May 23, 2017

China (中国) Today

Events Review (17.05–21.05.2017)


China's “Belt and Road” Strategic Initiative in the Context of the PRC's Political, Economic and Regional Interests

The world expert circles continue to actively discuss the results of the High-Level Forum within the framework of the PRC's “Belt and Road” initiative, which took place on 14–15 May 2017, in Beijing. Here we first of all should point out that China has risen to a qualitatively new level and is becoming a global geopolitical force of world importance.

This is evidenced by the significant influence of the PRC on political, economic and defense processes in the Asia-Pacific region, Central and South-East Asia, Russia and Europe through the implementation of the “Belt and Road” projects. China's economic activity in the USA, Canada, Brazil, Argentina and other American and African countries is becoming more active, which in fact completes the process of China's reaching the whole world.

This in a certain way changes the PRC's foreign policy — from non-interference with internal processes of the above-mentioned countries and regions — to the desire to exert influence on them. Trying to defend these interests, China is increasing its military presence in the APR and on important transport communications leading to other regions.

“Belt and Road” Initiative. Six economic corridors spanning Asia, Europe and Africa

“Belt and Road” Initiative.
Six economic corridors spanning Asia, Europe and Africa

Experts believe that from now on all countries, including those in the zones of interests of the USA, NATO, Russia and the EU, should reckon with China. True, this objectively makes relations between the latter and other leading countries (first of all with the United States — on a world level, and with India — in Southeast Asia) more difficult, making more complicated China's economic and commercial cooperation with the same USA or India, the leaderships of which refused to participate in the forum of the “Belt and Road”.

If we talk about Russia, in Russian analytical circles the opinion is widely spread that the threat from the PRC is growing with each year coming. After all, China's superiority over Russia in the economic, military, scientific, technical and demographic spheres is growing rapidly, in particular, Beijing has intercepted Moscow's initiative to implement integration projects in the Eurasian space. In fact, the “Belt and Road” initiative nullifies all the Kremlin's plans to build the Eurasian Union and the SCO as a counterweight to the USA and NATO. Suffice it to say that the volume of trade, economic and investment cooperation between the People's Republic of China and the members of these organizations already exceeds by several times the volume of their cooperation with Russia.

Such processes are confirmed by the nature of the development of China's relations with other countries, as well as by its special actions in the economic, security and other spheres.


Development of China's International Cooperation

The High-Level Forum, held as part of the “Belt and Road” initiative, gave impetus to the processes of strengthening ties between China and its partners, as evidenced by examples of international cooperation at the multilateral and bilateral levels. For example, on 18–19 May 2017, in the city of Guiyang (Guizhou Province), the 14th meeting of senior officials of the China and ASEAN countries was held, which discussed the issues of joint activities in the region. As a result of the meeting, a framework draft of the Declaration on the Conduct of the Parties (DOC) in the South China Sea was adopted.

Meeting of senior officials from China and ASEAN countries APEC Trade Ministers' meeting held in Vietnam
Meeting of senior officials from China and
ASEAN countries
APEC Trade Ministers' meeting held in Vietnam

And already on 20–21 May 2017, the trade ministers of the APEC member countries met in Vietnam. There, China proposed to develop a new concept of regional cooperation based on joint development of the region and to create a free trade zone within APEC. The parties promised to continue regional economic integration and support the multilateral trading system.

As for the development of relations between China and the EU, it continues. For example, on 16–20 May 2017, the 13th round of negotiations on the EU-China Investment Agreement took place in Beijing.


As for the bilateral level of cooperation, the United States is China's main partner in it. According to the report of the American “Rhodium Group”, in 2016 the volume of bilateral direct investments of both countries exceeded 60 billion US dollars and reached a historic maximum. In 2016, China's total investments in the USA exceeded 46 billion US dollars , which is three times more than in 2015. First of all, Chinese entrepreneurs invested into real estate, transport and infrastructure, as well as into the information industry of the United States of America. At the same time, the USA's direct investments in China have not significantly increased.

US-China bilateral foreign direct investments (FDI), USD million
US-China bilateral foreign direct investments (FDI),
USD million

The PRC continues its cooperation with both Russia and the countries of the former USSR. The Russian leadership tried to use the High-Level “Belt and Road” Forum to strengthen Russia's international positions and counterbalance the US and EU sanctions. Thus, Russian President V. Putin suggested using the eastern Russian energy facilities to implement the project for the creation of the “Asian Energy Ring” (assuming the unification of the energy systems of Russia, China and the Korean Peninsula). Besides, Russia and China's projects for creation of a wide-body aircraft and development of outer space were mentioned among promising ones.

Within the framework of the Russian delegation's visit to China, bilateral agreements and contracts were signed, including between the Chinese oil and gas company “CNPC” and Russian “Gazprom” on the construction of underground gas storage facilities and thermal power stations in China. “CNPC” and “Gazprom” are also clarifying the timing of the launch of the “Siberia Power” pipeline.


