Peter Nolan on China's silk road strategy

the theme today is about Europe and also about about integration integration challenged and I was tempted when I looked at the lineup to change that the topic of might of my talk and at the moment my current research is is on trying to understand the long-run historical paths of political economy in the West which of course has Europe at its core though what is Europe we can debate very extensively and the relationship with China and the theme is so important certainly for the way China thinks about the world and people talk about convergence and divergence so the theme of this study will be the ancient world where actually Europe and China followed very similar development paths up until the collapse of the Roman Empire I won't go into the details but a lot of similarities then we get the first phase of incredible divergence between the West and China after the collapse of the Roman Empire the breakup of Europe no such thing as Frankia separate languages nations struggling fighting with each other building a sense of nationalism and conflict and one could go on about that but of course China remains unified for most of this period and had an incredibly successful long-run dynamic commercial and industrial development not only within China but also as we will see outside China so for example the last couple of days I've been working on history of the Chinese iron industry and China had an enormous iron industry far greater than Europe's at the very very latest or 1600 and possibly 1700 and could be even into the 18th century and so that was over a thousand years while Europe was disunited fighting each other and only gradually catching up with China in this second this first phase of divergence to us the period since 1800 is a long time more than 200 years to China it's a very short time in China's history so I encourage my students to think the next year five years ten years but also fifty and a hundred years and even beyond the world will look very very very different and that long-term perspective is most important to consider till that second divergence when incredibly I'm this Britain it had the thing that we call the Industrial Revolution and it was a remarkable fact that in all most important senses right up to the late 18th century up until arguably 1800 when Baldwin and Watts patent on their steam engine expired right up to the very end the levels of industrial commercial development and enlightenment in China in terms of culture civilization commercial understanding was at least as vance as Europe so if you compare the Netherlands or the area around today Jang man with China in the 18th century you be very hard put to say that Britain or Netherlands was more advanced than China you couldn't say that but of course it changed dramatically revolutionarily between 1800 and 1848 which of course was quite important in this city and was very important across Europe and so China watched bewilderment bewildered while this extraordinary second phase of divergence happened but of course since then since the 1970s we can say maybe even since the year 2000 we've entered a new phase possibly of global convergence I say possibly because it's still a very big question mark around how we're going to relate to each other and so China looking back at Europe and its history the history of the West is very fearful there is tremendous fear in the West tremendous fear in Europe everywhere I go to talk all I hear is fear from Westerners I hear very few people say this is great there's some business opportunities of course but underneath it when you get away from the business discussion ask tremendous fear that's not a good thing and China is also very very fearful there are deep fears in China so for example in recent months last year or so entering the lexicon of public discussion from the Chinese leadership have been very important phrases that didn't appear ten years ago which was we must avoid we being China The Clash of Civilizations we must avoid the Peloponnesian War scenario right up front in terms of discussion in China so in the West we have a lot of fear and anxiety and in China a lot of fear and anxiety so it's a very very complicated time but a historical trajectories have been very very different China unity has been the core despite periods of periodic breakup the core of its history and when we sit today and think about where I come from British passport holder with a brexit vote pending we can hardly say we have reached a comfortable point where we're all European understand and work with each other and China's very fearful of brexit very fearful that if Europe if that is a prelude to the breakup of Europe in a significant way it will be a bad thing for global cooperation and read global regulation whether they're right is another matter but that's the way China sees it so those are quite dark introductory thoughts but it's hard to avoid entering that space when you see the title and think about the theme after days after days talk lectures by way of introduction beyond those funds at those points I noticed somebody was reading the Financial Times in the audience and the Financial Times is very important very important paper and a lot of things about global political economy Financial Times or litmus test for those thoughts on 17th of August it was announced that the Nikkei would buy the Financial Times and that is quite a big decision for the leading one of leading Japanese media groups to buy such an important global newspaper a 17th of August on the chart on the 23rd of July on a 17th of August the Financial Times had an editorial less than a month after it had been acquired announced to be acquired by Nikkei where it said the real problem in global political economy I I'm pricing now I quote is China's constant demand that China chatham unisza China's Communist Party uses anti-japanese sentiment to bolster its own legit ously it's constant demands that Japan squares up to the past would be more convincing if it were not so wantonly dishonest about its own blood-stained history so in the first great editorial at financial times under impending Japanese ownership was a very very strong attack on China's view of itself in the world its refusal to cooperate and its intense nationalism the next day that's the next day those you can't see it it looks quite hot quite innocuous it's a picture of a smiling Japanese leader sitting in an aircraft and it looks quite fun he's having fun he's smiling and laughing then of course you notice this is the day after that editorial a month less than a month of our required by Japan when China's appealed to to be better Global's but it's not Sydney of course in an ordinary aircraft he's sitting in a fighter plane and emblazoned on the front of the fighter plane are three numbers 731 if you're interested you can google 731 it was a disgusting abomination of a germ warfare camp to compare with the worst of the regime and Hitler's Germany it was disgusting no comment from China China restrained if this had been whipped up sentiment would have