The Emperor’s New Road: China and the Project of the Century Page 5
As Chinese officials respond to criticism about their current infrastructure efforts, they recall this history and cry hypocrisy. After all, today’s developed countries were not required to meet high environmental and social standards when they were developing in the nineteenth and early twentieth centuries. Is the international community now setting a higher bar or a double standard? But this is a dangerous misreading of history. The United States, for example, developed not because of its railway misadventures but in spite of them. Had U.S. railway construction proceeded more slowly, reflecting market needs rather than insider interests, the United States would have enjoyed more of the railway’s benefits with fewer of its costs.
As the following chapters show, the BRI is at root an imperial project, harnessing new technologies to old ends. Some of these are the latest generation of basic technology that was used during the nineteenth century, including automated ports, high-speed rail, and fiber-optic cables. Others could bring more revolutionary changes, including remote sensors that sweep up vast amounts of data and artificial intelligence that sorts it. There is also fundamental tension between the connectivity that Beijing claims to seek through the BRI and the control it is unwilling to give up, as Chapter 10 concludes.
Without a doubt, China’s BRI will carry unintended consequences. Connectivity is often fetishized, viewed in Silicon Valley as a good in itself rather than as a means to an end. The historical record is sobering. The silk routes carried not only spices and ideas but also the bubonic plague.72 Railways were the pride of a divided America and the catalyst for two recessions. Britain’s telegraph wires provided commercial and strategic advantages before hastening the loss of its prized colonial possession. As China races forward with the largest foreign infrastructure push in history, its foreign partners, its competitors, and even its own officials will be surprised.
PART II
To Europe
Central Asia
Center for Strategic and International Studies, Reconnecting Asia Project
CHAPTER THREE
The Crossroads
Central Asia
THE CENTER OF THE world is surprisingly close to the middle of nowhere. In human terms, the center of the world is the city with the smallest average distance to every person on the planet. It is always shifting, as populations fluctuate, but one estimate puts it at Almaty, Kazakhstan.1 The world’s furthest point from any ocean, the middle of nowhere, sits in western China, near its border with Kazakhstan. Geographers call it the “Eurasian point of inaccessibility.”2 Less than a hundred miles away, China and Kazakhstan are making a massive bet to turn that label on its head.
Early one morning in May 2017, I set out from Almaty to visit Khorgos Gateway, a massive industrial zone and logistics facility that straddles the Chinese-Kazakh border. During the three-hour drive, I saw more livestock than people on the road. Every so often, our car slowed to a halt and waited for a herd of goats or sheep to pass. Most wandered the flat green plains unattended. To the south, snow-capped mountains, part of the Tian Shan range, hung in the background like a giant’s lower teeth. The highway was under construction, and smooth new segments interspersed with older stretches that seemed to have more potholes than road.
Just miles away from Khorgos, our car was stopped by police. We pulled over, joining a small line of cars. An officer approached, and rather than waiting inside the car, my driver stepped out. I watched in the mirror as he was escorted away and into the backseat of a police car. He returned a few minutes later, unfazed. I asked what happened. “Money,” he said in Russian, rubbing his thumb and forefingers together as he pulled the car back onto the road. The cost was about a fifth of what I had paid the driver for the ride, and he must have priced the bribe into the fare, because he did not ask for more. The shakedown was as routine as filling up with gas.
“Welcome! How was the drive? Did you meet the police?” my host at Khorgos Gateway said with a smile. Donning orange hard hats, required for touring the grounds, we set out to see the facilities.
“New Dubai”
Before arriving, I had looked at satellite images from 2010, which showed undeveloped brown steppe. The same area is now equipped with customs and immigration facilities and dormitories for thousands of workers, although only 250 were employed in 2018.3 Early promoters of the facility promised it would become a “New Dubai” and projected that by 2020, economic activity at Khorgos would increase twenty-fold, supporting fifty thousand jobs—a dramatic transformation that has yet to occur.4 The nearby town of Nurkent, which had twelve hundred residents at the end of 2017, is optimistically projected to grow to one hundred thousand by 2035.5 Kazakhstan is building it, but on this steppe of dreams, it is far from guaranteed they will come.
