China’s “Going Global Strategy,” launched in 1999 to encourage Chinese investment abroad, has boosted Chinese overseas investment and lending. Since then, China has become one of the country’s largest creditors. China began allocating nominal sums for grant assistance. However, in 2016, China emerged as one of the largest donors to international development assistance, accepting the part of grant-based foreign aid engagement with developing countries. China’s lending abroad policy typically involves relatively high interest rates and short maturities, in contrast to the mostly concessional lending terms of other official lenders such as the World Bank, IMF or OECD governments. For the 50 most indebted recipients (located in low- and middle-income economies) of Chinese direct lending, the average stock of debt owed to China has increased from less than 1% of GDP in 2005 to more than 15% of debtor country GDP in 2017. For these countries, debt to China now accounts to 40% of external debt, on average.
China is pursuing “debt-trap diplomacy,” which involves luring poor, developing nations into agreeing on unsustainable loans to follow infrastructure projects. When they face financial difficulties, Beijing can seize the asset, thereby expanding its strategic or military reach. China lends money to countries, which must surrender control of vital assets if they cannot repay their debts. Sri Lanka is a good example of debt-trap, having taken significant credit for a large port project in Hambantota with Chinese investment years ago. In July 2017, Sri Lankan government and CMPort entered into a lease agreement, which saw the port leased for $1.1 billion, which Sri Lanka used to pay down other debts and increase foreign reserves. In exchange for debt relief, China offered to help. No right of the port was transferred, and no debts were forgiven. Colombo was provided with liquidity to repay Western creditors; the obligation to China remained the same as reported by Chatham House.
The researchers at AidData research lab developed a global dataset on China’s official development spending from 2000 to 2014. It has identified more than $350 billion in Chinese foreign aid and other forms of state financing through a thorough search of official public sources and verified by media and other additional sources. In official debt statistics, half of China’s lending to developing countries is not recorded (hidden debts). It is frequently kept off government balance sheets, rather than going directly from the government to the government, and directed to state-owned businesses and banks, joint ventures, or private institutions. Sebastian Horn, Carmen M. Reinhart, Christoph Trebesch at the US National Bureau of Economic Research went further and developed dataset spanning from 1949 until 2017, and covers a total of 1,974 Chinese loans and 2,947 Chinese grants to 152 emerging or developing countries, with total commitments of 520 billion US$. The Chinese loan projects do usually share some key characteristics:
(2) A typical “No Paris Club” clause is present in the Chinese contract sample and are found in 43% of China Development Bank and 81% of Exim bank projects contracts;
(3) Collateral or security clauses to ensure that the lender has cash available in the event of default. Security arrangements are used in 75% of China Development Bank’s and 22% of Exim Bank’s contracts, whereas only 7% of OECD bilateral creditors and 1% of multilateral creditors set do so.
(4) Escrow or special accounts are used to secure repayment and are used by Chinese state-owned banks; Throughout the life of the loan, sovereign borrowers agree to maintain and fund bank accounts at the lending institution or at a bank “acceptable to the lender,” as well as route project revenues and cash flows through these accounts that are unrelated to the project funded by the loan; (5) Cross-default clauses are present in 100% of China Development Bank’s and Exim Bank contracts, “When the debtor defaults on its obligation to Creditor B, a cross-default clause allows Creditor A to pressure the debtor and protect its claim priority. If the debtor misses a payment to B, both A and B would have the ability to demand entire loan and accumulated interest repayment at the same time under a creditor-friendly version of the clause. A creditor may retain the right to cancel the loan and demand immediate repayment under various circumstances, including political and economic developments not directly connected to the lending relationship. Once the contracts are signed, the debtor’s exit options are very limited”.
After the Central Asian republics gained independence in 1991, the countries began to diversifying their infrastructure-based project by receiving grants and loans and external debts from international financial institutions as well as China; Each country of the Central Asian region total external debt had risen, making China the largest creditor in Asia: for example, Kyrgyzstan – 1.7 billion (40% of the total); Tajikistan – 1.2 billion (48 per cent of the total); Why is it easier and faster to get credit from China? A former president of Kazakhstan said: “China doesn’t dictate how we should live compared to Western creditors? What structural changes must be made before the Chinese credit becomes available? We will help you to become like us, China”.
