Interpretations of Five Connectivity Indexes of South Asian Countries——FIVE CONNECTIVITY INDEX REPORT(2018)

April 26,2019
About the author: Hu Shisheng[1], Research Professor,Director of Institute of South Asian Studies,China Institute of Contemporary International Relations

 

Over the past three years, the Five Connectivity indexes between China and South Asian countries as a whole have not improved significantly (see annexes I and II). None of the South Asian countries were included among the top 10 “smooth cooperation countries” in the ranking list of Five Connectivity Index scores of 94 countries and regions in 2017, and even the ranking order of the countries has not changed significantly. This, in fact, reflects the structural contradictions that are difficult to resolve in a short period of time in the connectivity construction between South Asian countries and China.

 

Pakistan is still far ahead of other South Asian countries and is extremely close to be a “smooth cooperation” country; Bhutan remains near the bottom in the “weak cooperation” countries; the Maldives and Afghanistan remain in the "countries of potential for cooperation"; and the rest of South Asia's overall rankings rise and fall year on year but there is no significant gap among them. In the modified Five Connectivity index assessment of 2017, Pakistan and India, two major South Asian countries, albeit significantly different from each other, ranked among the "interconnected" countries and made it to the middle and upper reaches of the new Five Connectivity system. In fact, this is also an objective reflection of China's long-term policy towards South Asia which focuses on India and Pakistan. Overall, there has been no fundamental improvement in the nature of South Asia as being at the bottom of the ranking in terms of connectivity with China, but the outlook is promising as some highlights have emerged.

 

Table 10-1: Scores of Five Connectivity Indexes of 63 countries and regions in 2016
(Four categories: smooth cooperation countries, good cooperation countries, countries of potential for cooperation, and countries of weak cooperation)

 

Table 10-2: Scores of Five Connectivity Indexes of 94 countries and regions in 2017
(Four categories: smooth cooperation countries, connected countries, good cooperation countries, countries of potential for cooperation, and countries of weak cooperation)

 

Figure 10-1: Radar chart of Five Connectivity Indexes of South Asian Countries along the Belt and Road

 

China and Pakistan are far ahead of other South Asian countries in terms of Five Connectivity. As can be seen from the above table, in 2017, of the eight countries in South Asia, Pakistan topped all other countries in terms of the Five Connectivity with China. It ranked the 13th on the list, 19 places ahead of India. This is not only a true reflection of the "all-weather and all-directional strategic partnership" between China and Pakistan, but also a true reflection of the rapid development of the China-Pakistan Economic Corridor in 2017. It is politically correct for Pakistan to maintain overall stability in its relation with China, and any force that wants to undermine Pakistan-China relation will be regarded as a public enemy of that Pakistani people. As a result, despite the political turmoil over the change of prime minister in mid-2017, relations between Pakistan and China remain ultra-stable. On 21 November 2017, the Joint Committee of the China-Pakistan Corridor released the "Long-term Plan for the China-Pakistan Corridor (2017-2030)", which integrates the Belt and Road Initiative and Pakistan's "Vision 2025". This heralds a further rise of Five Connectivity between China and Pakistan in 2018.

 

As far as policy coordination is concerned, in addition to the institutionalized policy communication and coordination necessary for the corridor construction, there are also interactions at all levels, including visits to Pakistan by Chinese Vice Premier Wang Yang, and visits to China by Pakistani Prime Minister, Foreign Secretaries, Foreign Ministers, and so on. It is worth mentioning that the "China Plan" has won high recognition in Pakistan. People from all walks of life in Pakistan have paid close attention to the successful convening of the 19th National Congress of the Communist Party of China and praised China's policy of governing the country and its proposal of participating in global governance. China-Pakistan relations have expanded in depth, and the policy interface between the two countries has become smoother. Any problems can be resolved seriously and carefully at the first time.

 

As far as facilities connectivity is concerned, thanks to the joint efforts of China and Pakistan, the China-Pakistan Economic Corridor, as the flagship project of the Belt and Road Initiative, moved forward smoothly in 2017. Nineteen early harvest projects have been completed or accelerated, and the medium- and long-term planning also moved forward in an orderly manner. Pakistan has made remarkable progress in the construction of the three major infrastructure areas of transportation, energy and Gwadar Port, laying the foundation for the construction of special economic zones in the next stage and bringing high-quality Chinese technology and labor-intensive industries to Pakistan. For example, the Orange Line Project of Lahore Metro was officially launched on 8 October 2017. As a comprehensive rail transit project with Chinese technology, Chinese standards and Chinese equipment, the Orange Line Project will provide reference for the improvement of the rail transit level of the whole Pakistan. Moreover, the subway train imported from China will run on the Lahore Orange Line, marking the official entry of Pakistan into the subway era. Another example is the port of Gwadar, which was officially opened in November 2016 and fully operational in 2017. In May 2017, President Xi made a special mention of Gwadar Port in his speech at the opening ceremony of the Belt and Road Forum on International Cooperation. After China Port Control Corporation operated Gwadar Port, the port had five additional container cranes, built 100,000 square meters of storage yard, added state-of-the-art container scanning equipment, expanded the original 100,000-gallon-a-day seawater desalination plant to 220,000 gallons, added two sewage treatment systems, added 80,000 square meters of green space and built a new petroleum liquefied gas receiving terminal. At present, the Gwadar port can handle bulk cargo, containers, roll-on/roll-off cargo, liquefied petroleum gas and other operations, and has full operational capacity, thus solving the problem mismatch between cargo and ships. In short, the construction of the China-Pakistan Corridor has brought Pakistan many tangible benefits. Early harvest projects focused on infrastructure in the Corridor have created 38,000 jobs, more than 75 percent of which are local jobs, according to data from the Pakistan Planning Commission in June 2017.  China's industrial transfer will also create tens of thousands of jobs for Pakistan as capacity cooperation under the corridor framework advances.[2] Pakistan's GDP grew by 5.28 percent in 2017, the first time in a decade that it had grown at a rate of more than five percent. In the nine months before fiscal year 2017-18 (July 2017-March 2018), Pakistan's large manufacturing sector grew by 5.89 percent, second only to 5.98 percent in fiscal year 2013-14. The China-Pakistan Corridor contributed 20.9 percent of GDP in the 2016-17 fiscal year and created 22.6 percent of new jobs for Pakistan, while boosting its industry by 58 percent, according to the Pakistani newspaper National News. The China-Pakistan Corridor has brought tangible benefits to the Pakistani national economy and people's livelihoods, which has further consolidated and strengthened the "development consensus" promoted by the Belt and Road Initiative in Pakistan.

