The apparent fraternization of the unpredictable dictators also raises questions for Beijing. Last week, as is well known, Vladimir Putin and Kim Jong-un met at the cosmodrome in the Amur region of eastern Siberia. The high-profile rapprochement, during which they most likely exchanged information about ammunition supplies and missile technology, does not only worry the West.
For instance, why did Kim make his first foreign trip in many years to Russia instead of Beijing? However, a trilateral alliance, as Washington is already painting with horror on the wall, remains unlikely, writes Christiane Kuehl. The individual interests of the three dictators are not aligned enough for that – not to mention the mutual trust between them.
A lack of mutual trust also appears to be at the highest levels of China’s leadership. After Foreign Minister Qin Gang disappeared in July and was officially ousted a short time later, there is no trace of Defense Minister Li Shangfu. He is allegedly being investigated on suspicion of corruption.
However, the case of Li Shangfu is different in several respects, Michael Radunski analyzes. Li was not least regarded as a close confidant of Xi, with whose appointment he accepted significant tensions in the military relationship with the United States. Much now indicates that there is a lot of turmoil behind the scenes in Beijing’s power apparatus.
Last week, images of Russia’s Vladimir Putin and North Korea’s Kim Jong-un on the cosmodrome in the Amur region of eastern Siberia went around the world; two dictators who hate the West and allegedly talked about ammunition supplies and missile technology. Not present: China.
But Beijing likely watched closely from the sidelines. All that was made public about the talks in the cosmodrome was platitudes about intensified cooperation. The assumption on all sides is that North Korea will supply Russia with ammunition and artillery shells for the Ukraine war in return for money, food, oil and perhaps even Russian missile technology and military know-how.
Despite the similarly anti-Western sentiment of Kim and Putin, China must have looked at the meeting with suspicion. After all, only one aspect of such a deal is positive for Beijing. Ammunition from North Korea might help prevent a defeat for Putin in his war – without China having to get its own hands dirty.
But apart from that, the bilateral coziness between the two is more likely to raise questions in Beijing. Why, for example, did Kim make his first foreign trip in many years to Russia instead of Beijing? That is a bit of an insult.
The United States is already voicing fears of the emergence of a China-Russia-North Korea trilateral bloc. But such a bloc, apart from the rejection of the US-dominated world order, has so far been shaped primarily by individual interests, which come first for all three.
But these three interests do not match, at least from China’s perspective. Beijing rejects the development of nuclear bombs by North Korea. The Chinese leadership is only interested in the outcome of the Ukraine war insofar as it is intended to keep Putin in the Kremlin and weaken the United States.
Moreover, the fact that China is the strong partner in bilateral relations with Russia and North Korea does not mean that President Xi Jinping trusts his unpredictable counterparts, Kim and Putin. And he knows that closer cooperation between Russia and North Korea will reduce both countries’ dependence on Beijing – and thus make them even harder to control.
So if Kim now provides Putin with the weapons and ammunition that Beijing, by most accounts, denies him, then the balance between the three anti-Western partners changes.
What is clear is that such a deal would violate the extensive UN sanctions regime against North Korea, which both Moscow and Beijing have repeatedly agreed to over the years. Accordingly, all arms imports from North Korea have been banned since 2009. However, it is safe to assume that Putin and Kim couldn’t care less about that.
China, on the other hand, does not want a complete break with the West, especially not with the EU. While Kim toasted victory with Putin in his “holy struggle” against evil, China generally stands by Russia, but speaks rather vaguely about safeguarding the “interests of all parties” regarding the Ukraine war.
Since the collapse of the Soviet Union at the end of 1991, China has been the only country supplying impoverished, isolated North Korea with everything it needs, from oil to everyday items. “They can’t even make a nail,” a trader in the border town of Dandong quipped in the late noughties. Today, the dependency is still huge. Nevertheless, Kim Jong-il – the second Kim, son of the state founder Kim Il-song and father of Kim Jong-un – pursued nuclear armament against opposition from Beijing.
