’s ability to overcome inefficiencies by successfully integrating renewables into the larger national grid could serve as a blueprint for a globally integrated sustainable energy grid

China’s ability to overcome inefficiencies by successfully integrating renewables into the larger national grid could serve as a blueprint for a globally integrated sustainable energy grid

China’s growing leadership around energy efficient technology and policy, coupled with its perpetuating environmental troubles and grid infrastructure inefficiencies, demonstrate the complex and dichotomous identity of this 21stcentury global giant. Though record-breaking investments in renewable energy and concurrent efforts to curb carbon output through coal factory closings offer a glimpse of China’s great desire to surmount its environmental struggles, a bureaucratic stranglehold over state-owned energy companies enables industrial overcapacity to offset much of the nation’s progress in clean energy.

China’s prospects for accomplishing its clean energy and climate change prevention goals will greatly depend on its ability to overcome internal political and infrastructural inconsistencies. However, should the country prevail in its energy goals—transforming successful local energy systems into a blueprint for a comprehensive integrated national grid—China will usher in an innovative future for global energy. The successful integration of renewables could offer a new foundation of technologies and standards for a globally integrated grid—enabling humanity to move one step closer toward achieving a healthier future for the planet.

This article was originally posted here on David Solomon’s China Rising blog and is reposted with permission from the author.

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Lancang-Mekong Cooperation Overlooks the Real Key to Peace and Prosperity: Mekong People

When I first heard the Lancang-Mekong Cooperation Mechanism (LMC) last year, the name of the river stood out. I initially thought it was only a mechanism for water management among the six countries that share the longest, mighty river in Southeast Asia. I was not completely wrong, but water management is only a tiny bit of the whole deal.

At the public forum “The Lancang-Mekong Cooperation: Challenges, Opportunities and Ways Forward” organized on April 28 by the Institute of Security and International Studies (ISIS), Mr Yang Yi, secretary general of the Chinese Institute of International Studies repeatedly asserts that the LMC is a mechanism to enhance the idea of “Shared River, Shared Future” among the six Mekong countries. It entails a platform to seek peace and prosperity via three cooperation pillars —political and security; economic and sustainable development; and social, cultural and people-to-people exchanges. It is no accident that these three pillars coincide with ASEAN three pillars of the same name because the LMC aims to pave way for China to strengthen its political and economic influence in ASEAN.

Water resource ranks among the top five priorities of the LMC. Of the 26 measures specified in the declaration to outline the activities of connectivity, production capacity, cross-border economic cooperation, water resources and agriculture and poverty reduction, only one is dedicated directly to water resources management. It lists the establishment of centers for technical exchanges, capacity building, data and information sharing, and joint research projects . The majority of the measures, however, focus on various investment and trade opportunities such as the Belt and Road Initiative, ASEAN+3 partnerships, financial assistance for infrastructure development which opens the door for China to invest in the region.

Other panelists, Cambodian Ambassador Pou Sothirak and Professor Dao Trong Tu, criticized China’s previous lack of engagement in the Mekong River Commission, an organization is set up to promote sustainable development and water management among Mekong countries. Nonetheless, they agreed that the LMC could lead to more discussion potentially on a water treaty, which clearly delegates how the shared international river could be managed—something MRC has failed to do.

But I don’t think it is going to be that simple when China never admits that its upstream projects have destroyed the ecological harmony of the Mekong River.

In the middle of the dry season, between January and February 2016, the Chiang Khong riverbank community, located in Thailand’s Chiang Rai province, 200 kilometers downstream of Jinghong Dam, suffered from the abrupt rise of the Mekong River. This is the time when local villagers tend river gardens and reap dry season harvests due to the robust sediment deposited along the river bank during the monsoon season. But this year, the fluctuating water level caused locals to shake their heads when their source of food and income submerged under water.

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Further down in Loei, a fishery network lamented for the decreasing catches and damaged fishing equipment due to the “Water Tsunami.” In Bung Karn Province, 200 kilometers downstream from Loei, the Mekong level rose 2 meters and flooded locals’ riverbank gardens. Some gardeners had to pick up remaining scallions and corns.

In March 2016, the Mekong River at Nakhon Phanom, Thailand rose rapidly again and showing no sign of subsiding. It was officially the beginning of summertime and a month away from Songkran, Thailand’s traditional new year and the most important family gathering occasion in the country. Religious sites that usually submerged under Mekong River in rainy season would appear for Thais and Laotians as well as tourists to revere for the annual special occasion. Locals usually set up restaurants and leisure rest spots for tourists on the riverine sand bars in the middle of the Mekong River. But this year, sand bars were inundated; religious sites remained underwater. Less tourists showed up.

On April 13, 2016, the first day of Songkran, the water still remained high. Subsequently, district chief of Woen Phra Baht in Nakhon Phanom cancelled the annual Buddha footprint ceremony, an ancient religious ceremony that attracts local Thais and Laotians for centuries. The new year became a quiet time by the Mekong River. Restaurant owners indicated that they usually earn between 500,000 to 1,000,000 baht (15,000-30000 USD) during the December to April dry season (December-April), but that income had been unstable and decreasing over the past several years due to fluctuating Mekong flow.

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The Mekong River first meets Thai border at a river town called Chiang Saen in Chiang Rai province. Here, the Mekong River Commission set up a hydrological station as part of its effort to contribute data for better-practice water management among the four downstream Mekong countries, namely Thailand, Laos, Cambodia, and Vietnam. Chiang Saen Hydrological Station shows the water flow rate between March and April in 2016 remained high around 2,000 cubic meters per second and dropped to 1,000 cubic meters per second within a couple of days. After a week, the graph climbed up to near 1,500 cubic meters per second. What happened?

