Archive for the ‘China’ Category

Chinese stocks crash another 7% while World Bank warns of further possible shocks

January 7, 2016

European stock markets can be expected to decline another 2-3% today. The Chinese stock markets hit the automatic circuit breakers soon after they opened today when they dropped another 7%. The devaluation of the Chinese Yuan continues apace with a 0.5% drop, which is the largest single day drop since August when it was devalued 2%. The Shanghai composite index is now down at 3115, down from the high of 5000 it reached in June 2015. In the meantime Brent oil fell below $35 which is the lowest since 2004.

Back in August last year I expected market “bottom” to be when the SCI was less than 3200 and oil was around $30 per barrel.

So I’m looking for the SCI at or less than 3200 and oil prices of about $30/barrel to start getting bullish again. That will not be before November/December this year.

And until then its probably best to keep cash under the mattress.

Hopefully the bottom is not too far away.

sci jan 2016 graphic by bloomberg

sci jan 2016 graphic by bloomberg

In the meantime the World Bank has released its Global Economic Prospects for 2016. WB Global Economic Prospects January 2016

While the WB expects global growth to increase slightly from 2.4% in 2015 to 2.9%, it sees some major risks ahead. The nightmare scenario is if the economies of the BRICS countries decline simultaneously and that could spillover and cause a prolonged downturn globally.

The simultaneous slowing of four of the largest emerging markets—Brazil, Russia, China, and South Africa—poses the risk of spillover effects for the rest of the world economy. Global ripples from China’s slowdown are expected to be greatest but weak growth in Russia sets back activity in other countries in the region. Disappointing growth again in the largest emerging markets, if combined with new financial stress, could sharply reduce global growth in 2016. …….

…….. Specifically, a 1 percentage point decline in growth in BRICS is associated with a reduction in growth over the following two years by 0.8 percentage points in other emerging markets, 1.5 percentage points in frontier markets, and 0.4 percentage points in the global economy. Spillovers could be considerably larger if the growth slowdown in BRICS were combined with financial market turbulence.

The World Bank ends by advising developing economies to develop resilience – which may be easier said than done

In the current environment, developing countries need to brace for possible shocks by building resilience to risks to growth. Where they are able to boost government spending or lower interest rates, they can provide support to economic activity. They can further encourage investor confidence with reforms to governance, labor market functioning, and business environments. Measures to absorb young workers or to increase workforce participation will relieve demographic pressures in many countries.

Hopefully the stimulus that low oil price provides will be sufficient to prevent the nightmare scenario.

China has been burning more coal than reported – and any Paris “agreement” will have no significance

November 4, 2015

The NYT reports that in the last 10 years China has admitted it has been burning about 17% more coal than has been reported. The extra one billion tons burned every year is equivalent to what is consumed by Germany. But the global temperature (the satellite measurement based calculated temperature, not the calculated land based measurements which are fudged every year to keep cooling the past) has been flat for over 18 years. Antarctica is gaining ice mass. Ice cover in the Arctic is at the highest level for the last 10 years. Sea levels are not rising any faster than they have been for the last 500 years. Apart from shifting money between countries it is difficult to see what Paris is all about.

Irrespective of what Paris may “agree”, it will be non-binding and will allow India to treble its coal consumption and China to double its coal burn. Both will however “reduce” their carbon emission intensity per unit of GDP (how not?). Energy growth exceeds GDP growth at low levels of development (and fuels GDP growth) but then flattens out as the GDP increases. Thus reducing carbon emission intensity per unit of GDP is easy (and virtually impossible to avoid) when GDP is growing and development has reached the point where growth in electricity (or energy) consumption is lower than GDP growth.

energy to gdp growth as function of gdp

energy to gdp growth as function of gdp

The trebling and doubling respectively of India and China’s coal consumption over the next 20 or so years is an inevitability. Carbon emissions will follow no matter how they are packaged to seem to be “a reduction of emissions per unit of gdp”.

