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Rede von Staatssekretär Markus Ederer "China’s Belt and Road Initiative in Context"

05.11.2016

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Vice-Chancellor Professor Fanny Cheung,
Professor Christopher Gane,
Professor Lutz Wolff,
Ladies and Gentlemen,
Dear students of law,

Thank you for inviting me to your symposium on the Belt and Road Initiative.

In March 2014, President XI Jinping was welcomed in Germany for a state visit. Everyone would expect such a high-ranking event to take him to world-known places like Berlin, Munich or famous castles. And yet, President XI wished to pay a visit to Duisburg - of all places. Why Duisburg? Experts will know the city on the Rhine to be Europe’s largest inland port, but from China’s perspective, Duisburg is to become the final German destination for New Silk Road.

When in Duisburg, President XI’s greeted an incoming train from Chongqing, which lies at the intersection of the Silk Road Economic Belt and the 21st Century Maritime Silk Road. A journey of more than 10.000 kilometers leading trains through numerous countries along the route for days. The President’s visit showed China`s serious commitment to OBOR and that China has identified Germany as a major partner on the western End of the New Silk Road.

This is particularly interesting, as back in 1877, it was a German geographer, Ferdinand von Richthofen, who originally coined the term of the “Silk Road”. This historic trade route linking China with the West, is now being transferred by China to the 21st century: China’s One Belt one Road initiative has been received with great interest all over the world – including Germany and Europe. The initiative is a strong signal that China wants closer, faster, better connections with its main trading partners – on that, we couldn´t agree more!

Ever since, OBOR has become a cornerstone of Chinese foreign policy, not only by aiming to link East and West, but as a project of regional integration, inter- and intra-continental cooperation and deepened economic relations.

However, OBOR is not only about trains and maritime connections. It also concerns the energy and IT sector in order to promote trade, financial and policy coordination. It is based on and built around what I call the new currency in international diplomacy and power politics: Connectivity!

Ladies and Gentlemen,

Common infrastructure planning is an established practice in the European Union. Jointly defined maps on the TENs show where new roads, ports, railroad links or energy pipelines need to be built in order to connect European countries.

To ensure, that the OBOR initiative, reaching from east to west, and the European plans, benefit from each another to the greatest extend possible, we have initiated, the “EU-China Connectivity Platform”. It is a working group between the EU, representing all of its member states and the National Development and Reform Commission NDRC representing China.

Through the Platform, we have invited China to consult and to participate in some of the European projects. China has indicated its interest in several projects, especially those linking to ports in the Mediterranean, the Black Sea and the Baltic Sea.

Joint projects are not only to be undertaken in Europe, but also in China. Thus, on the basis of Chinese projects lists, the Platform is also identifying infrastructure in China which could be developed together. Those projects include for instance the extension of airports at Urumqi, Xian, and Guangzhou as well as for example the construction of high speed railways between Wenzhou and Hangzhou.

This coordination mechanism, aims to guarantee a rules based and transparent planning process. The first meetings have already taken place and we hope to schedule the first expert meeting in Beijing before the end of the year.

This is not the only initiative we have come forward with:

Earlier this year, as part of Germany’s chairmanship in the Organisation on Security and Cooperation in Europe, we organized an event in Berlin focusing on connectivity on the Eurasian continent, addressing the infrastructure needs from Europe across the Caucasus to Russia, to Turkey and Central Asia, reaching to China.

Additionally there are also several projects by German enterprises reaching out to the Central Asian region, aiming to deepen economic relations.

This is to underline also our political conviction that connectivity can and should serve as a bridge, going beyond allegedly binary choices between major powers or camps. (Russia between EU and China, Central Asia between Russia and China.)

Ladies and Gentlemen,

China often talks about OBOR in terms of “win – win”! But it needs to create credible narratives.

In that context I am reminded of an illustrative presentation on OBOR which was offered by a Chinese scholar in Berlin this year: on the last slide, a benevolent Panda bear is pumping air into a deflated globe, and the accompanying line reads: “China provides”. The audience noted this with amusement, for we all know: China has its own political interests which go beyond charity. Some even believe, OBOR is a means to create unilateral economic and political dependencies. And the same people would say that “win-win” for China means that China wins twice.

