China’s involvement in the development of the Mekong

Deng Xiaoping’s “Southern Tour” of China in 1992 reportedly triggered the Chinese action plans for expanding the rapid economic growth from coastal regions to inland and border provinces.30 This economic adjustment has since seen China becoming ever more committed to connecting its southern border districts with the Mekong Subregion. Its first move was in 1992, when Yunnan Province joined the other five countries in setting up the GMS Economic Cooperation Program under the supervision of the Asian Development Bank (ADB). In 2004, Beijing successfully managed to get its Guangxi Zhuang Autonomous Region, another rural province in South China, included in the GMS framework.

Through Yunnan and Guangxi, China could directly interact with Cambodia, Lao PDR, Myanmar, Thailand, and Vietnam on various cross-border infrastructure projects under the GMS framework.

Not coincidently, a central focus of the GMS framework has been the construction of cross-border transportation networks in the region. Some of the key projects in this regard include the North-South Economic Corridor (NSEC), the East-West Economic Corridor (EWEC), and the Southern Economic Corridor (SEC).31 Among those completed is the Phnom Penh-Ho Chi Minh City Highway Project approved in 1998 and finished in 2006. This project was largely financed by the ADB which granted Cambodia a low-interest loan of US$40 million and Vietnam one of USS 100 million.32

In addition to the GMS, China also tries to implement its Mekong strategy' through linking up with the AMBDC. Established in 1996, the AMBDC cooperation scheme is also aimed at promoting economic growth by strengthening physical connections within and between the countries involved. Accordingly, the cornerstone of the AMBDC infrastructure project is the Singapore-Kunming Rail Link (SKRL), which also plays a crucially supportive role in the GMS “North-South Economic Corridor” (NSEC). Furthermore, since the AMBDC is composed of 11 member states, 10 ASEAN countries plus China, its cooperation framework has been aimed at attracting continued comprehensive Chinese support for greater integration of physical infrastructure and human capital in the region. The GMS and the AMBDC thus share a common objective of promoting closer interconnections for greater economic growth in their member states.

China of course has its own priorities on its engagement with the GMS and the ASEAN. One of them is to help some of its still underdeveloped rural provinces get out of poverty through tapping their renewable energy sources, and in turn satisfying the country’s ever-growing energy demands. Driven by this pragmatic consideration, in 2004 China established the Regional Power Trade Coordination Committee (Rl’TCC) in Guangxi Autonomous Region, which is under the administration of the GMS Intergovernmental Agreement on Regional Power Trade (IGA) signed in 2002. Beijing meanwhile designated the state-owned China Southern Power Grid Co. (CSG) to participate in the planning and implementation of regionally proposed power trade projects.33 China’s intention was further complemented by the agreement reached at the 5th Meeting of the Planning Working Group (PWG-5) of RPTCC in 2008, which commissioned CSG to take charge of some hydroelectric projects across the Mekong region. These included the Nam Ou Hydropower Station in Laos, the Sambor and Stung Chay Areng Hydropower Projects in Cambodia, and the Ta Sang Hydro-Electric Plant on the Thalwan River in Myanmar.34

From a broader prospective, CSG’s direct involvement in hydropower projects overseen by the Rl’TCC provides Beijing with a channel to perform economic diplomacy towards the Mekong countries, which often features the participation of state-owned/backed enterprises and the offering of low-interest loans. These measures facilitate direct economic linkages between recipient states and China, which in return better serve its own domestic development needs.3’’ Specifically, to help CSG and other similar companies expand their business in the Mekong Subregion, China has developed the “Build-Own-Operate-Transfer” scheme (BOOT).36 Participating companies are typically offered financial assistance with the initial development costs of their contracted hydropower projects. A commonly cited reason for this generous offer is that the BOOT scheme requires participating companies to hand over the ownership of what they build to the host countries in 25 years. During the allowed time, however, these Chinese state-backed companies not only operate and maintain hydropower facilities, but also strongly influence regional electricity trade. Carrying such a great clout, they can surely make China a major export destination of hydroelectric energy, which is expected by Beijing in the first place. The Mekong countries for their part seem to welcome this arrangement, primarily because the “generous” scheme makes their own hydro development affordable and therefore achievable. As a result, few in the region are raising the alarm about the potential of becoming overly dependent on China for economic growth. 37

