Tag: state capitalism

Looking at the Belt and Road through the lens of Marxist geography

The Belt and Road is driven by a capitalist logic recognizable to any large economy

By Tom Baxter

In November last year researchers from the Transnational Institute (TNI) wrote a framing paper on the Belt and Road Initiative (BRI) on behalf of the Asia Europe People’s Forum. The paper provided a quite different and refreshing perspective on the BRI, seeing it through the lens of political economy and, in particular, Marxist geographer David Harvey’s theory of the “spatial fix” for economies facing crises of overaccumulation. Steering clear of the noise of proponents’ and opponents’ political sloganeering around the Initiative, the researchers dug into the underlying economic drivers of the Belt and Road. Such an approach is potentially enabling for advocacy groups in that it helps to identify different actors and their motivations within the Initiative and provides new discussion points and perspectives for researchers and anyone else interested in the Belt and Road.

Panda Paw Dragon Claw interviewed the three authors of the framing paper, Stephanie Olinga-Shannon, Mads Barbesgaard and Pietje Vervest, on their critical perspectives on the Belt and Road Initiative.

PPDC: Looking at Belt and Road as a whole, many have seen the motivation for the initiative through the lens of geopolitics – China attempting to increase its influence around the world. In your briefing, however, you reject this view in favor of the macro-economic push factors, which you describe as a “capitalist crisis with Chinese characteristics”. Can you tell us more about this reading of the BRI?

TNI: Viewing the BRI through the lens of political economy, rather than geopolitics, a different picture emerges. Rather than a ‘grand strategy’, we see the BRI as a broad and loosely governed framework of activities seeking to address a crisis in Chinese capitalism. Under the capitalist mode of production, crises routinely emerge and – as argued by geographer David Harvey – an indicator of such crises is the “overaccumulation of capital”. This overaccumulation can be defined as: “some combination of surplus capital looking for productive investment, surplus commodities looking for buyers, and surplus labor power looking for productive employment”. This then requires some sort of fix. As Harvey argues, such fixes are discernible throughout the history of capitalist development. For example, Britain’s export of surplus capital and labor in the nineteenth century to the United States, Australia, Argentina and South Africa. Or more recently, the export of surplus capital from Japan in the 1960s, South Korea in the 1970s and Taiwan in the 1980s. Significant parts of the export from the latter three in fact went to China and helped build up productive capacity there. In the framing paper, we argue that the BRI needs to be seen in the context of such fixes that have also been taking place in China to solve moments of “overaccumulation”.

As we try to show, similar activities to those currently happening under the BRI, in fact began in the 1990s in a similar moment of overaccumulation, as Chinese companies began operating abroad, including state-owned enterprises (SOEs). Thus, in this view, the BRI, like ‘Going Out’ and ‘the Great Western Development Project’ before it, provides a broad framework to incorporate and encourage these activities that seek to provide a solution to overaccumulation.

Almost any activity, implemented by any actor in any place can be included under the BRI framework and branded as a ‘BRI project’. This campaign mobilisation approach to policy making is common in Chinese economic policy. It allows Chinese SOEs and provincial governments to promote their own projects in pursuit of profit and economic growth, while the central Chinese government maintains a semblance of leadership and control over the initiative. Where necessary, the central Chinese government plays a strong politically supportive role, through local embassies, or national ministries or agencies such as the National Energy Administration or the Ministry of Commerce. But at the same time, with such a broad framework, and a multitude of actors involved, the Chinese government has struggled to effectively govern BRI activities.

PPDC: In particular, you talk about BRI as a “spatial fix” to China’s economic woes. Can you explain more about this concept?

TNI: David Harvey explains that when capital, for different reasons, can no longer find profitable outlets, crises characterized by surpluses of money, commodities and industrial capacity emerge, leading to “mass unemployment of labor and an overaccumulation of capital”. Capital is understood here as a process rather than a thing, whereby money is invested into productive labor in order to earn more money. If this process stops, surpluses of capital sitting ‘idle’ – that is, not in process (including money, commodities and machines) – emerge side-by-side with surpluses of labor power (meaning workers, who are unemployed). Under capitalism, such barriers to the process of capital can lead to situations of social unrest. Under globalized capitalism, any and all governments must manage these crises, if they are to remain in power.