Chinese experts emphasized at the time just how irritated the government was with the Kims’ stubbornness: No economic opening following the Chinese model, but nuclear armament. Beijing organized the so-called six-party talks with the two Koreas, the USA and Russia, on the Korean peninsula’s denuclearization. The talks failed in 2008. Since around 2018, Kim has been trying to improve relations with both countries. With success: in 2022, Beijing and Moscow blocked new punitive measures against North Korea for the first time.
Kim Jong-un is apparently feeling enough self-confidence to pull some stunts. When he invited China and Russia to a pompous military parade in July, he particularly courted the Russians around Defense Minister Sergei Shoigu, as Khang Vu, an expert on East Asian nuclear policy at Boston College’s Political Science Department, observed. Kim personally gave Shoigu a tour of a weapons exhibit featuring his intercontinental ballistic missiles. Li Hongzhong, Vice Chairman of the National People’s Congress, only played a secondary role.
The expert interprets this as an attempt to play China and Russia off against each other a little. “Even though the Chinese delegation was not the center of attention in Pyongyang, China is more important to North Korea than Russia,” Vu writes. “Still, North Korea wants an alternative option to lessen its dependence on China. Playing Russia off against China is a chance to get the best deals from both, just as North Korea did under Kim Il-sung in 1961.” Back then, Mao’s China and the Soviet Union were enemies and vied for North Korea’s favor.
North Korea sees Russia’s war against Ukraine as an opportunity to re-establish a similar constellation. “Exploiting Russia’s isolation and desperation because of its invasion of Ukraine will give Kim further leverage,” writes Vu, “which possibly includes access to weapons technologies that China would not be comfortable transferring to North Korea.”
A possible supply of advanced Russian missile technology to North Korea would further strengthen Kim’s nuclear and missile programs, and, thus, Kim’s threats against South Korea. This would push Seoul even closer to Japan and the US. That would not be in China’s interest. An arms race already threatens in the Far Feat as it is.
Some Western commentators believe Xi Jinping would have the power to stop an arms deal between Putin and Kim. However, it is entirely uncertain how far Xi’s influence in the Kremlin will reach on such issues.
So far, at least, the three countries do not seem like the dreaded trilateral bloc. “It’s just difficult for me to imagine that Xi Jinping and Kim Jong Un and Vladimir Putin can trust each other enough for a real long term concerted alliance formation,” Mason Richey, a professor at the Hankuk University of Foreign Studies in Seoul, told Reuters.
Although it may be rationally in their interest to cooperate, “it’s just difficult for dictators to cooperate with each other.” Their egos are simply too big.
As the week began, there were growing signs that China’s authorities were indeed investigating Minister of Defense Li Shangfu (李尚福). Allegedly, there was suspicion of corruption in the procurement of military equipment. This is reported by the Reuters news agency, citing a regional security official as well as three other individuals who are said to be in direct contact with the Chinese military.
In addition, eight other senior officials in the Chinese military’s procurement unit are under investigation, according to Reuters. The military’s powerful disciplinary commission is leading the investigations. However, the Chinese side still needs to confirm this officially.
The ousting of the defense minister seems to fit seamlessly into a series of high-ranking purges. In July, Foreign Minister Qin Gang was unexpectedly ditched. At that time, too, the minister had disappeared for weeks without any official statement from Beijing.
Then, in early August, Xi Jinping replaced the leadership of the militarily important rocket forces. Here, again, the now familiar pattern: Li Yuchao and Xu Zhongbo disappeared without a trace or comment. So now Li is simply the next one to go.
In fact, the main points in this case also sound all too familiar: From supposed health problems and suspicions of corruption to the sudden disappearance of the protagonist.
In Li Shangfu’s case, many observers point to Xi Jinping’s extensive anti-corruption campaign, which he has relentlessly used against his political opponents since taking office. In the People’s Liberation Army, in particular, countless military officers were removed from their posts before Li Shangfu. Accordingly, the accusations against Li come as little surprise. Yet it seems clear that it is almost impossible to rise in the Chinese political arena without corruption, as Desmond Shum impressively reveals in his book Chinese Roulette.