 

As far as unimpeded trade is concerned, China has become Pakistan's largest trade partner for four consecutive years and is Pakistan's largest source of imports and third largest destination of export, according to Pakistani statistics. In 2017, China-Pakistan trade exceeded USD 20 billion, of which USD 18.25 billion was exported to Pakistan and USD 1.83 billion was imported from Pakistan, an increase of 5.02 percent over the same period last year. [3]Most of Pakistan's imports from China are electrical machinery, electrical, audio-visual equipment and accessories, nuclear reactors, boilers, mechanical appliances and spare parts, steel, chemical fiber filaments, organic chemicals, steel products, plastics and their products, and so on, which are closely related to the construction of the Corridor. Pakistani exports to China are mainly cotton products, grains (rice), ore, slag and ash, garments, optical, photographic, medical and other equipment and accessories, lime cement, animal leather and other products. Most of Pakistan's exports to China are raw materials and Pakistan is in a state of serious trade deficit, which is closely related to the backwardness of Pakistan's manufacturing industry. In order to increase Pakistan's exports to China, the Ministry of Commerce of China organized enterprises to carry out economic and trade exchanges in Pakistan from 9 to 11 August 2017. During the period, 38 trade agreements worth USD 325 million were signed, representing 17 percent of China's total imports from Pakistan in 2016 (USD 1.91 billion). The products involved in the agreements include electrolytic copper, fish meal, seafood, pine nuts, Guar products, leather, frozen fish, castor seeds, frozen shrimp, tantalum ore, zirconium ore and its concentrate, crude copper, hazelnut sauce, crustaceans, marble waste and other products useful to Pakistan. In the future, as the construction of industrial parks under the framework of the China-Pakistan Corridor continues to advance, the export of manufactured goods from Pakistan to China will usher in a wave of great growth.

 

The two sides work closely together in financial integration. On November 7, the Bank of China officially opened a branch in Karachi, marking the opening of the Bank of China's first branch in South Asia. In 2017, China accounted for nearly 40 percent of Pakistan's USD 10 billion in foreign loans. In November 2014, the two sides reached a renewed bilateral local currency swap agreement by five years. In particular, China's early harvest of USD 19 billion involved about USD 6 billion in premium loans, with interest rates of just over 2 percent and grace periods ranging from five to eight years. China's direct investment in Pakistan has been firmly in the forefront since 2013. In fiscal year 2017-18, Pakistani FDI eventually recorded USD 2767 million, up 0.8 percent from USD 2746 million in fiscal year 2016-17. Of this amount, China's direct investment in Pakistan amounted to USD 1.58 billion. In addition, in order to promote bilateral investment and trade and strengthen financial cooperation, the People's Bank of China and the State Bank of Pakistan signed a bilateral local currency swap agreement of 10 billion yuan as early as December 2011 for a period of five years. In December 2014, the two parties signed another five-year agreement.

 

As far as people-to-people bond is concerned, on the one hand, nearly 10000 Chinese personnel are involved in the construction of the corridor project; on the other hand, about 9000 Chinese people are working hard on Chinese projects that are not directly related to the corridor. These projects are in themselves the arena for communication between the people of China and Pakistan. The "Chinese fever" spurred by the corridor construction is a popular booster, which further strengthens the mutual friendship and recognition between the two peoples. For example, the provincial government launched a multi-million-Dollar Chinese language scholarship program in 2017, and more than 500 students have been sent to China to learn the Chinese language. Pakistan has also opened a number of centers of excellence in Chinese studies in universities. It can be perceived that with gradual transition of the China-Pakistan Corridor from infrastructure-based stage into the next stage of industrial park-based construction, the commodity, personnel and service exchanges between the two countries will have a blowout development. Moreover, a number of projects benefiting the people have also been launched along with the infrastructure. For example, in May 2017, the China-Pakistan Boai Medical Emergency Centre of Gwadar, the first first-aid center for the CPEC, was inaugurated in Gwadar Port in response to the medical difficulties faced by the people in the Gwadar Port area. A 12-member team of China's first medical team to support Pakistan, jointly formed by the former National Health and Family Planning Commission of China and the Red Cross Society of China, also arrived in Gwadar Port in September 2017 for a two-year medical service. As of the end of March 2018, the Emergency Centre had received nearly 10 million yuan in assistance from the Red Foundation of China, receiving more than 1000 Chinese and Pakistani patients and 260 medical examinations for pupils of the Fatal Primary School and employees of the Port Authority of Gwadar, which was built with the assistance of China in Gwadar. With the development of medical team work, the team has won high praise of the local people. For another example, the China Harbor Control Corporation has also taken the initiative to assist relevant Chinese or Pakistani charities in the Gwadar area to carry out public welfare activities. Through the local government, 14 poor families in the Gwadar area have been selected to provide "one-on-one" assistance to these families, mainly through special recruitment and targeted purchase services.

 

China and India have made steady progress in building Five Connectivity. India ranked 32nd of all 94 countries in 2017, and rose to the second place from third among South Asian countries. Although it is only a small promotion of rank, it has far-reaching significance. In 2017, there was a 73-day stand-off in Doklam between China and India. However, the most serious security and political crisis in the past 30 years did not hinder the construction of the Five Connectivity between the two countries, especially economic and trade exchanges, the movement of people, and the two countries' joint efforts to oppose trade protectionism in multilateral forums. This shows that the construction of connectivity is gaining consensus between the two countries and has its own law of development.