What European countries do to cut their fossil fuel use – and increase their electricity costs – is pointless and with no measurable objectives. European actions are no longer of any significance in terms of global emissions. Moreover nothing “agreed to” in Paris will give any measurable impact on any climate parameter over the next 50 years. The only measurable results of any Paris deal are the inputs – money flows between countries and the changes in fuel use. None of the desired “climate changes” are measurable. Truly policies without any measurable objectives.

china - revised coal consumption - graphic NYT

china – revised coal consumption – graphic NYT


China, the world’s leading emitter of greenhouse gases from coal, has been burning up to 17 percent more coal a year than the government previously disclosed, according to newly released data. The finding could complicate the already difficult efforts to limit global warming.

Even for a country of China’s size, the scale of the correction is immense. The sharp upward revision in official figures means that China has released much more carbon dioxide — almost a billion more tons a year according to initial calculations — than previously estimated.

The increase alone is greater than the whole German economy emits annually from fossil fuels.

India and China have already won and the Paris climate conference has become irrelevant

October 20, 2015
Paris conference

Paris conference

India and China have successfully managed to get the UN to focus on the intensity of emissions per unit of GDP and thus can make promises (not legally binding) about future emissions tied to GDP such that they will not be limited in their use of coal in any significant way.

The hype about the UN’s December climate meeting in Paris is gradually growing. Media, politically correct politicians and the global warming religion’s orthodoxy are winding up their rhetoric. Ostensibly the goal is to demonise carbon and to get nations to commit to reducing fossil fuel use such that the global temperature rise “will not exceed 2ºC”. This target of “allowable” temperature rise is not “2ºC caused by man” but just “2ºC”. Nobody actually knows what the rise by “natural causes” might be and what is caused by man. “Global temperature” itself is an artefact, a calculated quantity and calculated by those with a vested interest in showing that it is increasing. It seems that the calculation method is conveniently variable and is adjusted every year to show that the current year has demonstrated the highest ever temperature. Nevertheless the 5,000 participants and 190+ countries have effectively set themselves up to discuss commitments to stop climate change itself. The arrogance is astounding and worthy of King Cnut.

What effect man has actually had on climate is unknown. For almost 20 years now, man-made carbon dioxide emissions have been growing explosively but “global temperature” has paused. Those countries which have increased their own costs of electricity by reducing fossil fuel use (mainly in Europe) have effectively done it all quite uselessly and unnecessarily. Other countries (China and India in the main) have increased their use of fossil fuels such that global emissions of carbon dioxide have continued to grow. And yet there has been no change in “global temperature” except by arithmetical tricks. The last 3 decades of reducing fossil fuel use in Europe have been unnecessary. Three decades of subsidising renewable energy have still not made them commercial in their own right.

Climate policies are all policies where the objectives are not measurable. Policies are being proposed where the effect of the policies on climate itself cannot be measured. All that can be measured are the actions themselves which is both trivial and meaningless. For example countries can measure amounts of money spent but have no clue as to what the resultant effect on climate may be. Emissions reductions can be measured, but not the actual climate effects such reductions may have caused or not caused. For many delegates the purpose is not climate but the redistribution of wealth among nations where climate policy is the vehicle.

Ask a politician what his countries climate policies will achieve and the answer is that it will “contribute to the world’s efforts to stop climate change”. But by how much and how success can be measured are unknowns. It has become a matter of solidarity among nations not of policies with objectives. Not a single country (nor any politician nor any so-called climate scientist) has any inkling about what its climate policies will achieve for climate or even if it will achieve anything at all.