China’s “generous” assistance to the Mekong Subregion, as mentioned earlier, has not been confined to hydro development. Determined to close its rural-urban economic gaps, China has also invested heavily in building an infrastructure network to better connect its border provinces with the Subregion countries and other ASEAN member states.38 A good case in point is the SKRL Project, which the AMBDC announced in 1995 and has been continuing to highlight since its 7th Ministerial Meeting in 2005.39 As suggested by its increasingly popular byname, the Pan Asian Railway Network, the SKRL will connect China, Singapore, and all the countries of mainland Southeast Asia. Yet given that the costs have to be shouldered nationally, and given that technological systems vary across the region, the SKRL Project has been progressing slowly. It has also had to battle, virtually from day one, with the near-constant doubt and scepticism about its eventual profitability. Yet China ploughs on. Not only does its investment in the SKRL network across the region continue to grow, but it has finished the construction of the Yuxi-Mengzi segment on its side of the border.40 Since coming into operation in late 2012, this 141-kilo-metre train route , has made it much easier and faster to travel between Kunming, the capital city of Yunnan, and the town of Hekou on China’s border with Vietnam.

More importantly, Beijing expects that the Kunming to Hekou rail line will help accelerate the development progress of other sections of the SKRL. China’s keenness may be explained by the fact that when completed, the rail network will have the northern terminus of all its three main routes in Kunming.41 Needless to say, the SKRL will allow for freer and greater cross-border movement of people and goods, likely accompanied with growing demand for complementary businesses and services.42 To a great extent, this is already happening, and China has also begun to reap the rewards of its linkages with ASEAN through the AMBDC.

To maximise its benefits from the Subregion economic integration and infrastructure connectivity, and to minimise uncertainty, Beijing has placed considerable emphasis on the Japan-China Policy Dialogue on the Mekong Region since its first session in 2008. The two leading Asian powers established the platform to discuss their respective concerns on trade, investment, and development in the

Mekong Subregion.43 The Dialogue, however, has yet to achieve any meaningful collaborative result. In other words, constant diplomatic frictions between the two countries across Asia have rendered it practically impossible for China to score, through the Dialogue, bilateral endorsement of its strategic objectives in the development of the Mekong. Amid the Dialogue, for example, Japan categorised China as a threat in its 2011 Defense White Paper. Then, in 2012, the Tokyo Governor proposed that his prefecture “buy” the Senkaku/Diaoyu Islands. China meanwhile self-announced its establishment of the East China Sea Air Defense Identification Zone (ADIZ) in 2013.44

Further complicating the situation, the US launched its Lower Mekong Initiative in July 2009. Whether or not it is meant to balance China’s rapidly ascending influence in the development of the Subregion, the Initiative expresses the US’s intention to be also involved in infrastructure projects in the Mekong countries. The LMI also envisions a partnership with the region to overcome challenges faced by locals but unattended by Beijing, such as strengthening public health, environmental protection, sustainable energy technologies, implementing good governance, and community building. Yet a more fundamental motivation behind the US “Pivot to Asia” project is to rebalance China’s growing leverage in shaping the geopolitical and geoeconomic landscape of Asia.45

Not surprisingly, China has not taken the strategic challenge as a stop sign, but strived to meet it with determined but not confrontational responses.46 Since a key premise of the US “pivot” to the Mekong Subregion is that China’s contributions and commitments remain insufficient, China intensified its engagement with ASEAN by creating the Lancang-Mekong Cooperation mechanism in 20 1 5.47 Under this regional framework, Chinese leaders host regular meetings with their counterparts in the Mekong countries about China’s pledged support for and participation in ever more projects in the areas of water resource research/management, physical connectivity, industrial capacity, border trade, agriculture, and poverty alleviation.48 Since five of its six participating states are also members of ASEAN, the LMC may be viewed as a regional cooperation pillar in parallel with the Southeast Asian Association. Yet, since one of its primary purposes is infrastructure development in the Subregion, the LMC does not hesitate to subscribe to the Master Plan on ASEAN Connectivity (MPAC). China supports the Master Plan particularly because it embraces not only the ASEAN Highway Network, but also the SKRL network as two flagship infrastructure projects. Another pragmatic calculation behind Beijing’s approval of the MPAC is that it allows China to carry forward its earlier commitment under the GMS and AMBDC frameworks. Finally, linking up the LMC scheme with the ASEAN Connectivity endeavour may empower the China-sponsored Asian Infrastructure Investment Bank (AIIB) to redraw the regional and global financial maps.

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