Chinese President Xi Jinping with Belarusian President Alexander Lukashenko
Chinese President Xi Jinping with Belarusian President Alexander Lukashenko

A wide range of agreements in various fields was reached during the visit of the governmental delegation of Belarus led by its president A. Lukashenko to China on 14–16 May, 2017.

The main ones were the agreements on China's providing technical and economic assistance in the amount of 300 million Yuan for the social housing project in Belarus, four new companies' (including “Bel Lotosland”, “AE International Investment”, “Feng Cheng” and “Fluence International Technologies” lighting companies) joining the “Grand Stone” Industrial Park, as well as an agreement on creation of the Chinese-Belarusian Venture Fund “The Great Stone “. Consideration was also given to the construction of a section of the Chinese expressway to Europe via Belarus, the cost of which is estimated at about 7.5 billion US dollars.


Chinese President Xi Jinping with the President of Argentina Mauricio Macri
Chinese President Xi Jinping with the President of Argentina Mauricio Macri

The leadership of the PRC met with the leaders of other countries, in particular, the APR, South America, Africa, including Argentina, Kenya, Cambodia and Laos. In this context, the most revealing were the talks between the President of the People's Republic of China Xi Jinping and the President of Argentina M. Macri. The parties agreed to intensify the relations between the two countries in trade, investments, science, technology, agriculture, tourism and sports. In particular, an agreement was signed between the Chinese company “China National Nuclear Corp. “(CNNC) and the Argentine nuclear power company “Nucleoelectrica Argentina” to build the 4th and 5th nuclear power plants in Argentina.


Some Aspects of the Domestic Economic Situation in China

Against the background of the expansion of China's investment cooperation with other countries, the volume of investments into the Chinese economy has also increased. In particular, on 16 May 2017, a group of state-owned companies of the PRC together with the “Chinese Aerospace Science and Technology Corporation” (CASC) created a fund of 150 billion Yuan (about 22 billion US dollars) to invest into strategic innovation projects. First of all, such investments will be targeted at the development of aviation and space industries, renewable energy, 3D printing technologies, quantum communication, high-speed railways and robotics.


Security and Law Enforcement Agencies

In the process of deepening the integration of the APR countries in the trade and economic sphere, one cannot help taking into account the growing tension caused by North Korea's measures to implement its nuclear missile program. Thus, the leader of the DPRK Kim Jong-un, during a meeting with the developers of the long-range ballistic missile “Hwasong-12” (launched on 14 April 2017), said that Pyongyang would in any circumstances create powerful weapons systems, relying only on itself. He even promised that North Korea would become the leading missile power in the Asia-Pacific region and would “be ready to give an adequate strike in response to the aggression against the DPRK”.

On 21 May 2017, the Armed Forces of North Korea launched a new ballistic missile

In support of such intentions, on 21 May 2017, the Armed Forces of North Korea launched a new ballistic missile at a range of about 560 km. The rocket has a solid-propellant engine, which is a new step in the development of the DPRK's missile program. As this launch of the missile was successful, Kim Jong-un ordered to start its serial production. Together with the ground version, another version is being developed, designed for launching from submarines. In this aspect, North Korea expects that Russia will help with the appropriate technologies.

As for the United States, in these circumstances it is increasing pressure on North Korea, including through building up its military presence near the Korean Peninsula. The second carrier strike group (CSG-7) of the US Navy, headed by the aircraft carrier “Ronald Reagan”, was sent to the said area. After its arrival at the destination, joint exercises of the “Ronald Reagan” and CSG-1 “Carl Vinson” (which has already arrived in the region) carrier strike groups are planned. The concentration of the two carrier strike groups of the US Navy in the Korean Peninsula does not exclude the possibility of the United States' air strike against the military infrastructure of the DPRK and its facilities participating in the nuclear missile program.

USS “Ronald Reagan” Carrier Strike Group One (USS “Carl Vinson”)
USS “Ronald Reagan” and Carrier Strike Group One (USS “Carl Vinson”)

The government of Japan is seriously concerned about North Korea's missile launches. According to Prime Minister S. Abe, he is going to raise this issue during the meeting of the “Big Seven” on 25–27 May 2017 in Italy (in the island of Sicily). Japan has also condemned Russia's actions to open a ferry crossing with the DPRK (from May 17 this year), which is considered a violation of sanctions imposed by the UN Security Council against North Korea.

By the way, according to some sources, the PRC's leadership is preparing a set of measures to influence the government of the DPRK, which should make it stop developing nuclear missile weapons. These measures are coordinated with the United States.

At the same time, China negatively perceives the strengthening of the USA's military presence in the Asia-Pacific region. May 17, 2017, two Chinese Su-30 fighters intercepted the US Air Force WC-135 “Constant Phoenix”, designed to conduct atmospheric research (in particular, the detection of nuclear explosions) over the East China Sea. The aircrafts came close at a dangerous distance of 45 meters.

Chinese SU-30 fighter jet and US Air Force WC-135 “Constant Phoenix”
Chinese SU-30 fighter jet and US Air Force WC-135 “Constant Phoenix”

Another factor in the destabilization of the situation in the APR is the confrontation between China and the rest of the region due to some islands in the South China and East China Seas.

