Global Greed

The global construction equipment rental market is booming as never before, thanks to a vast array of infrastructure mega projects taking shape in countless arenas across the planet.

These huge and complex multi-billion-dollar endeavours are creating jobs, boosting connectivity, driving economic growth and delivering unrivalled returns for lovers of money everywhere. Moreover, each of the power generating facilities, land reclamation programmes, high speed rail links, mass transit systems, expressways, ports, bridges and tunnels that make up these awesome undertakings, require massive amounts of construction equipment to bring them into being.

What this means is that whether they’re invested in India, the Middle East or anywhere else in the world, the owners of that machinery are enjoying the most phenomenal returns by renting it out to contractors on the ground responsible for delivering the projects in question.

India

In India, where some 18 per cent of the world’s population reside, flagship projects include a much-needed second international airport for Mumbai, the country’s most populous city. Considered an essential addition to the city’s infrastructure portfolio, this new super hub will serve to ease congestion to the tune of 90 million passengers annually when it opens in 2023.

Meanwhile, in Hyderabad, a comprehensive new metro rail system is currently under construction. This includes a 31km express link to the city’s airport, with elevated or underground sections making up the majority of its length, meaning an army of specialised equipment is needed.

In fact, across India, the machines are out in force, toiling day and night on projects ranging from power, road, rail and telecoms, to shipping; all part of a strategic decision to prioritise connectivity and enhance business and trading opportunities across the country.

Foundation Capital | Metro commuter train in Doha, Qatar

Middle East

In the Middle East, the world’s richest country, Qatar, is busy crafting a 300km metro at a cost of $36 billion, while an expressway programme spread across 78 major projects will deliver 800km of new road and 200 interchanges; all part of the “Qatar National Vision 2030”.

Elsewhere in the region, Dubai’s Al Maktoum International Airport is being built at a staggering cost of $82 billion dollars, and comes complete with unprecedented demand for material handlers, earth movers and other construction equipment. What’s more, this demand will persist until 2030 at the very least, when the colossal new facility’s first phase is due for completion.

Meanwhile, Dubai International City, a mixed-use development of residences, businesses and tourist attractions, has a $95 billion price tag, while a further $65 billion is being thrown at “Dubailand” to make it the world’s largest retail and entertainment site when it opens in 2025.

Abu Dhabi is also a hotbed of activity, exemplified by the ongoing construction of super-sustainable $22 billion Masdar City, while the $36 billion homage to pleasure that is Yas Island, is sure to keep the machines gainfully employed for many years to come.

Foundation Capital | Skyscraper buildings in the Dubai financial district

Fabulous Fortunes

It is the same story anywhere in the world one cares to look, with big, bold, beautiful building projects dominating skylines from Rio to Riyadh and from Jakarta to Johannesburg.

And, with so many new mega projects coming on stream, the demand for construction equipment has gone through the roof, delivering for the owners of that machinery unrivalled rental income.

Across the globe, throughout history, the smartest investors have understood that fabulous fortunes can be made simply by renting things out. And, today is no different, with construction equipment rental the most lucrative modern-day example of this tradition.

It stands to reason, of course, when one considers that global construction output is set to grow by 85 per cent to reach an awesome $15.5 trillion by the end of the decade! And, with increased automation, growing populations and urbanization combining to drive this rapid growth, the global construction equipment rental market is forecast to reach an almighty $230 billion by 2025!

With figures like that, even those with the biggest appetites for making money are getting in on the act and feasting on the fruits of this bonanza business.

Japan: Land of the Rising Returns

Japan is the country that pioneered high-speed rail travel more than 50 years ago with its legendary bullet train.

Known the world over for its sleek, aerodynamic shape, this iconic mode of transport has come to represent all that’s best about Japanese engineering, while it posts passenger numbers in the billions across the country’s network annually. In fact, so popular has it become, the flagship line linking Tokyo with Osaka is now the busiest high-speed rail service in the world, carrying almost half a million people each working day along the 425 km route in 145 minutes.

Japan says “Konnichiwa” to Maglev

Yet, 145 will soon become a mere 67 minutes, for a new £90 billion Maglev line is currently under construction and will be completed by 2037.