 

As far as policy coordination is concerned, although the Doklam stand-off can be interpreted as a problem in policy communication between the two countries, the crisis has also prompted the leaders of the two sides to reflect on the existing mode of communication and improve it. During the crisis, under the close attention of the leaders of the two countries, the communication between the two sides at the policy and working levels played a role in defusing the crisis, and since then, a new form of communication, the informal leaders' meeting, has been born to ensure that the "high-level pilots" continue to act as the stabilizer in Sino-Indian relations. The successful resolution of the Doklam stand-off before the BRICS summit in Xiamen, fully demonstrates that the multilateral mechanism has become an important stage for the leaders of the two countries to strengthen strategic communication. At present, leaders of China and India can use the multilateral arena at least four times a year to enhance high-level communication, including the SCO Summit, the BRICS Summit, the East Asia Summit and the G20 Summit. These multilateral mechanisms are also an institutional guarantee for the high-level navigation of Sino-Indian relations to ensure that they will not fundamentally reverse under any circumstances. In addition, the China-India Cooperation Forum for Heads of Provinces/States was held in 2017. Indeed, as far as policy coordination is concerned, the interaction between China and India is far more frequent than that between China and other South Asian countries. As long as policy coordination is maintained, some specific differences between China and India will not seriously impinge on the general trend of the Five Connectivity between the two countries.

 

In terms of facilities connectivity, although the Indian government is still opposed to the Belt and Road Initiative (India refuses to send representatives to the first Belt and Road Summit Forum on International Cooperation in 2017 and publicly criticized the Belt and Road Initiative during the Summit) the cooperation between China and India involving "connectivity", especially the participation of Chinese enterprises in the construction of connectivity within India, is still huge. This largely ensures that the Five Connectivity between China and India will remain at a level above medium. The inclusion of India in “connected countries” in the 2017 Five Connectivity ranking list therefore makes sense.

 

In terms of unimpeded trade, bilateral trade grew strongly in 2017. In 2017, bilateral merchandise imports and exports between India and China reached an all-time high of USD 84.54 billion, up 21.4 percent, according to the Indian Business Information Statistics Agency and the Ministry of Commerce. Of this total, India's exports to China totalled USD 12.48 billion, up 39.3 percent; India's imports from China totalled USD 72.05 billion, up 18.7 percent. Judging from bilateral economic and trade relations, the Doklam crisis hardly caused any impact.

 

In terms of people-to-people bond, there were about 1.2 million travellers between China and India in 2017, of which nearly one million came to China from India and 250,000 from China to India. Given the general rivalry between the two sides, from the general public to the elite, during the Doklam crisis, this figure was quite unexpected. In fact, the personnel exchanges between China and India account for the vast majority of the personnel exchanges between China and South Asia.

 

The construction of Five Connectivity between China and Sri Lanka remained stable at the top three among South Asian countries. In 2017, Sri Lanka ranked 36th among all countries in terms of Five Connections Index with China, and stayed high in the category of good cooperation countries and third in the South Asian region. This ranking reflects China's strong presence in Sri Lanka. It can be perceived that once China's key projects in Sri Lanka are completed, such as ports, expressways and power stations, and are playing their due role in Sri Lanka's national economic life and bilateral economic and trade relations, especially in bringing Sri Lanka's export processing capacity and geopolitical potential into full play, the Five Connectivity between China and Sri Lanka will reach a new height. In the near future, Sri Lanka will become an interconnected country in terms of Five Connectivity with China. Of course, due to the interference from India as a super-strong external player, it is unlikely that Sri Lanka will become a smooth cooperation country in the foreseeable future.

 

In terms of policy coordination, China and Sri Lanka maintain frequent high-level exchanges. Yu Zhengsheng, chairman of the National Committee of the Chinese People's Political Consultative Conference, visited Sri Lanka in April to celebrate the 60th anniversary of the establishment of diplomatic relations between the two countries, and in May, Sri Lankan Prime Minister Victor Wickremesinghe visited China and attended the Belt and Road Forum for International Summit Cooperation.

 

As far as facilities connectivity is concerned, in 2017, various projects jointly constructed by China and Sri Lanka within the framework of the Belt and Road Initiative either advanced rapidly or had a significant impact. As the first key project to take root and bear fruit in the Belt and Road Initiative, the construction of the South Port Terminal of Colombo Port in Sri Lanka, invested and operated by Chinese enterprises, has advanced rapidly. The South Port Terminal is a model project for China and Sri Lanka to jointly build the 21st Century Maritime Silk Road, with an investment of USD 550 million. It was completed and put into operation ahead of schedule in 2014, which led Colombo Port to achieve a 14 percent increase in container throughput in that year. By the end of 2017, Colombo ranked 13th in the world port connectivity rankings released by Drury Shipping Consulting, with a throughput exceeding 6 million TEUs. Colombo International Container Terminals handled more than a third of the port's total throughput. The port of Colombo has now become a hub for the trans-shipment of maritime cargo in South Asia. Colombo Outer Ring Expressway is another benchmark project in the field of transportation infrastructure construction between China and Sri Lanka. The scale of the project is huge, the compilation of the planning scheme is complex, and the technical construction is difficult. Thanks to the unremitting efforts of the Chinese and Sri Lankan governments, project engineers and construction personnel, the project has made breakthroughs in key projects and construction areas, with four key projects winning awards in 2017 alone. These core technologies, with independent intellectual property rights, will not only greatly enhance the core competitiveness of Chinese enterprises in overseas markets, but also enhance the magnetization effect of Chinese technology in the international community under the Belt and Road Initiative. This will make countries along the Belt and Road, including Sri Lanka, applaud China's engineering quality and business philosophy. In addition, in 2017, the Sri Lankan government actively discussed with the Chinese side the conclusion of a new reciprocal arrangement for the port of Hambantota, which was ultimately satisfactory to both sides. In mid-December, Sri Lanka handed over the strategic port of Hambantota in the south of the country to China Merchants Port Holdings Ltd., who will operate the port commercially for 99 years. [4]The deal gives USD 1.1 billion in Chinese state loans to Sri Lanka. Earlier, the governor of the Sri Lankan central bank said that the leasing of the port to Chinese enterprises will generate USD 5 billion in foreign exchange income, which will stimulate investors' strong interest in the industrial development of the region.

