How Is China’s Maritime Silk Road Faring?

In last month’s magazine, I looked at the progress on China’s Silk Road Economic Belt three years after President Xi Jinping introduced the concept. This month marks another anniversary: three years since Xi unveiled the idea of the 21st Century Maritime Silk Road (MSR) during remarks at the People’s Representative Council of Indonesia on October 3, 2013.

The initial concept of the MSR focused closely on cooperation between China and ASEAN -- thus the choice of Jakarta, home to the ASEAN Secretariat, as the venue for Xi’s speech. After identifying Southeast Asia as “an important hub along the ancient Maritime Silk Road,” Xi pledged to “develop maritime partnership [with ASEAN] in a joint effort to build the Maritime Silk Road of the 21st century.”

Ironically, though, the MSR has faced some of its greatest hurdles in Southeast Asia, while flourishing father from China’s borders. In this, it’s the mirror image of its overland twin, the Silk Road Economic Belt, which (as I discussed last month) have found more willing partners in close proximity to China.

Southeast Asia

The vision for a Kunming-Singapore high-speed railway network, linking China’s Yunnan Province to Laos, Thailand, Myanmar, Malaysia, and Singapore is a case study in the difficulties facing China’s MSR in Southeast Asia. China is hoping not only to build maritime infrastructure in ASEAN member states, but also to construct the necessary overland infrastructure – in this case, railways – to connect with Southeast Asian ports. Yet the Kunming-Singapore railway has hit high-profile snags in nearly every country along its route.

Laos, the first country on the route outside of China, held the groundbreaking ceremony for its $7 billion leg of the railway in December 2015. However, as of July 2016, construction still had not begun. Laos has said that the delay is due to the need to complete environmental and social impact studies, but there is concern Laos may drop out of the project altogether due to financial concerns.

Thailand has already done just that – Bangkok canceled its deal for China to construct a high-speed rail (HSR) linking Bangkok to Nakhon Ratchasima, citing concerns with financing arrangements. Adding insult to injury, Thailand awarded a separate HSR contract, for a route linking Bangkok to Chiang Mai, to a Japanese company in 2015. There was renewed hope in late September 2016, though, with China and Thailand reaching an agreement to let construction proceed -- at a discounted price for Bangkok.

Myanmar, meanwhile, canceled its portion of the HSR project back in 2014, as the then-Thein Sein government walked back high-profile agreements with China in response to public opposition.

Despite a poor track record in Southeast Asia over the past few years, China Railway Group is still hoping to win a deal to construct a HSR linking Malaysia and Singapore. If successful, China will have concrete plans for the beginning and end of the Kunming-Singapore link, but the crucial connections on the Indo-China peninsula remain very much in doubt.

A similar story has unfolded in Indonesia, where China beat out Japan for a contract to fund a $5 billion HSR project running from Jakarta to Bandung. The groundbreaking was held in January but there has been no “notable construction” since then, according to the Jakarta Post. That’s due in part to a new plan calling for a wider track, which will increase the price by an as-yet undisclosed amount.

Indonesia in general has had some reservations about the MSR – surprisingly so, considering that it was the site of Xi’s speech unveiling the concept. There are some obvious synergies between the MSR and President Joko Widodo’s global maritime fulcrum strategy – namely, Indonesia wants to build ports and China wants to fund them – but Beijing has yet to capitalize on such similarities. Indonesia, like many ASEAN members, is wary of the potential downsides of increasing Chinese influence in the region. Though not a claimant in the bitter South China Sea disputes, Jakarta has seen several recent clashes with Chinese fishermen intruding into its exclusive economic zone near the Natuna Islands – an area China claims as its “traditional fishing grounds.”

Vietnam, which has directly competing territorial claims with China in the South China Sea, is even more wary of the MSR’s implications. Despite Hanoi being included as a stop on every official map of the “Belt and Road” published to date, Vietnam and China have yet to sign any large-scale deals signaling cooperation on the initiative. Vietnam’s long standing concern over Chinese influence has been exacerbated by recent flare-ups in the South China Sea disputes. With its leadership increasingly criticized as being “soft” on China by the public, Hanoi can ill afford to be seen as cozying up to Beijing.

Instead, the crown jewel of the MSR in Southeast Asia so far is the ambitious Malacca Gateway Project in Malaysia, which will see $10 billion in Chinese investment. Launched in February, the project calls for the construction of a deepwater seaport, which both China and Malaysia hope will compete with Singapore for shipping traffic transiting the Malacca Straits. Slated for completion in 2025, it will be the “largest port in the region,” according to Malaysian Transport Minister Datuk Seri Liow Tiong Lai. However, the Malacca Gateway Project is far larger than just a port; the full project will span 246 hectares divided into “12 precincts, including residential, commercial, cultural, entertainment and lifestyle elements,” according to Malaysia’s The Star.

That blueprint will look familiar to those acquainted with China’s MSR projects elsewhere in Asia, particularly Colombo Port City in Sri Lanka.

South Asia

The $1.4 billion Colombo Port City project will see China construct not only a port but a “mini city” on the outskirts of Colombo, Sri Lanka. As a sign of the importance Beijing places on the project, Xi himself, along with then-Sri Lankan President Mahinda Rajapaksa, attended the groundbreaking ceremony in September 2014.

However, Port City ran into trouble with the election of Maithripala Sirisena as president just four months later. Sirisena had run, in part, on a promise to rethink massive Chinese investment in the country; accordingly, Sri Lanka’s new government suspended the project in March 2015. The delay proved short-lived, though, with the Sirisena administration allowing land reclamation to proceed again in March 2016 -- after strong protests from China and the threat of a lawsuit from China Communication Construction Company (CCCC), the company behind the project. For now Colombo Port City is progressing as planned, albeit behind schedule. However, if the Hambantota deep sea port in Sri Lanka is any example, the port city’s fate will continue to be complicated.