However, China does impose some conditions on Central Asian countries: the recipient nations should only use Chinese equipment types, and labor for infrastructure projects should also come from China. Conditionalities work and they provide Chinese banks and companies such as Tebian Electric Apparatus (TBEA), China Road and Bridge Corporation (CRBC), China National Petroleum Corporation (CNPC) and others with access to Central Asian natural resources. One China policy means the recipient nation must recognize mainland China as the only legitimate Chinese government, and the recipients also cannot have official relations with Taiwan. In addition to one-China policy, Beijing expects recipient countries to refuse supporting the Uygur cause, collaborate in the extraditing the dissidents, and possibly expects support for China at the UN Security Council, as reported by Sherzod Shamiev.
Kyrgyzstan and Tajikistan (including Djibouti; Laos, Maldives; Mongolia, Montenegro; Pakistan) were all identified as highly indebted countries and unsustainable with possibility of falling into a debt-trap in a report in 2018 by the Centre for Global Development, meanwhile in top 5 countries located in a worst debt situation, Kyrgyzstan is enlisted (along with Djibouti, Tongo, Maldives, Congo). Export and Import Bank of China is the country’s largest single creditor, with reported loans totaling $1.5 billion by the end of 2016, or roughly 40% of the country’s total external debt. Kyrgyz and Chinese authorities are discussing the construction of a hydropower plant network, a China-Kyrgyzstan-Uzbekistan railway system, additional highway development, and the completion of the Central Asia-China gas pipeline. Risk of debt distress, Kyrgyzstan is still vulnerable to shocks due to a significant exchange rate depreciation, which is compounded by the scaling up of public investments.
Tajikistan is one of the poorest countries in Asia, and the IMF and World Bank have classified it as having a “high risk” of debt distress. The total foreign debt of the country is 3.2 billion US dollars which is 38.2% of Gross Domestic Product. Sputnik Tajikistan reports that it is coming to the critical point – 40% is defined in the country Strategy in Public Debt Management. Meanwhile, in a joint IMF/World Bank Debt Sustainability Analysis A public debt-to-GDP ratio above 25 per cent of GDP is considered. in 2006 China didn’t plan in Tajikistan debt structure, however by 2016 the country had borrowed more than US$1.1 billion from China. Tajikistan still plans to increase its external debt at concessional and non-concessional rates to fund infrastructure investments in the power and transportation sectors, including those supporting BRI. The single largest creditor in Tajikistan, China, accounts for nearly 80 percent of the total increase in Tajikistan’s external debt. Tajikistan in return for constructing phase one of Dushanbe coal plant granted TBEA rights to explore and mine gold deposits at the Eastern Duoba mine and Upper Kumarg mine. Tajikistan has swapped its natural resources to complete an initial phase of the coal plant, thus opening a risky dynamic of funding infrastructure projects by giving away licenses to mine precious metals.
Umedjon Majidi – Author of the blog series, Expert/Research Consultant, Civic IDEA
Since Joe Biden came to power, relations between the US and China have been strained. Unlike Trump, the Biden administration directly opposed China’s policies in relation to Taiwan, human rights abuses, and economic and technological spheres. On November 14, Joe Biden met Xi Jinping face-to-face in Bali, Indonesia, on the sidelines of the G20 Summit. It was the first time since his presidency that the US president met with his Chinese colleague in person after numerous video and written correspondence. The meeting lasted for 3.5 hours and, as publicly announced, touched upon the following issues: US-China strategic competition, the Taiwan issue, the Russian-Ukrainian war, North Korea’s missile tests, and further grounds for improving relations in various areas, comprising technology, trade, climate change, and so on. A delegation of nine government members accompanied each side: while Biden showed up with senior officials including Antony Blinken, Janet Yellen, Jake Sullivan, Kurt Campbell, Daniel Kritenbrink, and members of the National Security Council, Xi Jinping brought all his trustees, who were promoted during his reelection for the third term a few weeks ago. For more information about the high-level officials traveling with Xi Jinping, see the previous blog “Inside the 20th national congress of the Chinese Communist party: What to expect”.
While shaking hands with his American counterpart, Xi Jinping did not seem very enthusiastic and avoided eye contact, which clearly manifests tense relations between the two states. Both parties realized that it was impossible to work everything out in one meeting; therefore, they agreed to frequent discussions. According to the white house readout, to keep the communication and talks dynamic and systematic between Washington and Beijing, the US president will send the US Secretary of State Antony Blinken to China for the first time without specifying the exact dates of the trip. Moreover, Biden mentioned the possibility that National Security Adviser Jake Sullivan and Defence Secretary Lloyd Austin will participate in negotiations with their Chinese colleagues as well. Since the meeting, the US president has been very convinced that no new cold war threatens humanity, as specifically outlined during his press conference.