On March 16, Xinhua reported that China would release water from its dam following Vietnam’s request. Ministry spokesman Lu Kang stated 2,000 cubic meter of water will be discharged from the dam every second between March 15 to April 10. In response, Pham Binh Minh , Vietnamese deputy prime minister at the time, congratulated the positive move to alleviate drought. Thailand’s coup leader Gen. Prayuth Chan-o-cha  cheered happily for China’s considerate move. Cambodian prime minister Hun Sen  joined the acclaim. Laos took a step forward and announced that it too would discharge water to help relief devastating condition downstream.

Looking back at the hydrological data, the Mekong flow rate has been fluctuating for the past few years when, naturally, the volume ought to be decreasing in dry season. Comparing the flow rate between 2014, 2015 and 2016, the number remain around 2,000 cubic meters between March and April for second for all three years. Simply said, China’s altruistic move is actually turning into an annual practice. But locals are not aware of this change unless China announces its plan and notify Mekong downstream authorities to spread the news. Nonetheless, by the time the notification reaches riparian communities, the fish are already gone and the riverbank gardens are already submerged.

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The Lancang River contributes nearly 70 percent of total Mekong catchment area at Chiang Saen in wet season. The number jumps closer to 100 percent in dry season. For this reason, downstream communities will feel any changes happening upstream. It also means that China is in control of how the river flows.

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As of 2016, China has already built at least six mega-dams on the Lancang with a total capacity over 15,000 megawatts. The closest dam to lower Mekong countries is the Jinghong dam located in Xishuangbanna, Yunnan less 100km from China’s border with Laos and Myanmar.  This dam is often mentioned in China’s media release on water discharge. The Jinghong dam is China’s water gate, thus China has complete control over when it shall open or close.

Downstream riparian communities have been asking China for prior notification on dry season  discharge from Lancang dams and to share hydrological information for many years already. Nonetheless, China never taken full responsibility.

“It becomes politics when China announces its discharge,” said Montree Chantawong, a researcher who has been monitoring the Mekong flow for more than a decade now. He illustrates the water flow graph to show that China’s dam discharge is nothing new. The higher volume aims to facilitate Chinese large cargo ships during the dry season. The discharge also helps to generate electricity and make way for new water in the reservoir during the rainy season. What’s new is China’s approach to talk about Mekong water management through the LMC mechanism.

China’s altruistic move came before the release of Sanya Declaration at the first LMC summit on Hainan Island on March 23-24 . The two-day meeting marks the official beginning of cooperation among Mekong countries. However, Kavi Chongkittavorn, senior fellow at ISIS and one of the panelists at the LMC public forum, left the audience with a note to think about China’s spatial location and subsequent posture towards Mekong downstream countries. “If China sees its neighbors as the front yard, it would treat its neighbor with respect. If it sees it as its backyard, then the treatment would be different.”

LMC_06

On the same day that leaders gathered in Sanya, the Network of Thai People in Eight Mekong Provinces released a statement to the same leaders. The call was simple: admit the transboundary impacts caused by development projects, mainly dams and rapids blasting. The impacts of Chinese dam discharge on Mekong downstream ecosystems and livelihoods were immense in the beginning of 2016—a clear example of transboundary impacts of dams.

The network further emphasized the need for respect and involvement of Mekong grassroots communities . As many riparian communities still depend deeply on Mekong fluvial ecosystems to sustain their livelihoods and nourish their cultures, the Mekong governments ought to take this into account when they design development plans for their countries. To ensure that the needs of the people are met, it is crucial for all Mekong governments to recognize the importance of grassroots riparian communities and respect their indigenous knowledge for the river they depend on for their livelihoods, cultures and economy. A democratic process is more than ever necessary to leverage the voice from the ground to be heard at the international geopolitical platform especially in the region where grassroots participation increasingly become restricted while dictatorship flourishes in the region. In addition, the statement calls Mekong governments to take responsibility to provide mitigation for damages and losses caused by dams and navigation projects. An accountable and participatory water management mechanism must be assured and enforced to prevent further negative environmental and social impacts on downstream communities, rather than transforming a mother river to a dead river.

While the leaders smile and hold hands tight for an unprecedented moment in history that could lead to sustainable water governance in the Mekong Region, grassroots riparian communities suffer from unnatural flow of the Mekong River. The applause for China’s move towards regional peace and prosperity will only be a façade if the Mekong leaders never take a moment to seriously promote public participation. It will only set up the beginning of a countdown to water conflicts.

Four numbers of the Sanya Declarations: 6, 3, 5 and 26.

  • 6 indicates the six member countries in the Mekong Region.
  • 3 points at the three cooperation pillars: political and security, economic and sustainable development and social, cultural and people-to-people exchanges. The three pillars coincides with ASEAN’s three cooperation pillars. This is no accident. The Sanya Declaration paves way for China to strengthen its political and economic partnership with ASEAN.
  • 5 is the key priorities during the initial stage, namely connectivity, production capacity, cross-border economic cooperation, water resources and agriculture and poverty reduction. Simply put, these are the main programs China hopes to implement and enhance its domination over other members.
  • 26 means the twenty-six measures detailing the five key priorities. Most of them map out how to place downstream countries in China’s “go global” economic policies like the Belt and Road Initiative and affirms its influences in ASEAN+3 partnership.

 

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Thailand bets on China-led AIIB to finance massive infrastructure needs

Will China's AIIB-backed 'railway diplomacy' be enough to jumpstart Thailand's lagging economy?

Will China’s AIIB-backed ‘railway diplomacy’ be enough to jumpstart Thailand’s lagging economy?

On January 26, Thailand’s cabinet approved a budget of 52.82 billion baht (US$1.47 billion) to join the China-led Asian Infrastructure Investment Bank (AIIB).

