Paw Tracker newsletter (Week of May 9)

Last week, Myanmar’s blacklisting of Chinese solar companies, which dominated pre-coup solar project tenders in 2020, sends worrying signals about the future of Chinese business interests in the country. The situation highlights the challenges of navigating the complicated political and economic landscapes of post-coup Myanmar, which Chinese observers not so long ago considered “protective” of Chinese interests. It also serves as a reminder of how a significant realignment of political interest in a host country may affect long standing Chinese investments: the China-Belarus industrial park’s fate after the war in Ukraine might be another case in point.

Talk of the Town

On May 5, Myanmar newspaper The Irrawaddy reported that, in the wake of personnel change at the Ministry of Electricity and Energy, the Myanmar government has canceled 26 tenders for solar PV projects issued in Sept 2020, under the previous National League for Democracy (NLD) government. Chinese companies have dominated tenders for solar projects in Myanmar for a number of years, winning 28 of the 29 tenders up for grabs from May to Sept 2020. Many of those companies have now been blacklisted by the Myanmar government for “breaching tender regulations”, write The Irrawaddy. 

The companies include three major private companies, Sungrow Power, Xi’an LONGi Solar and GCL System Integration, as well as three state owned power sector investors, Yunnan International Power Investment (a subsidiary of the State Power Investment Corporation(SPIC)), China Machinery Engineering Corporation (CMEC), and the Gezhouba Group Overseas Investment Company.

According to the Myanmar Ministry of Electricity and Energy, the apparent breach of tender regulations is the companies’ failure to sign Power Purchasing Agreements with authorities since the coup in Feb 2021. The Chinese companies had promised to sell electricity from the 26 solar projects at a far lower rate than their competitor bidders – between 3.5 and 5.1 US cents per kilowatt, while the average cost for power supply in the country by 2018 was 8.1 cents/Kw.

Interestingly, the last few weeks has seen a flurry of reports on Chinese solar projects in Myanmar holding ceremonies for the “official commencement of construction”. As we discussed a few weeks ago, among them were two SPIC invested projects, tenders for which were won in the 2020 round of bidding. Local government officials from Mandalay and Bago regions were in attendance at the ceremonies. But according to Myanmar’s Ministry of Electricity and Energy, those tenders are now invalid and the company blacklisted. 

Of the Chinese companies, Sungrow will be particularly affected. In the 2020 bidding round they won a total of 9 out of the 29 tenders. CMEC won 8.

The dramatic move by Myanmar’s government may have come as a surprise to many Chinese Myanmar watchers. While many questions were raised about the future of Chinese investments in the country in the wake of the coup in Feb 2021, business appeared to continue largely unaffected. As we covered at the time, Chinese analysts were in fact largely calm about the coup. On the day of the coup on 1 Feb, associate researcher at the Chinese Academy of Social Sciences, Tian Guangqiang, offered his opinion that a new military government would likely “actively protect and advance Chinese investments” in the country due to its urgent need for economic development. Developments since then have perhaps shown the limitations of one dimensional economic assessments of complex political realities.

Of course, many more Chinese companies are involved in projects in Myanmar – including the proposed Kyaukpyu Port, the Kyaukpyu gas power plant being constructed by Power China, and a number of new solar project tenders won in 2021. The cancellation of tenders and blacklisting of Chinese solar companies last week should be setting off warning signals for all of them.

This week's highlight project

Cameroon: Sinosteel signs $700 million deal for iron mine

Chinese state-owned mining company Sinosteel last month inked a deal with the government of Cameroon for rights to the Lobi iron mine, located on the southwestern coast of the country. The mine is 17km from the Chinese-built Kribi deep water port. The project promises a total of more than 600 million tons of high quality iron ore.  

Sinosteel has been in rounds of discussions over Lobi mining rights and related infrastructure projects with the presidential office of the Cameroon government since as early as 2015. The final deal, agreed in April, is for an “integrated iron mining project”, including extraction, ore screening, power generation and a port terminal, which Sinosteel will develop in collaboration with partners. Sinosteel CEO Liu Andong said the project is an “important milestone” for mining in central and western Africa.

The bigger picture: Chinese companies only control less than 7% of the total value of African mine production, and while iron ranks as the second most valuable metal for Chinese mining interests in Africa, worth USD4.9 billion annually, copper and cobalt together bring in USD8 billion. China, however, dominates Africa’s rare earth metal mining. Gakara Rare Earth Project in Burundi, the continent’s only large scale extraction project, exports its entire output to China. China produces more than 85% of the world’s rare earth metals. 

Other project & corporate updates

Belarus: China-Belarus industrial park welcomes new corporate resident

The “Great Stone” China-Belarus industrial park, one of the early fruits of the Belt and Road Initiative, celebrated its hosting of 90 companies on May 11. The 90th corporate resident of the park, located near the Minsk airport, is a Chinese logistics firm. According to the BRI Portal website, the 90 companies now represent USD1.2 billion in total investment. Among the residents, slightly over half (46) are Chinese companies, while the rest are from Belarus and other countries. The industrial park is aiming to attract its 100th corporate resident by the end of this year.

A bit more context: The industrial park, established as an outcome of Xi's visit to Belarus in 2010, predates the BRI (announced in 2013) and represents the early-day ambitions of the Silk Road Economic Belt to form stronger economic ties between China and Eastern Europe, through the vast Eurasia landmass that used to be Soviet republics. That vision has always been complicated by the presence of Russia, which sees the region as its sphere of influence. Chinese economic involvement in Belarus is said to be overshadowed by Russia, a situation that will likely become more accentuated after the war in Ukraine. How the “Great Stone” project will position itself in the wake of Western sanctions on Belarus is worth watching.