The significantly reduced travel time will help to create a single mega city by binding together Japan’s three principal urban centres of Tokyo, Nagoya and Osaka, with economic benefits projected to be as much as $155 billion during the line’s first 50 years of operation.

Impressive stuff indeed, yet this is just one of numerous infrastructure mega projects funded by the State, as part of Japanese Premier, Shinzo Abe’s massive government spending programme to stimulate the country’s economy, popularly known as “Abenomics”.

Cutting-Edge Locomotion

Maglev means “Magnetic Levitation” and constitutes an energy-efficient, reliable and durable high-speed rail system using magnets to control trains’ stability and speed. And, with friction between wheels and rail eliminated, ultra-high speeds of over 600km/h are achievable, meaning trains will deliver passengers to their destinations quicker than a plane, and with considerably less fuss!

Yet, while Maglev trains are cheaper to build and maintain than conventional trains, since they have no moving parts, the infrastructure itself is hugely expensive and requires a host of specialist machinery.

Endless Work for the Machines

17 more years of construction before the project is delivered may seem excessive, but there are compelling reasons for this timeline.

Firstly, much of the construction area sits within one of the most heavily built up areas in the world. This means 86 per cent of the line will be located deep underground, with tunnels needing to be bored 40m+ below the surface to ensure no conflict with existing land use. One such example is a 25km tunnel currently being constructed under the southern Japanese Alps, and set to be the deepest in the country upon completion in 2025.

Secondly, nature is a force to be reckoned with in Japan, so everything must be built to an extremely high standard to ensure all infrastructure across the line’s length is earthquake, typhoon, flood and even tsunami-proof!

Yet, while these factors may combine to prolong build times and push costs up, there are always winners; not least the owners of the material handling, earth moving and other specialised construction equipment, who rent them out to the Japanese contractors tasked with delivering this feat of engineering. Their machines will be working overtime to keep this mega project on track and on time.

Foundation Capital | High speed maglev train tunnel on the Yamanashi test line, Japan

Boom Time for Investors

So vibrant is the construction equipment rental market in Japan, the country takes bronze medal in the global revenue stakes, punching far above its weight in terms of its land mass and population, helped in no small measure by this glittering new Maglev project.

However, many other factors are helping to fuel the boom in this rental market, including infrastructure requirements for the forthcoming 2020 Tokyo Olympics, as well as ongoing recovery from various natural disasters that have afflicted the nation in recent years. Moreover, such reconstruction efforts are set to run for many decades yet, meaning this boom has long legs!

It all translates to ever rising returns for those investors smart enough to realise that when demand exceeds supply, as it does in the construction equipment rental business, he who holds the asset is perfectly placed to cash in!

China vs. Coronavirus

The Coronavirus has certainly packed a punch since it arrived in China, but with the full might of the Chinese authorities now ranged against, the tide could be about to turn.

Complete containment of the contagion is the objective and quarantining entire city populations is considered the most effective means of achieving this.

Shutdown Mode

So, that’s exactly what’s happening in Wuhan, Central China, where this beastly outbreak first reared its head, meaning the city and surrounding region’s entire transport system has been shut down, and an almost total restriction on travel out of the metropolis is being enforced. Moreover, Wuhan’s 11 million inhabitants are being encouraged to stay indoors, while the wearing of face masks is now compulsory if citizens must venture out.

Tough times call for tough measures, but few are complaining, for it is hoped these measures will serve to arrest the spread of this wretched germ.

For the unlucky ones who have already contracted the virus, however, urgent isolated medical attention is needed. This means it is imperative a suitable medical hospital is constructed without delay, both appropriately equipped and with enough space to accommodate the inevitable short-term increase in confirmed cases before the containment strategy kicks in.

Record Breakers

The Chinese do, in fact, have form when it comes to successfully dealing with deadly microscopic foes, for back in 2003 they built a fully functioning mobile hospital in Beijing in just seven days, where they housed and treated those who had fallen foul of the deadly SARS epidemic.

In Wuhan, it’s going to be six days.

Or, to put it another way, a 1000 bed facility modelled on Beijing’s solution, will rise from the ground in less than 150 hours and be fully operational by February 3rd, once the requisite medical equipment has been integrated.

Construction Equipment to Hand

And, the reason the Chinese authorities are able to deliver on this scarcely believable deadline is because they have ready access to legions of construction equipment already on the ground.