The lifeblood of Khorgos is railway traffic, and its beating heart are giant yellow container cranes, which span parallel sets of Chinese and Russian railway tracks. Because railways in Russia and across the former Soviet Union are wider than the standard gauge used in China and most of Europe, cargo must be swapped at the border. Popular legend holds that tsarist Russia picked a different gauge to defend against invasion. In truth, it is more likely that the decision was initially made for efficiency and safety reasons.6 As more track was constructed, the cost of switching to standard gauge became too high.
Khorgos is a gamble that overland trade will be more competitive in the future than it has been during the past half millennium. In the late fifteenth century, the invention of large oceangoing vessels and new navigation methods made maritime trade cheaper and faster. Mercantilism and competition among Europe’s colonial powers pulled commerce to the coastlines. Political disintegration in Eurasia’s heartlands, which brought conflict and harder borders, reinforced this shift. Since then, trade between Asia and Europe has traveled primarily by sea. In 2016, rail carried just under 1 percent of trade between China and Europe by volume and just over 2 percent by value. Maritime shipping carried 94 percent of China-Europe trade by weight and nearly two-thirds of trade by value.7
Central Asia’s Soviet past still casts a shadow, standing in the way of east-west routes through the region. When Soviet planners looked south, they did not see a collection of republics but a single political entity. They created road, rail, air, and energy networks running north-south with Moscow at the center. These networks were further cemented by divisions of labor that were intended to keep the republics dependent on Moscow. Rather than allowing any single place to become efficient at producing railway technology, tasks were spread across workshops in different republics, so that one handled passenger carriages, another repaired diesel locomotives, and so on.8 Requests for repairs or new construction were routed through Moscow. As the Soviet economy slowed, so did its railways. By the late 1980s, nearly a third of railway maintenance positions were vacant, due to funding shortfalls. Fixing the railways, according to one estimate, would have taken sixty-six years.9
When the Soviet Union split into fifteen separate countries in 1991, these struggling but still functional networks were cut into pieces.10 The railway from Kyrgyzstan’s capital, Bishkek, to its second-largest city, Osh, passed through Kazakhstan, Uzbekistan, Tajikistan, and Uzbekistan again before finally arriving back in Kyrgyzstan.11 Just before the collapse of the Soviet Union, nearly 150 trains ran weekly between Uzbekistan, Tajikistan, and Kyrgyzstan and other Soviet regions, mostly in what became Russia. Ten years later, only fourteen trains connected them with Russia.12 Many of the region’s flights still connect through Moscow. Due to political tensions, the first commercial flight between the capitals of Tajikistan and Uzbekistan did not fly until 2017.13 The state-run airline of Turkmenistan, the most insular of the five Central Asian states, has direct flights to London, Moscow, and Beijing but not to the Central Asian capitals of Bishkek, Dushanbe, or Tashkent.
After the fall of the Soviet Union, proposals for rekindling “silk roads” began sprouting up, most of them as ambitious as they were underresourced. The European Union was a
mong the first to take up the mantle, establishing an initiative it dubbed “the renaissance of the Great Silk Road.” That imaginative appeal might have been lost in the effort’s less silky name, the Transport Corridor Europe-Caucasus Central Asia, or TRACECA, for almost short. TRACECA was bogged down by disputes among the newly independent Central Asian governments and conflict in the Caucuses. Its focus on transport through Baku, Azerbaijan, and Poti, Georgia, was politically appealing, as the route avoided Russia, but economically uncompetitive, since it involved two ferry crossings and more tariffs.14
Several others joined the fray. In 1996, a United Nations committee approved adding Central Asian countries to the Asian Highway Network, or AHN. The AHN was formally launched in 1959, but having not received significant funding since 1975, it has become a loose coordinating body and observer rather than a catalyst.15 Committee meetings are held to add or subtract priority projects from a master list, which helps share information but does not impose any requirements or restrictions on countries to integrate their efforts. Every few years, it issues an update on the status of transportation links, assuming the participating countries have provided information. This is the Silk Road by bureaucracy.