Yongshu Reef (Fiery Cross Reef) in the South China Sea
Yongshu Reef (Fiery Cross Reef)
in the South China Sea

Thus, the problems that arose because of the disputed islands of the Spratly archipelago and the Scarborough reef in the South China Sea were discussed at the meeting of President Xi Jinping with the President of the Philippines R. Duterte on 15 May, 2017. The parties promised to refrain from actions that could provoke clashes in the mentioned area.

However, on 18 May 2017, China deployed anti-ship missile systems on the disputed with Vietnam Yongshu Reef (Fiery Cross Reef) in the South China Sea. According to the Ministry of Defense of the PRC, this reef is a Chinese territory, which allows the PRC to deploy any defensive weapons systems on it. The United States, Japan, New Zealand and Vietnam categorically disagree.


Visit of the Minister of Defense of the United Arab Emirates M. Al-Bawardi to China
Visit of the Minister of Defense of the United Arab Emirates M. Al-Bawardi to China

China actively cooperates in the military sphere with other countries. For example, on 17 May 2017, there were talks of Deputy Chairman of the Central Military Commission of China Fan Changlong and the Minister of Defense and State Councilor of the People's Republic of China, Chang Wanquan, with the Minister of Defense of the United Arab Emirates (UAE), M. Al-Bawardi. According to Fan Changlong, the UAE is China's strategic partner in the Persian Gulf region, and as an energy supplier is important for China. Proceeding from this, the parties agreed to deepen cooperation in strengthening security on the route of tankers from the Persian Gulf to the APR.

China's military cooperation with Myanmar has similar goals — to guarantee the security of maritime communications. In particular, last week in the waters of the Gulf of Mottama, the CPC's and Myanmar's Navies for the first time held joint naval maneuvers. They mastered establishing radio communications between the ships of both countries, joint movement of flotillas and search and rescue operations.


Science and Technology

In order to increase the PRC's energy security, the government is implementing large-scale programs to gain access to alternative sources of energy. Thus, in May this year, Chinese drilling platform for the first time in the world extracted from the seafloor the so-called combustible ice. It is a crystalline compound of water and natural gas, it can be used as a hydrocarbon fuel (contains 99.5 % methane). One cubic meter of such “combustible ice” is the equivalent of 160 cubic meters of natural gas in the vapor state.

According to the representative of the Ministry of Land and Natural Resources of the PRC, the development of China's technology of producing “combustible ice” can be placed on a par with the “shale revolution” in the United States. At this, extraction of this fuel can lead to a critical drop in world prices for oil and gas.

The first Chinese submarine well was drilled in the South China Sea at a depth of 1.2 km, at a distance of 285 km from Hong Kong.

Chinese drilling platform for the first time in the world extracted from the seafloor the “combustible ice” Chinese drilling platform for the first time in the world extracted from the seafloor the “combustible ice”
Chinese drilling platform for the first time in the world extracted from the seafloor
the “combustible ice”

The leadership of the PRC pays special attention to the development of new weapons systems, both for the needs of the national Armed Forces and for export supplies. In particular, on 18 May 2017, in Harbin, the first flight test of the Z-19E attack helicopter of the Chinese company “HAIG” (Harbin Aircraft Industry Group) was conducted. The feature of this machine is the improved protection of the crew from enemy attacks, low noise level, as well as increased speed and maneuverability. The take-off weight of the Z-19E is 4.25 tons. The helicopter is designed to destroy light and heavy equipment on the battlefield, suppress enemy firing points, as well as to support ground forces. Besides, it can be used to intercept low-flying targets. The helicopter is equipped with machine guns and “air-ground” and “air-to-air” missiles.

Harbin Z-19E attack helicopter Harbin Z-19E attack helicopter
Harbin Z-19E attack helicopter


Plans and Prospects for China-Ukraine Cooperation

Signing of contract by the Administration of Seaports of Ukraine and Chinese “Harbor Engineering Company LTD”
Signing of contract by the Administration of Seaports of Ukraine and Chinese “Harbor Engineering Company LTD”

An important positive development in cooperation between China and Ukraine within the framework of the “Belt and Road” initiative is the expansion of the participation of Chinese business in the development of Ukrainian infrastructure. For example, last week the Administration of Seaports of Ukraine and the Chinese “Harbor Engineering Company LTD” signed a contract for the work on deepening the bottom in the port “Yuzhny” in Odessa region. The implementation of the project will significantly expand the port's capabilities as a “sea gate” of Ukraine. At this, more than 350 new jobs will be created.

Besides, a preliminary agreement was reached between the Kyiv City State Administration (KCSA) and the Chinese consortium consisting of the companies “China Railway International Group” and “China Pacific Construction Group” for the construction of the fourth subway line in Kyiv. The consortium can act as a contractor working under the EPC scheme (engineering, procurement and construction) and execute projects on the EPC+F model (engineering, procurement, construction and financing). In this regard, the consortium will assist the KSCA in attracting funds from Chinese financial institutions.