China's infrastructure projects and strategic implications

There is a lot of strategic implication in infrastructure projects that China gets itself involved in. I have yet to see a thread on this, so starting one now.

A lot of great stuff here on the silkroadbriefing web site, so I will start with the latest one.

In this case, China is leveraging its infrastructure building capability to link Kazakhstan and Uzbekistan to Japan, Korea and Southeast Asia. Aside from making money off transiting fees and port traffic, this makes countries around it even more dependent on China. I actually don't even know how Kazakhstan and uzebekistan did business with Japan/korea before. I'm assuming using rail to Persian Gulf and then shipping around Indian Ocean and then Malacca strait and then SCS before reach Japan. Now, most of the routes would be through China's territory.

note the commentary here about how Lianyungang allows Kazakhstan to deliver wheat faster to Vietnam than US or Australia. So, this route also allows China to help central Asian economy at the expense of Western economies.

And if you look at where the rail ends, it can easily be extended into Afghanistan, where they would be able to access that enormous mining resource.

Now of course, this route can also go through Caspian sea into edge of Europe.
The countries along this route are all neutral to friendly. Again, tremendous amount of leverage here for product from Uzbekistan and Caspian sea to get to Lianyungang all the way to north/south east Asia.

The importance of Azerbaijian and Georgia.
The 2 countries are an important part of the southern BR between Europe and China.

Azerbaijan-China bilateral trade reached US$2 billion in 2021, with China exporting Carbon-based Electronics, Broadcasting Equipment and Computers, and Azerbaijan exporting Crude Petroleum, Ethylene Polymers, and Propylene Polymers.

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Note here. If the Middle East/Africa oil/natural gas gets cut off, we already discussed China's ability to reduce oil consumption through EVs (transportation account for over 50% of total oil usage). We also discussed domestic production and pipelines. Here is another example of where they can easily get around things. By rail from Central Asia, they can directly import crude petroleum as well as industrial by product. If they are low on oil, they can ramp up carbon products. Keep in mind that they are able to import from all the central Asian countries.

This discusses the importance of Azerbaijian and Georgia as the middle ground in the transportation to Europe. Note, this is how you could bypass Russia to Europe given the current sanction. Given the current security concerns. China probably needs to work a lot with Turkey

Again note here, all this freight can eventually end up arriving at Lianyungang -> go to rest of Asia. All this dramatically shortens trade between Europe and Asia. Bypassing Suez Canal and Malacca straits.

here is a better illustration of the completed project. Note, how this route completely bypasses Russia.

A new central Asian corridor is on the table. It will link China with the very lucractive Afgahnistan mining sector. It will also further connect Uzebekistan and Kyrgyzstan to China
When extended further, this also connects Uzbekistan to ports of Pakistan.

Discussions about CKU has been ongoing for a while and things only seem to have picked up this year.
if we look at the map here, car route is extremely inefficient. Of course, it's also a lot more polluting and generally inefficient way of travel. The rail line will provide another link to Turkey through Azerbaijian. Looks like they are still figuring out the best route. As with other Central Asian countries, Uzebekistan exports a lot of gas to China. Aside from that, other top items are cotton, copper, Ethylene Polymers. Similarly, the top export items from Krygyzstan are metal ore, precious stones.

Where the rail network really gets into high gear are the lines to southeast Asia
A new line was launched this year linking Chongqing to Hanoi. Notice how this link can go through Kunming to reach Vietnam, Laos and Myanmar through rail or Singapore and Indonesia through the ports at Beibu Gulf like Beihai. This is linked all the way to those Central Asian rail that could reach Europe.

This was what was suggested when it was first created.
note the route to Europe (probably not through Russia) and the connection to Beihai as well as Shenzhen. I think Shanghai is probalby too far. Yunnan is quite important here. That allows that connection to Laos, which can then connect to Thailand. Of course, it also allows connection from Kunming to myanmar. This land sea corridor significantly strengthens the connection between the less developed Western China and ASEAN countries.

This link provides some other possibilityes of these links
For example, connecting Russia to Vietnam via Gansu, Qinghai and Yunnan. There is the G213 highway that reduced travel time by 5 hours (400 km).

An extension of NILSTC is the Western land-maritime corridor that links Beihai to Chongqing and all the way to Xinjiang.

The other interesting one is China through Uzebekistan to Arabian Gulf. What we have seen so far links Xinjiang to Iran and Afghanistan and Pakistan. There are numerous passes through these land locked nations. And of course, this also leads to Turkey and the Middle East.

tphuang said:

The importance of Azerbaijian and Georgia.

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And both are target for destabilization.

damn.

I talked about Afghanistan a lot, because they are potentially a solution to a lot of natural resources problem China has.
This article points out why Afghanistan is important

Afghanistan’s significant but largely unexploited mineral reserves are valued at an estimated

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. However, that estimate does not consider the extraordinarily high cost of accessing the reserves. A 2019 Afghan mining sector map

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that the country’s reserves include critical resources for the energy transition, like 2.3 billion metric tons (MTs) of iron ore, 30 million MTs of copper, and 1.4 million MTs of rare earth materials. The country is also believed to have

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stores of lithium, potentially rivaling those of

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, which currently has the world’s largest reserves.