At all other times, these machines would be toiling around the clock to craft the expressways, high speed rail links, power stations and other mega projects that are serving to make Wuhan one of China’s fastest growing cities. Yet, at this time of great national concern, construction companies have instead placed as many machines as are required at the Government’s disposal, so ensuring the medical facility can be built at breakneck speed.

Set to cover an area of 25,000 m² and arranged across 20 distinct blocks, an army of earthmoving and material handling construction equipment is working in harmony to deliver this miracle of medicine. Meanwhile, hundreds of workers are being paid well over the odds by the authorities to incentivise then, to get the two-storey temporary hospital up and running in record time.

Vanquish the Virus

Yet, their commitment to the cause is about more than money, for with their own families at risk, they want this virus vanquished, and are going above and beyond the call of duty to ensure it happens. This includes celebrating Chinese New Year on site, so as never to leave their posts until the job’s complete.

Elsewhere, in the region, the solidarity and selflessness that mark the Chinese character are similarly in evidence, for the public are responding with great generosity to the urgent appeal to donate supplies of medical gowns, goggles and face masks, as well as medicines and disinfection equipment.

Centralising treatment in one super-facility, rather than the 61 currently in operation, will undoubtedly allow for more effective control of the dastardly virus. Governments in the Asia Pacific region are confident this virus will be contained because having defeated the SARS virus 17 years ago the Chinese authorities know what they are doing.

Asian Games 2022

The eyes of the world will turn to Hangzhou, Eastern China in September 2022, for it is to be the host city of the 19th Asian Games, second only to the Olympics in terms of its size and global profile.

It is the moment when this rapidly growing capital of Zhejiang province, 180km southwest of Shanghai, will repay the faith placed in it to deliver both a Games to remember and a long-lasting legacy for the city; all part of a wider Chinese government drive to create a sports industry set to be worth some $730 billion by 2025, bolstering both GDP and national pride.

A Transportation Transformation

Construction highlights include an $8.3 billion, 446km-long urban rail transit system, new expressways compatible with 5G technology and driverless vehicles, as well as major expansion of the city’s Xiaoshan international airport, 27km east of downtown Hangzhou.

Such glittering new infrastructure is designed to ensure both visitors and athletes can move seamlessly between the various venues, as well as around the city and beyond, with over ten new metro lines and two intercity links to be constructed in total.

Meanwhile, the city’s rapid transformation continues with construction of a new airport express reaching out to Wushan West Station, a flagship project with major long-term benefits for the 10 million inhabitants that call Hangzhou home.

Foundation Capital | Planes at bay in Hangzhou Airport

Steel and Concrete Legacy

As to the facilities for the games itself, the jewel in the crown is the stunning Hangzhou Olympic Centre, an 80,000-seat lotus-shaped stadium currently under construction, which sees 56 entwined steel petals making up its framework. The sheer scale and ambition of this venue makes it the largest stadium being built in China over the next decade, while the complex engineering techniques being applied mean an array of specialised machinery must be brought to bear.

Meanwhile, in addition to visually arresting new tennis, aquatic and convention centres being built nearby, the Athlete’s Village, a 3.26 sq km site connected by monorail, subways and cable cars, is taking shape along Hangzhou’s Qian Tang riverfront.

Situated 3km from the main stadium and linked to it by striking water-themed parkland, it is sure to leave a beautiful and lasting legacy of steel and concrete, for it will feature as part of Hangzhou’s expanded Central Business District once the Games conclude. Defined by its mixed-use nature, buildings will be purposed for the full spectrum of commercial, leisure, retail and residential activities and connected by a stunning array of sky bridges.

It is worth stating that these headline projects are just the start of things to come for the city, for its strategically significant location means it is set to further benefit from ongoing One Belt One Road and Yangtze River Delta infrastructure mega projects to the tune of several billion dollars.

Foundation Capital | High speed train docked in station

Equipment Owners: Kings of Construction

Perhaps the biggest challenge confronting the authorities is in ensuring there is enough material handling and earth moving industrial equipment for the many construction tasks at hand, for while the demand for these machines is huge, supply lags far behind. This means those that own the machinery are able to command the highest rates when renting them out to contractors desperate to get their hands on such kit to win and fulfil the numerous lucrative contracts on offer. Equipment owners also know what a source of national embarrassment it would be should everything fail to be ready in time for the Games, and that they are the key to ensuring all the construction is delivered on time.