Still, Li Shangfu’s case is different. Li is considered a confidant of party and state leader Xi Jinping – who is also the commander-in-chief of the Chinese military. Xi only appointed him defense minister in March of this year. Before that, Li headed the Equipment Development Department of the Central Military Commission (中央军委装备发展部) from 2017 to 2022. This division develops weapons systems and is responsible for purchasing weapons and military technology from overseas.
When Li ordered the procurement of Russian military equipment, the US imposed sanctions on him. Li’s preference for Russia and his dislike of the United States were already well-known at the time. Xi Jinping nevertheless later appointed Li as minister of defense – knowing full well that this would make direct exchanges with the United States in the military sphere very difficult.
And this is what happened. Even at the important Shangri-La Dialogue, Asia’s security conference in Singapore, Li Shangfu and his US counterpart only exchanged a brief handshake. Since then, they have preferred to hurl harsh accusations instead of engaging in direct talks.
Li’s last public appearance as minister of defense, on August 29, at the China-Africa Forum in Beijing, fits in with this. Li lashed out against (Western) hegemony, dominance and bullying. He was sure to win the applause of the audience. But Li has since disappeared from the public eye without a trace.
Li was supposed to appear at a bilateral security conference in Vietnam a few days ago. But his participation was canceled on short notice. According to Reuters, Beijing informed Hanoi that Li’s health was the reason for the cancellation, citing Vietnamese representatives. There has been no comment from the Chinese side on this either.
And so, the supposed explanations have been rolling in ever since. Rahm Emanuel, the US ambassador to Japan, claimed on X/Twitter on Friday that Li had failed to appear at a scheduled meeting with the Singaporean navy chief because he was placed “under house arrest.” However, the US diplomat did not name a source for the claims. The Washington Post newspaper reports Li will likely be deposed, citing two informed US officials.
The question of consequences remains. In foreign policy, China is increasingly becoming an uncertainty factor. It becomes impossible to build personal relationships or make direct agreements when even Chinese ministers can arbitrarily disappear from the scene the next day.
This leads directly to Chinese domestic politics and the potential consequences for the leader, Xi Jinping. The persecution of ministers is almost certainly politically motivated. For one, it is unlikely that a decade after Xi took office and after the greatest consolidation of power since Mao Zedong, new corruption incidents are still being discovered at the highest levels.
Furthermore, it’s no longer Xi’s political opponents who are being targeted, but his trusted allies. “For the officers of the Rocket Force and Li Shangfu, Xi can’t blame his predecessors, in any case,” says China expert Bill Bishop. Fear and uncertainty will continue to grow within the Party.
Is the case of Li Shangfu an expression of the systemic paranoia of autocratic leaders? Or is it a sign that Xi is under internal pressure in the face of numerous problems such as a weak economy and high youth unemployment?
Su Tzu-yun, an expert on the People’s Liberation Army at the Institute for National Defense and Security Research in Taipei, is quoted in The New York Times as follows: “For Xi Jinping, this is a loss of face, and in the Chinese military and across China, people will notice, even if they don’t say so openly.” Su is certain: “It’s not going to force him from power, but it will erode his prestige as ruler.”
Accordingly, one must probably interpret Xi’s words, which he addressed to the Chinese military during his trip through Northeast China the Friday before last. There, Xi said, “We must strictly enforce the training and leadership of the troops and maintain a high degree of unity, security, and stability.” The fall of Li Shangfu was probably already sealed internally at that time.
Time and again, the Belt and Road Initiative (BRI) has come under fire: Projects under its umbrella have been accused of expanding fossil fuels (especially coal), while the BRI as a whole has been accused of creating financial dependencies.
Since China’s President Xi announced the BRI in 2013, China’s ambitions and technological progress have changed significantly, especially in the area of sustainable development. According to our calculations at the Green Finance & Development Center at Fudan University, the share of fossil energy in the BRI has continued to decrease. For instance: While China supported coal projects worth more than 17 billion US dollars in 2015, there were only about 1 billion US dollars worth of announcements since 2020. Concurrently, the share of China’s engagement in solar and wind increased to 42 percent in 2023.