David Harvey cover

Such crises are often managed by what Harvey terms a ‘spatial fix’, that is, as Harvey writes in his book Seventeen Contradictions and the End of Capitalism, the “absorption of these surpluses through geographical expansion and spatial reorganisation”. The crux of spatial fixes is to provide new opportunities for productively combining capital and labour in pursuit of profit. Spatial fixes can take many forms, such as opening up new markets by breaking down trade and investment barriers or building large-scale infrastructure projects to absorb surpluses while facilitating expansion into new territories. While these spatial fixes have occurred throughout the history of capitalist development, they are necessarily unable to permanently resolve the crisis, they merely delay or relocate it. In the framing paper then, we try to conceptualise the BRI as encapsulating the latest in a series of spatial fixes happening since the 1990s.

PPDC: What do you see as the principal motivations for Chinese companies, in particular SOEs, to invest along the Belt and Road?

TNI: We see profit as the main motive for Chinese companies, including SOEs, to invest abroad. Since reforms to corporatize Chinese SOEs in the 1990s, they have been required to become self-funding and their success is evaluated by the State-owned Assets Supervision and Administration Commission (SASAC) primarily based on economic targets, including profit. Investments and projects abroad are one of the means through which these SOEs are pursuing profits. This pursuit can take many forms, e.g. from the construction of infrastructure, to hunting for cheaper manufacturing opportunities, to constantly reducing shipping costs in different ways.

We aren’t thinking in terms of ‘along the Belt and Road’, as this assumes one big physical project, but see these as a broad range of investments branded under the BRI framework. Investments have also been branded by their promoters as ‘BRI activities’ in countries that have not signed Memorandums of Understanding (MOUs) relating to the BRI.

Branding investments and projects under the BRI provides Chinese companies, especially SOEs, with financing opportunities, political support for projects both from the Chinese government and potentially from the government where the project is located, and the prestige of their project being part of a global initiative.

PPDC: Given that BRI is designed to release the pressure valve on China’s overcapacity industries, many of which are polluting heavy industries, to what extent do you think the Belt and Road can really be “greened”, an intention that was reiterated at last year’s Belt and Road Forum in April?

TNI: ‘Greening’ the BRI will be challenging given the scope of the BRI and its focus on mega infrastructure and mega production. As renewable energy capacity has increased in China, some Chinese companies have developed strong technology and experience in this field. However, the use of this capacity and technology has not necessarily been used in BRI-branded projects outside of China. Furthermore, activists and researchers are increasingly showing there is also a ‘dark side’ to renewables, for example Corporate Europe Observatory’s research on so-called ‘renewable gas’.

The type of energy projects implemented in participating countries also depends on what these governments want. Where there is a demand for coal power and large-scale hydropower, profit-seeking Chinese companies will be keen to fulfil these demands. At the same time, we have seen strong lobbying from Chinese energy companies to promote their projects. In Myanmar, for example, hydropower companies, with the support of the Chinese Embassy in Yangon and the National Energy Administration, have lobbied the national government for the expansion of large-scale hydropower in the country’s north.

We also need to think about what is meant by “green”. In China, large-scale hydropower is viewed as ‘green’ and has been key to the reduction of China’s energy emissions. Large-scale hydropower has, however, had devastating impacts on communities affected. It is important that ‘greening’ the BRI does not mean destroying the lives and livelihoods of those involved.

PPDC: In contrast to placing China’s domestic economic issues as the main drivers of the BRI, you describe the geopolitics of Belt and Road as “a consequence” of the Initiative. Can you tell us a bit more about this perspective?

TNI: We argue the primary drivers of BRI are political-economic. The types of profit and growth driven activities currently being branded under the BRI were implemented long before the BRI was announced. However, the BRI does encourage the building of political and public support for the initiative (BRI priority areas number one and five), and trade and investment on such a mammoth scale is apt to change the economies and relations of many places involved, at both the national and local level. The BRI has already impacted relations between China and participating countries, and between participating and non-participating countries. Japan and the United States, for example, have launched similar initiatives in response to the BRI, in an attempt to prevent their own influence from diminishing.

PPDC: If the geopolitical implications of BRI are a consequence rather than a motivating factor, why do you think the initiative has triggered so much scepticism from Western governments, in particular the US?