So extensive and intense is the building work, it feels like payday every day for these investors, and with China leading a global industrial equipment rental market set to be worth $75.2 billion by 2024, there will be no shortage of work for their machines right across China for many years to come.

China Goes Nuclear

The explosive economic growth China has experienced over the last few decades shows no signs of slowing down.

And so inevitably, this unparalleled Chinese success story comes with a sub-plot: one of increasing pressure on energy supplies, as booming industries and newly demanding consumers lust after more and more power.

In fact, so insatiable has the demand become, the only viable way to meet it currently is via highly polluting coal-fired power stations, the continued construction of which is considered preferable to power cuts, which would be sure to test the people’s patience and place prized economic growth at risk. Yet, this reliance on fossil fuels has led to chronic smog across much of the country, which itself serves to undermine the physical well-being of the country’s human capital.

Foundation Capital | Nuclear power plant control room

Nuclear: The New King in Town

Confronted with this conundrum, the authorities have prioritised addressing the issue of pollution, placing nuclear power ahead even of wind and solar as the answer to China’s energy prayers.

Consequently, China is spending $570 billion building new nuclear power stations over the next decade, as it seeks for it to make up 10 per cent of its energy mix by 2030. And, with eight new reactors being built every year until 2030 to meet the country’s climate and clean energy goals, this will make it the fastest expanding nuclear power generator in the world.

Moreover, with China now largely self-sufficient in reactor design, as well as most aspects of the fuel cycle, it is full speed ahead on the construction front, meaning endless work for the earth movers and material handling equipment relied upon to craft these massive facilities. So extensive is the schedule of works, despite there being decades of construction still to come, the Asian powerhouse economy already leads the world in terms of the largest installed nuclear power capacity, with 21 per cent of the global total.

In addition, with some provinces holding back on new approvals for wind and solar projects until the associated transmission infrastructure improves, nuclear power’s star is set to rise further still, for it comes with the assurance that more of the actual energy produced will reach its intended destination.

Foundation Capital | Nuclear power plant cooling towers with China flag

No Expense Spared

With government support and subsidies assured, and safety and security concerns dictating that any new nuclear infrastructure must be exceptionally robust, no expense is being spared in the construction of these facilities. This translates to armies of machines working day and night to meet challenging deadlines across dozens of sites simultaneously both along China’s coastline, as well as inland.

For example, in Jiangsu province, the industrial equipment will be out in force to ensure that the two new reactors to be added to the existing Tianwan facility are completed in time for the start of operations in 2027.

Such mega projects do not come cheap, however, with these two new units alone costing $3.3 billion, while the four new reactors at Xudabao plant in Liaoning province come with a whopping $16 billion price tag!

Foundation Capital | Nuclear power plant control room

Mega Projects, Mega Income

As a low-carbon energy source with capacity for a large base load of electricity, nuclear power is hard to beat. And it needs to be, for even the most conservative estimates have demand for energy in China doubling within 20 years.

As such, the authorities there are looking at having some 200 nuclear power plants in operation by 2050, translating to an unprecedented amount of building work to come.

Understandably, this is very welcome news indeed for those investors who own the machinery used to realise this new national energy vision, since it pushes yet more business their way from those construction companies obliged to rent the industrial equipment they need to secure the contracts they covet.

And, with China absolutely dominating this global rental market estimated to be worth $75.2 billion by 2024, no doubt a lot of investors will be very happy.

Al Mulla Seals Partnership Deal with a Chinese Construction Group

The Al Mulla Group has signed a partnership agreement with China’s Xuzhou Construction Machinery Group (XCMG). The Kuwait-based Al Mulla Group is privately-held and is involved in a range of businesses.

Al Mulla may be looking for ways to gain access to XCMG depth of construction knowledge, as well as its equipment manufacturing prowess.

XCMG has experience in building civil and commercial buildings, as well as mining, roads, and other forms of vital infrastructure. It is ranked 44th in the list of China’s Top 100 Manufacturing Enterprises, 65th in the list of China’s Top 500 Companies, and fourth on the list of China’s Top 100 Machinery Manufacturers.