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If we look at this , copper supply is spread around the world. China produces 8.5% of world's supply, but the largest suppliers are either in Western Hemisphere (Chile, Peru, Mexico) or US/Allies (US and Australia, Canada). A lot of vulnerability in a decoupling scenario.

That's still not bad compared to iron ore . Australia controls over half of the supply with Brazil controlling another 20%. This is a huge problem for China. I've even read online where some Australians are calling on using iron ore as a tool to control China. It's reasonable to assume that this is something that could be cut off.
In fact, China buys around 70% of the world's seaborne iron trade. That's a lot.

Australia has the world’s largest estimated reserves of iron ore with 52 billion tonnes, or 30 per cent of the world’s estimated 170 billion tonnes.

Australia is followed by Russia, with 25 billion tonnes (13 per cent), Brazil with 23 billion tonnes (12 per cent) and China, with 21 billion tonnes (but of substantially lower grade) of estimated iron ore reserves.

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So yes, while China can access its own supply and Russian supply in a decoupling event, it needs all the help it can get to replace Australian supply.

Afghanistan with its supply of iron, copper and Lithium could be a big part of China's strategy going forward.

Here is a recent article about how China is being active in Afghanistan, but nothing has really been signed yet. Without a more robust infrastructure, it would be hard to get mining operation setup and delivered to China.

It's interesting to see the discussions about building the infrastructure to Afghanistan through new road and rail. Back a year ago, this article described the options from China to Afghanistan by road. Looked like the road through Pakistan through Karakorum is the most promising by road.

However, a robust rail network from China through Krgystan, Uzbekistan into Afghanistan and eventually reaching Gwadar may be the best option. It would be more efficient than current freight operations. Note that along with rail, power lines could be extended to Afghanistan. All of which is needed to support a functioning Afghanistan government and large mining operation.

I will look at the Pakistan/CPEC angle of this in another post.

A direct freight rail from Xinjiang to Pakistan seems to not have taken off.
So this trans Afghan rail link is the most likely at the moment. This would allow China to directly access Pakistani ports through rail. Again, rail is just a lot more efficient than road transportation. Aside from increasing trade with Afghanistan, this rail line would push along CPEC.

Financial infrastructure is also a big deal. For the past few years, we've seen the expansion of Yuan in international trading. There are a lot of advantages in not using USD/EUR/GBP for foreign trade, since a lot of transaction costs are saved and you do not have to go through systems that are controlled by Western banks.

Here is a good article on how ASEAN countries are looking to increase direct local currency settlement trading with each other and with China. I can attest that when I'm in ASEAN countries, the exchange rates between local ASEAN countries always had much wider bid/ask spread than with USD. In fact, they are often so wide that it's less costly for me to first trade the local currency into USD and then exchange it to the other currency rather than a direct currency exchange. Having ASEAN countries + Russia using CNY and CIPS more often in their trading will be a huge deal in the future.

I've already speculated on the so called Petroyuan in the near future.

Now, China is informing Pakistan that it can pay them directly in RMB. While on the face this is to reduce the Pakistani burden, it is also in China's interest to have Pakistan trade with them directly in CNY

It's well known by now that Russia is increasingly utilizing CNY as its main trading currency since being cut off from USD/EUR. Even India is buying coal from Russia using CNY.

Given that China does a lot of trades with Africa, it should start establishing direct trading with African countries in CNY also.

Keep in mind that USD became the reserve currency of the world by being pegged to Gold. Even though Bretton woods agreement was destroyed in the 70s, USD remained the reserve currency. China has been silent about its gold purchases for a long time, but it has been buying Gold at a record pace recently.

Finance/banking is a big reason for China's promotion of BRICS. Getting these large non western economy to embrace not using USD is a big boost to the currencies/financial institutions of these countries. CNY will clearly be the big winner if BRICS countries actually start to trade with each other using their own currencies

Someone please talk about the new Fengtai Railway Station in Beijing. It is somewhat similar to the Berlin Hauptbahnhof for having two levels of platforms. But the one in Berlin separates tracks going different directions, while the one in Beijing separates HSR and conventional green-skinned passenger trains.

ChongqingHotPot92 said:

Someone please talk about the new Fengtai Railway Station in Beijing. It is somewhat similar to the Berlin Hauptbahnhof for having two levels of platforms. But the one in Berlin separates tracks going different directions, while the one in Beijing separates HSR and conventional green-skinned passenger trains.

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Not related to your topic but this does remind me of this really gargantuan railway station being constructed in Bangkok called the Bang Sue grand station.

It's got 4 levels including the underground, and the top platform has HSR, of which 1 line will eventually connect to the China-Laos HSR (Bangkok-Nong-Khai HSR jointly constructed between China and Thailand). And the plan is that Kunming will eventually connect all the way down south through Malaysia and terminate in Singapore. There's another HSR offshoot line going east towards the Cambodia border which is also a jointly built with Chinese construction companies.

Once built China will be the one operating the HSR line, at least initially. Anyway, this is just another example of China and ASEAN becoming increasingly intertwined.