Thailand will hold around a 1.43 percent share of the bank with payments beginning in five installments of 2.112 billion baht (US$58.90 million) due by the end of 2019.

“As the country [has] aggressive plans to improve its much needed infrastructures, the AIIB would offer great opportunities in terms of more loan availability” explains Nithi Kaveevivitchai, a research economist at the Bank of Ayudhya.

Thailand’s junta is attempting to revive the country’s flailing economy with an ambitious spending program of over US$100 billion that would include large-scale infrastructure upgrades for the country’s railways and roads, as well as air and seaports. Being one of the fifty-seven founding members of the AIIB, Thailand could potentially receive cheaper loan rates and more flexible lending conditions from the Beijing-based bank, compared against the US-led World Bank or the Japan-led Asian Development Bank.

The Thai government foresees it will benefit from intensified diplomatic rivalries between China and Japan. During a speech in April 2015, Thailand’s energy minister Narongchai Akrasanee, cannily asserted that “one thing we have learned is that if we welcome the Chinese, the Japanese will come running.”

Support for the AIIB in Thailand has not been unanimous, however. Kasit Piromya, a former foreign minister and current advisor to the Democratic Party of Thailand, criticized the creation of the AIIB as “part of China’s global strategy to dominate” and argued at the Asian Financial Forum that “China will be dictating terms and that will further weaken the Asean community.”

Since seizing power, Thailand’s military generals have instead sought to deepen political and economic ties to China, which is now the country’s largest trading partner. “It has been analyzed that any related projects that could benefit the supply chain network and trading routes between the ASEAN region and China would receive great attention from the AIIB,” assesses Nithi Kaveevivitchai.

The Sino-Thai railway link, which aims to transform Bangkok into the hub of China’s ambitious Pan-Asia Railway Network, appears to be a particularly likely candidate for an AIIB infrastructure loan. After months of bumpy negotiations – during which Beijing insisted on downgrading the railway from high-speed to medium-speed – the project saw a breakthrough in January 2016 when China agreed to Thailand’s demand that it slash its interest rate from 2.5% to 2%.

The Chinese government had long insisted on a 2.5% rate, arguing that Thailand was now an upper-middle income country, notes Mr. Nithi.

“Whether [the] AIIB will be used to fund this project is still too early to say… it could be seen as a good alternative for funding, especially if the development bank can offer a more competitive lending rate,” he adds.

The railway is currently facing further uncertainties due to its estimated budget of 500 billion baht (US$13.08 billion) and the Thai government is asking China to take more financial responsibility for the project.

Thai Deputy Prime Minister Somkid Jatusripitak told the Nation (Thailand) on February 5 that “Thailand was requesting that China be responsible for civil construction and related work for the 800km-plus railway track instead of just providing trains, rolling stock and related equipment, as the scheme is mutually beneficial so profits should not be the only factor for consideration.

In addition to issues of cost, critics in Thailand have asked whether the project is actually beneficial to the country, which has no mass goods in need of rail transit.

In parallel to the Sino-Thai railway link, Thai and Japanese authorities recently announced they have launched on a trial basis a train-delivery service using 12-foot long containers at Nong Pla Duk Junction in Ratchaburi province.The aim would be to eventually connect the junction to the Dawei deep-sea port in Myanmar, where Thailand has been developing a special economic zone (SEZ) with Naypyidaw since 2012. The long-delayed project was recently joined by Japan in 2015 and has the ambitious aim to become the gateway for the Mekong region to the Indian Ocean. China, however, has also expressed interest in creating a Dawei rail link, intimating a likely point of competition in the future. 

While it remains too early to be seen whether Minister Narongchai will be proven right, using the AIIB to expedite rail infrastructure loans could significantly help China  secure its fragile ascendancy over Japan in terms of ‘railway diplomacy’, as the two countries continue to compete for contracts across Southeast Asia.

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Clouds Gathering as Obama Hosts Southeast Asian Leaders at Sunnylands

ASEAN leaders gather for a family photo with U.S. President Barack Obama (5th L) after a US-ASEAN meeting at the ASEAN Summit in Kuala Lumpur, Malaysia November 21, 2015. REUTERS/Jonathan Ernst TPX IMAGES OF THE DAY

Photo courtesy aseanmp.org

On Monday and Tuesday, February 15-16, President Obama will host eight leaders and two senior alternates from the 10-country Association of Southeast Asian (ASEAN) at Sunnylands, the former estate of Walter and Leonore Annenberg in Rancho Mirage, CA.

The Sunnylands summit will be an historic development in US-ASEAN relations and a significant testament to the positive impact of the Obama administration’s Rebalance to the Asia-Pacific and its broad all-of-government reengagement with ASEAN. But amidst the bonhomie many if not most of the leaders are likely to have more questions than answers about future US initiatives towards the region.

Obama and most Presidents since Dwight Eisenhower have used the Sunnylands conference center for retreats and to host high-level foreign visitors.  Obama hosted Chinese president Xi Jinping at Sunnylands in 2013.

But even as relations with ASEAN have never been stronger, clouds are gathering over arguably the world’s most successful developing region. The most serious are blowing from China, which has followed an erratic course almost since Xi Jinping became Asia’s “man-in-a-hurry” since he took office in March 2013.

Since 2000 the ASEAN countries have averaged GDP growth of more than 5 percent, though per capita income and living standards still vary widely.   McKinsey & Company judged ASEAN collectively to rank the lowest among the world’s largest economies in GDP growth volatility from 2000-2013.

Still, economic cooperation has generally not lived up to the hopes and aspirations of most member countries.  Over nearly five decades the rhetorical bar regarding intra-ASEAN trade and investment has always been set significantly higher than actual performance.