Al Mulla has operations in eight countries and will make one of its subsidiaries, the Gulf Trading Group, the sole distributor in Kuwait as a part of the partnership. The deal was signed by Al Mulla Group CEO Talal Anwar. Dr. Jiansen LIU, who is the vice-president of XCMG was present for the signing, as well as Counselor Yongru Cheng.

Yongru Cheng is the Economic and Commercial Counselor at China’s Embassy in Kuwait.

The Al Mulla Group on the partnership,

“It (the partnership) enables us to support the ambitious development plans in Kuwait. It will also extend our capability to provide advanced, high-quality machinery and services to civil construction, infrastructure, and mega projects…Our partnership with XCMG is built upon common goals and shared values. We are both driven by innovation and we both give utmost importance to excellence in product quality, customer experience, and sales services.”

The partnership will give the Al Mulla group direct access to XCMG’s construction machinery manufacturing business, which is the largest in China, and the sixth-largest globally. XCMG has traditionally produced earth-moving machinery, hoisting machinery, and road construction machinery.

XCMG recently launched seven new categories of equipment: heavy trucks, mining equipment, excavation equipment, sanitation, concrete, piling equipment, and aerial fire-fighting machinery.

Dr. Liu said, “We are confident that this alliance will help us expand the presence of XCMG products in the Kuwaiti market and boost customers’ trust in the superior quality of our advanced machinery and services,” after the partnership was announced.

China’s Hotel Construction Pipeline Has Grown to Record Highs

A new report from Lodging Econometrics (LE) stated that at the end of Q3 2019, China has 3,380 projects that house 628,972 rooms in its hotel construction pipeline. At the moment, China has 2,548 projects that house 438,797 rooms under construction, and over the next year, 404 projects with 85,026 rooms are scheduled to begin construction.

China has 428 projects with 105,149 rooms in the early planning stages, and hotel development in the nation seems to be stable, despite other parts of the economy that are facing setbacks. The US / China trade war has impacted both nations. Regardless, China added 661 new projects with 80,692 rooms to its hotel construction pipeline in Q3 2019.

During Q3 2019 658 new hotels that house 92,932 rooms opened in China, and another 363 new hotels with 45,799 rooms are scheduled to open by the end of 2019. Next year, 1,084 new hotels with a staggering 157,893 rooms are set to open to the public.

In the event that all of these hotels open in 2020, China will be adding the highest number of hotel rooms since the last cyclical peak in 2014. LE estimates that China will open 73 hotels with 135,294 rooms, which suggests that the next cyclical peak is near.

Here are the Chinese Provinces that are leading the hotel construction boom, listed in order of projects (highest to lowest):

  • Chengdu – 124 projects / 25,560 rooms (a record high)
  • Guangzhou – 122 projects / 26,105 rooms
  • Shanghai – 119 projects / 22,581 rooms
  • Wuhan – 111 projects/15,457 rooms
  • Suzhou – 88 projects/14,855 rooms
  • Xi’an – 80 projects/15,054 rooms.
  • Hangzhou – 73 projects/15,647 rooms

Of the cities listed above, four of them have seen a pipeline increase of more than 20% over their existing operating hotel space. Chengdu has seen that metric rise by 30% and is adding hotel rooms at a record pace.

Major hotel chains are adding capacity to their hotels in China. Of them, the most aggressive is  Hilton Worldwide. It is adding 454 projects with 93,644 rooms to its pipeline, followed by InterContinental Hotels Group (IHG) which is adding 375 projects with 82,358 rooms, and then Marriott International which has 315 projects that house 86,151 rooms in its construction pipeline.

The three companies above are adding a record amount of new hotel capacity to their construction pipelines, and account for 34% of the total amount of new construction in the pipeline. AccorHotels is also adding new properties to its pipeline, with 218 projects that house 35,556 rooms. Jinjiang Holdings is the fifth chain on the list, and it has 214 projects with 22,548 rooms in its pipeline.

Here is a breakdown of how the chains are adding capacity:

  • Hampton by Hilton – 273 projects with 42,645 rooms (a record for the company)
  • DoubleTree (Hilton) – 59 projects with 16,489 rooms.