The decline in fossil energies is due to various reasons. Partner countries such as Bangladesh or Egypt requested to reduce the expansion of coal-fired power plants and to channel planned funds into renewable energy projects. Additionally, civil society resistance in partner countries has made it clear to the Chinese side that the appetite for coal-fired power plants is declining.
Moreover, financial incentives for building and operating coal-fired power plants abroad have decreased. Owing to substitution effects and supply chain disruptions, coal prices have doubled or tripled globally in 2021 and 2022 compared to 2020. Planned emissions trading schemes and other measures of carbon pricing suggest increasing costs for coal-fired power plants. Global interest rate hike cycles by central banks further increase financing costs. All this has led to the completion of only one of the 51 announced coal-fired power plants between 2015 and 2020. 25 were stalled and 8 were canceled completely.
Another development on the BRI is the greater involvement of private rather than state-owned Chinese companies, and the move from loan-financed projects to actual investments. In the first half of 2023, the share of construction projects (often financed by loans) was only 41 percent, whereas investments by Chinese companies accounted for 59 percent of China’s BRI commitments, by far the highest share in the history of the BRI. The trend is towards more and smaller projects – or as they are officially called “small and beautiful.”
This trend is due in no small part to debt problems, which recently worsened in the wake of international shocks. As Horn et al (2023) show, 60 percent of China’s foreign borrowers were in debt distress in 2022. More than 20 countries have received a total of 240 billion US dollars in bailout loans since 2000, most of them BRI low- and middle-income countries. 185 billion US dollars of these were made via direct drawings from the Chinese central bank.
The Chinese government has, for a few months now, been actively evaluating innovative and “green” solutions to the debt problem on the BRI: one possibility to address it long-term could be so-called debt-for-nature swaps. In such constructions, a part of the outstanding debt is canceled, reduced, or restructured in combination with international partners, whereby the debtor government, for instance, delaminates a given area for nature conservation or biodiversity purposes.
Since the 1980s, such constructs have been successfully employed several times, including by Germany and France. Several Chinese institutions have now written studies on this (Christoph has supported three such studies for the Chinese government).
One possible candidate for testing the instrument could be the Lao People’s Democratic Republic, as it has already expressed its interest in debt-for-nature swaps. This could not only reduce risks for the Chinese central bank but also ameliorate Laos’ liquidity problems and contribute to global climate protection. It would, in a sense, be a “win-win-win” scenario: For China, for Laos, and for the climate. Germany and France can be important partners in sharing best practices and cooperating on the basis of common goals.
There is still much work to be done to make development in BRI countries truly green. But only through active international engagement and cooperation with China and the BRI countries and beyond can we succeed in mitigating the global climate and nature crisis.
Christoph Nedopil is Director of the Asia Institute at Griffith University. Previously, he was Professor and Director of the Green Finance & Development Center at Fudan University and Founding Director of the IIGF Green BRI Center in Beijing.
Silas Dreier is the coordinator of the Global China Conversations at the Kiel Institute for the World Economy’s China Initiative. He is also pursuing a master’s degree in China Business and Economics at the University of Wuerzburg.
This article is produced as part of the event series “Global China Conversations” by the Kiel Institute for the World Economy (IfW). On Thursday, September 21st, 2023 (11:00 a.m. CEST), authors Christoph Nedopil and Reinhard Buetikofer will discuss the topic: “Global Gateway and the Belt and Road: A Sustainable Alternative?”. China.Table is the media partner of the event series.
Chinese tourists in Thai dresses at the Temple of Dawn in Bangkok: Thailand’s new government is allowing travelers from China to enter the attractive vacation destination temporarily without a visa. The aim is to ease the bureaucratic burden of the expected influx of tourists during the winter season. The new rule applies from September 25 and ends on February 29.