I can't imagine what would have happened in China that's a day after the editorial and it's a very violent a very violent piece of iconography in what one hopes is the most balanced newspaper in terms of trying to discuss questions of global political economy it's a very ill wind a very bad sign in the taste of the global wind and it's real this is not appearing in some strange journal this is the Financial Times that we most of us read every day in order to understand the work very serious if we then go back a couple of years and think about the so called tilt pivot to Asia Hillary Clinton was at the heart of the so-called pivot to Asia and she said introducing this in 2012 the 21st century will be America's Pacific century just like previous centuries in plural I don't quite know which centuries as in the plural she's talking about but she's not of course an inconsequential figure and may become an even more consequential figure shortly just like previous centuries have been and of course President Obama was deeply supportive of a pivot to Asian I didn't talk more about that on the other hand from China's point of view the pivot to Asia is very puzzling very problematic and fails to understand China and that's the theme of what I want to talk about is to help us to understand China a bit better and I'll talk about first of all the Silk Road across Asia Silk Road bile and then little bit about the Silk Road by sea across the South China Sea and then I'll talk thirdly about the United Nations Convention on the law of the sea which relates to China's claims to the South China Sea and finally I'll talk more directly about questions of current political economy business which is infrastructure and the Silk Road so I'll say a little bit and in 50 minutes left to me in my hour about each of these topics the theme of the wave Chinese leadership has talked about the Silk Road emphasizes the depth of China's historical relationship with Central Asia with the South China Sea across the silk robe by land and sea and the recentness of our own Western interaction with the areas so when Hillary Clinton says the Pacific yes always being has been for many centuries America's that of course is being economical avec la vérité really really very economical with the truth and so China feels that the West doesn't understand which I don't believe it does the depth of its own historical complicated interaction with these areas which are surrounding this extraordinary place which had no set historically no sense of nationalism because it simply was the central Kingdom that's not the same thing as having no nationalism today but it had historically no sense of itself as a nation because it simply was the center of the world that everybody came to and paid tribute to and from which they many of them derive much of their culture so first of all a few words about the Silk Road buy land through Central Asia and if we think about this region in economic geography terms it's quite simple in a way we have Shenyang in western China based around the Taklamakan desert a very formidable area then to the north mongolia which is quite big where mongolia begins and ends is it's a very complicated questions which there's no simple answer but it's quite large equally tibet is quite large and where to beget begins and ends is rather simpler geographically because of the geological structure these are very very big areas in the west of china mongolia Shenyang and Tibet and these are the areas that China historically called the West they xx natok Sabac the West they have two census of the West one is us in the Europe and the and in America the other is the western region beyond what was called the Jade gate you won't grant which was at the entry to Xin Zhao Mongolia up here and Tibet down there and historically China has ruled this area on and off pulsating depending on on the power of the core of China and it's been an on/off rule of these areas sometimes ruled by China sometimes not but never gone beyond the Himalayas never gone beyond the Tian Shan in the west of China then of course beyond that is this very complicated area what we might call outer down in Central Asia which is extremely important historically and I won't go through the DJ agraphia call details but that's the connection between inner Turkestan in China outer Turkestan which is a big and very very important region historically is complicated and important we can broadly speaking distinguish three phases in the relationship between China and the Silk Road inside and outside China into Central Asia the first phase of course began under the Roman Empire but would more importantly was about the relationship of Buddhism to China and of course Buddhism evolved developed in in North India and in the nobody knows exactly when but before in the first second century BC into the second third fourth century AD Buddhists Buddhism and Buddhists through mainly through trade spread into China and of course Buddhism spread like wildfire and became the dominant belief system and religion of Asia for a thousand years and the impact on Chinese culture was very very deep through trade through monasteries that were both religious institutions but also trading institutions and of course trade went through Central Asia we won't go into details of the trade but was carried on huge numbers mainly of camels and this entered deeply into Chinese culture and we can see today the remnants of this but of course Buddhism was so powerful in China that the Chinese leadership in the Tang Dynasty was afraid that it would become the dominant religious and ideological foundation of the society so in the 1840s there was an attack on Buddhism analogous to the Reformation in some senses but a peaceful attack doesn't no historical evidence of any mass violence but the monasteries and nunneries were just broken up and then monks and monks and nuns were cast out into the society and most of these monuments were destroyed the Buddhism remained very important for China and it became then into balance like so much in China is a balance between what we can loosely call Yoon and Yong and so Buddhism became closely associated with Taoism which I want to have a long discussion about but it's captured very well by a picture in the 13th century so Buddhism was defeated as of the dominant belief system but retained its place in a triangular triangular relationship with Confucianism and Taoism this is a picture from the 13th century of polyps one of the most famous one is called three persons and this is a picture by a Buddhist by a Buddhist chant Buddhist Zen Buddhist painter philosopher and that the interesting thing of course about Chan Buddhism is it came from northern India into the Silk Road into China and then of course spread into Japan and this beautiful picture from the 13th century now is in Kyoto in a museum in Japan so it's a very very deep cultural link between China the Silk Road and Japan and that's a very positive aspect in one sense of the relationship between Japan and China of course as we all know from the 7th 8th century