The talks about Taiwan had a major significance due to the deteriorated US-China peace dialogue after Nancy Pelosi visited Taipei in August 2022. The two states even threatened one another with military interference. Beijing initiated arms mobilization while frequently violating Taiwan’s airspace and pressuring its economy. During the meeting, Biden assured that the official position of the US government has not changed, it seeks “peace and stability”, though it is ready to intervene conventionally in case the PRC invades Taiwan. Nonetheless, the president highlighted that such an occasion is unlikely to happen in the nearest future despite the warnings coming from US officials about Beijing’s plans to seize Taiwan several weeks prior to the Xi-Biden meeting. On the contrary, Xi Jinping called Taiwan the PRC’s core interest and the “first red line”, once again pinpointing that no such thing as “Taiwan Independence” exists within the policy of maintaining peace and stability across the Taiwan Strait and it is directly related to state’s internal affairs. Therefore, the contradictory statements of the leaders of the two countries do not prevent us from losing grip over further escalation. Indeed, both parties agreed on maintaining peace and stability in Taiwan; however, none have specified how to ensure these incentives.
More common grounds were found during the discussion of the Russian-Ukrainian war. Both presidents agreed that nuclear war should never happen and condemned the threat of using nuclear weapons in Ukraine. They also decided to continue talks and avoid further confrontation. In this respect, President Biden also stressed the constant provocations from DPRK concerning its continuous pursuit of nuclear weapons development and urged the PRC to try to talk with North Korean leaders regarding acting more responsibly.
Even though both parties clarified that there would be no joint statement after the meeting, certain tendencies have still been identified and left nobody wondering that the US-China struggle for power and world domination will continue. Nevertheless, both parties prefer to call it a competition rather than a conflict. As stated by Joe Biden,
“The United States will continue to compete vigorously with the PRC, including by investing in sources of strength at home and aligning efforts with allies and partners around the world”.
Despite certain confrontations, Xi Jinping seeks to stabilize the situation in the international arena after the turbulent year of his reelection. According to his statement,
“It should not be like you win and I lose, and I survive and you die…Both sides should view each other’s domestic and foreign policies and strategic intentions correctly and establish the tone of dialogue exchanges rather than confrontation.”
Both leaders intend to ease the tension between their respective states by foreseeing coexistence in competition.
Ani Kintsurashvili – Author of the Article, Senior Researcher, Civic IDEA
A Smart City is a city built on the combination of endowments and activities of self-decisive, independent, and aware citizens. It follows strategies through the innovation and use of its natural resources, the city areas that collect large amounts of data and use it to improve city operations. Developers can produce applications based upon managed data to be converted into insights and insights into tools. These applications can serve as a form of public-private partnerships and create opportunities for the public sector, private sector, and the citizens. Privacy International brings some clearance to the definition of “Smart Cities” based on global multinationals – For IBM – it is about finding “new ways for the city to work”; For Google’s Alphabet, “building innovation to help cities meet their biggest challenges.”; For Siemens, “open-air computers” make them “healthier, more comfortable, and more relaxed.”
The development of “digital cities” or “smart cities” in China started in 2011 with the adoption of the 12th Five-Year Plan, when it was announced the intention “to accelerate the construction of new-generation IT infrastructure, mobile communication networks, internet infrastructures, digital and television broadcasting networks, satellite communication facilities, and an ultra-high-speed, large capacity, and brilliant national trunk transmission network, broadband connection throughout urban and rural areas to strengthen interconnectivity.”
This is the basis of modern China’s smart cities and citizens’ surveillance.49% of the smart cities are located in Asia. Smart Cities projects are expanding in Central Asia; the main countries and tech companies introducing them are tech companies from the People’s Republic of China.
In Central Asia, the countries are accelerating the development of safe cities to focus on security and order with Chinese assistance in developing and financing them: Tajikistan in 2013, Kazakhstan in 2007, Kyrgyzstan in 2019; In China in the World index developed by Taiwan-based Doublethink Lab, Central Asian countries, at least Tajikistan, Kyrgyzstan, and Kazakhstan collaborated (such as data collection or exchange agreement, or adoption of related hardware) with the PRC government or PRC-connected entities on facial, voice recognition or other applications involving biometrics achieved by AI.
