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International Consultants LtdAndrew Leung

Turkish-China Relations: New Silk Road in a Changing World

Andrew K P Leung, SBS, FRSA

A presentation to the Forum Istanbul 2015 Swissotel, The Bosphorus, Istanbul

Tuesday, 28 April, 20151

A transformed world: Flat, Connected, and Dynamic Global Connectivity Global supply and value chains

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A transformed world: Inter-dependent

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A transformed world: Shared Destiny

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A transformed world: Changing of the Tide

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A transformed world: ideologies and religions

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A transformed world: Exceptionalism to Multi-polarity

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A transformed world: flexible bonds

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Cobweb of rivalry and inter-dependence

SAARC =South Asia Association for Regional CooperationPIF= Pacific Islands ForumARF = ASEAN Regional Forum

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China Dream

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A broken China - core-rotten corruption and palace plot

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Falling apart?

Unbalanced, Unstable, Uncoordinated, Unsustainable

Middle-income trapAging profile Territorial discordEnergy security

Rising social unrests Worker’s rights

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Illusion of Chinese PowerPath Dependency Soviet shadow

Vested interestsAggrieved nationalism

China to remain a “Partial Power” –

(a) economic model (b) government monopoly (c) inequality (d) rule of law (e) ethnic discord (f) political atrophy (g) nationalistic foreign policy

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Crisis of Party legitimacy and national survival

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Reform plan took shape Feb 2012

2020 Target

• China to become middle-income country by 2020 - President Hu, 18th Party Congress

• From $5,500 in 2012 to $10,000 requires average growth < 7% - Not beyond reach

2030 – World Bank Report with Development Research Centre of State Council

• Local authorities to be regulated (v land grabs)• SOE reform• Hukou reform• Universal access to healthcare, education and housing• Improve governance through the middle-class• Liberalize financial system to achieve higher TFP• RMB internationalization and eventual full convertibility• Green economy with cap and trade + procurement

standards• Responsible stake-holder in global order

*Harvard Kennedy School alum Liu He, Secretary-General of DRC , promoted to VC of NDRC in March, 2013

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Turkey Vision 2023

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Ancient Silk Road dates back to 1st century

Eastern Silk Route connected Han capital Luoyang, Kaifeng, Xuzhou, and Lianyungang and helped spread Christianity from the Holy Roman Empire – Professor Glen Thompson of New Testament and Historical Theology at Asia Lutheran Seminary HK, Lecture at Asia Society, HK 18.12.2014

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China’s New Silk Road strategy

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Silk Road Economic Belt to be linked by high-speed rail

A high-speed rail grand vision of continental proportions to connect China’s world’s longest high-speed rail network, across the Eurasian Continent, to the Middle East, Western Europe, and Africa.

•Third Eurasian Land Bridge – proposed railway network linking the Port of Shenzhen to Kunming onwards to Myanmar, Bangladesh, India, Pakistan and Iran, across Turkey to Rotterdam.

•Across 20 countries in Asia and Europe over 15,000 km, 3,000 to 6,000 km < sea route via the Indian Ocean and Malacca Straits.

•Total annual trade volume of the regions traversed - $300 b in 2009.

•A branch line to start in Turkey, cross Syria and Palestine, and end in Egypt, facilitating transportation from China to Africa.

•A new Chongqing-Xinjiang-Europe high-speed line via Duisburg proposed by President Xi during visit in April, 2014

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With an alternative to Panama Canal ?

• Nicaragua's Congress has granted Wang Jing's Cayman Islands-registered HKND company a 50-year concession to develop a 286-km (178-mile) canal connecting the Caribbean with the Pacific via Lake Nicaragua, at a cost of $40 billion, to be completed in 6 years.

• The canal is three times longer than Panama and can accommodate the largest container vessels, thoseShanghai’s Linyungang can accommodate as the world’s deepest container port.

• To anchor China’s commercial and geopolitical interests in Latin and South America

• Likely partner – China Railway Construction

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And an even grander vision or pipedream?

• China-Russia-Canada-America" line –13,000km, entire trip to take two days, travelling at an average of 350km/h (220mph).

• Crossing the Bering Strait between Russia and Alaska in 200 km (125 miles) of undersea tunnel

• China to provide funds, technology and construction and to share operation with countries traversed in exchange for resources

• According to Beijing Times report 8 May, 2014, already in discussions.

• According to Inhabitat.com 23.08.11, Russia has already given the greenlight to $65 Billion Siberia-Alaska Rail and Tunnel to Bridge the Bering Strait.

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South East Asia’s dynamic futureAsia to 2050 depends on overcoming the Middle Income Trap High growth rates expected

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ASEAN infrastructure shortfall World Bank lent only $25 b for Asian infrastructure in 2011 = 50% of total WB capacity

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Silk Road Infrastructure Fund

• China will contribute $40 billion to set up a Silk Road infrastructure fund to boost connectivity across Asia, through building roads, railways, ports and airports across Central Asia and South Asia.