The apparent fraternization of the unpredictable dictators also raises questions for Beijing. Last week, as is well known, Vladimir Putin and Kim Jong-un met at the cosmodrome in the Amur region of eastern Siberia. The high-profile rapprochement, during which they most likely exchanged information about ammunition supplies and missile technology, does not only worry the West.
For instance, why did Kim make his first foreign trip in many years to Russia instead of Beijing? However, a trilateral alliance, as Washington is already painting with horror on the wall, remains unlikely, writes Christiane Kuehl. The individual interests of the three dictators are not aligned enough for that – not to mention the mutual trust between them.
A lack of mutual trust also appears to be at the highest levels of China’s leadership. After Foreign Minister Qin Gang disappeared in July and was officially ousted a short time later, there is no trace of Defense Minister Li Shangfu. He is allegedly being investigated on suspicion of corruption.
However, the case of Li Shangfu is different in several respects, Michael Radunski analyzes. Li was not least regarded as a close confidant of Xi, with whose appointment he accepted significant tensions in the military relationship with the United States. Much now indicates that there is a lot of turmoil behind the scenes in Beijing’s power apparatus.
Last week, images of Russia’s Vladimir Putin and North Korea’s Kim Jong-un on the cosmodrome in the Amur region of eastern Siberia went around the world; two dictators who hate the West and allegedly talked about ammunition supplies and missile technology. Not present: China.
But Beijing likely watched closely from the sidelines. All that was made public about the talks in the cosmodrome was platitudes about intensified cooperation. The assumption on all sides is that North Korea will supply Russia with ammunition and artillery shells for the Ukraine war in return for money, food, oil and perhaps even Russian missile technology and military know-how.
Despite the similarly anti-Western sentiment of Kim and Putin, China must have looked at the meeting with suspicion. After all, only one aspect of such a deal is positive for Beijing. Ammunition from North Korea might help prevent a defeat for Putin in his war – without China having to get its own hands dirty.
But apart from that, the bilateral coziness between the two is more likely to raise questions in Beijing. Why, for example, did Kim make his first foreign trip in many years to Russia instead of Beijing? That is a bit of an insult.
The United States is already voicing fears of the emergence of a China-Russia-North Korea trilateral bloc. But such a bloc, apart from the rejection of the US-dominated world order, has so far been shaped primarily by individual interests, which come first for all three.
But these three interests do not match, at least from China’s perspective. Beijing rejects the development of nuclear bombs by North Korea. The Chinese leadership is only interested in the outcome of the Ukraine war insofar as it is intended to keep Putin in the Kremlin and weaken the United States.
Moreover, the fact that China is the strong partner in bilateral relations with Russia and North Korea does not mean that President Xi Jinping trusts his unpredictable counterparts, Kim and Putin. And he knows that closer cooperation between Russia and North Korea will reduce both countries’ dependence on Beijing – and thus make them even harder to control.
So if Kim now provides Putin with the weapons and ammunition that Beijing, by most accounts, denies him, then the balance between the three anti-Western partners changes.
What is clear is that such a deal would violate the extensive UN sanctions regime against North Korea, which both Moscow and Beijing have repeatedly agreed to over the years. Accordingly, all arms imports from North Korea have been banned since 2009. However, it is safe to assume that Putin and Kim couldn’t care less about that.
China, on the other hand, does not want a complete break with the West, especially not with the EU. While Kim toasted victory with Putin in his “holy struggle” against evil, China generally stands by Russia, but speaks rather vaguely about safeguarding the “interests of all parties” regarding the Ukraine war.
Since the collapse of the Soviet Union at the end of 1991, China has been the only country supplying impoverished, isolated North Korea with everything it needs, from oil to everyday items. “They can’t even make a nail,” a trader in the border town of Dandong quipped in the late noughties. Today, the dependency is still huge. Nevertheless, Kim Jong-il – the second Kim, son of the state founder Kim Il-song and father of Kim Jong-un – pursued nuclear armament against opposition from Beijing.