onwards the second period began and that was the Muslim era about which I will not say a great deal but I think our understanding of Islam is I don't know if it's as weak as our understanding of China but our understanding in the west of both is is these much to be desired but of course the spread of Islam principally through trade into Central Asia through caravanserai analogous to the Buddhist - monasteries where trade was conducted into Central Asia had a very big impact also on China and as we ought to know under Islam in Central Asia the outer Turkestan if you like for many centuries this was these were vibrant trading communities which produced some of the most advanced intellectual progress of the world far ahead of Europe so but in Samarkand and Bukhara across the Silk Road were phenomenal generation after generation stimulated by trade by all the things that brings through moving around across the Silk Road by land and by sea and stimulated a long golden era of many centuries of enlightenment while Europe was still in the dark ages this produced great astronomers like all and beg if you go to Samarkand you can still see the remnants of his extraordinary Observatory mapping a huge number of stars and his works were were widely circulated in Europe you can see there was produced Avicenna who of course produced many many things polymath but one of the great books on medical science translated into Latin read in Europe and translated into Chinese and widely circulated in China and of course in mathematics our core is me who was the originator of the algorithm and many many other extraordinary achievements of Central Asia permeating into China to the extent that the early Ming Emperor tides in the 14th century a set up a Muslim astronomical Bureau welcoming Muslim astronomers to come and help China to improve the quality of its astronomy to a very deep historical relationship first of all under Buddhism including the development of Chan Buddhism and many aesthetic aspects of Chinese development and then under Islam in the between date from the end of 15th or 16th century and then of course the final phase was Russian expansion into Central Asia which had a very big impact on the region and under which trade continued and the spread of ideas across the Silk Road but a more complicated relationship in many ways so that's the history of the Silk Road in a very very short nutshell by by land but the point that Chinese leadership emphasizes is how deep and complex that was in terms not just of politics and international relations but also culture and through trade both on the Buddhism and under Islam and under the Russian expansion then we turn to the Silk Road by sea across the South China Sea and this is an area where very few people I think outside China have much historical understanding of China's relationship to this area one of the most learned scholars is a man called Wan Gong Wu who is professor in Singapore National University of Singapore and he was studied in Britain's was a very senior figure Australian National University and he describes the South China Sea as follows the South China Sea was he says the main trade route of what may be called the Asian east-west trade in commodities and ideas he emphasizes always ideas and trade went together which is why China's emphasis on openness today reform and opening-up is so important it was the second Silk Road its waters and Island straits whereas the sands and mountain passes of Central Asia it's ports were like the caravanserai both Buddhist and Islam along the Silk Road of Central Asia where people could stop and feel safe and park their goods it became to the southern Chinese people of Georgian people of Fujian people of Guangdong it became to the southern Chinese what the land outside the Jade gate human Guam was to the northern Chinese that's one Gong was beautiful characterization so there's a symmetry the core of China where the ancient Chinese civilization grew and still prospers and then Central Asia Xin Jiang and the South China Sea quite a symmetry to this geologic geographical and trade and intellectual structure so trade across the South China Sea from Joe Jiang coming down from Shanghai into Fujian next on the coast then Guangdong into across the South China Sea took place well before the rim I mean under the Roman Empire after the Roman Empire continuously with very little interruption right the way through to today and if we want evidence of that trade and its consequences we can study the works or read the works of our great joseph needham in cambridge who died about 15 years ago and Needham amongst his researches researched maritime technology and pointed out the close relationship between China's precocious development of key aspects of maritime technology stimulated by trade so that merchants could go safely across the South China Sea and these included for example the precocious development of watertight compartments in ships this was developed in 2nd or 3rd century AD we didn't develop watertight compartments until more than a thousand years later but it added a lot to the safety reduced costs reduced insurance costs meant the fewer fewer ships sank so it had it was closely related to commerce as most things in China's history are the stern post rudder which helped ships to navigate through more difficult seas was also developed in China and in Needham's view found its way to Europe a couple of centuries several centuries after it was used in China impact about a thousand years and of course most famously the compass the magnetic compass which China used on the land very very early but was used by Mariners to go across the South China Sea by eight for ninth century well before its use in Europe and these weren't things that just dropped out of the sky or the Emperor instructed people to do they came through merchants seeking prosperity across the South China Sea and then people innovating things that would help to make trade safer for themselves where does the trade across the South China Sea end well one of our again Cambridge sorry archaeologist sir Mortimer wheeler that went to Africa were East Africa in the 1950s and he walked along the beaches of East Africa and this is his comment quoted by Joseph Needham 1955 in East Africa I have never seen he says so much broken china china porcelain in the past fortnight between Dar es Salaam and the Kilwa Islands literally fragments of Chinese porcelain by the shovelful in that area as far as the Middle Ages is concerned from the 10th century onwards the Buried history of jenika is written in Chinese porcelain there was a huge trade across the South China Sea mainly of valuable objects like porcelain like high-quality silk and eventually of course tea but it portion of course lasts shards last but silk fades those are very very big trade again in terms of the home team in Cambridge we have a wonderful archaeologists still alive called Janice Stargardt and she has discovered the great ancient port of Satine prayer which is in the isthmus of the coming down from Malaya akka Dismas of cry it's very