Some of the more savvy politicians and countries have figured out ways to seem to support political correctness while ensuring that their continued – and increasing – use of fossil fuels is not constrained in practice. For India and China the continued use of fossil fuels is critical and necessary for their growth. For the next 20  – 30 years, their carbon dioxide emissions are going to increase regardless of what the Paris meeting decides. India has proposed policies which seem – at first sight – to be drastic reductions in the “intensity of carbon dioxide emissions per unit of GDP” but defined in terms of growth such that coal consumption will have trebled in the next 25 years from 2005. India has now said it will cut emissions intensity by up to 25% of 2005 levels by 2020. China has also said it will reduce the intensity of carbon dioxide emissions per unit of GDP in 2020 by 40 to 45 percent compared with the level of 2005.

India’s GDP has grown from $0.8 trillion in 2005 to be about $2.1 trillion in 2014. China’s GDP has already grown from $2.3 trillion in 2005 to $10.3 trillion in 2014. These “promises” based on GDP are not even going to be legally binding  and there is certainly no cap to the GDP which can be aimed for or achieved. The GDP targets for India and China inherently require a mix of fuels to be used for electricity generation; coal, gas, nuclear and hydro primarily. Solar and wind power may have a large installed capacity and may contribute something to the growth but are not necessary or critical. The Indian and Chinese plans for using more gas and nuclear in their mix automatically brings down the carbon intensity per GDP from the levels of 2005 when both countries were heavily dependent on coal. Their coal plans can therefore proceed unimpeded while still meeting their “promises”. Both countries are relying on GDP growth to effectively reduce their “intensities of carbon emission” without having to reduce the rate at which they increase planned fossil fuel use or carbon dioxide emissions. Both India and China have reached the stage of development where electricity consumption growth is now lower than GDP growth. Both are at low levels of energy utilisation efficiency such that significant demand side improvements can be made. With around 7% growth in India and even with China reducing to, say, 6% growth, the reductions of intensity of carbon dioxide emissions per unit of GDP are impossible to prevent.

Any agreement in Paris will mean India trebling and China doubling its coal burn by 2030. And with “official” sanction to do so. So what “success” in Paris means is that global, man-made, carbon dioxide emissions are going to double (at least). And it also means that any carbon dioxide emission reductions promised by other countries are of no significance whatsoever. It is a very good thing that man-made, carbon dioxide emissions have no significant impact on global temperature.

And the Paris conference is both meaningless and irrelevant.

European nuclear moratoria are ineffective and counter-productive as China plans 110 nuclear plants by 2030

October 18, 2015

Update! Numbers have been corrected. By 2030 China plans 110 nuclear plants in operation which is another 60 reactors in addition to the 50 currently in operation or under construction. (I had earlier assumed that the plan was for 110 new reactors).

The European nuclear industry is almost dead as a consequence of,

  1. the ban on nuclear power in countries which have succumbed to environmental political correctness (e.g. Sweden, Germany…)
  2. the ridiculously long and costly permitting processes (environment and safety) in countries where nuclear power has not been banned (UK, Finland…)

As a contribution to the global use (or non-use) of nuclear power, the European reluctance to use nuclear power is entirely meaningless. For the objectives of killing the European nuclear industry and raising costs for electrical power in Europe, the anti-nuclear lobby has been entirely successful.

China currently has 23 nuclear plants in operation and 27 under construction which will be in operation by 2020. By 2020 the Chinese nuclear generating capacity will have almost tripled from the 21GW, 2014 level to be about 58GW in 2020. They have just announced their next five-year plan and some long-term strategies. Another $78 billion has been earmarked to reach 110 nuclear plants in operation by 2030. These plants will be built using indigenous Chinese technology. This technology is now available for export. It is being actively considered for projects in Pakistan and Argentina and now China is even a possible investor in the UK. Each Chinese nuclear plant has a capacity of about 1.1GW (1,100MW). At $78 billion for a further 60 plants, the investment cost planned is about $1200/kW. This is incredibly low, not just for nuclear plant, but for any type of power generating plant. Even assuming a volume effect, it can be expected that Chinese nuclear power plants could be exported at about $1,200-1500/kW.

