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China Reform Monitor - No. 1333

Bumps in the road for the BRI;
Beijing pushes travel restrictions for "discredited" persons

Edited by Joshua Eisenman
July 11, 2018

May 28:

Malaysia and Myanmar are both reconsidering mega deals associated with China's Belt and Road Initiative (BRI). Malaysian Prime Minister Mahathir Mohamad said he would scrap a $13.8 billion rail project linking Kuala Lumpur to Singapore to avoid taking on extensive debt to Beijing and would talk to the Chinese government about renegotiating what he called "unequal treaties,"
Bloomberg reports. Meanwhile, and for the same reason, Myanmar is reviewing a $9 billion deep-water port in the country's Western Rakhine state. Both countries are also reconsidering whether to go ahead with other major projects financed by Beijing, the South China Morning Post (SCMP) reports.

June 4:

China published a list of 169 "severely discredited" people who are banned from boarding flights or high-speed trains as a punishment for misdemeanors such as misbehavior while travelling and financial irregularities. The list, which will be updated monthly, was posted on the Credit China website as part of a plan by China's National Development and Reform Commission, is part of the nationwide social credit system that was initiated in 2013. The system, which rates every Chinese citizen according to his or her financial history and behavior, aims to "allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step." Since it was rolled out nationwide in 2017, authorities have "discredited" 6.73 million individuals, and by 2020 social credit scores will be made public. The government has deployed artificial intelligence and millions of surveillance cameras to enforce the system,
the Indian Express reports.

June 6:

There is confusion about the fate of Nepal's 750MW West Seti project, a mega dam financed by China's loans, after two senior Nepalese officials contradicted each other on whether the $1.8 billion deal would go ahead,
the SCMP reports. Last week, Nepalese Finance Minister Yubaraj Khatiwada said Kathmandu would fund the dam itself, rather than through loans from China, and said the deal with China Three Gorges Corp. (CTGC) would be cancelled. But afterward, Nepal's energy minister, Barsha Man Pun, said: "The West Seti project is still in the hands of CTGC and we are ready to continue with CTGC if it is eager to develop this project." The conflicting statements from ministers reflect a need to keep both pro-Indian and pro-Chinese forces inside the country happy, said Bhaskar Koirala of the Nepal Institute of International and Strategic Studies. The domestic politics of foreign countries now present a challenge to BRI projects, notes Zhao Gancheng at the Shanghai Institute for International Studies.

June 12:

China's Coast Guard has been stealing fish from Filipino fishermen around the disputed Scarborough Shoal reef 358 kilometers west of the main Philippine island of Luzon, said a spokesperson for President Rodrigo Duterte. "Fish unacceptable," he told a news conference, at which he announced that three fishermen had lodged complaints after China's Coast Guard boarded their boats and confiscated their "best fish" last month. "We are not taking this sitting down," he said, adding Duterte and President Xi Jinping have "an understanding" that Filipinos are allowed to fish unimpeded around Scarborough Shoal. "China's Coast Guard should not be taking a single kilo of fish from our fishermen," he said, adding that the Foreign Secretary had raised the matter with China's Ambassador in Manila,
the Straits Times reports.

[EDITOR'S NOTE: China seized control of Scarborough Shoal in 2012, after a Philippine Navy frigate intercepted eight Chinese fishing boats for poaching coral and giant clams. A two-month standoff between the Philippines and China ensued, until the U.S. mediated a deal that both sides should withdraw. But although the Philippines pulled out, China stayed and sealed off the atoll. China loosened its hold last year, when Duterte sought warmer ties with Beijing and Filipinos were again allowed to fish in the area.]

June 15:

China Railway Group, which is spearheading Beijing's "railway diplomacy" as part of the BRI, has launched a debt-equity swap deal intended to raise 11.6 billion yuan,
the SCMP reports
. The idea is to have lenders swap loans for stakes in the borrower, helping the latter to cut debts, while also avoiding bad debts for creditors. Nine state-controlled investors have taken part in the China Railway swap deal to date, including China Great Wall Industry, China Orient Asset Management, and China Cinda Asset Management. The three, which are among China's top four bad-debt managers, will transfer 4.5 billion yuan worth of debt into equity. After the deal, China Railway will see its equity in four subsidiary companies decline from 100 percent to between 70-76 percent, and its debt ratio will fall by 1.37 percent to 78.5 percent, which will save about 580 million yuan in annual interest costs.

Related Categories: China; Southeast Asia; South Asia; China and East Asia Program

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