thin about fifty kilometers across and in the old days ships had to go all the way down and around through the Straits of Malacca but under a civilization that had this city as its foundation for several centuries goods were carried across from satting prot on the east through to the Indian Ocean on the west and there are two big lagoons to the west of setting prow and setting proud built canals for the rest of the journey across of course to make money it's all about trade it wasn't just some abstract government concept and so she has studied the history of satting prior discovered this place and she found between nine hundred and fourteen or fifteen hundred ad an enormous quantity of shards of Chinese porcelain the silk of course had disappeared among in this in this powerful city on the trade across the South China Sea into the Indian Ocean and there are many other examples there's a famous wreck in Changjo harbor on the South Chinese coast and this Harbor was a wreck of a ship coming back into harbor from Southeast Asia and it was embedded in the mud and discovered and because of the mud many of these things that disintegrated elsewhere survived so you found in this returning ship coming back from its voyage around the South China Sea extraordinary quantities of very valuable objects from twelve thirteen fourteen century for example there was a 2.4 metric ton log but it wasn't a log for building buildings it was a log of incense extremely high value giving evidence to the density of trade across the South China Sea enormous sums of money were involved in this trade across the South China see so that was if you like in the ancient and-and-and medieval period up till about 12:30 and 14th century then we come to a very interesting episode in the relationship much misunderstood of China and the South China Sea but of course very important in China's mindset if you're trying to understand the way China thinks about the world and the Silk Road and these are the famous expeditions which people are probably fed up with hearing about jeong-ho in the early 15th century so over the course of 25 years or there abouts jung-ho who was a government official who was a leader who was a commander in the Chinese Navy as people now I'm sure well aware led a series of seven expeditions with mighty ships may be as big as 1500 tons or more some of them carrying hundreds if not thousands of sailors great 60 over 60 great sailing ships with 30,000 sailors some of the ships were over 15,000 tons which were compared to 300 tons for the ships that went Vasco de Gama that came sailed into the Indian Ocean but the important point about this was no attempt was made to establish colonies they had guns they had military capabilities but there was it was a peaceful expedition to find out information and take back exotic things like zebras and and other wild animals back to China but junkers expedition was so far ahead of any thing they encountered they could very very easily have conquered anywhere along the Silk Road but chose not to it was an expedition to bring back information that was the last time the last expedition was in 1433 so a common interpretation is that China's closed its relationship with the world the maritime world after that point but this was a commercial it was a diplomatic expedition I've just been reading the last few days as I said about the island Austrian China I'm very fortunate a friend of mine is a very big expert in this industry so on the plane here yesterday I was reading about a place called Foshan which is in Guangdong near to Hong Kong and Foshan in the 12 13 14 15 century right the way through into the 17th century was probably the biggest location of iron production of anywhere in the world and they produced about 20-30 kilometers away were huge blast furnaces about 60 blast big big blast furnaces producing pig iron they shipped it down the river to four Shan and four Shan was the center of an enormous industry which made all kinds of metallurgical objects pulled wire needles knives cut early walks all these things for sale within China and sail into Southeast Asia so there's one little example so it didn't stop China kept on trading and these places if you visited there and you're business people places like Shan Paul like Changjo like Phu Joe like Guangzhou they're just seething with a history of commerce commerce across the South China Sea and in the periods when Chinese government tried to block it piracy boomed and for most of the time there was a thriving trade across the South China Sea as JK Fairbank the great American scholar of Chinese history tells us hundreds if not thousands of sturdy merchant ships of 1000 tons or more plied annually between an Moy shaman or Guangzhou Canton and the Straits of Malacca going across the South China Sea south in the winter north in the summer they followed detailed sailing directions through numerous ports of call it's very important centers they followed numerous they followed clear directions across the South China knew where they were going and he says the trade with Southeast Asia was carried on in Chinese vessels and was mostly in the hands of Chinese traders that were of course Muslim traders but mainly Chinese across the South China Sea and this is had been going on for a very very long period of time and of course accompanying this trade was people so there was recently article in The Financial Times which I'm ashamed to say by so-called expert who argued that the Chinese were absent from trade across the South China Sea published by the Financial Times by some professor somewhere other so-called professor and it is just preposterous it's completely wrong but I give the Chinese what comes in from trade across the South China Sea just defies belief and if you want to see evidence of that go to the Philippines so for example in my study at the moment of the iron industry the Philippines had a precocious iron industry with blast furnaces from very early on why because Chinese people in the Philippines brought the technology of blast furnaces to the Philippines probably who knows thirteen fourteen fifteen sixteenths century so the Philippines had a huge Chinese community and we know there was a big Chinese community because there were huge numbers of them were murdered so in early 17th century there is very very strong evidence of the massacres of twenty thirty thousand Chinese people in the Philippines Indonesia had a very big Chinese community of course relative to China's population tiny but a very important thing significant in absolute terms the same for Thailand what was will be today called Thailand in 1767 the Bangkok became the capital city of Thailand more than 50% of the population was Chinese in the late 18th century the King of Siam the king of Thailand was half Chinese he came from childhood from chantal so that was the trade across the South China Sea and the movement of people that accompanied that trade in the late medieval early modern era the way in which one Gong Wu describes China's relationship with these people around the South China Sea