• To focus on China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative.

• To be "open" and welcome investors from Asia and elsewhere.

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Asian Infrastructure Investment Bank• Now 57 countries including 16 of world’s largest

economies (except US, Japan, Canada, Mexico) • Nearly all Of Western Europe, except Belgium

and Ireland• Most Eastern Europe have not joined• Non-Asian countries limited to overall 25%

shares• All BRICS countries included • Negotiations for Charter to be signed by end

June, 2015

Jordan Kazakhstan Kuwait Kyrgyzstan Lao Luxembourg Malaysia Maldives Malta Mongolia Myanmar Nepal Netherlands New Zealand Norway Oman Pakistan Philippines

Poland Portugal Qatar Republic of Korea Russia Saudi Arabia Singapore South Africa Spain Sri Lanka Sweden Switzerland Tajikistan Thailand Turkey UAE United Kingdom Uzbekistan Vietnam

Australia Austria Azerbaijan Bangladesh Brazil Brunei Cambodia China Denmark Egypt Finland France Georgia Germany Iceland India Indonesia Iran Israel Italy

Final list of 57 founding members of the AIIB

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What is AIIB all about?

• World Bank president reserved for an American• IMF head for an European • ADB – Japan’s voting power 2X China’s• Bretton Woods institutions follow Washington Consensus –

full privatization and liberalization of markets, exchange rate, interest rates, trade and investment, tight budget – Not working for most developing countries 26

New Development Bank (BRICS Bank)• Representing 41.4% (3 b)

world population, 25% of world land mass and GDP

• HQ in Shanghai; African regional centre in Johannesburg

• Inaugural President from India

• Inaugural Chairman of B of Directors from Brazil

• Inaugural Chairman of B of Governors from Russia

• No veto power for any Member

• No increase in any Member’s share without other 4 Members agreeing

• Non-BRICS country can join but BRICS share > 55%

• Authorized lending up to $34 b p.a., to start in 2016

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Sino-Turkish cultural links and affinities

• Early Toba tribe of Turkish-Mongol extraction helped found China’s Northern Wei Dynasty in A.D. 386, reuniting China across the northern steppes, the Tarim basin and the North China Plain.

• Sino-Turkish families prominent amongst the imperial elite during China’s heyday in the Tang Dynasty (A.D. 618-906).

• From the second century B.C. to the 15th century, the old Silk Road carried busy trade between China’s ancient capital Xi’an and the eastern capital of the Christian world, Constantinople in the Ottoman Empire.

• Caravans transported silk and other luxury goods from the Middle Kingdom in exchange for cosmetics, amber, carpets and other products. Exchanges of religious culture such as Buddism and Islam and of technology such as paper and glass also took place.

• Common ground between China’s Daoism and Turkish Sufism - a willingness to deny pre-conceived notions, a kind of heuristic constructivism, and a yin-yang correlativity in which the importance of identities and understanding is stressed. “A nation’s identity is seen as being a work-in-progress through mutual interaction and norm forming” that resists Western scientific predictions. Sets great store on interaction with other countries and cultures.

• Both countries’ adaptive strategies in an “amorphous world of globalization”.28

Warming Turkish-China relations • President Abdullah Gul - two-day visit to Xi'an to receive an honorary degree, 2009

• Uighur riots in Xinjiang in July 2009, Ankara openly condemned suppression as “near genocide” -Turkey’s de facto guardianship of ethnic Turkic peoples in the Caucasus and Central Asia after the breakup of the Soviet Union.

• Premier Wen Jiabao - a three-day official visit to Turkey on October 7-10, 2010 as the final stop of Wen's European tour. Announced joint goal to increase bilateral trade from $17 billion to $50 billion by 2015 and $100 billion by 2020. The China Railway Construction Corporation (CRSS) is constructing a high-speed rail link between Ankara and Istanbul. Prime Minister Erdogan said Turkey intended to build a railway connecting Istanbul to Beijing as part of China’s grand plan to connect China by rail to Western Europe via Central Asia and Turkey.

• Visit of Turkish Foreign Minister Ahmet Davutoglu to China from October 28 to November 4, 2010.Reaffirming Ankara’s support of China’s “One China Policy” and Turkey’s commitment to control Uighur separatists operating in Turkey.

• Unprecedented participation by the People’s Liberation Army Air Force (PLAAF) in a NATO aerial military exercise, code named “Anatolian Eagle” in central Anatolian Konya from 20 September to 4 October, 2010.

