Appetite could grow for Beijing’s Maritime Silk Road

The Chinese plan involves building ports and creating a 6,000km continuous sea route connecting China with South East Asia, Oceania and North Africa.

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When he unveiled a grand plan called the 21st Century Maritime Silk Road during a speech in the Indonesian parliament on a visit in 2013, the Chinese president XI Jinping could hardly have imagined a Donald Trump victory in a US presidential election or, having won, that as US president he would scrap the Trans-Pacific Treaty (TPP).

The Chinese plan involves building ports and creating a 6,000km continuous sea route connecting China with South East Asia, Oceania and North Africa, passing through several contiguous bodies of water such as the South China Sea, the South Pacific Ocean and the wider Indian Ocean area.

It is meant to complement the One Belt, One Road (Obor), or the Silk Road, connecting China with central Asia, west Asia, the Middle East and Europe. Obor involves building railway and road infrastructure that will support the ports along the way.

Mr Trump’s decision to end TPP may prove to be a great opportunity for China. Many countries who were reluctant to join the Maritime Silk Road pact may now be persuaded to accept the Chinese programme because Mr Trump’s “America first” policy leaves little room for the United States to invest heavily in Asia and other regions. American construction companies are expected to be busy building infrastructure at home if the Mr Trump implements his promise of large-scale infrastructure building, analysts say. On the other hand, Beijing may face a major challenge in its biggest export market, the European Union, in the coming months and years.

Beijing is trying to obtain market economy status, ie one where there is little government intervention or central planning, from the World Trade Organisation but getting that may not ease its passage into the EU. The bloc is currently drafting new laws that will make it difficult for China to be treated as a market economy, thus putting pressure on Chinese trade with the EU. Analysts say Mr Trump’s decision to scrap TPP will make no difference to the EU’s approach to China on this issue.

"It is unlikely that the EU will revisit its previous decision on China's status as a market economy as the underlying fundamentals of its decision have not changed," Max J Zenglein, a research associate with the Mercator Institute of Chinese Studies in Berlin, tells The National.

Away from Europe, China’s expansion is less rocky. The country is not just buying Australia’s coal assets, it is also expanding access to the limited infrastructure needed to ship it globally.

Yancoal Australia’s latest US$2.45 billion purchase of the biggest slice of Rio Tinto’s coal operations will double the Chinese-owned miner’s output in the country, Reuters reported yesterday. The deal also includes a 36.5 per cent stake in Port Waratah Coal Services, the owner of two terminals at the port of Newcastle, Australia’s main conduit for thermal coal. The amount Yancoal will be permitted to ship will double.

“The Rio operations are long life, so they have plenty of reserves, and Yancoal will benefit from increased port capacity at Newcastle,” says Matthew Boyle, a Sydney-based industry consultant at CRU Group. “This is a definite game changer and Yancoal suddenly becomes a rather large player.” Yancoal is expanding its clout in the world’s second-biggest shipper of thermal coal as prices of the power station fuel recover from a five-year collapse.

The commodity is forecast to remain the dominant fuel in global electricity generation over the next decade amid rising demand from India, China and Japan, in spite of environmental ­opposition.

“In Australia, logistics are very important, especially the port terminals,” says Helen Lau, a Hong Kong-based analyst at Argonaut. “You must have your own stakes or facilities to ensure shipments are smooth and won’t be disrupted. If you don’t own access to infrastructure, that makes shipments more expensive.”

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* with Reuters