The Hindu:

China plans to build 110 nuclear power plants by 2030 with an investment of over $78 billion overtaking the U.S. which has 100 such plants amid criticism that Beijing is yet to implement enough measures to develop safety controls in existing projects.

China will build six to eight nuclear power plants annually for the next five years and operate 110 plants by 2030 to meet the urgent need for clean energy, Beijing-based China Times quoted plan analysts as saying. China will invest 500 billion yuan ($78.8 billion) on domestically developed nuclear power plants, the report said. According to the China Times, the country plans to increase its electricity generation capacity to 58 gigawatts by 2020, three times the 2014 level. 

China currently has 23 nuclear power generating units in operation and 27 under construction, about one-third of the world’s unfinished nuclear units.

The construction resumed after the Chinese government which put the brakes on nuclear power plant approvals after the Fukushima nuclear accident in Japan in 2011 permitted their construction after a safety review.

nuclear sites in china (graphic

nuclear sites in china (graphic

In Europe the Olkiluoto #3 nuclear plant of 1,600MW in Finland, was first expected to cost about $2,000/kW, but with all the delays and cost overruns it is going to end up costing about $5,300/kW. Even if the unnecessary approvals and cost overruns incurred just to satisfy the environmental lobbies were not there, the investment cost for new nuclear capacity in Europe would still be about $2,600-3000/kW (compare that with about $1,100/kW for gas fired plant, about $2,500/kW for a coal or onshore wind plant and about $6,800/kW for offshore wind power).

As a comparison, India currently has 21 nuclear rectors in operation with a capacity just under 6GW. A further 6 reactors giving another 4 GW are under construction. The Indian plan is to reach about 63GW of nuclear capacity by 2032 which, of course, will not happen. My experience of Indian power planning is that about 60% of the plan will be implemented (though the track record is improving). So it is quite probable that India will construct around another 40 nuclear reactors (@800MW/reactor on average) by 2032. (In that period Indian coal consumption would also have trebled).

At the Chinese cost of exporting nuclear plant for around $1,200-1,500/kW, it is only to be expected that the electrification of Africa and nuclear expansion in S. Asia will be satisfied to a large extent by nuclear power.  A big chunk of that would be with Chinese technology. I have no doubt that European nuclear plants operate to much higher safety standards than the current Chinese reactors, but the European nuclear industry is now dead and it is Chinese nuclear technology which will be affordable and will prevail.

Considering the goals it was set out to achieve, the European anti-nuclear stance has been totally ineffective (except locally in Europe) and grossly counter-productive:

  1. it has no long-term impact on global use of nuclear energy,
  2. it has effectively killed the European nuclear power industry,
  3. it has effectively reduced the safety levels of all those nuclear plants that will be built over the next two decades, and
  4. it has increased the cost of electric power in Europe.

It is worth remembering that while the Great 2011 Earthquake and Tsunami killed some 18,000 people in Japan, the Fukushima accident it caused has killed no-one directly due to radiation. Now, less than 30 years after the major disaster at Chernobyl, the area is very far from being some nuclear waste-land, and plant and wild-life are thriving as never before in the region.

Chinese markets dive below ground “zero”

August 25, 2015

I thought that the “bottom” for the Shanghai Composite Index was at about 3100. Yesterday the SCI dropped below 3000.

SCI Aug 25th 2015 Yahoo

SCI Aug 25th 2015 Yahoo

I think Shanghai at 2950 is undervalued now, but I am no longer sanguine about when it might hit a floor and begin to bounce back. The speed of the decline in the last week indicates that even 2500 is not impossible. The risk is that it will drag the global markets down as well.

Perhaps the turnaround can only come when oil price has dropped to $30/barrel?

865,000 evacuated as Typhoon Chan-hom heads for landfall today

July 11, 2015

Close to a million people have been evacuated and almost 30,000 fishing boats have been recalled to port as Typhoon Chan-hom approaches Sheijiang on the East China coast.