Chinese experts emphasized at the time just how irritated the government was with the Kims’ stubbornness: No economic opening following the Chinese model, but nuclear armament. Beijing organized the so-called six-party talks with the two Koreas, the USA and Russia, on the Korean peninsula’s denuclearization. The talks failed in 2008. Since around 2018, Kim has been trying to improve relations with both countries. With success: in 2022, Beijing and Moscow blocked new punitive measures against North Korea for the first time.
Kim Jong-un is apparently feeling enough self-confidence to pull some stunts. When he invited China and Russia to a pompous military parade in July, he particularly courted the Russians around Defense Minister Sergei Shoigu, as Khang Vu, an expert on East Asian nuclear policy at Boston College’s Political Science Department, observed. Kim personally gave Shoigu a tour of a weapons exhibit featuring his intercontinental ballistic missiles. Li Hongzhong, Vice Chairman of the National People’s Congress, only played a secondary role.
The expert interprets this as an attempt to play China and Russia off against each other a little. “Even though the Chinese delegation was not the center of attention in Pyongyang, China is more important to North Korea than Russia,” Vu writes. “Still, North Korea wants an alternative option to lessen its dependence on China. Playing Russia off against China is a chance to get the best deals from both, just as North Korea did under Kim Il-sung in 1961.” Back then, Mao’s China and the Soviet Union were enemies and vied for North Korea’s favor.
North Korea sees Russia’s war against Ukraine as an opportunity to re-establish a similar constellation. “Exploiting Russia’s isolation and desperation because of its invasion of Ukraine will give Kim further leverage,” writes Vu, “which possibly includes access to weapons technologies that China would not be comfortable transferring to North Korea.”
A possible supply of advanced Russian missile technology to North Korea would further strengthen Kim’s nuclear and missile programs, and, thus, Kim’s threats against South Korea. This would push Seoul even closer to Japan and the US. That would not be in China’s interest. An arms race already threatens in the Far Feat as it is.
Some Western commentators believe Xi Jinping would have the power to stop an arms deal between Putin and Kim. However, it is entirely uncertain how far Xi’s influence in the Kremlin will reach on such issues.
So far, at least, the three countries do not seem like the dreaded trilateral bloc. “It’s just difficult for me to imagine that Xi Jinping and Kim Jong Un and Vladimir Putin can trust each other enough for a real long term concerted alliance formation,” Mason Richey, a professor at the Hankuk University of Foreign Studies in Seoul, told Reuters.
Although it may be rationally in their interest to cooperate, “it’s just difficult for dictators to cooperate with each other.” Their egos are simply too big.
As the week began, there were growing signs that China’s authorities were indeed investigating Minister of Defense Li Shangfu (李尚福). Allegedly, there was suspicion of corruption in the procurement of military equipment. This is reported by the Reuters news agency, citing a regional security official as well as three other individuals who are said to be in direct contact with the Chinese military.
In addition, eight other senior officials in the Chinese military’s procurement unit are under investigation, according to Reuters. The military’s powerful disciplinary commission is leading the investigations. However, the Chinese side still needs to confirm this officially.
The ousting of the defense minister seems to fit seamlessly into a series of high-ranking purges. In July, Foreign Minister Qin Gang was unexpectedly ditched. At that time, too, the minister had disappeared for weeks without any official statement from Beijing.
Then, in early August, Xi Jinping replaced the leadership of the militarily important rocket forces. Here, again, the now familiar pattern: Li Yuchao and Xu Zhongbo disappeared without a trace or comment. So now Li is simply the next one to go.
In fact, the main points in this case also sound all too familiar: From supposed health problems and suspicions of corruption to the sudden disappearance of the protagonist.
In Li Shangfu’s case, many observers point to Xi Jinping’s extensive anti-corruption campaign, which he has relentlessly used against his political opponents since taking office. In the People’s Liberation Army, in particular, countless military officers were removed from their posts before Li Shangfu. Accordingly, the accusations against Li come as little surprise. Yet it seems clear that it is almost impossible to rise in the Chinese political arena without corruption, as Desmond Shum impressively reveals in his book Chinese Roulette.