TNI: Regardless of the drivers of the BRI, many western governments are viewing the BRI through how it impacts their interests (including the interests of capital emanating from their respective countries). As the BRI is increasing competition and BRI-branded projects are changing the physical landscape and movement of goods, people, resources and energy, this is undoubtedly impacting those interests. However, just because the BRI is perceived to be driven by geopolitics, doesn’t mean that it is.

PPDC: You also explain that China and the BRI are, contrary to more commonly heard interpretations, not trying to overthrow the international order, but rather are proactively engaging with international organisations to create legitimacy for and smooth the path for the initiative. Can you tell us more about how China is doing this and the likely intentions and outcomes?

TNI: In recent years we have seen a significant increase in the Chinese government’s involvement in the UN and other international organisations, including funding, personnel and cooperation. At least 29 international organisations have signed MOUs relating to the BRI, and the Chinese government, for example, is promoting the BRI as a key means to achieving the UN Sustainable Development Goals. This builds legitimacy for the BRI and seeks to change the perception of the BRI from a threat, to the BRI as a global and cooperative initiative to promote development. The Chinese government, for example, has also been a key advocate for a UN Treaty on Transnational Corporations and Human Rights. Another key moment was President Xi’s 2016 speech to Davos, where he made it clear that the Chinese government was willing to be a champion of free trade, as President Trump espoused more protectionist trade policies. These commitments show that the Chinese government is seeking to play a key and increasingly prominent role in existing international organisations, rather than overthrow them.

A notable exception is the establishment of ‘BRI courts’ for commercial and investor-state dispute arbitration. Here, rather than work within the existing (and flawed) international arbitration system, the Chinese government is establishing their own courts under the People’s Supreme Court. This is likely to create a venue for arbitration that is more in favor of Chinese companies but follows the same model as similar venues in Singapore, Dubai and Hong Kong. The Chinese government is, therefore, not overthrowing the existing system, just tweaking it in favor of Chinese actors. We are, therefore, likely to see an international system that increasingly involves and favors Chinese actors, but not an overhaul of this system.

PPDC: Looking at BRI as a “spatial fix” underpinned by economic considerations, what are the most hopeful pathways for better environmental and social governance of the Initiative? 

TNI: Viewing the BRI as a broad and loosely governed framework of many activities, rather than a pre-planned grand strategy, is politically enabling for activists on the ground, in that individual BRI activities (though large) are thereby not so different from other projects that they may have successfully challenged. Rather than being reduced to mere pawns in a larger geopolitical powerplay between governments, people can be mobilized and organized to engage in and/or challenge these activities as they see fit. While still very difficult, it is easier to halt or alter individual activities than an entire grand strategy hence opening up pathways for better environmental and social governance of BRI-branded projects.

Some activists and NGOs have had success halting BRI projects taking a ‘follow the money’ approach. Financiers of BRI branded projects, in some cases, have been willing to review  their financing if the project is shown to be unprofitable or harmful. For example, in March 2019, the Bank of China agreed to review their financing of the Batang Toru hydropower dam in Indonesia following concerns raised by campaigners. The bank has not yet announced the results of their review and the financing for the project remains in doubt. However, activists opposing the dam continue to be threatened and in October 2019 activist Golfrid Siregar died in suspicious circumstances.

Another successful approach has been through litigation in national courts. For example, in Kenya, the deCOALonize campaign won a court case to stop the construction of a BRI-branded coal-fired power plant in Lamu. Their case was based on environmental grounds and the companies’ lack of consultation with affected communities.

Lastly, the Chinese government is sensitive to criticism and does not want to be perceived as an imperial actor. As discussed above, the self-branding nature of BRI activities means that the brand is difficult to control. This presents risks for the Chinese government, who cannot control, and may not even be aware of harmful BRI-branded projects abroad. This sensitivity can also provide an opening for activists and NGOs.

PPDC: Anything else you want to add?

TNI: Chinese investments are often racialized in a way that investments from other countries are not. That is, investments are referred to as ‘Chinese’ or by ‘China’, while investments from other countries are mostly viewed as from a specific company. For example, an international investment by Shell is rarely seen as ‘Dutch’ investment but investment by Shell the company. It is also often assumed that the activities of Chinese SOEs are under the tight control of the central Chinese government, when in reality these enterprises are loosely governed by central or provincial government agencies with limited capacity. As profit-seeking companies, they are, in fact, not innately different from other international companies. It is important that we refer to individual Chinese actors, such as companies and provincial governments, by their names so as not to racialize investments and contribute to anti-Chinese sentiment.