Like several other projects now included in the Belt and Road, Hambantota predates the official MSR rollout. In fact, phase one of the $1.4 billion port project opened in 2010, before Xi even assumed China’s highest office. But today the port remains seriously underused and critics have derided the project as unnecessary source of debt for Sri Lanka – although that hasn’t stopped construction on phase two from beginning. There is one caveat, however. To reassure India, which has serious concerns about a Chinese foothold so close to Indian shores, Sri Lanka has insisted that Hambantota’s port will not be managed by China.

India, indeed, is the X-factor in all of China’s MSR deals in the Indian Ocean region. New Delhi itself views the project with suspicion, believing that the civilian port infrastructure will inevitably be used by the Chinese military as well. Not only has India shown little interest in joining the MSR, but the Modi government has leaned heavily on its neighbors, including Sri Lanka and Bangladesh, to limit their participation as well.

In Bangladesh, for instance, China is interested in undertaking the expansion of Chittagong into a deepwater port. That is far from guaranteed, however; Beijing has already seen one port contract with Bangladesh in Cox’s Bazaar canceled (while Japan was awarded a separate deal for a nearby port). Similarly, China’s bid to build a port at Payra in Bangladesh faces stiff competition from India, with Dhaka not eager to embrace Chinese investment at India’s expense.

The upshot is that Pakistan’s Gwadar port remains the most promising MSR project in South Asia (though, as I discussed last month, connectivity with China and beyond will be an issue due to security concerns). Gwadar port was officially leased to China for 43 years in 2015; currently China is working on expanding the port as well as constructing a Special Economic Zone nearby.

Africa

China has had considerably more luck bringing the MSR to the western edge of the Indian Ocean – east Africa.

In Kenya, China is constructing and largely funding a $3.4 billion railway to link Mombasa, home to east Africa’s busiest port, with Nairobi. Beijing, according to Kenya’s The Star, also has plans to build a new port at Kisumu at an estimated cost of $140 million.

Farther north, China is also building a $1.1 billion railroad linking Sudan’s capital, Khartoum, to Port Sudan. While not port infrastructure per se, these railroads will make the existing ports of Mombasa and Port Sudan more commercially viable by linking maritime hubs to inland capitals. 

Perhaps China’s highest profile engagement with Africa is in Djibouti, where construction has already begun on China’s first ever overseas military logistics facility. While Djibouti was long rumored to be a desired site for a Chinese naval base, the deal was only officially announced earlier this year.

However, in the media blitz that followed, one crucial detail often went overlooked: the naval facilities being built are envisioned for dual use, meaning China is increasing its military and economic presence in the Horn of Africa in one fell swoop. Alongside the new naval base, China also plans to open a free trade zone, so that the project in Djibouti could wind up looking quite similar to the Malacca Gateway Project and Colombo Port City, with the notable exception that Djibouti is overtly designed for military purposes as well. These similarities will only stoke fears – particularly in India – that Chinese investments elsewhere are merely a cover for construction of military facilities.

Maritime facilities – military, civilian, or both – in Djibouti will provide China with access to the Red Sea. From there, the MSR will need to transit through the Suez Canal to Europe, making Egypt one of the few truly indispensable partners for the ambitious initiative. Fortunately for Beijing, it has found a more than willing partner in Cairo. Egypt has been actively wooing more Chinese involvement, including investment in the expansion of the Suez Canal.

China’s interest in Egypt’s Suez Gulf Special Economic Zone dates back to 2000, when then-President Jiang Zemin visited the country. The project gained new life as part of the MSR, with Suez providing the crucial maritime link between Africa, the Middle East, and Europe. Accordingly, China’s plans for the China-Egypt Suez Economic and Trade Cooperation Zone have been drastically scaled up – the current plans call for a staggering $2 trillion in ultimate investment.

Europe

After making its way through the Suez Canal, the MSR will have arrived at its ultimate destination: the Mediterranean Sea and Europe. Here, too, China has found itself a foothold. In April, Athens signed a deal to sell control of Piraeus port to China Cosco Holding Co., which has plans to invest over $550 million in the Greek port over the next five years. With Greece still mired in an ongoing debt crisis, the influx of extra cash was welcomed by Greek Prime Minister Alexis Tsipras, who embraced his country’s position as “the first stop in China’s way to Europe” during a visit to Shanghai this summer.

Meanwhile, Italy is also seeking its share of Chinese investment. Chinese companies already own stakes in two Italian ports, at Genoa and Naples, and Italy is looking for more. In July 2015, the Italian foreign minister hosted a delegation of Chinese officials and businesspeople in Venice, the historical European gateway to the Silk Road. The implication was clear: Venice – and Italy as a whole – wants in on the money flowing along the updated MSR. Venice is seeking international investment for a major port expansion; Beijing is a natural source of funds, given its largesse in other ports along the MSR.

“The Chinese have been in Athens for a while; In Istanbul they have recently signed; now it is the turn of Venice,” Pablo Costa, the president of Venice’s port, proclaimed during a visit to China in late 2015.

In Europe, as elsewhere, China’s port investments have sparked fears that a growing Chinese naval presence will follow close behind. But so far, at least in Greece and Italy, the quest for investment has outweighed these security concerns. Rather it’s China’s nearest neighbors – India in particular, and to some extent Southeast Asian states like Vietnam – who are reluctant to take part.

It seems states closer to China’s shores, those that have already experienced the impact of a growing Chinese maritime presence, are thinking twice about the security implications rather than embracing the economic gains. That means the MSR is currently missing important links close to home, even as it notches gains in faraway oceans.