• Differences over Arab Spring and Syria. China prefers holistic approach to Syria, often siding with Russia, while Turkey sides with NATO US. However, on Iran, Davutoglu declared during Beijing visit that “views are very close."

• Former VP Xi Jinping visited Turkey in February 2012 and Prime Minister Erdoğan visited China in April 2012, first by a Turkish Prime Minister in 27 years. A “Year of China” in Turkey 2012, followed by a “Year of Turkey” in China.

• For the first time in history, President Xi hosted Palestinian President Abbas on 6th and Israeli Prime Minister Netanyahu on 9 May, 2013. This augurs new Chinese proactive role in global commons. 29

Ten possible Turkish-China cooperative projects (1)

• The One Belt overland Silk Road route is similar to the long-proposed Third Eurasian Land Bridge rail network to cross 20 countries in Asia and Europe, measuring 15,000 km, 3,000 to 6,000 km shorter than sea route via Indian Ocean and Malacca Strait

• Ties in with China’s overall energy and trade route security – the “Malacca Strait Conundrum”

Investment with the Silk Road Fund in One Belt overland infrastructural links

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Ten possible Turkish-China cooperative projects (2)

China’s Investment in upgrading the Port of Bosphorus to link with China’s Maritime New Silk Route

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Ten possible Turkish-China cooperative projects (3)Joint investment in infrastructure and logistics in Customs Union of Belarus, Kazakhstan, and Russia (effective January 1, 2010) along a 5,000- km highway through Kazakhstan linking China to Europe

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Ten possible Turkish-China cooperative projects (4)Joint Chinese investment in rail and telecommunications in Central Asia economic corridor

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Ten possible Turkish-China cooperative projects (5)Joint Chinese investment in Central Asia natural resources

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Ten possible Turkish-China cooperative projects (6)China’s investment and linkages to grow Istanbul’s status as a Central Asia RMB financial centre

Bilateral Currency Swap Agreements

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Ten possible Turkish-China cooperative projects (7)Investment with BRICS development bank in extractive and light manufacturing businesses in Africa’s SEZs

1. Chambishi, Zambia - copper and copper related industries.2: Lusaka, Zambia - garments, food, appliances, tobacco and electronics. Is classified as a subzone of the Chambishi zone.3: Jinfei, Mauritius - manufacturing (textiles, garments, machinery, high-tech), trade, tourism and finance.4: Oriental, Ethiopia - electrical machinery, construction materials, steel and metallurgy.5: Ogun, Nigeria, - construction materials, ceramics, ironware, furniture, wood processing, medicine, and computers.6: Lekki, Nigeria - transportation equipment, textiles, home appliances, telecommunications, and light industry.7: Suez, Egypt - petroleum equipment, electrical appliance, textile and automobile manufacturers. (completed in October 2010)

China-managed SEZs

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Ten possible Turkish-China cooperative projects (8)BRICS development bank in Africa’s processed food businesses both for export and for rising African middle class

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Ten possible Turkish-China cooperative projects (9)Joint ventures with China’s largest tourist enterprises offering tailored-made programs

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Ten possible Turkish-China cooperative projects (10)Exchange programs and joint research projects between universities; China-Turkish studies, cultural exhibitions, sister-city relationships, joint youth festivals; and a Turkish think-tank on contemporary China studies

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Andrew Leung International Consultants Ltd

Thank you

Andrew K P Leung, SBS, FRSAwww.andrewleunginternationalconsultants.com

International and independent China Specialist with over 40 years professional experience covering Hong Kong and Mainland China. Chairman of Andrew Leung International Consultants, founded in London now relocated to Hong Kong. Provides strategic advice on China-related finance, investment, politics and economics globally, including both business and governments. China Futures Fellow selected worldwide by Berkshire Publishing Group, Massachusetts. On the Brain Trust of Evian Group, a Lausanne-based think-tank. Founding Chairman of China Group of Institute of Directors City Branch, London. Advisory Board Member of China Policy Institute, Nottingham University, 2005-10. Governing Council, King’s College London, 2004-10. Visiting Professor with Metropolitan University Business School. Helped set up Standard Chartered Bank’s first merchant-banking subsidiary in Hong Kong (1983); oversaw the trans-migration of industries into China as Deputy Director-General of Industry; US-government sponsored month-long visit to brief Fortune 50 CEOs on China beyond Tiananmen Square (1990); Editor-at-Large of a London-based international consultancy on China’s energies (2007). Sponsored Speaker on China at international conferences, including Forum Istanbul, Turkey, Annual African Banking and Financial Institutions Conference in Accra, Ghana, and Low Carbon Earth Summit in Dalian, China. Regular interviewee on live television with CNBC, Aljazeera English, Times Now of India, BBC and other international channels. Awarded Hong Kong’s Silver Bauhinia Star (SBS) and included in UK's Who's Who since 2002.

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