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China’s Asian Infrastructure Bank needs borrowers...badly

By Stewart Taggart - posted Thursday, 4 February 2016


Instead of responding with strident, threatening language, State Grid quietly accepted the expulsions with little more than a call for "procedural fairness".

This indicates that as State Grid and other Chinese infrastructure companies realize that as they expand internationally, they no longer occupy the home turf where capricious actions are the unchallengeable privilege of the home team.

Therefore, the devil's bargain for China of gaining a solution to its "bicycle problem" of maintaining domestic employment through export infrastructure may be a realization in China that it must play by other countries' rules as part of its "Going Out" export strategy.

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Given this, AIIB borrowers may now enjoy being able to apply a few pages from China's own successful playbook.

These can include limiting Chinese companies like State Grid and CNOOC to minority stakes with majority owner domestic joint venture partners, requiring transfer of leading edge intellectual property and requiring local staffing.

All of these are common features of Build-Operate-Transfer infrastructure projects, which already are staples of Chinese domestic projects that have involved foreign partners.

In coming years, China can be an infrastructure engine for a greening global economy using capital China is now ideally-suited to provide through the AIIB.

Done right, it can be a rising tide that lifts all ships. It can bind China into a positive web of mutually beneficial, trusting relationships.

The place to start down this path would be through funding such Chinese "near abroad" infrastructure projects such as theTrans-ASEAN Gas Pipeline (TAGP) and Trans-ASEAN Electricity Grid (TAEG). Both of these fit well into China's concepts of a One Belt, One Road concept linking China to the world.

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They also fit with other energy infastructure concepts for Asia such as the Japan's Masayoshi Son's proposed East Asian Super Grid connecting northeast Asia and southeast Asia and Grenatec's Pan-Asian Energy Infrastructure stretching from Australia to South Korea with gas pipelines, high voltage power lines and fiber optic cables.

This in turn could reduce the risk of territorial war in the South China Sea through creating a deepening web of cooperative ventures focused on energy security. This in turn would be best served through creating Joint Development Areas in the South China Sea protected by multilateral patrols.

This in turn would meet all the criteria of Chinese President Xi Jinping's "Three No's":

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About the Author

Stewart Taggart is principal of Grenatec, a non-profit research organizing studying the viability of a Pan-Asian Energy Infrastructure. A former journalist, he is co-founder of the DESERTEC Foundation, which advocates a similar network to bring North African solar energy to Europe.

Other articles by this Author

All articles by Stewart Taggart

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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