IHG’s primary brands in China

  • Holiday Inn Express – 179 projects with 31,430 rooms (a record for the company)
  • Holiday Inn – 61 projects with 15,435 rooms (a record for the company)

Marriott International

  • Marriott Hotel & Resort – 73 projects with 22,068 rooms (a record for the company)
  • Courtyard – 39 projects with 10,250 rooms

JinJiang Holdings

  • 7 Days Inn – 113 projects with 8,931 rooms
  • Vienna Hotel – 26 projects with 3,300 rooms
  • AccorHotels (both at record levels):
  • Ibis – 102 projects with 10,888 rooms
  • Mercure Hotel – 58 with 9,346 rooms

Fall 2019 Green Fee Project Awards Announced

The William & Mary Green Fees, awarded by The Committee on Sustainability, for the Fall of 2019 have been announced. The Green Fees support projects that focus on sustainability at the college.

From the time of its inception in 2008, the Green Fee has supported projects with more than $1.6 million USD. The projects focus on research, initiatives, events, and infrastructure that are sustainable in nature. Green Fee projects can be led by students, staff, and faculty.

At the moment, the college is looking for ways to source large amounts of green energy from solar farms in the area, as the first step toward a carbon-neutral campus.

Green Fee funds will contribute an additional $85,000 to this goal and will work on dealing with things like the natural gas that currently heats campus buildings. The Climate Action Plan is still being finalized and is scheduled to be completed in the fall of 2020.

The Green Fee Projects at William & Mary for this Semester Are:

Educational Solar Array

The associate director of central utilities, Farley Hunter, will receive $24,305 to add an on-site solar generation project. There are already solar projects that are under construction that were made possible by previous awards. Students will have access to the project via a web portal, and upcoming awareness campaigns.

China’s Public Diplomacy and Spending in South and Central Asia to be Evaluated, Quantified

William & Mary’s research lab, AidData, recently released new data that pertains to China’s public strategic diplomacy and aid spending in 13 countries spread across Central and South Asia.

Based on AidData’s analysis, using its proprietary “TUFF” methodology, the lab has created an in-depth look at China’s humanitarian aid, infrastructure investments, budget support, as well as debt relief for the years between 2000 and 2017.

AidData found $126 billion USD in funds that had been implemented, committed, or had helped to completed projects in the SCA by Chinese-based banking entities. Of this figure, $120 billion USD was used in infrastructure projects.

China is in the middle of financing one of the largest infrastructure projects in world history, which is known as the Belt and Road Initiative (BRI), or One Belt One Road (OBOR).

Samantha Custer, who is AidData’s director of policy analysis, commented:

“Beijing has ramped up the volume and sophistication of its public diplomacy overtures in the region over time…But infrastructure as a part of its financial diplomacy dwarfs Beijing’s other public diplomacy tools in terms of the sheer scale and visibility.”

Beijing has been selective in how it allocates its foreign political development capital. While around 85% of the money that China spends to shore up political ties is spent on infrastructure, two nations were the recipients of half that spending.

Kazakhstan and Pakistan received half of the money that China spent between 2000 and 2017 on infrastructure. In fact, as an early signatory to the BRI, Pakistan received six times more money than its neighbor, India. The data that AidData collects comes from concessional loans, non-concessional loans, grants, policy banks, investment funds, and state-owned commercial banks.

In addition to the data sources listed above, researchers from AidData interviewed 216 individuals in 145 organizations that span six South and East Asian nations to better grasp how China is using its wealth to expand its political influence.

Siddhartha Ghose, who is an AidData associate director, as well as a co-author of the recent report, said:

“At the end of the day, citizens appear to be somewhat polarized regarding Beijing’s financial diplomacy overtures in their countries…These activities are associated with both lower approval and disapproval of Chinese government leadership.”

Art that Promotes Sustainability

M.S. biology student Caroline Schlutius and advisor Xin Conan-Wu, who is an associate professor of art will be the recipients of $3,000 to support a project that pairs student artists with sustainability students. The goal is to create compelling art that supports the core concepts of sustainability.

Case Competition for WMGIC

The Global Innovation Challenge Team, which is comprised of Thomas Liu ’22, Hannah Garfinkel ’22, Nathan Liu ’22, Macy Punzalan ’20, and advisor David Trichler will be receiving $2,000 to brand their team as the collegiate-level sustainable and international development case competition.