is very potent he says these were these Chinese people in the Philippines Indonesia Thailand and Malaya these were merchants without an empire that nobody protected them they went on their own the Chinese government wouldn't protect them and indeed when they had an investigation into the massacre of twenty or thirty thousand people in the Philippines extraordinarily the Chinese government went and sent people to investigate it and they actually said to the Chinese people locally you didn't behave very well extraordinary report doing quite a quite you know quite a regen demand historical fact they said you you you we don't think you should have been massacred but don't don't underestimate your own contribution to this horrible retribution against you it's a remarkable document there's a very long report in the 17th century about that Massacre so these were merchants without an empire as I mentioned already Chinese merchants for over a thousand years knew where they were going they were sailing across very very dangerous seas these areas that we look at in the International Press the South China Seas Islands Shoals rocks whatever we want to call them it's a very very dangerous place to sail and that's why the availability of guidance and maps was crucially important so China mapped the South China Sea merchants produce their own maps they produce them individually collectively and the government produced maps of the South China Sea a classic public goods function of the government like lighthouses and Chinese maps included the South China Sea as a part of China not the land around it but the sea across which Chinese and foreign ships but predominantly sign of Chinese ships sailed from as early as the 11th or 12th century and they just kept producing maps which showed the South China Sea as a part of China weather what that means for international relations today we can debate but that is the reality of China's perception of this region and it's a starting point for a sensible conversation and of course after 1949 one of the first things that Chinese leaders did Premier Zhou Enlai in 1951 was to make a very famous statement which is the sheesha the Paracels and the Nana sha the Spratlys are and have always been a part of China's territory this isn't some perception that was invented when oil was discovered in the South China Sea how we deal with it is a different matter but it's very important to get the historical perceptions and facts of history correct so that's the second thing I want to talk about which is Silk Road by land it's silk road by sea now it's a little bit about the third topic which is related to that which is how China views Western colonialism and its relationship to the United Nation Convention on the law of the sea unclose so China didn't establish colonies it traded across the South China Sea and across Central Asia and from the 16th century onwards something happened and for this territory which China had been at the core of its language spread to Vietnam it conquered it relationship to Vietnam is very calm gated it's a language spread to Japan its language spread to Korea but it didn't conquer these places with the exception of Vietnam it's a very complicated story but of course is it a part of China should it have been it's on the border of China it's a very complicated relationship but China didn't establish overseas colonies didn't expand into Central Asia into Siberia but of course if we look at Western colonialism China produced guns armaments made of metal in the 12th century under the Song Dynasty with gunpowder but it didn't use them to conquer other parts of the world and because most the time was peaceful they didn't make a lot of technical progress but of course Europe got gunpowder and got metallurgy in a big way from 15th or 16th century onwards and today countries that we think of a nice and peaceful and friendly with lots of iron ore like our friendly Swedish neighbors yes the northern wars were quite interesting but they're just one example of what we did with our cannon with our divided nations and our national identities and national rivalries and and this helped us to stimulate enormous progress in military technology or china stagnated in military technology having developed gunpowder and the gun and the tubular weapon so for two thousand years china was at the center of East Asian civilization and then buy land across Central Asia came this creature called Russia and of course Russia and the sixteenth century was just it was just a Moscow just a principality and Russia expanded very very late in its historical development in China's view violently explosively across this huge territory essential and as we know even conquer Alaska and it moved into Central Asia northern Kazakhstan and eventually moved into south of Central Asia into what today we call southern Kazakhstan Uzbekistan etc and so China observed and of course eventually moved into China's own territory and the Chien dynasty an axe in north large parts of northeast China in the process so this was an extraordinary awakening for China and a very fearful thing for Japan if we want to understand Japan's psychology understanding the expansion of Russia is a very important part of our psychology and that's a very big territory to the west of Japan across two seas or hotsy the Sea of Japan and we tend to forget that the appearance of these great Russian people the other side of this sea capturing territory that historically as Japan was a very important part of the psychological response of Japan to the west and we don't think about this I think sufficiently but China certainly definitely thought about it as Japan did and of course if we think about expansion by land across the ocean America the United States of America was created by our European ancestors was principally by British with the the Old Testament with the Bible and with extraordinary violence so the thing that we'd a call the United States of America was expansion by land across the North American continent and we choose not to think about it but it's it's a reality one of the most powerful books I've read is by an American military historian in that US Armed Forces called John Grenier and his book is called the first way of war and it's about the war that we the British wage first of all in Ireland to destroy Irish people and subject them subjugate them in the 16th 17th and 18th centuries so 1742 Handel's Messiah was playing in Dublin with beautiful tunes all we like sheep etc etc etc I can't you know so many beautiful tunes in Handel's Messiah but outside Irish people were being murdered in large numbers and their lands confiscated by the nice British forces it's a beautiful contradiction but across handle was German baby he was Austrian and so I don't know but these contradictions are just astounding at standing when you when we think about them beautiful music but not the music of the gunfire it's not so far off extraordinary contradictions our conception of the Enlightenment is is really astounding anyway there we go so Russia by land across into Siberia