At the time of the initiation of the ASEAN Economic Community in 2015, the ten countries were still trading much more with the rest of the world than with one other, especially if trade figures are adjusted to separate intraregional trade among Japanese and Chinese corporate shipments of parts and components for their regional supply chains.

Relations with the US have been warm throughout ASEAN’s expansion and evolution, though US preoccupation with the Middle East after 9/11 and the invasion of Iraq created significant anxiety in some capitals about the strength of American interest and staying power.   Relations have been on the upswing since the beginning of the Obama administration, though some important moves such as the Rebalance to Southeast Asia and closer engagement with Vietnam had bureaucratic if not high level political roots in the last year or so of the George W. Bush administration.

To date, nervousness about China’s increasingly assertive efforts to solidify its claim to nearly 90 percent of the South China Sea—including parts of the 200 nautical mile Exclusive Economic Zones (EEZs) of five ASEAN countries—has been the single most important reason for the positive reception in the region to the US military rebalancing to East Asia and the US’s its broader political and economic reengagement with Southeast Asia.

China’s effort to create a modern mare nostrum in the South China Sea through bullying and the deployment of overwhelming numbers of maritime police vessels, Coast Guard and PLA warships remain a continuing threat to regional peace and stability and drive other claimants closer to the US, but in recent months China’s fast slowing economy and unsettling blunders by the Central Bank have created even more imminent dangers to both to ASEAN economies  and regional stability.

The main reason has been China’s emergence little more than five years ago as the single largest market for ASEAN exports of commodities and manufactured goods. Chinese imports and fast growing American investment were twin engines of growth that supported ASEAN throughout the global recession.

Now China’s rapidly slowing growth and questions about its financial stability are imposing a serious and unexpected drag on ASEAN’s largest economies, where massive Chinese investment in mines as well as deforestation in order to create rubber and oil palm plantations and transportation infrastructure have left communities adrift in a wasteland of environmental devastation.

The falling Yuan and the Xi administration’s surprisingly clumsy handling of its financial turmoil have shaken investor confidence throughout the world.  China’s economic slowdown is likely to continue until policymakers finally make well recognized but politically difficult reforms and the economy purges itself of excess capacity and non-performing debt.  Meanwhile, the rapid fall in imports of commodities coupled with a weak and still tenuous recovery of the global economy pose a serious short and medium threat to the wellbeing of most of the ASEAN countries.

Several non-military moves of the Obama administration, including the 2009 Lower Mekong Initiative (LMI) and the Trans-Pacific Partnership (TPP), have been strongly welcomed by the relevant countries—Cambodia, Laos, Myanmar, Thailand and Vietnam in the case of the LMI and Brunei, Singapore, Malaysia, and Vietnam in the case of the TPP talks. But Thailand and one or more other countries have reason for concern that their own exports and attractiveness to multi-national investors will suffer as a consequence.

How Washington responds to the situation in the South China Sea and its overall policy towards Beijing are certain to be high on the list of talking points for the ASEAN leaders, as will a range of multilateral and bilateral development and capacity building programs under the framework of the new US-ASEAN Strategic Partnership and the LMI.

Equally if not more important will be the TPP agreement and its uncertain fate in Congress. If approved by Congress, the far-reaching agreement  will almost certainly have significant economic, financial and even domestic political impacts on both the four ASEAN signatories, as well as the six who are not. Non-signatory ASEAN countries as well as China will be disadvantaged by restrictions on third party content.  The most likely short-term disadvantage will fall on Thailand, the largest ASEAN economy after Indonesia, because of its deep integration in regional supply chains and geographic centrality astride major regional transportation networks.

In addition TPP discussions and the South China Sea tensions, concern that ISIS is establishing a foothold in the region and the best means to counter its recruitment efforts and the establishment of terrorist cells will be high on the Sunnylands agenda.  Economic and security concerns, particularly those where the root cause emanates from China, continue to drive several ASEAN states closer to the US, openly in the case of Vietnam and the Philippines and quietly in the case of Malaysia and Indonesia. It is unsurprising that these issues will drive the conversation at Sunnylands. The Obama administration and ASEAN would also be wise to begin give equal weight to conversations on climate change resilience and energy governance, two areas which ASEAN countries are lagging but are beginning to articulate the need for external partnerships.

 

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Laos’s leadership transition raises questions over regional alliances

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Bounnhang will be the leader of Laos’ ruling Lao People’s Revolutionary Party.

Laos’ Communist Party elected vice-president Bounnhang Vorachit to be its next leader last week, after a vote by the newly formed 10th Party Central Committee.

State media announced on Friday that the congress of the Lao People’s Revolutionary Party, which is held every five years, had selected a new central committee and politburo to lead the country. The 78-year-old Bounnhang is replacing Choummaly Sayasone, 79, as secretary-general and president, who is stepping down after almost a decade in power.

Some observers believe that the change in leadership signifies a tilt away from China and closer to longtime ally Vietnam, as Laos takes on the chairmanship of the Association of Southeast Asian Nations (ASEAN) regional bloc.

The secretive nature of Lao People’s Revolutionary Party, which has ruled the country since 1975, makes its internal politics difficult to understand, but the changes in the politburo offer some indications of a slight shift in the ruling elite.

The choice of Bounnhang, a senior figure of the regime who was a prominent member of the Pathet Lao armed independence movement and has previously acted as prime minister, is an unsurprising one for the single-party state.

However, few expected the departure from the party of Prime Minister Thongsing Thammavong, 71, who had been in the politburo since 1991. Speculation in Laos is rife that his exit from power is linked to the recent arrests for corruption of Central Bank Governor Somphao Sayasith and former Finance Minister Phouphet Khamphounvong.

The 70-year-old Deputy Prime Minister Somsavat Lengsavad was also reported as not having sought re-election to the central committee, where he had been been a politburo member since 2006. Though less highly ranked in the cabinet, he was notable for being the principal pro-Beijing voice within the government.

