Paw Tracker newsletter (Week of Nov 1)

This week's highlight projects

Thailand: Key contract signed for Sino-Thai railway

Thailand's State Railway signed a key piece of procurement contract with a Chinese consortium for the train carriages, electrical and signaling systems of the much debated first phase of the Sino-Thai high speed railway, from Bangkok to Nakhon Ratchasima.

The 253km stretch of the planned railway was previously envisioned to be much longer in distance. Originally, the China-Laos-Thailand cross-country railway system would connect Bangkok all the way with Kunming. But the Thai segment, at the beginning designed to stretch more than 800 kilometers from Bangkok to Nong Khai on the Lao border, underwent several cuts and renegotiations by multiple Thai administrations throughout the years since 2013. Besides a much shortened route, the most significant change is the shrunken role of China in the project. In 2016, Prime Minister Prayuth Chan-ocha announced that Thailand intended to finance the project on its own, after failing to secure more favorable interest rates for Chinese loans. Thai government also did not grant Chinese companies the right to develop rail station properties. The move reduced China to a supplier of equipment and technology, which the recent contract reflects.

Guinea: Survey of trans-Guinean railway starts

A team from China Railway Construction Corporation (CRCC) has arrived in the West African country Guinea to kick off surveying work for the 553km railway from Mariyaba port to Simandou, a major mining area for iron. The railway is a key component of the Simandou block 1 and 2 mining project, one of the world's largest untapped iron ore deposits. A consortium of Guinean, Singaporean and Chinese companies (The SMB-Winning Group consortium) won the right to develop the mining blocks in November 2019. 

By giving the mining concessions to the consortium, the Guinea government is hoping the railway could become a key piece of infrastructure that opens up inland Guinea to more development opportunities. Previous environmental and social studies of the route, done by Rio Tinto and Chinalco, estimated that more than 10,000 people would need to be uprooted for the rail project. The SMB-Winning Group consortium also has a controversial track record in Guinea for its bauxite mining activities in the Boke region.

Other project & corporate updates

Pakistan: Port Qasim power plant completed maintenance outage amidst the pandemic

Unit 1 of the Port Qasim coal-fired power plant, the first major energy infrastructure project to materialize under the China Pakistan Economic Corridor (CPEC) in 2018, went back on line on Oct 26 after a pre-scheduled maintenance outage. The 660MW x 2 power plant, located in Port Qasim near Karachi, is run by a joint venture of Power China and Qatar's AMC group. The project was launched in 2015 and achieved grid connection in April 2018.
 

Power China celebrated the event as a “milestone” in the running of the power plant in the middle of the Covid-19 pandemic. According to the company, the pandemic has created difficulties in the import of parts and equipment for the safety repair. A week earlier, a report by China's official Economic Daily, revealed that the power plant faced much more serious challenges. In the face of the pandemic, Pakistan’s government postponed payment for the electricity generated and froze tariff adjustments which greatly impacted the cash flow of the power plant to the point of a “revenue dry-up”, according to the newspaper. The company had to cope by delaying payment to its coal suppliers and slowing depositing into the escrow account for loan repayment. 

Talk of the Town

The Belt and Road Initiative will be central to China’s “dual circulation” economic pattern in the 14th Five Year Plan period (2021-2025), a new reality for investment, consumption and trade as seen by the Chinese leadership. This is the message coming out of the 3rd China International Import Expo held in Shanghai last week, where President Xi Jinping delivered an opening speech outlining his vision for how the Chinese economy should fit into global economic flows in a world ravaged by the pandemic and disrupted by protectionism.

The emphasis of “dual circulation”, where the “internal circulation”(i.e. domestic investment, consumption and trade) is supplemented by “external circulation” (i.e. economic exchanges with the outside world), does not mean China is moving towards a closed autarky, stressed Xi. But the new reality in the world economy does require a reorganization of China’s economic ties. As scholars Shi Zhiqin and He Yun see it, the shutdown of global supply chains caused by the pandemic is pushing China to pivot to its domestic market for continued economic growth. And the US-China trade war is reorienting China’s international trade flows towards new partners along the Belt and Road. 

The new “buy global” campaign is certainly trying to bear this new vision out. In an article on the People’s Daily, the China Exim Bank says it has set aside 350 billion RMB to support imports, especially from Belt and Road countries. A 5 billion USD import financing fund is specifically set up for imports from African countries. Xi also pledged to shrink China’s catalogue of technologies prohibited for import as a gesture to remove barriers to sell to China. It would be interesting to watch how the BRI changes China’s “buy global” shopping list, which so far has cutting edge technologies and high-end consumer products at its top, both serving its goal of industrial and consumption upgrade.