Stephanie Olinga-Shannon researches the Belt and Road Initiative at TNI, with a particular focus on Myanmar. 

Mads Barbesgaard works on agrarian and environmental justice and land and ocean politics at TNI and teaches at the Department of Human Geography at Lund University @Madsbarbesgaard. 

Pietje Vervest is an economic anthropologist coordinating TNI’s economic justice program.

 

 

Interview: What’s missing in the conversation about China’s expanding global presence?

Longtime Belt and Road observer Zhang Hong shares her insights about the historical evolution of China’s “Going Out”

ZhangHong
Former Caixin journalist and George Mason University PhD candidate Zhang Hong (Stella)shares her observations about China’s “Going Out”.

Within the Chinese journalistic community, a “foreign correspondent” is a rare species. Unlike their Western counterparts, Chinese media do not have a long history of dispatching reporters globally to cover events from where they are unfolding. Due to resource constraints and, more crucially, a lack of strong domestic demand for news thousands of kilometers away from home (with the exception of a handful of countries such as the United States), media organizations in China invest grudgingly into overseas operations. The situation differs between state-owned outlets (such as Xinhua News Agency and China Global Television Network), which in recent years have increased their global presence, and more independent outlets (such as Caixin). For the former group, the need to establish Chinese image overseas, more than the improvement of Chinese understanding of foreign affairs, has been the driving force of its global expansion. For the latter group, with all the intention of doing better international reporting, the lack of state support in setting up a stronger footing in foreign countries cripples its international ambition.

Zhang Hong (Stella) was, in her own words, one of the first-generation foreign correspondents working for a non-state Chinese media organization. Stationed in Europe and North America for Caixin Media between 2009 and 2014, she filed stories for Caixin’s readers on topics ranging from reforms in Poland to the Crimean crisis. She described her years in London and Washington as “drifting”, having to conduct journalism in a foreign land without much institutional support from home. While reporting from one country to another, she picked up an emerging theme that later became her research focus as a PhD candidate at George Mason University: the growing presence of China beyond its border and its political and economic implications.

In an interview with Panda Paw Dragon Claw, Stella shared her observations about China’s “Going Out” from both her standpoint as a journalist and a researcher. She believes a “China model” is indeed discernible from the practices of China’s state capital overseas, even though it doesn’t entirely fit the predatory image that Western media are accustomed of depicting lately.

Panda Paw Dragon Claw(PPDC): When you were a foreign correspondent for a Chinese media outlet, what was your mission?

Zhang Hong (Z): My intention was to write stories with more independence than what we usually saw in Chinese state media. I always believe that international news reporting should help our Chinese readership, citizens of a great power, to obtain an understanding of the world that matches China’s global status. A citizenry without empathy for its peers around the globe would become dangerously self-centered and hubristic.

But I found that I couldn’t do what I intended to do and was affected by a sense of powerlessness. Compared to Western foreign correspondents, we did not have the kind of institutional history and tradition that guide our operation overseas. Most non-state Chinese media only began to dispatch correspondents to other countries in the second half of the last decade, after a relatively liberalized period built up their coffer and ambition. When we were stationed in a foreign country, most of us did not have an office and had to build our sources and network from scratch. Since we were not part of China’s official media establishment, we were excluded from correspondence from Chinese embassies and consulates. We were largely “on our own.”

Situation of state media colleagues were slightly better, even though they were very much shaped (and constrained) by the nature of their outlets. Many of them couldn’t do reports that were at odds with the domestic and foreign policy agenda of the Party. And they were often stationed there to spread China’s own voices, more than they were required to do high-quality reporting about that country. For example, state media reporters were sometimes tasked to publish op-eds in local media, a not unimportant part of their job description.

PPDC: What kind of China “Going Out” stories did you cover when stationed overseas?