 

As far as unimpeded trade is concerned, Sino-Sri Lankan trade continued to grow slightly in 2017, with Sri Lanka's export to China doubling to become the biggest highlight of economic and trade relations. According to Sri Lankan customs statistics, bilateral goods imports and exports between Sri Lanka and China totalled USD 4.61 billion in 2017, an increase of 3.9 percent. Of this total, Sri Lanka's exports to China amounted to USD 410 million, an increase of 108.6 percent, accounting for 3.6 percent of Sri Lanka's total exports, an increase of 1.6 percentage points. Sri Lanka's imports from China amounted to USD 4.19 billion, down 1.1 percent, accounting for 19.6 percent of Sri Lanka's total imports, down 2.1 percentage points. As of December 2017, China was Sri Lanka's sixth largest export market and second largest source of imports. Sri Lanka's export of transport equipment to China has suddenly risen to become the largest category of Sri Lankan exports to China in 2017, with an export value of USD 180 million, accounting for 44.1 percent of Sri Lanka's total exports to China. The main commodities imported by Sri Lanka from China are mechanical and electrical products, textiles and raw materials, and base metals and manufactured articles. Total imports of Sri Lanka in 2017 amounted to USD 2.82 billion, accounting for 67.4 percent of Sri Lanka's total imports from China. Sri Lanka's imports from China fell by a modest 1.1 percent, unlike the surge in exports to China. Overall, bilateral trade remains severely unbalanced due to Sri Lanka's limited exports to China. However, the significant growth in Sri Lanka's exports to China in 2017 was clearly conducive to gradually improving its trade imbalance with China. However, it is worrying that the process of negotiations on the China-Sri Lanka Free Trade Area, which began in 2014, is lagging behind. Although the two sides held their fifth round of talks in 2017, no ministerial-level consultations have been held between the two countries since March 2017, and little progress has been made in discussions between lower-level officials. At present, there are two major differences between the two sides on the free trade arrangement. Sri Lanka insists on the right to review the FTA in 10 years' time, but China hopes to maintain the long-term stability of the FTA. China hopes that once the free trade agreement is signed, 90 percent of the merchandise trade between the two countries will achieve zero tariffs, but Sri Lanka hopes to achieve zero tariffs for only 50 percent of the products, and gradually expand the scope of zero tariffs within 20 years.

 

As far as financial integration is concerned, a survey conducted by LMD Business Magazine shows that 72 percent of the respondents believe that China's free aid and loans to Sri Lanka are the key to Sri Lanka's economic development. [5]According to data released by the Sri Lankan Investment Commission on 29 January 2018, Sri Lanka attracted a record USD 1.63 billion in foreign direct investment in 2017, of which about 35 percent came from China. China became Sri Lanka's largest source of foreign direct investment in 2017.

 

From January to June 2017, the number of Chinese tourists to Sri Lanka reached 135,000, making it the second largest tourist source to Sri Lanka after India.[6] In addition, the M Dam Reservoir Project, which went under construction in July 2012, was fully completed in July 2017. The project is the largest hydro-junction in Sri Lanka with a water storage capacity of 570 million cubic meters and a power generation capacity of 25 megawatts. The project runs through Sri Lanka from the south to the north, regulating the water storage in the rainy season to the dry season and regulating the water in the central region to the north, which not only solves the problem of water use in large areas of the lower reaches of the river and enhances the flood control capacity in the flood season, but also significantly improves the quality of regional power supply and becomes China’s largest livelihood project in Sri Lanka.

 

Figure 10-2: Composition of Five Connectivity Indexes of South Asian countries in the category of “good cooperation”

 

The level of China-Nepal Five Connectivity has risen markedly. The year 2017 is the year of implementation of the 2016 Constitution of Nepal, and the country is in a period of political transition. The ruling Communist Party of Nepal (Maoist) was in power until June, when the more pro-Indian Nepali Congress took charge of the platform. During the transitional period, some large projects contracted by Chinese enterprises encountered a cold snap. For example, in May 2017, the Finance Minister of Nepal announced plans to cancel the construction agreement with the Three Gorges Group for the Ciseti Hydropower Station and allow Nepal to build independently from its own resources. The construction of the Cisetti Hydropower Station was taken over by Three Gorges International Energy Investment Co. Ltd. in 2012 with an investment of USD 1.6 billion. Since, the project has been delayed for five years because of disagreements over how to interpret the terms. On 13 November, despite strong opposition from the country's left-wing political parties, the NCP government ordered the cancellation of the Gandaji Hydropower Project Cooperation Agreement signed between the Maoist government and the Chinese side in June 2017. The project was formally incorporated into the China-Nepal Belt and Road cooperation framework. Nevertheless, for the whole year, China and Nepal have made great strides in the construction of the Five Connectivity in 2017. The evaluation results of the Five Connectivity indexes over the past three years also reflect this obvious change for the better. In 2015 and 2016, Nepal ranked relatively low (at 50 and 49, respectively) in the good cooperation countries, when there were only 63 countries and regions in the ranking list. By contrast, Nepal ranked 41 out of 94 countries and regions in 2017, up nearly 10 places in absolute terms. In relative terms, Nepal should be ranked between 27 and 28 in 2017, fully eligible for "connected country" status. All this is the cumulative result of mutual political trust between the two sides. Among them, in April 2017, the Chinese and Nepalese armies held the first "Sagamata Friendship" exercise in Kathmandu, focusing on counter-insurgency and counter-terrorism tactics, which was the first of its kind between the two armies, pushing mutual trust between the two countries to a record high.