I will not comment, but advocate taking a sober view. States pursue interests, and that is legitimate. To my mind, China´s interests when we consider OBOR are the following:

Portray China as a cooperative and inclusive player to its neighbors and the wider world

Addressing an existing problem, lack of adequate connectivity that hampers its economic development.

Projecting its industrial overcapacities and excessive savings abroad.

Recapturing historical centrality. As the current saying goes: all roads lead to Rome. China´s objective is: all roads, sea lanes and rail lead to Zhongguo, the Middle Kingdom.

Beyond this analysis, I would rather not embark on speculation as to Chinas motives. But we should become as practical on OBOR as possible.

I am saying this because, despite all of the interest that the “Silk Road/OBOR” concept has created, there seems to be a fair amount of Chinese “vision”, but so far we note a relative lack of concrete project proposals. These by the way have to respond to essential criteria, such as international labor, environmental, safety and other standards, procurement procedures, etc. When putting into practice joint projects in the EU, European and international rules of competition, relevant laws and norms must be respected. If not, OBOR will not be able to convince of its “win-win” character and face legal hurdles.

For instance, the question whether a joint railroad project in Europe will be built by a Chinese company or a European company, has to be decided on the basis of transparent public tenders and competitive offers. The same holds true for projects in China.

To name a negative example, a couple of years ago, there was news about preparations for a highway in Poland by a Chinese company (COVEC), where some of the above-mentioned criteria were not met and the construction had to be aborted.

Similarly, initially disquieting information on the China sponsored Belgrade – Budapest rail link has led to amendments made with the help of the European Commission. Now we await a transparent tender procedure.

In order to ease the future implementation of OBOR However, allow me a few words on where future challenges may lie:

1. China is faced with a problem of overcapacities -among others in the steel and construction sectors. The same holds true for its high speed train industry. One of its main strategies to reduce these is to project them abroad at dumping price level. This – in the case of steel - triggered a big debate in Europe about conditions of fair competition. These aspects have the potential to create issues between China and its OBOR partners, at least in the EU.

2. As much as OBOR has been praised as a global strategy to foster trade, investment and development, questions about the distribution of benefits of the initiative remain. In Africa, for example, China’s infrastructure projects are often being identified with a Chinese “walk it alone” approach: from planning to financing to construction, using almost exclusively Chinese labour. In most of the EU, this would not fly.

3. OBOR is about closer, faster, better connections. In many cases, this means investing in hardware: new infrastructure, new railroads, new highways, new ports and airports, new energy and digital data links. But existing examples show severe deficits when it comes to the software of connectivity. Many difficulties are due to administrative hurdles, customs procedures at the borders, or the lack of common standards. To conclude, prior to investing in new transport lines we should ask ourselves how to create the necessary software.

These are some of the tricky issues when connecting both ends of the New Silk Road. I am therefore glad to see in the program of the symposium that a variety of these issues, such as finance & investment or labor standards -to only name some- will be addressed here.

Coming to the end, and back to the beginning of my speech: the link Duisburg – Chongqing. In 2012, in my then function as EU Ambassador to China, I visited Chongqing. Already at this early stage, we could recognize the inter-continental importance of a possible land-bridge, crossing Central Asia and spanning up to Europe.

At that occasion I met with Zhang Dejiang, then Chongqing’s party secretary. Afterwards, China Daily quoted him as saying “Maybe now … there will be more from the policies of reform and opening-up. This is good news for European business”. And I was quoted, saying “…it's about making companies aware of this new opportunity and making this opportunity economically viable so that companies choose this route." Both remarks point to the challenge facing us to make vision, politics, finance, economic viability and harmonized regulation meet when it comes to OBOR. We count on you! With your legal expertise we can ensure further progress in this important project of connectivity and Eurasian integration.

I am looking forward to the outcomes of today’s symposium. Thank you for your attention!

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