CRIMore than 865,000 people in the eastern Chinese province of Zhejiang have been evacuated as super Typhoon Chan-Hom, the second typhoon to hit China in two days, approaches.

A total of 28,764 ships had been recalled to port as of 10 p.m., Friday, and several cities were already reporting heavy rain and strong gales, the provincial flood, typhoon and drought headquarters said.

The National Meteorological Center (NMC) issued a red alert, the highest level, on Friday morning for the super typhoon.

At 0900 local time on Saturday, the typhoon was around 115 kilometres southeast of Zhejiang province over the East China Sea and forecast to make landfall in Zhejiang on Saturday in the afternoon. It could be the most powerful typhoon to hit the area since 1949.

Image from Pacific Disaster Center:

Typhoon Chan-hom July 10th 2015

Typhoon Chan-hom July 10th 2015

Chinese crash gives new investing opportunity

July 9, 2015

The 2015 Chinese stock market crash has different drivers but resembles the 2007/2008 crash in investor behaviour.

Many domestic Chinese investors made a great deal of money with the recovery in late 2008/ early 2009. My guesstimate is that any real recovery from the current crash cannot come until the 6 month freeze just introduced on large stockholders selling shares is withdrawn. But since investing in the Chinese market is now possible through a variety of funds, there is an opportunity coming. My estimate is that the bottom is when the Shanghai Composite Index is driven down to about 3,100 at which point the market will be grossly undervalued. The opportunity will come in the subsequent “bull” market when stocks will be driven up into “overvalued” territory again.

I am a strong believer in “track record” and that past behavioural patterns repeat or, at least, change very slowly.

My investments are far too small to be of any significance in the big picture. My strategies are therefore all based on detecting and riding the waves of behaviour exhibited by others. And so I will be looking to making some investments in about 4 – 6 months with a target of 30-40% growth over the following 6 months.

China investing opportunity

China investing opportunity

Time to invest in fossil fuels as China discovers vast new reserves

April 21, 2015

There is a campaign in the western “do-gooding” and deluded “green” community (exemplified by The Guardian) to pressurise investors to disinvest from fossil fuels. Fortunately there is no shortage of investors in Asia who would be only too happy to see the European financial institutions and pension funds selling off their shares in oil, shale and coal producing and using companies. There are few better investments than snapping up artificially depressed energy shares. I am watching closely to pick up any bargains that might appear if this campaign has any impact. So far it has had little effect.

In the 1970s and 1980s the alarmist view was that coal, oil and gas would run out catastrophically. Now that peak-oil and peak-gas have been pushed out into the indeterminate future and further new shale reserves are found, the alarmism has shifted to the use of these resources being catastrophic! The campaign itself is rather idiotic (“leave it in the ground”) and counter-productive, since any success can only shift ownership of energy companies eastwards. Supposedly – but misguidedly – it is about climate but the campaign has no measurable or relevant objectives. (Note that no “climate policy”  ever has a climate parameter as an objective and which can be measured.) It will certainly not reduce the consumption of fossil fuels at all – which will instead continue to grow as developing countries develop. In fact the competitiveness of the fossil fuel using countries will be further emphasised as the “do-gooding” countries entrap themselves into a very high-cost electricity production regime based on intermittent solar and wind energy. (It is worth noting that Germany which has installed more renewable energy than any other European country now has an electricity cost which is the highest in Europe and more than twice that of the US. And yet Germany burned more coal last year than they have ever done! The German Energiwende has been a fiasco for all other than those who have milked the subsidies available)

There is – again fortunately – no prospect of India, China and other developing countries in Asia and Africa reducing their use of all the fossil fuels they have available. If I could I would be investing directly in coal and oil and natural gas and shale gas in India and China and Indonesia. At present I must satisfy myself with some indirect investment.

History will be contemptuous of the irrational demonisation of fossil fuels by the alarmists and the “do-gooders” during the late 20th and early 21st century.