Z: I left journalism in 2014, and before that I was mainly based in Europe. It was before the Belt and Road Initiative (BRI) became an international spectacle. The pre-BRI stories about China’s “Going Out” that I ended up covering were mainly about Chinese companies shopping for European businesses and assets that were on sale after the debt crisis of 2009. The image of China around that time was that of a “nouveau riche” foreign investor. The Europeans were a bit skeptical of the Chinese’s ability to well manage what they had acquired. And that was the main discussion about China’s overseas adventures.

PPDC: Understandably, that story changed with the BRI…

Z: The BRI focuses very much on infrastructure building, with the Chinese state, not just Chinese companies, at the center of it. The level of Chinese overseas involvement (and the stake) is much higher now than when I was covering the space.

PPDC: With the BRI now so prominent on the global agenda, and popular narratives about it being reinforced by talks of “debt traps” and US-China arm wrestling, what do you think are elements missing in the current conversation?

Z: I think the first element that is not well understood and covered is the historical aspect. BRI should be viewed in the context of China’s multi-decade political and economic evolution. Modern China began its adventure into the global market in the 1990s, and not until 1999 was the concept of “Going Out” as a strategy first laid out. Major Chinese energy companies started to systematically move into other markets around that time. In preparation for the accession to WTO in 2001, a set of policies were also created to facilitate integration into the global market. The period laid the ground for an explosion of “Going Out” activities in the 2000s. On the one hand, China’s economic reform turned the country from a closed autarky to a world factory, driving up demand for resources from around the globe. On the other hand, Chinese companies, nurtured by strong domestic demand, ventured out for new markets and supplies. BRI is an extension to that two-decade journey. To some extent, China is almost driven by an urge to compensate for being absent from the global scene for too long. It is still retaking the globalization class.

Another aspect that’s worth emphasizing is that BRI reflects the “long view” that is embodied in the Chinese political system. China’s one-party system allows the ruling Communist Party to make long term plans and strategies. That’s why you find strong continuity from the “Going Out” strategy to BRI. This is not to say that Chinese leaders in the 1990s were particularly prescient. But it does appear that the approach of “crossing the river by touching the stones” works pretty well in China’s internationalization process, where later leaderships could build on the programs of their predecessors and adapt their strategies by studying the lessons learned.

In my opinion, the reason why stories of “debt traps” or China’s “predatory” behaviors become prevalent is that the international community does not fully understand this historical evolution. And the lack of transparency on the Chinese side is also to blame. When people cannot comprehend the seemingly “sudden” appearance of China on the horizon, they respond with fear and apply familiar narratives to make sense of it.

PPDC: Besides its historical context, what else is unique about the “Going Out” process? Is there a “China Model” being exported?

Z: What I’ve taken note of, as I have written in an article about Chinese investment in Sri Lanka, is the central role played by Chinese state capital in the “Going Out” process. Their prominence does speak to a powerful “formula” of economic growth in China, whether or not you’d like to call that a “model”. This formula is obsessed with infrastructure development, as this is where state capital has comparative edge over private capital. The vehicles of China’s state capital, the state-owned enterprises (SOEs), are a new class of international players in the global economic system that we have never seen before. Fed by a massive internal market and their monopoly status in key sectors, they have grown into gargantuan corporate conglomerates within a short period of time. With that much of capital on hand, they were able to take advantage of the vacuum left by the 2008 financial crisis and extend their tentacles to new places in the world, building and consolidating their access and control of world’s resources.

These conglomerates enjoy unique advantages in the current global economic structure. Backed with the state’s financial and political support, they are much more risk-tolerant than their Western competitors, which enables them to go into the infrastructure sector in developing countries with highly uncertain economic outlooks. Engaging in such strategic sectors in turn locks in long-term structural opportunities for China in these countries. For example, after building the standard-gauge railway for Kenya, Chinese companies will remain in Kenya for years to train the locals how to operate the system according to Chinese protocols; the next generation of Kenyan engineers will know more about how to build things according to Chinese technical standards than European ones.

PPDC: How does the Sri Lanka situation illustrate the model you outlined above?