Of all the connectivity plans to run through Central Asia, the Central Asia Regional Economic Cooperation (CAREC) program is perhaps the most successful. Since 1997, it has cut transport costs and travel time across six corridors, which were developed through a collaborative multicountry process that the Asian Development Bank oversaw. Five other multilateral agencies participated in the planning and funding process as well.16 Once these priorities were agreed on, progress was benchmarked and has been rigorously evaluated in terms of improvements in transit time and cost. China’s BRI, by contrast, has thus far brought money without regional consensus building, coherent and consistent plans, or performance testing.
The U.S. Congress even joined the action in 1999, passing the “Silk Road Strategy Act.” It aimed to help develop infrastructure and promote trade on an “East-West axis” but only made use of existing foreign assistance. The bill began by looking to the past. “Economic interdependence spurred mutual cooperation among the peoples along the Silk Road,” it observed before asserting, “restoration of the historic relationships and economic ties between those peoples is an important element of ensuring their sovereignty as well as the success of democratic and market reforms.”17 This was the Washington Consensus repackaged as a Silk Road. The U.S. government dusted off the Silk Road label a decade later, during the war in Afghanistan, as Chapter 7 describes.
Most of these efforts continue in some form, as does the region’s need for better connectivity. In Central Asia, it takes two days, on average, to travel from one main city to another in a neighboring country.18 Everyone agrees on the need for greater connectivity, but like the Soviet planners who created the region’s rusting infrastructure, each new vision reflects its authors’ interests. It has proven far easier to announce new efforts than to finish existing projects or to abolish those that have outlived their usefulness. For a region with few connections, duplication is all too common.
Khorgos is itself a duplicate. To the north, there is an older railway connection at Dostyk, opposite Alashankou in China. After putting that connection on hold for years, due to Sino-Soviet tensions, it was finally completed in 1990. The first freight trains arrived in 1991, and by the time passenger trains were running in 1992, they were passing between an independent Kazakhstan and China. Curiously, this older connection receives almost no attention from Western media outlets, which publish a new piece about Khorgos every few months. The Dostyk facility is less efficient, taking about half a day longer to process each train, but as recently as 2018, it was still handling more cargo annually.19
Khorgos should overtake Dostyk in the coming years.20 The railway route between Almaty and Khorgos is four hundred kilometers shorter than the distance to Dostyk. Khorgos has more advanced facilities, and if economic efficiency fails to do the trick, the government of Kazakhstan could direct more traffic from Dostyk to Khorgos, although doing so would deprive the workers and residents of Dostyk of economic activity. Most importantly of all, Khorgos has a patron in China. In 2017, at the Belt and Road Forum in Beijing, China’s COSCO shipping took a 49 percent stake in the facility. COSCO’s chairman, Xu Lirong, has promised to turn Khorgos into a “regional hub” and “deliver the products of Central Asia, including Kazakhstan, across the sea to the world market.”21 The image of Central Asia selling to the world is a powerful one, but nearly all east-west economic activity does not originate in Central Asia. It passes through.