 

As far as policy coordination is concerned, Prime Minister Prachanda visited China in March when he praised the Belt and Road Initiative and expressed his position on strengthening bilateral cooperation in various fields. [7] During the Belt and Road International Cooperation Summit on 12 May 2017, China and then Nepalese deputy prime minister and finance minister Mahara signed a series of cooperation documents, include the Belt and Road Memorandum of Understanding, the Memorandum of Understanding on the Construction of a Cross-Border Economic Cooperation Zone, the China-Nepal Friendship Industrial Park and the Nepal-China Tibet Cultural Tourism Industrial Park, and the exchange of documents on the post-earthquake rehabilitation and improvement projects of the Shara'a Highway and the Arnigo Highway. [8]In August, China and Nepal signed a Framework Agreement on Investment Promotion and Economic Cooperation, which defined the principles, fields, models, facilitation and safeguard measures, executing agencies and working mechanisms for bilateral investment cooperation, and was conducive to the healthy and stable development of Sino-Nepalese investment cooperation.[9] During his visit to Beijing in September, Nepalese Deputy Prime Minister and Foreign Minister Mahara held talks with Chinese Foreign Minister Wang Yi, and the two sides finalized a plan for the construction of a cross-border railway between China and Nepal. In the September and December elections, the left-wing party won a sweeping victory, even winning two-thirds of the seats in the parliamentary elections. After winning the election, Nepal's leaders made it clear that they would resume the Sino-Nepalese cooperation project that had been suspended by the Congress party. After the election, CPN (United Marxist-Leninist) leader Oli visited La Sova, the border crossing point between China and Nepal (across from Jilong), and said, "The future railway will be built from here."

 

As far as facilities connectivity is concerned, in August 2017, Nepal Telecom and China Telecom cooperated in laying optical cables. On January 12, 2018, the two sides held a ceremony in Kathmandu, the capital of Nepal, to inaugurate a cross-border optical cable between the two countries, and Nepal officially accessed the Internet via a Chinese line. The opening of the Chinese Internet provides an alternative source country to meet the growing demand of Nepal's Internet, and enhances the competitiveness of Nepal's domestic telecom operators. Figures released by the Telecommunications Authority of Nepal in March 2017 show that approximately 58 percent of the population of Nepal has access to the Internet. The opening of the Nepal-China cross-border optical cable is a milestone in the development of Nepal's Internet infrastructure, which will further deepen the friendly relations between Nepal and China from generation to generation and bring more business opportunities to the two countries. Previously, Nepal had relied entirely on India's submarine cable for Internet access, but users had complained about the slow speed of the Internet.

 

In terms of unimpeded trade, Nepal's economy recovered strongly, growing by 7.5 percent[10] in the 2016-17 fiscal year (ending at the end of July), its biggest increase since 1994 and well above the low growth rate (0.4 percent) of the previous year due to political unrest and India's "soft blockade". This is closely linked to the government's reconstruction after the 4.25 earthquake and the basic recovery of tourism. Moreover, Sino-Nepalese trade grew by 10.84 percent in 2017, according to the United Nations Commodity Trade Statistics Database, but bilateral trade imbalances remain prominent. China imports from Nepal, exports USD 967 million to Nepal, and imports USD 17.85 million from Nepal.

 

In terms of people-to-people bond, Nepal's tourism industry has gradually regained its vitality as post-earthquake reconstruction makes progress. Statistics show that the number of tourists from mainland China in 2017 was 104,600, several hundred more than in 2016. More importantly, China's post-earthquake public welfare activities in Nepal or the launch of people benefit projects have further improved the Nepalese people's feelings of closeness to China. For example, in recent years, the promotion of high-quality hybrid rice and maize in Nepal has become an important part of China's agricultural technical cooperation projects with Nepal. According to the cooperation plan signed by China and Nepal, the first phase of the cooperation project started in February 2016 and lasting for three years, will be completed jointly by Yuan Longping Agricultural High-tech Co., Ltd. and Nepal Agricultural Research Institute. In the past two years, after many trials, the project team has introduced 67 hybrid rice varieties from China and selected excellent varieties for high-yield cultivation demonstration in many places in Nepal. One of the varieties was also approved by the Seed Quality Management Centre of the Ministry of Agricultural Development of Nepal. Another example is China's 25 post-disaster reconstruction projects around the "4.25 earthquake" in 2015. In addition to infrastructure, these projects include a series of projects for people's livelihood, such as post-disaster recovery in mountainous areas, restoration of cultural relics and monuments, capacity-building for disaster prevention and control, and medical and health services. Throughout 2017, 2 projects were completed, 17 projects were under construction and the remaining 6 projects were undergoing pre-feasibility studies under a series of reconstruction plans. In addition, in response to the 60-year heavy rainstorm[11] that struck the Terai Plain in southern Nepal in August 2017, in November of that year, the Chinese government signed an economic and technical cooperation agreement with the United Nations Development Program (UNDP) in Beijing. Under the South-South Cooperation Fund, the Chinese government provided the UNDP with USD 4 million in earmarked funds to provide humanitarian aid to the southern region of Nepal, including blankets, cooking utensils, mosquito nets, water filters and sanitation kits. The project benefited 31,800 affected families in seven districts in two governorates. The project was officially launched on 11 January 2018. After two months, all supplies were distributed to the victims in mid-March.

 