Z: The Sri Lanka case demonstrates how certain elements of the “China Model” can indeed be exported through BRI. Under a strictly defined “market economy”, the construction of Hambantota Port does not make much sense. There is no natural demand supporting a major port built out of a traditional fishing village. But China’s state capital, coupled with its existing global network, may create demand to match the supply (a new port facility on the Indian Ocean). China Merchants Group, the state-owned Chinese conglomerate that will be running the Hambantota Port, could rearrange some of its global shipping routes to go through Hambantota, creating business for an industrial zone that is to be built adjacent to the port. With CMG’s global reach and resource allocation abilities, there is a fair chance that the Hambantota port may take off as a major trade node.

In this sense, China’s development model does have some “exportability”, even though China’s one-party system itself can hardly be recreated elsewhere.

PPDC: You speak of the Chinese leadership taking a “long view” when it comes to Going Out. Is exporting the China development model the ultimate goal?

Z: I guess the ultimate goal is the so-called “national rejuvenation”. As stated by the Chinese leadership, it is to build China into a real global superpower. Probably due to the Party’s Marxist ideology (which emphasizes the economic base as a determinant in all human activities), there seems to be a firm belief that the goal needs to be achieved through economic means rather than military means. Previous socialist regimes, such as the Soviet Union, never managed to plug itself so deeply into the global economy, let alone occupying structurally important positions. For China, becoming a global superpower in the new era means attaining a strategic, structural advantage in the global economy. And its SOE-driven state capitalism is an instrument to that end. In Party talks, there is already explicit language calling for SOEs to have “capabilities of global resource allocation” and “occupy a privileged position in the global value chain.”

PPDC: As you said, the understanding of those dynamics is still very poor outside China. Do you think there is a role that Chinese media, think tanks or others can play to help shape global perceptions of the BRI?

Z: There could have been a role for them to play, as theoretically speaking they should have better access to the Chinese actors participating in BRI, providing insights that outsiders often do not have. But in reality it is hardly the case due to the generally closed culture with regard to the press. It seems Chinese journalists (barring those from the state media tasked with propaganda) hardly have better access to Chinese companies and government officials than their foreign counterparts. This might also have to do with the fact that reporter tends to be an entry-level job in China; veteran reporters either get promoted to editorial roles (so they are no longer on the frontline doing reporting) or leave the profession after being disillusioned (I myself being an example). So you are left with young reporters who are energetic and passionate about doing good reporting, but without the necessary experience. Plus, Chinese media, when doing stories, still have the tendency of writing to the ears of the decision makers, hoping to have some influence there. So I am not quite sure the Chinese media as a whole is capable of shaping the conversation as part of the global civil society.

PPDC: In 2012, you’ve written a blog titled “the Cambodians who don’t want a dam”, which documented local resistance to a China-built dam and the rejection of China’s development-first mindset. Do you think Chinese media can play the role of safeguarding against the negative impacts of the Going Out process, as many have hoped?

Z: I’m not very optimistic that they can. Having left China’s media industry, I am not in a position to comment on my colleagues’ works today, as I understand that the room for independent reporting has shrunk even more compared to five years ago. However, I am a little disappointed that, for all the attention BRI is getting across the globe, we can think of very few cases of systematic and methodic reporting of BRI from the Chinese media that can draw wide attention. I get the sense that non-state media today are becoming more and more like their state media peers in reporting only one kind of BRI story: that of Chinese investment bringing benefits to other parts of the world. I understand the limitations Chinese journalists are facing, but for someone who used to have high hopes for the profession, this is disheartening.

PPDC: If media is not there as watchdogs, how should the Going Out process been governed given its massive political, social and environmental impacts?

Z: Scholars have described Chinese players as being more elastic with rules: they can follow higher standards when they enter developed markets but are more than happy to do the bare minimum when local governance is weak. At the end of the day, without strong regulation at home, adhering to high standards of corporate conducts is only “optional.” Paradoxically, for all my skepticism about Chinese state capital’s impact on the prospect of global human development, I think it might be easier to induce responsible behaviors in China’s SOEs than private firms in the short term. I think there is real appetite for it right now as the leadership wants China to be seen as a “responsible power.” SOEs are encouraged to take measures to protect the environment and provide services to local communities where they operate. Therefore, if the international community continues to push for these issues, they might gain enough traction in the political agenda, which can then be translated into requirements for SOEs’ overseas operations. That said, having the regulations is one thing, how they are implemented is another. To fundamentally create a system where Chinese players can be held accountable for their overseas activities, deeper governance reform and cultural change within China would be necessary.