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Paw Tracker newsletter (Week of Jun 27)

Last week we looked at the High Level Dialogue on Global Development, held in Beijing as part of the 14th annual BRICS summit. But what else came out of the group’s summit, which seems to have taken on new vitality in the current global context? Russia’s intention to build the BRICS into some kind of a financial union and China’s push to expand the BRICs bloc to include more developing country members, most notably Iran, are some of the most consequential steps for the bloc, and have potential to further bifurcate the global geopolitical landscape.

The Paw Tracker newsletter, developed by Panda Paw Dragon Claw, provides up-to-date and granular project-level information on the Belt and Road Initiative. Drawing from Chinese sources of information that are often disjointed and difficult to access, the newsletter also aims to become a convening space for watchers of the BRI to share and cross-check information about projects and their impacts on the ground. 

Talk of the Town

Receiving perhaps the most attention last week was the BRICS groups’ announcement, led by Russia, to develop a separate reserve currency system, using currencies from all five countries. On June 22 President Putin commented that the idea “is being elaborated on." The immediate incentives to establish such an alternative to dollar transactions are obvious from the Russian side. China, meanwhile, has long expressed a desire to internationalize RMB, making steps towards this by, for example, establishing RMB clearing houses in the UAE and other locations overseas.

In an interview with, President of the China Institute of International Studies, Xu Bu, commented that the strengthening of financial cooperation between the BRICS countries is an inevitable trend, given their global economic might – their GDPs added together amount to 25% of the world’s total and together they accounted for 50% of global economic growth in recent years. He also noted, without going into detail, that establishing a reliable alternative international payments mechanism faces many obstacles.

Among these obstacles are the current dominance of dollar payments across the world – indeed almost all Belt and Road related transactions such as loans and EPC contracts are conducted in US dollars – and the BRICS countries’ comparatively poor credit quality. In an analysis of the proposal, Dutch financial services company, ING, highlighted the three fundamentals needed to establish a strong reserve currency, “safety, liquidity and return.” It is questionable whether RMB, rubles, real, rupees and rand meet the standard. They also question the political willingness of “mercantilist nations” such as China to transfer foreign exchange reserves into a shared initiative with less individual state control.

Nonetheless, settling international payments in currencies other than USD may pick up in the face of the immediate political and economic pressures placed on Russia. And BRICS partners in particular appear to have little interest in curbing their trading options in line with Western sanctions, especially as the energy and food crises close in. A few days after the closing of the BRICS summit, UltraTech, India’s largest cement producer, reportedly bought a shipment of coal from Russia using RMB. According to Reuters, the price of the transaction was RMB 170 million for 157,000 tonnes of coal. This comes off the back of growing imports of Russian crude oil and gas.

Russian banks are far more willing to accept RMB than rupees or other emerging economy currencies due to the fact that China is Russia’s largest and fastest growing trading partner. Is RMB destined to become the main currency for transactions between sanctioned Russia and other countries?

This week's highlight project

Pakistan: CPEC’s first hydropower investment went into operation

On June 30, The Karot Hydropower Plant went into commercial operation, marking the materialization of the first hydropower investment under the China-Pakistan Economic Corridor. The contract for the 720MW power plant was granted to a consortium of Chinese companies led by China Three Gorges in 2016. With a total project cost of USD 1.6 billion, the project is jointly financed by China Exim Bank, China Development Bank and equity investments from both the Silk Road Fund and the IFC of the World Bank Group (with a 15% stake).

A bit more context: In recent months, many CPEC power projects have faced financial troubles as they were squeezed by rising fuel prices on the one side and delayed power purchase payments from the government on the other. The situation has led some Chinese power plants to threaten halting operation, and was further complicated by the IMF’s pressure on the Pakistani government to renegotiate power purchase agreements under CPEC. 

Interestingly, a month before its start of official operation, the Karot hydropower station has reportedly already provided “free electricity” worth Rs 4 billion to the national grid “as a gift to the Pakistani people”. 

Other project & corporate updates

Indonesia: RMB1.9 billion flood control and irrigation dam 

On June 29 China CAMC signed an EPC contract worth RMB1.9 billion for the construction of the Jenelata Dam in South Sulawesi province. The dam will stretch 1.5km in length and 63.8m in height. The total capacity of the reservoir after construction will be 285 million cubic meters and will be used to irrigate 24,400 hectares of land.

The project will be constructed by a consortium formed of China CAMC and two state owned Indonesian companies, ADHI and WIKA. Construction and installation work is expected to be completed in 56 months.

It received Chinese government financing and, according to an article on GoalFore, is the first time the Chinese and Indonesian governments have collaborated on a “livelihood related project”.

If you have further details of any of the above mentioned projects that you would like to share with the community, please reach out to us through
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