The Five Connectivity construction between China and Bangladesh is growing steadily. The year 2017 is an important one for the governments of China and Bangladesh to step up the implementation of the results of President Xi's visit to Bangladesh the previous year. During President Xi's visit, China and Bangladesh signed 27 agreements and memorandums of understanding covering trade and investment, marine economy, road and bridge construction, electric power and energy, maritime cooperation, communication technology and other fields of national economy. The Chinese side pledged to provide USD 21.5 billion in loans for this purpose to comprehensively help Bangladesh's domestic modernization drive. Major projects regard infrastructure. For example, as a landmark project symbolizing the friendship between China and Bangladesh, the Padma Bridge will connect the capital Dhaka and 21 areas in southern Bangladesh, so as to promote real connectivity across Bangladesh. Another key project is the Kanapuri Underwater Tunnel, which will become the most important transport infrastructure project in the Chittagong area and will greatly shorten travel time and reduce transport costs. Benefiting from the implementation of the aforementioned agreement and the super-stability of Bangladesh's political situation, the construction of the Five Connectivity between China and Bangladesh in 2017, maintained a steady pace of progress. However, due to the relative pro-India nature of the current regime, the pace of opening up new areas of Five Connectivity between China and Bangladesh is relatively slow. The slow pace of construction of the Five Connectivity between China and Bangladesh is also reflected in the ranking of the Five Connectivity in the past three years. Bangladesh ranked 41st and 44th out of 63 countries and regions in 2015 and 2016, respectively. The relative ranking in 2017 is between 39 and 40, and the actual ranking is 59. Overall, the rankings have been hovering at the bottom of the "good cooperation" category for three years. The reason for this is that the Hasina regime pursues the policy of "India first" relatively. The Dhaka government is not in a position to participate in some of the major strategic infrastructure projects initiated by China. For example, the Sonadir Deep-water Port project, which was once hoped to be a major Chinese participation, was forced to cease under the high pressure of New Delhi.  It was replaced by Japan's Matal Bari Deep-water Port as an alternative for Bangladesh to realize its Deep-water Port dream. In addition, the Bay of Bengal Rim Industrial Growth Belt (BIG-B) initiative of Japan, Subregional cooperation programs such as India's Act East Policy (particularly the India-Bangladesh-Myanmar Connectivity Plan), BBIN (Bhutan, Bangladesh, India and Nepal Connectivity Cooperation Mechanism) and BIMSTEC (Bay of Bengal Rim Multi-sectoral Cooperation Organization) have also greatly constrained Bangladesh's resources and efforts in building sub-regional cooperation with China. Meanwhile, the Rohingya problem, which broke out again in 2017, has also seriously impacted the construction of China-Bangladesh connectivity. Since 2012, ethnic relations between Buddhist Rakhine and Rohingya Muslims in Rakhine State of Myanmar have deteriorated and a large number of Rohingya refugees have entered Bangladesh. The bloody clashes, in late August 2017 in Rakhine State, forced another influx of about 600,000 Rohingya from Myanmar into Bangladesh as refugees, which eventually led to more than 800,000 Rohingya refugees camping in Bangladesh in 2017. This seriously aggravated relations between Bangladesh and Myanmar. The refugee problem may become the most prominent problem in the long-term relationship between Bangladesh and Myanmar, and become another main reason that the construction of the Bangladesh-China-India-Myanmar Economic Corridor is almost shelved. Nevertheless, Bangladesh's "Golden Dream of Bangladesh" (to become a developed country by 2041) and China's "Two Century Dreams" are highly compatible, and the consensus that China and Bangladesh are both "close partners on the road to dreams" has been gaining momentum in Bangladesh. This bodes well for the "Five Connectivity" between China and Bangladesh.

 

As far as financial integration is concerned, more Chinese enterprises are paying attention to Bangladesh's market, benefiting from the Belt and Road Initiative. As of July 2017, China had accumulated a direct investment of USD 239 million and signed a total of USD 30.1 billion of engineering contracts in Bangladesh, making China the largest investor in Bangladesh.

 

As far as unimpeded trade is concerned, bilateral trade has developed rapidly. According to statistics of Bangladesh Export Promotion Bureau, Bangladesh exported USD 949 million to China in fiscal year 2016-17, up 17.49 percent year on year. Of this total, garment exports amounted to USD 390 million, up 14.77 percent year-on-year. [12]The improvement of infrastructure has greatly boosted Bangladesh's economic growth. GDP grew by 7.24 percent[13], in 2017, and Bangladesh grew by more than 7 percent for the second consecutive year. Among them, agriculture and manufacturing are the driving forces of growth. However, the military exchanges between China and Bangladesh have attracted the most attention. China has become the most important arms supplier to Bangladesh. Bangladesh Prime Minister Sheikh Hasina made a special trip to Chittagong Naval Base to preside over a ceremony on March 12, 2017 when two 035G-class diesel and electric submarines purchased from China by the Bangladesh Navy the previous year officially came into service. On 8 November, two large patrol boats jointly constructed by China and Bangladesh were officially launched, and Bangladeshi President Hamid and Chief of Naval Staff Nizam personally attended the service ceremony. The successful incorporation of the two patrol boats, the first large military vessel to be built in Bangladesh itself, was a milestone. In December, Bangladesh may introduce the Chinese Rainbow series and the improved Pterosaur UAV. In addition to continued cooperation on military equipment, the joint naval exercises between China and Bangladesh in 2017, also reached a new height. In May 2017, a Chinese naval expedition visited Bangladesh and the two navies held a joint naval exercise in the Bay of Bengal. This created the largest number of joint exercises in the history of naval exchanges between the two countries, the longest duration and the widest range of exchanges. At the invitation of Bangladesh, the organizer of the Indian Ocean Naval Forum Multilateral Maritime Search and Rescue Exercise, held in November 2017, the Chinese Navy sent ships to participate in the multilateral exercise under the framework of the Forum for the first time, demonstrating the close military interaction between the two sides. Of course, Sino-Bangladeshi military exchanges have also become an important catalyst for New Delhi to continuously deepen its defense cooperation with Bangladesh in recent years. During his visit to Bangladesh in April 2017, Indian Prime Minister Narendra Modi announced a USD 500 million credit line for India's purchase of defense equipment in addition to a USD 4.5 billion loan to Bangladesh, a record amount for India's aid to neighboring countries.