A fluent Mandarin speaker, Somsavat has shepherded many joint ventures with China and is currently overseeing the controversial Laos-China high-speed rail project, whose ground-breaking ceremony took place in early December 2015.

The 427 km railway would connect the Lao capital to the Chinese border and is expected to cost  US$6.04 billion. A Radio Free Asia (RFA) report from January 4 mentions some government officials as criticizing Somsavat for having accepted a deal unfavorable to Laos, noting that it was not the first “high-cost investment where he gave too much away as collateral for project loans with little or no payoffs for ordinary Lao citizens.

The railroad has been mired in controversy ever since it was announced in 2010. The project was alleged to have created tensions between Laos and Vietnam, whose “own relations with China were then at a standstill,” explains Ian Baird, a Laos expert and a professor at the University of Wisconsin-Madison.

Bouasone Bouphavanh, the then-prime minister, is believed to have been removed from power and replaced by Thongsing in 2010, due to perceptions that he was favoring Beijing over Hanoi. Soon after, plans were started for a Laos-Vietnam railway, but never formalized.

In recent years, Beijing has vied aggressively for influence in Laos through aid, loans and infrastructure investment.

“China is using its economic interests to get political power” says Baird. “Politically, though, Laos remains much closer to Vietnam. Most of the country’s leaders studied or trained in Vietnam, including Bounnhang. They were already in governmental positions in the 1980s when there were strong enmities between Laos and China, who were then almost at war, with no trade or real relations.”

“What the Lao are doing now is trying to balance between the Vietnamese and Chinese. They want political support from Vietnam and financial support from China…The United States is also getting closer to Laos, but has relatively low investments in the country.”

“Ultimately”, Baird concludes, “I believe that Vietnam has more power than China in Laos.

Such diplomatic balancing was already visible this week. The Associated Press reported on Monday that Thongsing had assured US. Secretary of State John Kerry that “Laos would help counter China’s assertiveness in the South China Sea.

Xinhua, meanwhile, detailed a meeting on Tuesday between Bounnhang and Song Tao, a special envoy mandated by Xi Jinping, where the former announced “he was ready to join hands with China to further develop the relations between the two parties and two countries.” Unmentioned publicly by either government was the death of two Chinese nationals in a suspected bomb attack on Sunday in central Laos, though it remains unknown whether they were individually targeted.

As this year’s ASEAN chairman and co-convenor of the upcoming Sunnylands Summit, it is likely that Laos will be trying to strengthen its own position in the regional balance, particularly in light of mounting tensions in the South China Sea.

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China’s Key Cities: From Local Places to Global Players

China projects a huge and continually growing profile and impact on the world stage. Much of this Chinese influence globally is often anchored to and channeled out by its key cities. Shanghai towers over all these cities in what it stands and functions for China, as the country’s financial and trade centre, largest port (also the world’s top container port), and gateway to China’s huge domestic market. As such, Shanghai gets a lot of attention from the global business community, especially when its stock market tumbled recently and sent shock waves around the world.

Besides Shanghai, a variety of other cities have become more important for China, and the world economy, for that matter. A number of these cities are well known for their significant historic and contemporary economic and cultural roles such as Guangzhou and Xi’an. Other cities have risen from unknown origins to prominent economic centres like Shenzhen. There are also some much less known cities that have grown into new regional hubs with strong global connections. You most likely have not heard about them, names like Ruili and Yiwu.

In this article I take a new look at China’s key cities by focusing on two of their salient features. These cities are drivers of China’s local and regional economic growth. They also serve as bridges to link China’s varied local economies to regional and global markets. I examine both roles in how they play out in similar ways across four very different cities in scale and other dimensions: Shanghai, Chongqing, Yiwu, and Ruili (see their locations on Map 1).


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Map 1: The Location of Four Key Cities in China: Shanghai, Chongqing, Yiwu and Ruili

Shanghai: Leading Nationally and Bridging Globally and Regionally

Shanghai’s transformation has been heavily studied over the past two decades. Yet here is another interesting way to look at how Shanghai itself has changed in leading China’s economic growth and global integration. Compared to all major cities in China, Shanghai has undergone the most striking and sustained shift from manufacturing to services (see Figure 1).

Figure 1: Shares of Agriculture, Industry and Service in Shanghai’s GDP

Figure 1: Shares of Agriculture, Industry and Service in Shanghai’s GDP

During the first half of the 1984-2014 period, Shanghai was more of a manufacturing centre as it was built up to be during the centrally planned era from 1949 to the early 1980s. The second half from the late 1990s saw Shanghai move steadily towards a service economy. This trend not only puts Shanghai’s economic transition ahead of all other manufacturing-oriented cities in China but also places Shanghai on a similar pathway like other global cities as important service hubs.

Shanghai is indeed on track to resemble the economic profile of global cities like New York and London (see Figure 2). As Shanghai’s service sector as a share of GDP has surpassed manufacturing, its high-end or producer services like finance, insurance and real estate (FIRE) have grown faster than low-end services like retails. This shift reflects the faster and greater concentration of international banks in Shanghai, mostly in the Pudong financial district. More than half of the foreign-owned banks and their branches operating in China are registered in Shanghai. The assets of foreign banks in Shanghai accounts for 47.3% of the foreign banks’ total assets in China. Shanghai’s banking dominance today brings back its heyday in the early 1930s when it ranked the world’s third banking centre, only behind New York and London and ahead of Hong Kong and Tokyo.