Xinxiang became a kind of frontline laboratory for “Smart City” and surveillance technology, where start-up and tech companies first test surveillance technologies. Xinjiang – a model of digital repression that China has developed first and foremost for security reasons and for enabling severe human rights violations and developed many novel forms of surveillance, making it a world leader in repressive uses of digital surveillance such as facial recognition and biometric data collection integrated widely in the Xinjiang-Uighur Autonomous Region in western China. In 2017, the government officials in Xinxiang started collecting Uighurs, 3D portraits, voiceprints, fingerprints” and iris scans from all residents of ages 12 and 65 in the framework of a free public-healthcare program called Physicals for All and collected.
The military personnel check the residents’ smartphones for banned mobile apps and require each vehicle to have a GPS tracking device. Smart cities in Xinjiang Uighur Autonomous Region (XUAR) already form part of the state authorities’ systematic surveillance and repression of Muslim ethnic groups in the region. Facial and gait recognition, coupled with CCTV outside mosques, and powered by AI and analytics technology, enables authorities in Xinxiang to maintain a “digital police state.”
Famous tech company Huawei worked with facial recognition start-up Megvii in 2018 to test an AI camera system that could scan faces in a crowd and estimate each person’s age, sex, and ethnicity. The plan could trigger an ‘Uyghur alarm’ if it detected an Uyghur, flagging them to China police, where members of the group have been detained en-masse in the re-education camps. One of the authorities in Uighur studies, author of The Xinjiang Papers – Dr.Adrian Zens, an expert on Xinjiang, says that the companies like Huawei can develop such systems in regions like Xinjiang in tandem with the security services, which can enable intrusive surveillance – makes surveillance accessible and possibly palatable in other nations including Central Asia.
Electronic Frontier Foundation (EFF), based on a database leak discovered by Victor Gevers in MongoDB from SenseTime, which provides video-based crowd analysis and facial recognition technology, reported about live-tracking the locations of about 2.6 million Uighur residents of Xinjiang: the records include individuals’ national ID number, ethnicity, nationality, phone number, date of birth, home address, employer, and photos. Within 24 hours, 6.7 million individual GPS coordinates were streamed to and collected by the database, linking individuals to various public camera streams and identification checkpoints associated with location tags such as “hotel,” “mosque,” and “police station.” Police in Xinxiang force the residents (targeting Uyghur Muslim population) to install the mobile app called JingWang (Citizen Safety) developed by police forces from Ürümqi, Xinjiang’s capital. Urumqi Municipal Public Security Bureau launched the “People’s Safety” app on April 25, 2017, as information reporting software used by the municipal public security bureau to take the initiative and technical attack and successfully develop the grass-roots and ordinary people. The app (spyware) sends the government a user’s WeChat and Weibo chat records and the device’s IMSI and IMEI and Wi-Fi login details. Adam Lynn from Open Technology Fund confirmed that the JingWang app significantly lacks the security to protect the private, personally identifying information of its users: The app extracts a phone’s IMEI, MAC Address, manufacturer, model, phone number, subscriber ID, and filenames with hashes for all files stored on the person’s device; Jing Wang scans for specific files stored on the device, including HTML, text, and images, by comparing the phone’s contents to a list of MD5 hashes. A hash is a digital fingerprint of a piece of data. Full Jing Wang Report of OTF is available here.
Umedjon Majidi – Author of the blog series, Expert/Research Consultant, Civic IDEA
Secretary General of the China Communist Party, China’s President Xi Jinping one of the leaders who did not make any foreign visits since the outbreak of virus Covid-19 from January 2020. The situation has changed last week.
…he couldn’t miss a trip to Central Asia:
On 14 September Xi Jinping visits Kazakhstan to participate at the Congress of Leaders of World and Traditional Religions in Nur-Sultan (currently Astana). China has still complicated relations with some of Central Asian countries, namely Kyrgyz Republic and Kazakhstan due to anti-Chinese sentiments, failed China investment (Bishkek heating project), ethnic Kazakh, Kyrgyz, Uyghur maltreatment and imprisonment of ethnic Kazakhs relatives in Xinjiang. The importance of Kazakhstan
Why this trip of Xi Jinping to Central Asia is such a big deal?