Still, Li Shangfu’s case is different. Li is considered a confidant of party and state leader Xi Jinping – who is also the commander-in-chief of the Chinese military. Xi only appointed him defense minister in March of this year. Before that, Li headed the Equipment Development Department of the Central Military Commission (中央军委装备发展部) from 2017 to 2022. This division develops weapons systems and is responsible for purchasing weapons and military technology from overseas.
When Li ordered the procurement of Russian military equipment, the US imposed sanctions on him. Li’s preference for Russia and his dislike of the United States were already well-known at the time. Xi Jinping nevertheless later appointed Li as minister of defense – knowing full well that this would make direct exchanges with the United States in the military sphere very difficult.
And this is what happened. Even at the important Shangri-La Dialogue, Asia’s security conference in Singapore, Li Shangfu and his US counterpart only exchanged a brief handshake. Since then, they have preferred to hurl harsh accusations instead of engaging in direct talks.
Li’s last public appearance as minister of defense, on August 29, at the China-Africa Forum in Beijing, fits in with this. Li lashed out against (Western) hegemony, dominance and bullying. He was sure to win the applause of the audience. But Li has since disappeared from the public eye without a trace.
Li was supposed to appear at a bilateral security conference in Vietnam a few days ago. But his participation was canceled on short notice. According to Reuters, Beijing informed Hanoi that Li’s health was the reason for the cancellation, citing Vietnamese representatives. There has been no comment from the Chinese side on this either.
And so, the supposed explanations have been rolling in ever since. Rahm Emanuel, the US ambassador to Japan, claimed on X/Twitter on Friday that Li had failed to appear at a scheduled meeting with the Singaporean navy chief because he was placed “under house arrest.” However, the US diplomat did not name a source for the claims. The Washington Post newspaper reports Li will likely be deposed, citing two informed US officials.
The question of consequences remains. In foreign policy, China is increasingly becoming an uncertainty factor. It becomes impossible to build personal relationships or make direct agreements when even Chinese ministers can arbitrarily disappear from the scene the next day.
This leads directly to Chinese domestic politics and the potential consequences for the leader, Xi Jinping. The persecution of ministers is almost certainly politically motivated. For one, it is unlikely that a decade after Xi took office and after the greatest consolidation of power since Mao Zedong, new corruption incidents are still being discovered at the highest levels.
Furthermore, it’s no longer Xi’s political opponents who are being targeted, but his trusted allies. “For the officers of the Rocket Force and Li Shangfu, Xi can’t blame his predecessors, in any case,” says China expert Bill Bishop. Fear and uncertainty will continue to grow within the Party.
Is the case of Li Shangfu an expression of the systemic paranoia of autocratic leaders? Or is it a sign that Xi is under internal pressure in the face of numerous problems such as a weak economy and high youth unemployment?
Su Tzu-yun, an expert on the People’s Liberation Army at the Institute for National Defense and Security Research in Taipei, is quoted in The New York Times as follows: “For Xi Jinping, this is a loss of face, and in the Chinese military and across China, people will notice, even if they don’t say so openly.” Su is certain: “It’s not going to force him from power, but it will erode his prestige as ruler.”
Accordingly, one must probably interpret Xi’s words, which he addressed to the Chinese military during his trip through Northeast China the Friday before last. There, Xi said, “We must strictly enforce the training and leadership of the troops and maintain a high degree of unity, security, and stability.” The fall of Li Shangfu was probably already sealed internally at that time.
Time and again, the Belt and Road Initiative (BRI) has come under fire: Projects under its umbrella have been accused of expanding fossil fuels (especially coal), while the BRI as a whole has been accused of creating financial dependencies.
Since China’s President Xi announced the BRI in 2013, China’s ambitions and technological progress have changed significantly, especially in the area of sustainable development. According to our calculations at the Green Finance & Development Center at Fudan University, the share of fossil energy in the BRI has continued to decrease. For instance: While China supported coal projects worth more than 17 billion US dollars in 2015, there were only about 1 billion US dollars worth of announcements since 2020. Concurrently, the share of China’s engagement in solar and wind increased to 42 percent in 2023.
