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A Chinese national flag is affixed to a buffer stop on a railway at a freight yard in the Kazakh border town of Khorgos.   © Reuters
Belt and Road

China's Belt and Road stirs up local anxieties

Loans and investments ignore profits and blur economics and security

Nikkei staff writers | China

KHORGOS, Kazakhstan -- In late June, workers were busy transhipping freight from the Xinjiang region in northwest China at a Kazakhstan national railway station in the border town of Khorgos. Three cranes were operating nonstop, moving containers onto Kazakh freight cars. A buffer stop on a track bore a Chinese national flag, as if to emphasize Kazakhstan's close ties with its big neighbor to the southeast.

In fluent Chinese, a Kazakh railway worker with chiseled features who appeared to be in his 30s explained that the cargoes had arrived from Lianyungang in China Jiangsu Province, and were sent onward to Uzbekistan in the southwest. Some trains took them northward to Europe, he said. The amount of imported cargo had more than doubled in 2017 from a year earlier to the equivalent of 94,000 20-foot containers. Chinese is widely spoken in the free trade zone near the station.

In September 2013, Chinese President Xi Jinping announced the Belt and Road Initiative, which includes a plan for the creation of the Silk Road Economic Belt, an expansive economic bloc embracing Asia and Europe. The announcement was made in a speech at a Kazakhstan university bearing the name of President Nursultan Nazarbayev. The cooperation between the two countries in developing transport networks has been cast as resurrecting the Silk Road, an ancient network of trade routes connecting East and West.

To limit transport costs, the Chinese government provides a generous $1,000 in subsidies per container, reflecting its determination to make the plan work. Many foreign companies try to please Beijing by taking advantage of the transportation route, said a person familiar with the matter, citing U.S. technology company HP Inc., which uses it to export computers made in China to Europe.

The "belt" and the "road" refer to planned transport routes over both land and sea. The initiative aims to support infrastructure construction in more than 70 countries to create channels for Chinese businesses to expand in these markets, while increasing China's political and military influence. It is an ambitious attempt to build a China-led international order backed by the country's deep financial resources. Nomura International (Hong Kong) estimates investment will total over $1.5 trillion over about a decade.

From the 19th to the early 20th centuries, the United Kingdom and Russia repeatedly clashed over hegemony in Central Asia as part of what was called the Great Game. China's current attempt to assert its influence on Eurasia and the Indian Ocean in opposition to United States and India can be seen as a new Great Game.

But the way China provides investment and loans without regard to the profitability of projects, and the blurring of the line between economic and security interests is making countries along the routes anxious.

China's economic influence has extended into Mauritius, an island country and popular tourist destination in the southwestern Indian Ocean, where the ethnic Indian and African residents speak French.

On the outskirts of capital of Port Louis, a project to build the Jinfei Smart City is underway, led by investment companies affiliated with the Chinese provincial government of Shanxi. A resort offering karaoke, a casino and other forms of entertainment will open in this October, according to a Chinese woman working for the project. The first phase of the project investment will total $1.5 billion, and its area will be 16 times that of the Tokyo Dome baseball park. There is a plan for Xi to visit the project.

Mauritius has seen a steep rise in imports of communications equipment and machinery from China in recent years. In 2015, China became the biggest exporter to the country, surpassing India, with which Mauritius has historically had close relations. This past April, Mauritius started talks with China for a free trade agreement. A Mauritius economic development official said the government aims to take advantage of such an agreement to turn the country into a trade hub for exports destined to Africa. The country is also in talks with India for a similar agreement.

There may be geopolitical motives behind China's overtures to Mauritius. To the east is Diego Garcia, a British Indian Ocean Territory and home to the U.S. Navy's largest military base in the Indian Ocean. The French navy has a base on Reunion Island, just west of Mauritius.

In Sri Lanka, an island country located off the southern tip of India at a crossroads in the Indian Ocean, opposition is rising to the 99-year lease of the southern port of Hambantota to a Chinese government-owned company, giving it control of the facility as collateral for debts owed to China.

To ease both domestic and international concerns that China may use the port for its navy, the Sri Lankan government has moved its navy ships to the port. But the fact remains that the Belt and Road Initiative is becoming a cause for concern in some areas, rather than being roundly welcomed.

This is the first part in a four-part series on the broad implications of China's Belt and Road initiative.

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