 

Figure 10-3: Comparison of Five Connectivity Indexes between Nepal and Bangladesh

 

The level of China-Maldives Five Connectivity construction has been significantly improved. Maldives ranked 58th and 57th respectively, in 2015 and 2016, almost at the bottom of 63 countries and regions. The actual ranking in 2017, though 69, is roughly the same as the 46-47 ranking in the past two years, given that this is a large ranking among 94 countries and territories, and could well be elevated from "countries of potential for cooperation" to "good cooperation countries". This positive change is closely related to the more explicit pro-China policy adopted by the Maldivian Yameen regime. In particular, the Yameen Government expressly welcomes the Belt and Road Initiative. In 2014, China and Maldives signed a Memorandum of Understanding on the Joint Construction of the 21st Century Maritime Silk Road, making the Maldives one of the first South Asian countries to join the Belt and Road Initiative. During his visit to China on December 6-9, 2017, Yameen said that China is an important and reliable partner of Malaysia, and thanked China for its strong support for Malaysia's economic and social development, saying that the Belt and Road Initiative has greatly promoted the development of the vast number of small and medium-sized countries. The joint statement pointed out that the Maldives reiterates its active support for and participation in the 21st Century Maritime Silk Road Initiative put forward by China. The two sides will deepen practical cooperation and enhance connectivity within the framework of the Belt and Road Initiative. In December 2017, China and the Maldives signed the China-Maldives Free Trade Agreement, making the Maldives the second South Asian country to sign a free trade agreement with China and the first time that the Maldives has signed a bilateral free trade agreement with other countries. China's two major infrastructure projects in the Maldives--the "Sino-Maldivian Friendship Bridge" linking the Maldives' airport island with the capital Male Island and the reconstruction and expansion of the Maldives International Airport--have accelerated under the impetus of bilateral friendly relations. Encouragingly, China has been the Maldives' largest tourist source for eight consecutive years since 2010, with some 300,000 Chinese (22.1 percent of all foreign tourists to Maldives) visiting the country in 2017.[14] As infrastructure improves, the Maldivian government hopes to attract 1 million Chinese tourists in the coming years. However, the approach of Sino-Pakistani relations has caused serious dissatisfaction in New Delhi, especially when three Chinese warships docked in the Maldives in August 2017, which sounded a wake-up call to New Delhi. New Delhi believes Chinese warships have crossed what it calls the "red line", prompting India to step up its engagement with the Maldivian opposition. This objectively exacerbated the geopolitical game between the two Asian giants in the Maldives.

 

There is a glimmer of hope in the construction of the Five Connectivity between China and Afghanistan. Afghanistan's position as the "heart of Asia" provides it with advantages in Five Connectivity construction, but the advantages have been severely suppressed by the security situation. According to security reports for the third quarter of 2017, areas controlled or affected by the government accounted for approximately 56.8 percent of the territory, a decrease of 6 percent compared with the same period last year. Specifically, of 407 districts in 34 provinces, only 231 are under government control or influence; 54 districts are under the control and influence of the Taliban, accounting for approximately 13.3 percent of the territory; another 122 counties are in the conflict zone of government army and Taliban. According to the report, 11.4 percent of the Afghan population (about 3.7 million people) is located in areas under the control or influence of the Taliban, 20.7 million in areas under the control and influence of the government, and 8.1 million in areas under contention between the two sides. [15]This secure and volatile domestic situation is the most important reason why Afghanistan has been lagging behind in the construction of the Five Connectivity. In 2015 and 2016, Afghanistan's Five Connectivity scores ranked 61 and 60, almost at the bottom. In 2017, China-Afghanistan connectivity efforts continued to be deeply affected by the deteriorating security situation in Afghanistan, with the Five Connectivity ranking at 79, but converted to about 52-53 in 2015 and 2016 assessment system, with a relative improvement in position. This is closely related to the strengthening of economic and trade relations between the Xinjiang Autonomous Region and Badakhshan Province in northern Afghanistan, the establishment of an industrial park in Badakhshan Province by Xinjiang Special Electric Workers, and the display of precious cultural relics of Afghanistan on tour in China. Moreover, China-Afghanistan trade has increased markedly in the past two years. In 2016, the total import and export trade between the two sides was USD 430 million, an increase of 16.49 percent over the same period last year, and bilateral trade in 2017 was USD 544.6 million, an increase of 25.15 percent. These positive changes have freed Albania from the overall embarrassment of being at the bottom of the Five Connectivity rankings. Most noteworthy in 2017 was the relay tournament display of Afghan treasures in Chinese cities. In March 2017, the National Palace Museum took the lead in accepting these Afghan treasures by staging an exhibition entitled "Reborn in Fire: Treasures from the National Museum of Afghanistan". This was the first time that Afghan cultural relics had been unveiled in China. It was the National Palace Museum's "Ice Breaking Exhibition" that opened a tour of Afghanistan's cultural relics in China. After the exhibition at the Palace Museum ended in June 2017, the collection was supposed to continue its tour in other countries, but for special reasons, the original plan was cancelled. This meant that if this collection could not find its next site, it would have to return to Afghanistan, where the security situation was still precarious. The State Administration of Cultural Heritage, in consultation with the Palace Museum, decided to allow cultural relics to be temporarily stored in the Palace Museum, and the Chinese People's Association for Friendship with Foreign Countries contacted the Afghan Embassy in China to explore the possibility of exhibiting cultural relics in China. After that, Chongqing Dongling Art Co., Ltd. was authorized by the National Museum of Afghanistan to hold exhibitions in China, and the next exhibition was arranged during the "Silk Road (Dunhuang) International Cultural Fair" held by the Dunhuang Research Institute of China. The exhibition in Dunhuang not only deepened the cultural understanding between the two places on the Silk Road, but also further promoted the exchanges between their cultural and museum circles. The second to take over was the Chengdu Museum. In 2018, the roving baton will continue to alternate between Chinese cities. The exhibition of Afghan antiquities has increased the Chinese people's understanding of the splendid ancient civilizations of Afghanistan and their sympathy for the years of turmoil there. Also, the Chinese Red Cross foreign aid medical team's public welfare tour in Afghanistan has increased the friendly feelings of the Afghan people towards the Chinese people. On 26 August 2017, a Chinese Red Cross foreign aid medical team arrived in Kabul, Afghanistan, to screen children with congenital heart disease, and signed a cooperation agreement with the Afghan Red Crescent Society to rescue 100 Afghan children with congenital heart disease. Subsequently, the first batch of 21 children went to the First Affiliated Hospital of Xinjiang Medical University for free surgical treatment. In addition, on 10 October 2017, the commencement ceremony of the China-assisted construction of the comprehensive teaching building and auditorium of the University of Kabul in Afghanistan was held in Kabul. The project is contracted by MCC19 Group Co., Ltd. with an area of about 2.1 hectares and a total floor area of 14,100 square meters. The project, which is expected to be completed by the end of 2019, will become the largest building complex and an important landmark of the University of Kabul.