Old Saint William is Back

Suzanne Hagedorn will be presenting her research on an obscure Roman Catholic saint, who was venerated for centuries during the Middle Ages. William of Perth was all but wiped out of the public mind by the Protestant Reformation. Hagedorn plans to give a poster presentation St. William next summer in Durham, England, at the New Chaucer Society’s congress.

Early Career Leadership Award Given to VIMS Scientist

Virginia Institute of Marine Science scientist Molly Mitchell as been given an Early Career Leadership Award by the US CLIVAR Program. She is being honored for her work to create and disseminate sea-level forecasts and associated planning tools to emergency responders and coastal risk managers in the Mid-Atlantic region, including Virginia.

Climate Variability and Predictability, or CLIVAR, is the US branch of the International CLIVAR Program, which is one of four core projects undertaken by the United Nations’ World Climate Research Programme. It is given support by the National Science Foundation, NASA, NOAA, the Office of Naval Research, and the Department of Energy in the US.

Carl Hershner, who is Mitchell’s supervisor as director of the Center for Coastal Resources Management, commented:

“It’s nice to know that people at the highest levels of this field recognize the excellence that Molly brings to her work, and the promise she holds for future contributions…It’s an acknowledgment both of the work Molly has already done and is poised to do.”

Are We on the Cusp of Another Gilded Eurasian Age?

The freedom to trade has always been at the heart of creating wealth. As the USA was able to connect both coasts with the railroads in the 19th century, valuable goods were able to flow easily to and from anywhere the rail lines were laid. Now we may be on the edge of another rail-driven golden age of commerce, but this one is happening on the other side of the world.

A train recently left China and traveled through Kazakhstan, Azerbaijan, and Georgia. It then reached Turkey and went on to Europe via the Marmaray tunnel. That train crossed two continents and may be the start of some big changes in how Eurasia creates wealth.

The China Railway Express is connecting East Asia with Europe, and Turkey sits in a privileged position on that new trade corridor. Turkey and China have both been working on major infrastructure projects, and it appears that now the old seat of the Ottoman Empire has a new role to play in 21st-century commerce.

The Old can’t be Made New Again

Turkey was once a great global power and challenged the major European dynasties of the time. In its own backyard Turkey was absolutely unchallenged for hundreds of years, and as the recent invasion of Syria demonstrates, it is still a force that can make a meaningful impact on regional affairs.

When it comes to trade, Turkey is far less important. Even with the rise of Chinese rail service from east of Shanghai all the way to Hungary (and even further), the land that Ankara controls is only one of many client states that could act as a freight depot or transshipment point for maritime transfers.

The overall relationship that Turkey cultivates with both China and the USA are far more important to pay attention to than its geography within China’s new Eurasian distribution network.

Turkey has already ruffled some feathers in Washington D.C. when it decided to buy Russian-made S-400 missile systems, but if it becomes a Chinese proxy in the Near-East, the current sanctions that have been proposed for the nation aren’t likely to be seen as strong enough by US lawmakers.

Turkey’s Economic Issues

The Turkish economy isn’t in great shape, and the nation has seen many years of economic volatility. Turkish Lira has been making headlines for more than a year and has lost well over half its value when measured against the US dollar over the last decade.

Unfortunately for Turkey, even with a lower currency, manufacturing and exports haven’t seen much in the way of a bump. The tourism sector in the nation has been unable to capitalize on the weak currency as well, due to safety concerns, and an active war zone on the Southern border.

Some estimates see Turkish employment rising, inflation falling below 10% per year, and GDP growth rising to above 5% in 2020. Given the fact that these forecasts rely heavily on an uptick in manufacturing, as well as positive growth in Turkish agricultural production, it would be best to take them with some amount of skepticism.

A Possible Gilded Age for China, Not its Client States

There is little doubt that the investments and political alliances that the Middle Kingdom is making across Eurasia will provide China with massive rewards in the 21st century. China has built the largest manufacturing base in modern times, and now the country is looking for the best way to sell its wares on the globe’s largest landmass.

The new railway that is driving Chinese goods to all points west is a leap forward for the world’s most powerful manufacturer, and will probably unlock latent demand in many Eurasian nations. The situation is somewhat different for countries like Turkey, who offer little economic opportunity to China, with the exception of buying Chinese goods and allowing their free flow to Western nations.