Xinhua reports:

China continued to be increasingly successful at discovering crude oil and natural gas reserves last year, new data from the Ministry of Land and Resources indicated on Thursday.

The country discovered nearly 1.06 billion tonnes of new crude oil deposits in 2014, up from 1.1 billion tonnes the previous year, marking a stable increase and the eighth consecutive year in which the amount discovered surpassed 1 billion tonnes. More than 1.1 trillion cubic meters of new natural gas reserves were also discovered in 2014, a record high.

Of the new discoveries, 187 million tonnes of oil and 474.9 billion cubic meters of natural gas can be exploited with current technology, according to the ministry.

New shale gas reserves discovered amount to 106.75 billion cubic meters, with 26.69 billion exploitable.

This is the first time that proven reserves of shale gas have been publicized since the Chinese government approved the listing of shale gas as an independent mineral resource in 2011.

Discoveries of coal-bed methane, an unconventional gas, amounted to 60.2 billion cubic meters, up 155.3 percent year on year.

shale basins China (The Diplomat)

shale basins China (The Diplomat)

The Indian sub-continent too has large shale reserves waiting to be exploited. The shale basins extend into Pakistan and Bangladesh and offers Pakistan the possibility of actually becoming self-sufficient for energy.

shale gas basins India

shale gas basins India

Are Hong Kong demonstrations spontaneous or foreign financed?

October 6, 2014

After the US and Europe supported and financed demonstrations in Ukraine, one wonders if some of the US interest – and funding for “promoting democracy” – is now directed at China and its extremities.

Certainly in 2012, US government or government supported institutions spent quite a lot of money for promoting “democracy” in Hong Kong. The National Endowment for Democracy reports for 2012:

China (Hong Kong)

American Center for International Labor Solidarity
To continue to advance worker rights by building the capacity of democratic trade unions in Hong Kong. The Solidarity Center will work with its partners to advocate for collective bargaining rights, utilize local and international mechanisms to improve working conditions, and promote understanding of worker rights abuses and developments in China among the international labor movement and human rights community.

Hong Kong Human Rights Monitor
To raise the standards of human rights protection and democratic representation in Hong Kong. The Monitor will carry out human rights monitoring, casework, campaigning, and public education drawing local and international attention to civil rights and human rights developments in Hong Kong.

National Democratic Institute for International Affairs
To foster awareness regarding Hong Kong’s political institutions and constitutional reform process and to develop the capacity of citizens – particularly university students – to more effectively participate in the public debate on political reform, NDI will work with civil society organizations on parliamentary monitoring, a survey, and development of an Internet portal, allowing students and citizens to explore possible reforms leading to universal suffrage.

Grant descriptions are from the 2012 NED Annual Report.

The numbers for 2013 are not yet out but were probably over $1 Million compared to the c. $750,000 in 2012. It would have risen further in 2014.

The NED is said to be private but is funded by the US Congress.

The National Democratic Institute for International Affairs “is an organization created by the United States government by way of the National Endowment for Democracy to channel grants for furthering democracy in developing nations”- Wikipedia

The American Center for International Labor Solidarity better known as the Solidarity Centeris a non-profit organization affiliated with the AFL-CIO labor federation that serves as a conduit for US foreign aid.

The Hong Kong demonstrations may well have been spontaneous to some extent but they were also certainly not free of external support and funding and instigation. Clearly some substantial funds came through various US channels.

And I would not be at all surprised to learn that some EU and even some Japanese funds have been channeled into Hong Kong. But I am not so sure that using mob action to instigate change always leads to a promotion of democracy. A mob cannot be equated to being representative of the “will of the people”.


South East Asia vary of Chinese nationalism and a return of the Maritime Silk Road

September 22, 2014

The Chinese vision of a Maritime Silk Road is based on the seven great voyages of Admiral Zheng He in the time of the the Yongle Emperor (1360 – 1424), the third Emperor of the Ming dynasty.