Figure 2: Shares of Low vs. High-end Services in Shanghai

Figure 2: Shares of Low vs. High-end Services in Shanghai

As Shanghai marches (back) to its historic global city status, it has also been leading and driving the China’s major manufacturing cities in developing stronger services. At the same time, Shanghai plays a growing part in bridging the global economy with the Yangtze River Delta (YRD) region of which it has been the unquestionable hub (Figure 31). With the shedding of manufacturing functions to second-tier YRD cities like Suzhou, with subcontracting ties to even smaller cities, Shanghai has strengthened its position as the regional core by adding more critical and high-value-added functions such as corporate headquarters and R&D centres. By October 2014, Shanghai secured 484 regional headquarters of multinational corporations, of which 24 were Asia-Pacific headquarters, 295 investment companies, and 379 R&D centres.2

Besides being China’s premier international city, Shanghai continues to lead China’s major cities in transitioning towards a service-oriented and advanced local economy. This has also paralleled Shanghai’s stronger role in connecting and integrating the YRD region with the global economy, driving forward one of the world’s largest and most powerful regional economies.

Chongqing: Shanghai of the West

About 2,400 kilometers up the Yangtze River from Shanghai in western China is the city of Chongqing (Map 1). With over 30 million people in its sprawling administrative boundary, Chongqing may be “the largest city in the world that few people know about.” Chongqing drew some global attention in 2012 when Bo Xilai, the then Party secretary of Chongqing Municipality, was sacked and then imprisoned for what the central government labeled as corruption and other criminal activities.

If we take a much longer historical perspective, Chongqing has always loomed large among China’s major cities, even relative to Shanghai. Chongqing had a small concession zone as an inland treaty port after 1891, with a little similarity to Shanghai’s dominant treaty port status after the first Opium War in 1842. But Chongqing was hindered by its position as a mountain city close to the headwaters of Yangtze and languished as a distant backwater.

Chongqing was never cosmopolitan until the outbreak of the war of resisting Japan in 1937 and when the Nationalist government moved its capital to Chongqing in 1938. Being China’s political centre then in the first half of the 1940s propelled Chongqing to the largest financial, aviation and even cultural/fashion centre in interior China, second only to Shanghai.

Chongqing after 1949 was down and up. The uptick phase began during the Cultural Revolution. Concerned about a potential Soviet attack, the central government designated Chongqing as the core of the “Third Front” for hosting the relocated heavy industries from the coast. This turned Chongqing into a “Little Shanghai” that would lead the nation in developing defense-related machinery and ship-building industries. Chongqing ended up receiving 122 enterprises in these industries from Shanghai with a large pool of human talent in engineering and technical professions. In spite or because of this external transfer of resources, Chongqing neglected local advantages as the natural and potentially autonomous hub for the upper Yangtze region in achieving a more balanced development of housing, infrastructure and amenities of city life.

Chongqing got a big boost in 1997 when it was elevated to the fourth central government municipality besides Beijing, Shanghai and Tianjin. It would now cover 82,403 square kilometers and encompass a population of over 30 million. This designation brought about a great deal more autonomy by making it function as a province, and one of the most important ones at that, and thus setting it onto the most remarkable phase of growth and change in its long history.

Starting in 1997, the central government would give Chongqing $240 million as low-interest loans per year for the Three Gorges Dam-affected region, $80 million for building new housing for displaced residents, and refund $85 million from import taxes to Chongqing for Dam-related projects. In addition, Chongqing was allowed to lower enterprise tax for new foreign investment projects from 33% to 24%, or even to 15% if these projects were located in its economic and technological development zones.

The launch of China’s “Go West Campaign” in 2000 moved Chongqing up another notch to finally become the undisputed economic hub for the upper Yangtze region, or the “dragon’s tail” relative to Shanghai as the “dragon’s head” for the YRD. To live up to this ambitious goal, Chongqing unveiled the “One Circle and Two Wings” (see Map 2) master plan in 2007. It would accelerate the pace and spread of urbanisation and economic development from the enlarging urban core into the two largely rural subregions. It called for converting about 10 million rural residents of Chongqing Municipality to urban dwellers by around 20203, through the building up of several secondary cities like Wanzhou.

Map 2: Chongqing’s “One Circle and Two Wings” Development Plan Source: Chongqing Municipal Planning Bureau.

Map 2: Chongqing’s “One Circle and Two Wings” Development Plan
Source: Chongqing Municipal Planning Bureau.

By building up the municipal and transport infrastructure in and around these secondary cities, the municipal government can scale them up and out so they are capable of accommodating more rural people and also pushing some development impulses deeper into the distant and poorer areas of Chongqing’s sprawling regional hinterland. If successful, this strategy will replicate a similar regional bridging role as Shanghai.

Like Shanghai’s global connective functions but from a less advantaged interior position, Chongqing launched the 11,179-kilometer Trans-Eurasia Railway from southwestern China to Duisburg, Germany, through Kazakhstan, Russia, Belarus and Poland in 2011. In 2005, Chongqing also opened seven new international flights to Paris, Vancouver, Los Angeles, Sidney, Melbourne, New Delhi and Mumbai, even though they all connect through Shanghai. As labour and land costs in coastal cities like Shanghai have gone up, Chongqing has benefited by attracting more foreign investors and domestic producers to move inland. Having set up Asia’s largest laptop factory in Chongqing, US computer giant Hewlett Packard has already shipped more than four million notebook computers to Europe by the Chongqing-Duisburg railroad. This was part of the $2.5 billion worth of goods China has shipped on this route since 2011.4

 Yiwu: Relatively Small Yet Very Global

As the megacities of Shanghai and Chongqing continue to garner global attention, little remains known about China’s much smaller cities, although more of them have begun to play similar roles in driving local and regional growth and in fostering beneficial global connections. I start with the story of Yiwu. Few people outside of China have heard about Yiwu and how it has become one of the most globalised cities in China today.