America our ancestors buy land across North America and then of course by sea in the Pacific and if we think about Southeast Asia these territories across which China traded suddenly were occupied by all the Western powers mostly not entirely through violence sometimes in the British case a considerable degree of slippery British diplomacy which we are very skillful at and and but withal always the mailed fist under the under the velvet glove if necessary and of course within hundred years we had the British in Malaya the Dutch in Indonesia and of course by 1900 the Americans and the Philippines taking over very very very violently from the Spanish conquest of the Philippines and I've probably forgotten so of course yes it's the diviner matter of the Enlightenment a country par excellence which is the front French in Vietnam so there we were with France in Vietnam the Dutch in Indonesia the British in Southeast Asia and and and that was China looked at that and it was this point the Chinese Empire was disintegrating the end of the ching dynasty and it was bewildered while across the sea into Southeast Asia came all these forces and then of course we have the Pacific Ocean out beyond Southeast Asia and into that also came the colonial powers in 1890 the great American naval thinker and historian Alfred Mahan made the following statement in his famous book about naval power and history by controlling the great common hmm that's a what sentence worth repeating by controlling the great common hmm why should you feel you have a right to control the great common if it is the great common but what's right do you feel you have but you know this in a way mimics the words of Hillary Clinton which is I do not wish my grandchildren to live in a world where Chinese people have a strong say I am mimics Obama's statement on TPP which is we do not wish the world to be controlled not to be controlled in terms of international political economy regulation we should control it not that it should not be controlled by countries like China they're not too dissimilar from from these sentiments about the global Commons expressed by Alfred Martin by controlling the great common the overbearing power of command of the sea closes the highways by which Commerce moves to and fro from the enemy's shores and can only be exercised by great navies and of course America did produce a great Navy the Great White Fleet of nineteen hundred and seven to nineteen hundred and nine sixteen giant battleships while China was disintegrating made a 14-month voyage of intimidation going all the way around the world the white ship the Great White Fleet which of course was symbolic of America's wish to conquer particularly the Pacific Ocean and it did as Hillary Clinton says this is the America's territory and we forget what America did America conquered just took Hawaii over and just took it over in the 1890s why is very big there's a lot of Hawaii ah just a little colony there's a lot of her way it took over Guam took over the North Marianas Islands and so-called guano Islands American Samoa place after place in the Pacific Ocean was just occupied by the United States of America France of course acquired French Polynesia I'll come to that in a second New Caledonia and many other Pacific territories and Britain acquired rather less but the Pitcairn Islands were its main territory in the Pacific Ocean so how does this relate to the law of the sea in 1982 the United Nations passed a thing called knighted Nations Convention on the law of the sea unclutch unclutch was revolutionary because it allowed for the first time nations to declare not a known equivalent to a gunshot but 200 nautical miles away from their territory one is their territory in relation to this 200 nautical miles well of course the homeland Knights States of America east and west coast Britain around the British Isles France etc is pretty obvious China has not 900,000 not point 9 million square kilometers undisputed exclusive economic zone where it has a right to the products in over and under the sea because it has quite a long coastline but but that's it nothing else but of course claims these territories for historical reasons which it knows the chances of winning are complicated and it just let's postpone it let's let's strike our claim but we know it's going to be very complicated but if China did in the unlikely event was granted its claims to the South China Sea China would still have less than 3 million square kilometers of exclusive economic zone and it knows this is going to be a very very complicated process so undisputed less than a million disputed less than 3 million as a consequence of their conquest of Siberia and Russia's case America's case all these places across the Pacific Ocean Frances conquest of these territories which are enormous in the Pacific Ocean because most of these places are not an island they are many many many small islands and so the exclusive economic zone pertains to all these lands around those islands including of course curious places like Australia which China could have conquered but chai looks out on Australian as well we could have conquered that but now it's part of a relationship very intimate relationship so-called Faiz are five eyes with Britain America Canada Australia New Zealand and you know it's kind of funny that it's now occupied and these white people with a few Chinese allowed to go into Australia and it has all this exclusive economic zone not just around its territories but also little places that sound like innocuous offshore islands like Lord Howe Island Lord Howe Island is a lot of islands Norfolk Island is a long way from the mainland of Australia it's got a lot of little islands so if you count up all the different exclusive economic zones in the Pacific Ocean legally protected by the international treaty unclose it goes as follows China I repeat has 900,000 undisputed exclusive economic zone and there's a lot of stuff over in and under the sea the United States has nine point six million that's Hawaii the guano Islands Pitkin Clipperton it just goes on and on and on France has six point nine I repeat six point nine nine China has 900,000 unclose exclusive economic zone France has six point nine million you look at the map of French Polynesia it's not a little place with a few people jumping around with hula hula skirts it is a huge archipelago of islands with who knows what resources in the future and France wants to extend it France argues that has not enough but actually the continental shelf puts out pushes out further from its archipelago entitling it to an even bigger 6.9 France France 6.0 it's a rather a long way from La Belle France this is a long long way and then of course Australia outside Australia itself 3.5 million New Zealand 6.7 billion and of course Russia in the bearings in East in the lands around Siberia 3.4 million so you add it all up it's 31 million square kilometers of exclusive economic zone that only exists consequent upon Western colonialism and the claims that its take as a result of its conquest of these