The decline in fossil energies is due to various reasons. Partner countries such as Bangladesh or Egypt requested to reduce the expansion of coal-fired power plants and to channel planned funds into renewable energy projects. Additionally, civil society resistance in partner countries has made it clear to the Chinese side that the appetite for coal-fired power plants is declining.
Moreover, financial incentives for building and operating coal-fired power plants abroad have decreased. Owing to substitution effects and supply chain disruptions, coal prices have doubled or tripled globally in 2021 and 2022 compared to 2020. Planned emissions trading schemes and other measures of carbon pricing suggest increasing costs for coal-fired power plants. Global interest rate hike cycles by central banks further increase financing costs. All this has led to the completion of only one of the 51 announced coal-fired power plants between 2015 and 2020. 25 were stalled and 8 were canceled completely.
Another development on the BRI is the greater involvement of private rather than state-owned Chinese companies, and the move from loan-financed projects to actual investments. In the first half of 2023, the share of construction projects (often financed by loans) was only 41 percent, whereas investments by Chinese companies accounted for 59 percent of China’s BRI commitments, by far the highest share in the history of the BRI. The trend is towards more and smaller projects – or as they are officially called “small and beautiful.”
This trend is due in no small part to debt problems, which recently worsened in the wake of international shocks. As Horn et al (2023) show, 60 percent of China’s foreign borrowers were in debt distress in 2022. More than 20 countries have received a total of 240 billion US dollars in bailout loans since 2000, most of them BRI low- and middle-income countries. 185 billion US dollars of these were made via direct drawings from the Chinese central bank.
The Chinese government has, for a few months now, been actively evaluating innovative and “green” solutions to the debt problem on the BRI: one possibility to address it long-term could be so-called debt-for-nature swaps. In such constructions, a part of the outstanding debt is canceled, reduced, or restructured in combination with international partners, whereby the debtor government, for instance, delaminates a given area for nature conservation or biodiversity purposes.
Since the 1980s, such constructs have been successfully employed several times, including by Germany and France. Several Chinese institutions have now written studies on this (Christoph has supported three such studies for the Chinese government).
One possible candidate for testing the instrument could be the Lao People’s Democratic Republic, as it has already expressed its interest in debt-for-nature swaps. This could not only reduce risks for the Chinese central bank but also ameliorate Laos’ liquidity problems and contribute to global climate protection. It would, in a sense, be a “win-win-win” scenario: For China, for Laos, and for the climate. Germany and France can be important partners in sharing best practices and cooperating on the basis of common goals.
There is still much work to be done to make development in BRI countries truly green. But only through active international engagement and cooperation with China and the BRI countries and beyond can we succeed in mitigating the global climate and nature crisis.
Christoph Nedopil is Director of the Asia Institute at Griffith University. Previously, he was Professor and Director of the Green Finance & Development Center at Fudan University and Founding Director of the IIGF Green BRI Center in Beijing.
Silas Dreier is the coordinator of the Global China Conversations at the Kiel Institute for the World Economy’s China Initiative. He is also pursuing a master’s degree in China Business and Economics at the University of Wuerzburg.
This article is produced as part of the event series “Global China Conversations” by the Kiel Institute for the World Economy (IfW). On Thursday, September 21st, 2023 (11:00 a.m. CEST), authors Christoph Nedopil and Reinhard Buetikofer will discuss the topic: “Global Gateway and the Belt and Road: A Sustainable Alternative?”. China.Table is the media partner of the event series.
Chinese tourists in Thai dresses at the Temple of Dawn in Bangkok: Thailand’s new government is allowing travelers from China to enter the attractive vacation destination temporarily without a visa. The aim is to ease the bureaucratic burden of the expected influx of tourists during the winter season. The new rule applies from September 25 and ends on February 29.