“Dawn of a New Commercial Era”
China has turned east-west trains into an effective, albeit misleading, advertisement for the BRI.22 While their role in larger trade terms remains small, China-Europe railway services have grown dramatically in recent years. As recently as 2008, regular direct freight services from China to Europe did not exist.23 As of March 2019, they connect nearly sixty Chinese cities with nearly fifty European cities.24 Six times cheaper than air and twice as fast as shipping by sea, rail could provide a compelling middle option for high-value goods like laptops, cell phones, and auto parts.25 Hewlett Packard was among the first companies to experiment with direct rail shipments from its manufacturing facilities in western China to markets in Europe. An optimistic study, commissioned by a railway industry group, estimates that China-Europe rail services could double their share of trade by volume between 2016 and 2027.26
China provides generous subsidies for these routes, making their true economic viability difficult to assess. Subsidies vary in practice, but reports suggest they can account for up to half the total cost of shipping. From 2011 to 2016, China’s provincial governments collectively spent over $300 million subsidizing China-Europe block trains, which run as a unit from origin to destination. Provincial governments were so eager to announce new train services that they were undercutting each other with subsidies. Each new service was named after its local champion, creating a long list of services and confusion among prospective customers. In 2016, the China Railway Company stepped in and announced that all China-Europe trains would be referred to as “China Railway Express.”27
The railways’ economic outlook is cloudy, but their political benefits for China are clear. They have become one of the most visible, albeit misleading, manifestations of China’s connectivity ambitions. Xinhua, China’s largest state-run news agency, runs articles every few weeks about the China-Europe railways. They have been so eager to promote these routes that even trains terminating in Central Asia are described as new “China-Europe” services.28 The image of a train traveling across the Eurasian supercontinent is savvy marketing, casting the BRI as practical, peaceful, and historic. With first-time arrivals celebrated in France, Latvia, and Finland, among other countries in recent years, it is tempting to believe that trains are replacing camels on the old Silk Road.
Even countries that have been reluctant to endorse the BRI have embraced China-Europe railways. When a train from Yiwu, China, arrived in London in January 2017, the Telegraph called it “a new chapter in the history of the centuries-old trading route,” and the Guardian said it “heralds the dawn of a new commercial era.”29 In reality, the route was an adjustment from a similarly hyped journey taken between China and Spain in 2014, and the difference between the two routes exists entirely within the EU. On arriving in Duisburg, Germany, the train continued to London instead of Madrid. Given the abundance of transport services between the United Kingdom and Germany, that distinction is hardly groundbreaking.
After touring the container yard in Khorgos, we stepped into the control center. A few rows of desks, each with its own computer screen, faced a giant projector that had been divided into different video feeds. My guide toggled between them to point out the areas we had just visited. Cameras automatically catalogue the license plates of all vehicles entering and exiting the facility. Port-management software recommends
how to efficiently unload trains, where to place containers, and which equipment and staff are best for the job. These high-tech features are compelling, but they also mean that fewer people are required to operate the facilities. At successful logistics facilities, cargo is abundant, and people are scarce.
On China’s border and beyond, new infrastructure and streamlined customs have helped speed the movement of containers. With state-of-the-art equipment, Khorgos can process a train twenty hours faster than the older facilities at Dostyk. DP World, a Dubai-based logistics firm, helps operate the facility, bringing best practices with them and training local workers. A decade ago, prospective shippers had to coordinate with each country the railway crossed and navigate a mountain of duplicative paperwork. While the process remains cumbersome, specialized companies now handle the details. In 2006, it took thirty-six days to ship a forty-foot container by rail from Shanghai to Hamburg. In 2018, it took just sixteen days.30
But these new routes face several challenges to becoming sustainable. In 2016, the EU imported over $190 billion more goods from China than it exported to China, an imbalance that is reflected in rail transport patterns. Service operators estimate that roughly 60 to 70 percent of railway shipments are westbound. On those eastbound trips, containers are often empty. After arriving in Europe, other containers are sent back to China by sea.31 Maritime shipping offers benefits from scale that the railways will never match. Modern ships can carry more than a hundred times as much cargo as a standard train. All this suggests that while rail transport will increase, it will make up only a modest share of overall trade.
As my tour of Khorgos concluded, there was just one thing missing: an actual train. Despite the cutting-edge systems and the talk of Khorgos becoming the next Dubai, there was little noticeable commercial activity under way. Central Asia is second to none in hospitality, but I suspect that my host’s attention was due more to the absence of competing obligations. My colleague who visited in 2016 was also unsuccessful. “Maybe it will arrive later today,” an employee told him with a straight face, as they surveyed the vacant transit zone. My hosts were not holding out hope; or perhaps their tracking systems were more developed, and they had more accurate information. “Not today,” I was told.