places in the 19th and early 20th century China 900,000 so that's the way a child looks at the world it's very you know this was ours this was our space and now it's yours we woke up like all these places it's that's the mindset which I looks at it it's very bewildering from a Chinese point of view okay so that's the third fourth third point the fourth point Michael I reckon I started at 22 and I haven't have one hour okay so once I get the timer okay I don't use my my time okay the final point I want to talk about is today and is the is infrastructure and the Silk Road today that this background I think is very very important to understanding China's mindset in relation to the countries along the Silk Road and Central Asia across the South China Sea and there will be if there's if you think there's going to be brexit issues the issues around the politics of international relations along the Silk Road by South by sea and by land greatly exceed the complexities I think even of the de brexit debate at the moment it's a very complicated pattern and we would do well to consider that historical context carefully to try and get inside China's mindset rightly or wrongly we may say we disagree with everything that you say but we need to get inside it understand understanding China's very important to to producing a fruitful result in our discussions so finally in the last ten minutes talking about infrastructure and the Silk Road I think one of the unstudied aspects of China's development experience in the last twenty years has been the contribution of infrastructure I mean the World Bank has had a very powerful divisions that study and argued for decades about the importance of infrastructure and while one doesn't have to agree with everything that the World Bank says about the world I think they're spot-on I think infrastructure is really really deeply important one of my PhD students at the moment is doing his PhD for example on toilets and that's pretty big deal you know sewage is a very very very important subject it's a very very important subject he's a Vietnamese and he's studying the impact trying to measure the impact of good or bad sanitation facilities on human health and well-being and it's you think about it you know going to the toilet in a out some open place it's a huge impact on your well-being your your health your your how your family feels and for women is a nightmare women and young children it's a lot of little children in Vietnam will not go to school young girls because they're so embarrassed and humiliated about going to defecate inside the toilet in some public place but China has got infrastructure in spades and includes the very mundane things like sewage water supply and so on loss of crews includes housing includes getting people a roof over their head electricity supply telecommunications port facilities another of my students at advanced in comparison of China's port development India's port development and again this is is it a pure public good but it's certainly critically important for development and the contrast which seen China's ability through different means to build very rapidly successful port facilities contrasted with India's abject failure for whatever reason is a major explanation part of that story of development of China and other parts of the world especially East Asia so I think infrastructure as being at the center has been a critically important part of what the Chinese state is being able to do and very important underestimate it in China's development process as we know maybe less so in Austria than elsewhere but across much of the high-income countries infrastructure is crumbling one of the persistent themes of our government in Britain this please help us with our infrastructure you know build us power nuclear powers to enjoy at least give us the money of a nuclear power stations please Inc Lee points we don't want your technology but we want your money and help us to rebuild infrastructure across the high-income countries that's a persistent theme so and of course even more important in developing countries China still has another four hundred million people to come into the cities India who knows maybe you know in 50 years time there could be a colossal movement of people and doing the infrastructures crucial for it's absolutely crucial classic public a state function to facilitate development for the private sector its infrastructure vitally important for China vitally important development and will remain so huge opportunities in developing countries and still a lot of opportunities for replacement of all worn-out infrastructure in the high-income countries but what are the opportunities for China will China clean up with infrastructure well in one view of a fearful view China will China will use the markets use its capacity the fact that it contributes to the Asian infrastructure investment bank will become the dominant player in infrastructure along the Silk Road and will benefit enormously and disproportionately from this insofar as it goes ahead because it has many political obstacles but once you think very carefully before reaching that conclusion so let me give you a little a little cautionary tale which is from Shanghai and most of you know Shanghai probably quite well but Shanghai has two huge towers one of it has just been completed both well over 100 stories and there are many many of these in China so if you look at the outside it says Shanghai financial center Shanghai Tower a few hundred meters from each other one is 921 125 meters high there Futurist and across China hundreds of these things outside says whatever it is Shanghai Construction Company or China national construction company number three so you look at the outside of these towers and you think well that's Oh China has this capability it's building all this complicated infrastructure and there will be masses of it along the Silk Road so China will disproportionately benefit from the Silk Road but wait a minute if you look at the most complicated high-technology pieces of these two towers and they're inside what you find the most complicated piece of technology is the elevator system each of these has 60 70 80 high-speed elevators and high-speed elevators is a global oligopoly with very few players United Technologies Otis elevators Mitsubishi Electric elevators Khan net Schindler and one or two others I forgot just three or four or five very very powerful rival Russ oligopolistic high-technology elevator companies if you go from Shanghai down into northern Georgia there are tens of elevator companies but they're mostly making old-fashioned low technology poorly functioning energy inefficient possibly rather dangerous elevators for installation in low-rise buildings across China and probably in some developing countries it's a different world when the world of schindler corner to Sun Group Mitsubishi Electric etc but it doesn't stop there if you look for example at the electrical systems a Siemens is at the center of most of these complicated many of the complicated electrical systems in