 

Figure 10-4: Radar chart of Five Connectivity Indexes of South Asian countries with potential for cooperation

 

Construction of the Five Connectivity between China and Bhutan has stagnated. Bhutan is at the bottom of the China-South Asia Five Connectivity rankings, a position that has not changed in the past three years, either in absolute or relative terms. Bhutan ranked at 63 in 2015 and 2016 rankings, and 90 in the 2017 rankings. It has not yet established diplomatic relations with China, which has severely restricted the construction of the Five Connectivity between China and Bhutan. In 2017, the two countries also had to suspend the 25th round of border talks because of the Doklam stand-off between China and India. The absence of Bhutan from the bottom of the 2017 rankings is partly due to the 29.31 percent increase in China-Bhutan trade in 2017. Bilateral trade was USD 4.96 million in 2016 and USD 6.415 million in 2017. However, the increase was marginal, because on the one hand the total volume of trade between the two countries was almost negligible and on the other hand the increase was contrasted with a rare negative growth of 41.40 percent in China-Bhutan trade in 2016. In short, in all areas of Five Connectivity, there is little correlation between Bhutan and China. Bhutan is still a country completely affected by India.

 

Figure 10-5: Illustration of percentage of Five Connectivity Indexes of Bhutan in 2016 and 2017

 

The overall position of South Asian countries in the Five Connectivity Index ranking list in 2017 is still not very ideal compared with that of other regions around China. However, the positive momentum being accumulated between China and Nepal, China and Pakistan, China and Sri Lanka and China and India is expected to push China and South Asia to make even greater strides in the Five Connectivity construction in 2018.

 

Notes:

[1]:Hu Shisheng, Dean of Institute of South Asia Institute, China Institute of Modern International Relations, research fellow, doctoral supervisor.
[2]:Early Harvest Projects of CPEC Have Created More Than 30 Thousand Direct Employments in Total (《中巴经济走廊早期收获项目已累计创造3万多个直接就业岗位》), Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the Islamic Republic of Pakistan http://pk.mofcom.gov.cn/article/jmxw/201706/20170602587148.shtml (August 16th, 2017)
[3]:https://www.fmprc.gov.cn/web/gjhdq_676201/gj_676203/yz_676205/1206_676308/sbgx_676312/
[4]:Director if the Central Bank of Sri Lanka: Deal of Port of Hambantota and Trincomalee Oil Tank Project Help Regional Development (《斯央行行长表示汉班托塔港交易和亭可马里储油罐项目有助于地区发展》), Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the Democratic Socialist Republic of Sri Lanka  http://lk.mofcom.gov.cn/article/jmxw/201707/20170702602800.shtml (September 8th, 2017)
[5]:Daily Financial Times: Survey shows that 72% of the respondents believe that China is key to Sri Lanka's economic development (《每日金融时报:调查显示72%的受访者认为中国是斯里兰卡经济发展的关键》), Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the Democratic Socialist Republic of Sri Lanka  http://lk.mofcom.gov.cn/article/jmxw/201709/20170902639775.shtml (visited on November 10, 2017)
[6]:“Tourist arrivals rise in June, surpasses 1 million target in 1H 2017”, Daily Financial Times, 2017-7-7, http://www.ft.lk/article/626681/Tourist-arrivals-rise-in-June--surpasses-1-million-target-in-1H-2017. (visited on November 2, 2017)
[7]:President Xi Jinping Meets with Nepalese Prime Minister Prachanda (《习近平会见尼泊尔总理普拉昌达》), Xinhuanet, March 27, 2017,
http://news.xinhuanet.com/politics/2017-03/27/c_1120704811.htm (visited on November 12, 2017)
[8]:Chinese and Nepalese Governments Sign the Belt and Road Cooperation Agreement (《中尼两国政府签署“一带一路”合作协议》), Chinese Embassy in Nepal, May 13th, 2017,
http://www.fmprc.gov.cn/ce/cenp/chn/xwdt/t1461292.htm (visited on November 12, 2017)
[9]:China and Nepal signed Framework Agreement between the Government of the People’s Republic of China and the Government of Nepal on Enhancing Investment and Economic Cooperation, Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in Federal Democratic Republic of Nepal http://np.mofcom.gov.cn/article/jmxw/201708/20170802628671.shtml (visited on November 15, 2017)
[10]:“Nepal Development Update”, World Bank, Sep.15, 2017. http://www.worldbank.org/en/country/nepal/publication/nepaldevelopmentupdate. (visited on November 14th, 2017)
[11]:According to Nepalese statistics, the heavy rains caused flooding in 35 areas, and more than 80 percent of the land was submerged. Some 160 people were killed, more than 43,000 houses were damaged, nearly 200,000 houses were partially damaged and more than 21,000 families were displaced by the floods. The Nepalese government estimated that 1.7 million people were affected.
[12]:Export from Bangladesh to China Increases Rapidly, Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the People’s Republic of Bangladesh,
http://bd.mofcom.gov.cn/article/jmxw/201707/20170702616216.shtml (visited on August 26th, 2017)
[13]:BilkisIrani, “GDP growth peaks at 7.24% breaking all records”, Dhaka Tribune, May 14, 2017, http://www.dhakatribune.com/business/economy/2017/05/14/gdp-growth-breaks-records/. (visited on November 7th, 2017)
[14]:http://maldivestimes.com/maldives-records-1-3-million-tourists-in-2017 (visited on December 5th, 2018)
[15]:SIGAR Reports Govt Has Lost More Ground to Insurgents, http://www.tolonews.com/afghanistan/sigar-reports-govt-has-lost-more-ground-insurgents (visited on Novemer 8th, 2017)

 

—————————————————————

FOCUS ON CONTEMPORARY NEEDS.
Should you have any questions, please contact us at public@taiheglobal.org