For Kazakhstan, Temur Umarov, Carnegie’s Fellow suggests to be more timely, especially voices coming from Kremlin over neutral (or pro-Ukraine) position of Kazakhstan over Russia-Ukraine war. Kazakhstan is an important partner for China – Belt and Road Initiative launched in Kazakhstan’s Astana in 2013.
Kazakhstan importance to China is played by the transit potential and connectivity of Chinese cargo to Europe. Since Russia launched “military operation” in Ukraine, the whole West, especially European Union stand against Russia and the countries using Russia as a transit. Russia is totally isolated from global markets and Central Asia, especially Kazakhstan consider China as a great alternative to Russia as a trade partner and ally. Kazakhstan has a bug number of ethnic Russians in the north. There is a concern that Russia may want to “liberate” them from Kazakhstan.
Chinese cargo trains going through Kazakhstan (then to Azerbaijan on the Caspian Sea) increased up-to 6 times. In 2020, the two main cargo transit hubs on the border of Kazakhstan and China, Alashankou and Khorgos, was increased significantly in volumes compared to pre-pandemic. It was also emphasized the importance of the “Middle Corridor,” linking Kazakh rail to Turkmenistan, Iran, Turkey, and onwards to Europe. In 2022, about 2013 container trains passed the Kazakh territory, which is 25% more than the previous year. From Kazakhstan to Europe 1,147 trains were operated, which is a year-to-year increase of 14%. In the opposite direction 866 trains were sent, a notable increase of 43%.
The ensuring security of the global supply chain is one of the development priorities, putting importance on the role of the trains as “emergency measures” stabilizing unexpected events affecting sea-based trade was mentioned in the recent report on the China-Europe train by China Railway.
On 16 September 2022, President Xi Jinping attended the 22nd Meeting of the Council of Heads of State of the Shanghai Cooperation Organization (SCO) at the Samarkand Congress Center. President Xi delivered an important statement entitled “Ride on the Trend of the Times and Enhance Solidarity and Cooperation to Embrace a Better Future”. Leaders of SCO member states signed and released the Samarkand Declaration of the Council of Heads of State of the SCO.
Shanghai Cooperation Organization
SCO was founded in 2001 in Shanghai in post-border delimitation process of China with Central Asia and Russia, today is dubbed as a security organization of the East (as an alliance against the NATO) benefits both China and Russia. SCO serves the unique platform where China is played a leading role to bring together Russia, China, Central Asian countries also India, Pakistan and potentially Iran and Turkey in the future.
Some statements and documents were issued on protecting international food and energy security, tackling climate change, and keeping supply chains secure, stable and diversified; a memorandum of obligations on Iran’s SCO membership was signed; the procedure for Belarus’ accession was started; MOUs granting Egypt, Saudi Arabia and Qatar the status of SCO dialogue partners were signed; agreement was reached on admitting Bahrain, the Maldives, the UAE, Kuwait and Myanmar as new dialogue partners; and a series of resolutions were adopted, including a Comprehensive Plan for the Implementation of the SCO Treaty on Long-Term Good-Neighborliness, Friendship and Cooperation for 2023-2027. It was decided at the meeting that India will assume the SCO rotating presidency for 2022-2023.
Taiwan, Xinjiang and One China policy
Considering after 3 years of “lockdown”, the analysts link his trip to Central Asia as a reaction to Nancy Pelosi, US House of Representative Speaker to Taiwan in August; Russia has already expressed that that trip was provocative and dangerous of peace and stability in Asia; Others believe that it is a time for showing off the strength before the next Party Session scheduled next month where he to be reelected for the next term.
China is pursuing “reunification” of Taiwan as a Republic of China to People’s Republic of China even a military scenario to be involved. If a war breaks out over Taiwan, China will be unable to secure energy supplies by sea. China has turned its focus to Central Asia as part of Chinese strategic thinking, so the neighboring countries recognize Republic of China as an integral part of PRC. In China senior leadership circles, discussion about fighting against external interference meaning western aid to Russia-Ukraine war and supporting Taiwan.
This year the EU Parliament adopted a resolution where it describes China policies in Xinjiang as a genocide against Uyghur people. Based on this background Xi’s visit to Central Asia is the important diplomatic trips. Central Asian states history and culture is inseparable from Xinjiang and share a 3,000-km border with Xinjiang, and it requires a constant maintenance from Beijing to ensure there are no cross-border sympathizers to those opposing its extreme policies in Xinjiang.
Umedjon Majidi – Author of the blog series, Expert/Research Consultant, Civic IDEA