A small rural town of Zhejiang province in the late 1970s and located from 300 kilometers from Shanghai, Yiwu was an early beneficiary of China’s initial wave of decentralisation and economic reform. With a lot of local autonomy, the local government steered local market and global economic forces in jump-starting rapid urban growth through careful planning and flexible policies. Instead of building many factories in spatially distinctive industrial districts like Shenzhen and other coastal cities, Yiwu chose a commercial route and charted a new path to globalise its own local economy.

From the very outset, the local government focused on promoting spatially centralised and specialised markets and vending booths for small merchandise such as handicraft items and hand tools. These commodities found home at thousands of booths amassed in the International Trade Mart (Yiwu Market) located in a huge mall-like structure of 4.7 million square meters built by the local government (see Figure 4). In 1982 there were only 705 booths in this trade centre. Fast forward to 2004 the number of booths shot up to 42,000, which are estimated to reach roughly 65,000 in 2014.

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Figure 4: Yiwu’s market has an area of 2.6 million square meters, accommodates 58,000 booths, selling over 400,000 plus goods. Source: http://101.69.178.21/purchaserservice/detail/43511.html

These booths display and sell 300,000 different kinds of merchandise goods in specialised markets for glass gifts, wooden gifts, pencils, office supplies, jewelry, toys, radios, earphones, socks, clothes, etc. Some refer to Yiwu as “The Socks City” because it supplies an enormous amount of socks to the world. In addition, 600 factories around Yiwu make about 60% of the world’s Christmas decorations.6

As small commodity booths grew in numbers and density, they attracted hundreds of thousands Chinese and international buyers and traders. The increase in commercial transactions spurred the expansion of small factories around the region surrounding Yiwu. These factories process and assemble more small merchandise to be sold at and exported from the city’s central mart. This trade-manufacturing relationship, on a much smaller scale, bears some resemblance to the dominant trading and marketing specialisation of Shanghai with backward manufacturing ties to the YRD regional economy (see Figure 3).

The regional integration of Yiwu as a globally connected small merchandise hub has fueled the ten-fold growth of the city’s population from 1990 to around one million today. Among the long-term local residents are approximately 10,000 foreign businessmen from 85 countries working for over 3,000 foreign trading companies. This has earned Yiwu the moniker as “the largest commodity wholesale market in the world” with a market index that is widely regarded as a barometer of prices and performance.

The recent installment of the Yiwu-Madrid Railroad further highlights Yiwu’s extensive global economic reach. Covering 13,500 kilometers, this railroad goes through eight different countries as the world’s longest. It begins from Yiwu through central China, joins the Trans-Eurasia Railway at Kazakhstan, continues on from Germany to France, and finally reaches Madrid. The train takes just three weeks to complete a journey that would take up to six weeks by sea. It is also more environmentally friendly than road transport, which would produce 114 tonnes of CO2 to shift the same volume of cargo, compared with only 44 tonnes produced by the train – a 62% reduction.7 This new rail line expands Yiwu’s global trade in small merchandise by making it easy to export its goods all over Asia and Europe.

Ruili: From a Small Border Town to a Major Gateway to Southeast Asia

The last city takes us back from the coastal region to the southwest, but all the way to the border city of Ruili in Yunnan province (Map 1). A sleepy town on the border with Myanmar through the 1980s, Ruili has since grown into a key city for driving lagged economic development in its border region and bridging the latter with the neighbouring Southeast Asian economies. In this process Ruili has acted a little like Shanghai, albeit on a much smaller scale, and in similar ways as Yiwu but with a smaller scope of local marketing.

The collapse of the Burmese Communist Party at the end of the 1980s was key to opening up border trade between China and Myanmar. The city of Ruili created the Jiagao Border Economic Development Zone in 1991 to facilitate trade with Muse on the Myanmar side. At Ruili’s border trade market, hundreds of petty traders and dealers from Myanmar, Bangladesh, India, Nepal, Pakistan and Thailand selling cotton, jade, bracelets, ivory items and aquatic products. The market however is dominated by Chinese and Myanmar jade traders who converge from local and other places in their respective countries to make jade the central focus of Ruili’s lively border trade.

Ruili’s importance rose much beyond a border market in June 2010 when the city became more regionally linked to China’s strategic plan to develop its vast western region. During 2012-2013, the central and local governments began to execute the “Implementation Scheme of Ruili Experimental Zone” and the “Master Plan of Ruili Experimental Zone” in order to build Ruili up to a regional hub. The Master Plan included 238 projects such as industrial parks and trading centres, which would boost Ruili as a gathering place and gateway for economic activities and flows with the neighbouring Southeast Asian economies including a new oil/gas pipeline from western Myanmar into Yunnan.8

The new infrastructure investment strengthened Ruili’s role as an increasingly open land port. In December 2013, the Ruili Experimental Zone began issuing border passes for cross-border travel, which has facilitated the growth of cross-border tourism, especially Chinese tourists visiting Myanmar. The Experimental Zone also became a testing area for foreign current exchange making Ruili the first city in China to trade Myanmar’s currency of Kyat, and also the first county-level city in Yunnan province to establish a currency exchange centre. As of June 2015, Ruili completed hundreds of business deals amounting to over $160 million.9 The cumulative economic opportunities have raised Ruili’s population from around 10,000 in 1990 to over 150,000 today including temporary migrants.

Parallel to the cross-border economic boom has been the flow of illegal or illicit activities into and through Ruili. This is not surprising considering that the China-Myanmar border zone is infamous for gambling, commercial sex, drugs, and arms trafficking. Official figures show that Ruili has 7,700 people with HIV – the second-highest prevalence incidence rate in China behind a city in Sichuan province – and 53% of the sufferers come from Myanmar.10 Of the approximately 40,000 people from Myanmar entering and leaving Ruili, more than 200 are estimated to be prostitutes, 1.6% of whom may be infected with HIV. There are also around 30,000 people from Myanmar, many of them belonging to the persecuted minority group of Rohingya, living in Ruili, adding to the challenge of local governance. As part of a broader effort to deal with drugs and prostitution and thus maintain social stability, the local government has set up clinics for Myanmese citizens who are infected with HIV or who are drug addicts in Ruili including the provision of methadone treatment (see Figure 5).

