The Chinese approach

Andre Wheeler. Credit: Asia Pacific Connex

Consultant Andre Wheeler explains the Chinese strategy of distraction behind the port projects of Belt and Road

There is much debate as to who the winners and losers are with regards to the current trade war between China and the US. These debates, however, act as a distraction from what is happening in terms of China’s trade and economic growth. What it demonstrates is that many fail to recognise the Chinese approach to strategy, guided by the philosopher Sun Tzu’s Art of War.

Central to this approach is the creation of distractions and allowing others to think you are weak to subdue an enemy without fighting. Central to this is China’s signature Belt and Road initiative (BRI) policy that is part of a 100-year plan to restore Chinese pride to a time in which China was an economic powerhouse, namely during the Silk Road era.

A key ingredient to the BRI is infrastructure development that facilitates trade and opens access to markets previously isolated. The focus of the BRI is pairing of port and rail and inland connections where the maritime silk road meets the inland belt trade corridors.

So when looking at port developments, one needs to also look at developments around the port, in particular rail and other land-based transport infrastructure development. It is for this reason that we see shipping liner Cosco spend USD8 billion over the last year to develop terminals, shipping routes, and logistics networks.

China operates 174 container line routes and has direct ownership in 42 ports in 34 countries. Importantly, these ports have shifted port development from transhipment ports to gateway ports as China opens market access to inland Europe, Africa, and Asia.

With several developing countries beginning to appreciate the strategic complexity of the BRI, there are several recipient countries that are pushing back on China as alternative financing options become available, particularly through the US’ recently announced Better Utilising Investments to Leverage Development funding.

To name one example, the Tanzanian government suspended cooperation with the Chinese for the Bagamoyo port due to unpopular financing terms in June. These included China owning and operating the port for 32 years. Whilst the terms of the agreement are up for renegotiation as China embarks to reinforce its push for soft diplomacy, I would like to give you some understanding of what Bagamoyo is.

It is not just simply a port development but part of a road/rail economic zone that can handle 8,000 teu vessels and transform an economically depressed area into a trade and manufacturing hub. This mitigates issues with water depths in and around the facility and overcomes significant costs associated with port infrastructure, such as overhead cranage. Furthermore, it allows access to the regions new oil and gas finds.

Fundamentally, East African port development is an important nexus for China’s string of pearls strategy as it seeks geopolitical influence. Therefore, China does not see the USD10 billion Bagamoyo as undermining the USD522 million redevelopment of the Dar es Salaam port. Although Dar es Salaam connects to Burundi, Rwanda, and Uganda, it is inefficient and congested.

It is noteworthy that whilst negotiations around the port development took place, China quietly developed and built a transcontinental rail link between the Atlantic and Indian Oceans. Not quite as dramatic as the proposed Kra Canal in Thailand, the rail link will help integrate countries across the continent. The restored Benguela railway connects the port of Lobito in Angola to the border town of Luau that is adjacent to the Congo and progresses through Zambia.

The replacement of the original narrow-gauge track with a standard track will help facilitate trade connectivity to both North and South Africa and it increases efficiency as trains travel at a speed of 90 km/h. It should not come as a surprise that while this was happening, the Tanzam railway was built. This line connects Tanzania with Zambia, thereby completing the transcontinental connection between West and East Africa.

This opens trade of raw materials from Africa to China. What is often ignored is that rail and road networks also provide the skeleton for other crucial infrastructure. They facilitate the construction and development of oil and gas pipelines, as witnessed in Myanmar’s Kyaukphyu port development.

It also opens a digital connectivity corridor that allows technology infrastructure, such as fibre-optic cables and Wi-Fi base towers to improve communications, transparency and visibility along these trade routes. So, what does Tanzania’s stance mean to China? China, by establishing the backend development around the port through the transcontinental rail, has already begun its pivot towards Kenya’s Mombasa port as an alternative.

Afterall, China’s maritime silk road is not just about port development but is part of a strategic pairing of ocean shipping with land-based shipping routes. This port distraction has enabled China to build redundancy into its plans, just as has happened in Europe.