The admiral of all seven fleets was Zheng He, the great-grandson of a Mongol warrior. His original name was Ma Ho, the Chinese version of Muhammad, for his father was a Muslim who had made the pilgrimage to Makkah. In 1404, the emperor conferred on him the honorific Zheng, and he was appointed Grand Eunuch, thenceforth to be known as Zheng He. ….

From the point of view of geographical discovery, the Ming voyages must rank as the earliest state-sponsored effort to seek out new lands, markets and spheres of political influence. That the same idea occurred to the rulers of both the Far East and the “Far West” almost simultaneously is intriguing, and it shows that—long before the emergence of a “global economy” in the late 20th century—East and West were responding to the same rhythms of political and economic change.

Zheng He 7 voyages - National Geographic

Zheng He 7 voyages – National Geographic

The reestablishment of the Chinese Maritime Silk Road is said to be a pet project of President Xi Jinping who is a scholar of Chinese maritime history and an admirer of Admiral Zheng He. Even before the Ming dynasty there was extensive maritime and cultural commerce between South India and China during the Song and Yuan dynasties. But the maritime routes withered after Zheng He and left the area open for the Potuguese in the 16th century and later for the French, Dutch and the British who followed. The Maritime Silk Road was among the items to be discussed by President Xi with Narendra Modi on his recent visit to India.

New Delhi is abuzz with speculation that President Xi Jinping could raise the issue of Maritime Silk Road (MSR) during his visit to India this week and explore business, investments and trade opportunities for China in India. At least three reasons can be identified to uphold the above assumption; first, the issue of MSR was raised during President Hamid Ansari’s visit to China in July this year and the Indian side had indicated that New Delhi would examine the idea. The Chinese would be keen for a response from the Indian side and India may push for the BCIM (Bangladesh, China, India and Myanmar) corridor to which it has offered wholehearted support and it serves the interests of all the partners.

The second reason is that the MSR is a pet project of the Chinese President and is believed to have been driven by his knowledge of ancient Chinese cultural and trade connections with the outside world. Apparently, between 1985 and 2002, Xi had personally taken interest in the Quanzhou Maritime Museum, and according to the curator, Xi had perused through the ancient historical records, artifacts and exhibits at the museum and may have ‘learnt a lot about China’s maritime history’ which could have been the driver for his interest in MSR. Xi even secured substantial government grants for the museum. Incidentally, Quanzhou is home to several ancient shrines and temples built by Tamil communities who had established trading contacts with the Chinese during the Song (960-1279) and Yuan (1279-1368) periods. Given his knowledge of ancient maritime trade and cultural connections between India and China, Xi may recall the cultural and Buddhist connections between the two countries. It is pertinent to mention that China has committed US $1 million for the Nalanda University.

While India is not averse to some parts of the Maritime Silk Road being reestablished, others – and especially Vietnam – are very suspicious of Chinese intentions.

Maritime Silk Route

Maritime Silk Route

Most countries have maritime disputes with China in the South China Sea, but also see a threat to liberty, security and maritime safety at sea.

The restoration of “Silk Road on the Sea” is both an ancient ambition of the leaders in Beijing, and a symbol of Chinese nationalism. So it hides a lot under what seems beneficial to the surrounding neighbors of China. The essence of Chinese intentions in the idea of ​​building “new silk road” at sea are:

Firstly , create a new order in which coastal neighbors follow a trajectory operated and dominated by the Chinese. The “Silk Road on the Sea” is part of the  “string of pearls” master plan to transform China into a maritime power and compete with American superpower.

Secondly , “Silk Road on the Sea” is a diplomatic tool to execute foreign policy with China’s neighbors. Through the use of “Silk Road on the Sea”, the Chinese are trying to create a soft image, useful for the rise and expansion of its influence.