high-technology buildings the industrial valves that put central heating water around the building's danfoss of Denmark is in both these buildings if you look at their fire security systems United Technologies Kidder Cadiz subdivision some good lot okay right it supplies the fire security system the heating ventilation and cooling system United Technologies carrier subdivision has a very large market shares present in both of these buildings even the glass for these buildings advanced modern energy intensive energy-saving glass Nippon sheet glass DuPont the sealants around them are produced either by dow corning or by Evonik so these buildings which look as though they are symbolic of China's power in infrastructure in fact when you look at it closely or something very different and of course that's not surprising because what's happened to the global business system is pretty clear or at least it ought to be pretty clear but there still are curious complex views about this what's happened to the world business system so you get strange people like Thomas Friedman saying the world is flat yeah you get of course historically our own Alfred Marshall in Cambridge it says competition is like the trees and the forests little firms are continuously rising up and old firms get tired and they fall down and one of the most common observations of course is that there are now so few firms in the financial 2ft 500 that were there 20 years ago but of course that's to miss read what these firms actually are of course Novartis wasn't in the FT 500 in 1990 because if the name didn't exist but Novartis comes out of two giant Swiss companies and it goes on and on and on these are mainly not new firms they're mainly over firms that have been restructured into very very powerful global firms so is it like the trees in the forest or is it rather that the world in the last 30 years which China has observed with bewilderment bewilderment and puzzlement and not knowing what to do or is it rather as Karl Marx said the law of industrial concentration or as my own teacher ages Penrose are good in the theory of the growth of the firm I can see she said no limit to the growth of the firm barring the size of the market the power of economies of scale if well applied are so great so these are two very different views of globalization and business schools and economists actually has kind of just opted out of discussion of this question in my view very little serious discussion but the evidence is so obvious if one cares to look at it and if you take for example the latest report from the European Union the G 2500 the world's top two thousand five hundred companies by spending on research and development what you find that last year at the report that came out last year the G 2500 the first thing to observe is that since the 1980s the share of government in total R&D in the OECD has fallen and fallen and fallen from close to 50% today about 35% so the share of funding of global R&D in high-income countries oacd countries undertaken by private corporations has risen today to about two-thirds 65% from 52% in 1981 so most our R&D in the world is not done by governments but done by private corporations within this G 2500 the last year's report had the following simple data the top 50 companies account for 40 percent of the total spending of the G 2500 companies and they spent over seven hundred billion dollars there's not much else in the world apart from that the top hundred companies account for 53 percent top 44 top 50 for 40 percent top hundred for 53 percent the top 500 for 82 percent so that is the core is a relatively very small number of companies that dominate research and development spending by global corporates there are almost no countries from developing countries a very small number their total contribution to global G 2500 R&D spending is well under 10 percent about seven or eight percent defining depending on how you define a developing country China has less than six percent of total spending on our corporate R&D Switzerland Sweden and Netherlands have eight point four percent so three little countries with 30 million people have far more than 1.4 billion people and their firms from China the world is not flat in the space at all it's very very uneven and even more importantly is the core of this business system and if we want to understand everything in the modern world whether it's the information technology we carry in our hands whether it's the elevators that go up and down whether it's the airplanes and the guidance systems the control systems that guide them from one place to another where it's whether it's the railways whether it is the guidance systems that control traffic if we look at this and the way the world has changed in the modern for last 30 years is quite clear we used to say Intel and Microsoft inside now it's IT hardware and software inside absolutely everything it is a revolution in every significant part of the world especially including infrastructure whether it's buildings energy generation and distribution whether it's telecommunications equipment whatever we look at it IT inside hardware and software what is the g2 files and 500 tell us about IT hardware and software the biggest single sector over a quarter of total spending by the G 2500 companies and lo and behold within the G 2500 hello Europe and hallo China the United States corporates with their headquarters in United States of America account for 67% 67 percent of total IT hardware and software spending by the G 2500 companies so when we think about global infrastructure China's place in the world forget for the moment europe's place in the world as China builds this infrastructure as the institutions are being constructed with a very strong voice for countries and their representatives like Britain France Germany other than China and bidding takes place in a transparent fashion along the Silk Road for all kinds of infrastructure investment Chinese companies may be quite successful at winning the contracts perhaps but the Chinese government themselves including the Foreign Minister Yee has emphasized to these blue in the face this will be win-win we know that with some exceptions on they're pretty rare like while way you have the technologies we know America you have the technologies you're far ahead of Europe let's be frank and we emphasized that the Silk Road will be win-win because we know that your technologies will be insight a very large fraction of modern energy efficient user friendly infrastructure along the Silk Road we will not soon to get into high-speed elevators that are made by Chinese company they'll probably be Otis Mitsubishi Electric Schindler and corner you you

Channel: The Vienna Institute for International Economic Studies

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Keywords: wiiw, Wiener Institut für Internationale Wirtschaftsvergleiche, Vienna Institute for International Economic Studies, silk road, China

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Length: 62min 13sec (3733 seconds)

Published: Wed Apr 27 2016