Compared to Shanghai, Chongqing and Yiwu, the frontier city of Ruili bordering the less developed economy of Myanmar faces a different balance of opportunities and challenges. These however reflect the transformation of Ruili from a local place to a global city of sort.

Figure3

Figure 3: Regionalised Global-Local Production and Value Chains Into, Through, and Out of Shanghai and the Yangtze River Delta (YRD) Region Source: See Note 1.

A multinational company owns brand names, sets product specifications, subcontracts manufacturing and controls wholesale channels and retail markets. Shanghai (central hub of the YRD) contributes land, some capital, skilled labour, some production equipment, and management expertise; provides some producer services such as accounting, insurance, legal services, custom clearance, shipping logistics and increasingly R&D talent and outputs. Suzhou, Kunshan, and Jiaxing (secondary cities in the YRD) contribute medium-cost land and labour, intermediate inputs, manufacturing expertise, and also finished products to be moved (back) to Shanghai for exports.Wujiang, Qidu and Jiangcun (third-tier cities, fourth-tier towns, fifth-tier villages in the YRD) contribute lowest-cost land and labour, some raw processed materials, and ships parts and components to secondary cities for further assembling or manufacturing.

International Implications

Despite their huge differences in history and population size, these four cities have become both the driving force and bridging agents for their rapid growth, gradual regional integration and increasing global influence. They are no longer local places that they once were, although Shanghai has been global for a much longer time. They show us why they are key cities for China today and in the future. More importantly, these four cities point two critical international implications.

First, to understand what is going on across China and its extensive global impact, we need to understand China’s key cities much better. These cities not only continue to drive and sustain China’s geographically uneven growth but also play a key role in regional integration by creating more varied and largely beneficial global connections. We can no longer only focus on the megacities of Shanghai and Chongqing, although their massive scale and economic power will continue to matter a lot more to China’s and global economy than Yiwu and Ruili. The latter cities, and many more like them, will become more important over time as they catch up in development and help bring forth the lagging regions and generate more global integration.

 

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Figure 5: Drug Users from Myanmar Collect Doses of Methadone from a Clinic in Ruili, Yunnan Province, China Source: Photo by Jiang Dong, China Daily, July 10, 2014, p. 7.

Relative to the much larger and more diversified cities like Shanghai and Chongqing, cities such as Yiwu and Ruili face the more difficult choice of how to sustain their growth and play their respective regional or global roles. The narrowly specialised economy makes Yiwu vulnerable to the price volatility in the global economy. Yet diversification beyond Yiwu’s distinctive and entrenched strength is unlikely. The border location may lock Ruili into a developmental path built on border trade unless the city can maximise its gateway position to create wider economic ties with Southeast Asia. These uncertain and contingent conditions will continue to challenge the outside world to better understand these cities.

This article was first published here and is reposted with permission of the author.

References

*I express my gratitude to Yu Xue in Shanghai for her assistance in gathering the most up-to-date data in Figures 1 and 2. This article also draws from some of my collaborative work with former and current students at Trinity College, and research partners in the United States and Shanghai.

1. This figure was adapted from Figure 4 in Xiangming Chen, 2007. “A Tale of Two Regions in China: Rapid Economic Development and Slow Industrial Upgrading in the Pearl River and the Yangtze River Deltas.” International Journal of Comparative Sociology 48 (2-3): 167-201.

2. Ren, Yuan, Jiaming Sun and Jing Gan. 2015. “Shanghai: The Rise and Future of China’s Premier Global City,” Chapter in Research Handbook on Asian Cities, edited by Xiangming Chen, Sarah Moser and Ratoola Kundu (Edward Elgar Publishing, forthcoming).

3. Chen, Xiangming. 2014. “Steering, Speeding, Scaling: China’s Model of Urban Growth and Its Implications for Cities of the Global South.” Pp. 155-172 in The Routledge Handbook on Cities of the Global South, edited by Susan Parnell and Sophie Oldfield. London and New York: Routledge.

4. Chen, Xiangming and Julia Mardeusz. 2015. “China and Europe: Reconnecting Across a New Silk Road,” The European Financial Review (February-March): 5-12.

5. Figure 11.1 in Xiangming Chen, Anthony Orum and Krista Paulsen. 2012.Introduction to Cities: How Place and Space Shape Human Experience. Oxford: Wiley-Blackwell.

6. Burchill, Billy. 2015. “The Diverse Effects of Globalization: Yiwu, China and Hartford, CT.” A senior thesis for the Urban Studies Program, Trinity College, Hartford, Connecticut.

7. Same as Note 6 above.

8. See Chen, Xiangming and Curtis Stone. 2013. “China and Southeast Asia: Unbalanced Development in the Greater Mekong Subregion.” The European Financial Review (August): 7-11.

9. Chen, Xiangming and Curtis Stone, “Relocating the City in Transborder Spaces: Relative Urbanity, Catch-up Development, and Contested Governance in the China-Southeast Asia Borderland.” Chapter under preparation for The SAGE Handbook of Urban Sociology: New Approaches to the Twenty-first Century City, edited by Ricky Burdett and Suzanne Hall (Sage Publishers, forthcoming).

10. Shan Juan. 2014. “Clinic on frontier of AIDS care,” China Daily, July 10, p. 7; extracted from http://usa.chinadaily.com.cn/epaper/2014-07/10/content_17709424.htm.

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