Thirdly , “Silk Road on the Sea” provides an opportunity for China to promote its policy of “setting aside dispute and pursuing joint development” so as to exploit marine resources in the region, especially energy resources of oil and gas. 

Fourth , the initiative “Silk Road on the Sea” is to further the territorial claims on islands by China. Successful implementation of the initiative “Silk Road on the Sea” will create conditions favorable for the presence of the Chinese coast guard  especially the South China Sea, the Strait Malacca, Indian Ocean, and help to expand Chinese maritime influence and enhance the influence of its military on the sea. … As with ancient Zheng He’s voyage the objective is “to establish and enforce sovereignty “over the Paracels and Spratlys (of Vietnam). To justify its claims to sovereignty. China will continue to use the “Silk Road on the Sea” for aggressive actions in the South China Sea make the situation hotter and more physical.

Fifth , China will use initiative “Silk Road on the Sea” to implement a divide and rule policy of the neighboring countries. There may be the possibility that some countries will be attracted to the immediate economic benefits, are willing to overlook the problem rules and norms of international law to support the initiative “Silk Road of the Sea ​​”of China that will harm the interests of the country which has sovereignty disputes with China over some island. On the other hand, this does not exclude the possibility that China will increase the pressure and aggression with countries that do not support the initiative “Silk Road on the Sea”.

Sixth , the initiative “Silk Road on the Sea” also aims to push the United States and the Western countries out of the area. This initiative is important in order for the policy to “rebalancing strategy in Asia – Pacific region” of America. On the economic front, “Silk Road on the Sea” is to fight Agreement Trans-Pacific economy (TPP) of the United States. Thus, one can see “Silk Road on the Sea” China will make competition between the United States and China increasingly fierce.

Once the “Silk Road on the Sea” is formed China will set out new rules to force other countries to comply; China will act unilaterally ignore international law. The actual situation in the South China Sea has proven time over this. Seen from this perspective, the “Silk Road on the Sea” is not only a threat to the security and territorial sovereignty of neighboring countries, especially countries with maritime disputes with China in the South East, but also a threat to freedom, security and safety of navigation at sea.

China has officially put the materials to build the concept of “Silk Road on the sea at a meeting of Senior Officials (SOM) ASEAN – China. ASEAN countries have not yet responded. …..

For Vietnam, the initiative “Silk Road on the Sea” is a challenge to the sovereignty of the islands of Vietnam just as Zheng’s ships in ancient times were used as an argument concerning the sovereignty of archipelagos Sa and Truong Sa of Vietnam.

But Malaysia, while still vary, is tempted by the possibilities of development on the relatively under-developed East coast in Kuantan.

More than 600 years ago, the legendary Ming Dynasty diplomat Admiral Zheng He made seven epic journeys to the West via a route known as the maritime Silk Road.

First used in the Qin and Han Dynasties (AD 25-220), the nautical passageway connected the ports of south China to Southeast Asia, India, Arabia and Africa. Silk, china, tea and spices exchanged hands from Guangzhou, the starting point, to the countries around the Gulf. 

Now, China is proposing to rebuild this centuries-old seaway into a 21st century maritime Silk Road. Kuantan, on the east coast of Peninsular Malaysia, is hoping that modern day Chinese vessels will share Zheng’s assessment when he landed here in the 15th century: that this city facing the South China Sea is an ideal gateway to the region and beyond.

Located 250 kilometers from the capital city of Kuala Lumpur, Kuantan is the east coast’s economic hub and its most modern city; although by no means as cosmopolitan as its west coast sisters. The capital of the state of Pahang is being developed into an integrated logistics and industrial hub for the East Coast Economic Region (ECER), a major project by the Malaysian government to decentralize economic activities.

Crucially, it provides fast access to China through its namesake port. The multipurpose, deep-sea port serves the resource-rich hinterland of the east coast and is a leading petrochemical hub port and container terminal for that part of the peninsula.

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