Turkey’s situation is hardly unique, and China isn’t building manufacturing infrastructure with the Belt and Road Initiative (BRI, or One Belt One Road ‘OBOR’), it is building distribution infrastructure to carry its goods to market.

Like most of the nations on the new Silk Road, Turkey is a client state. It may see some economic upside from the free flow of Chinese goods through Turkish land, but the shipment of Chinese goods is unlikely to make a big impact on the flagging Turkish economy.

Perhaps the best analogy for the role that Ankara plays in the new Chinese global order is that of the ‘Last Spike’ in Promontory Summit, U.T., back on May 10, 1869. The transcontinental railroad was completed in Promontory Summit on that day, and a ceremonial golden spike was driven into the ground.

Merchants in San Francisco, New York, and Boston were the clear beneficiaries of that last spike that connected the two coasts. Promontory Summit didn’t get much out of it, but trains carrying valuable goods did pass through the area for many years to come.

Growth vs. Green: China’s Dichotomy of Ambitions

For the past decade, China has been the world’s fastest-growing economy, with its ambitions matched only by their willingness to make painful sacrifices to achieve their goals. However, in their drive for both economic growth as well as a future powered by renewable energy, they’re currently facing a dichotomy of ambition.

In order to drive the world’s second-largest economy forward at the pace that China is striving for, a staggering amount of energy is required. Despite massive investments in this area, renewable energy is not yet close to being a viable, nor feasible option to power this growth. This is particularly the case in the current economic climate, where a variety of factors are threatening China’s growth targets.

The current inability to drive growth through renewable energy is not for lack of effort on the part of the Chinese. When it comes to investment in the renewable energy sector, China is head and shoulders ahead of the rest of the world. In 2017 alone, they invested $132 billion into clean energy – this constitutes 40% of total clean energy investment across the globe. Not only are they leading in terms of financial investment into this space, but they’re also well ahead of when it comes to power generation from clean energy sources.

Their total renewable energy capacity has grown at an annual average of 15% over the past 10 years, which is more than double that of the global average according to the International Renewable Energy Agency. Even more impressive is their increases in solar power capacity, which has more than doubled every year since 2008. At that stage, they were producing 113MW of solar energy and by the end of 2017, the figure stood at 130.6GW.

“No country has put itself in a better position to become the world’s renewable energy superpower than China”

The Global Commission on the Geopolitics of Energy Transformation.

This is only one side of the story though. Although China’s renewable energy capacity is dwarfing that of the rest of the world, they’re still heavily reliant on coal to support their energy needs. With 60% – 70% of their current energy requirements being generated through coal, they’re a long way from achieving their renewable energy goals. According to the state-owned China National Petroleum Corporation, China’s coal demand will reach its peak only in 2025 and an estimate by the International Energy Agency has China consuming about half the world’s coal until at least 2023.

This reliance on coal isn’t set to decrease in the near future. With the pressure that the U.S-China trade war has put on the Chinese economy, they have back-tracked on some of their progress towards a coal-free energy spectrum to ensure that they don’t fall short of economic growth targets. In the first half of 2019, 141 million tonnes of new coal production capacity was authorized; contrast this to the 25 million tonnes for the entirety of 2018 and it shows that China isn’t afraid of using coal to stoke the fires of its economy.

This drive back towards coal is a short-term move to counteract short-term market conditions. It will give investors some assurance that the Chinese are willing to make difficult, and unpopular decisions in order to achieve their growth objectives.

The future of energy, however, undoubtedly lies in renewables and it’s here that China is in a dominant position. As a result of its investment in this sector, it now holds the most renewable energy-related patents in the world, with the U.S., Japan, and Europe some distance behind them.

This places investors in the Chinese growth story in a strong position: invested in a country willing to make difficult energy decisions to achieve short-term growth, but still a world-leader in the renewable energy sector, which will doubtlessly power the future.

Weathering The Trade War Through Consumption

Currently led by President Xi Jinping, China’s sights have long been set on an economy less dependent on exports, and on one that draws growth from domestic consumption. This desire for economic independence from the rest of the world may be the key to withstanding the economic pressure created by the U.S.- China trade war.

The transition from an export-based to a consumption-based economy has been a long-held goal for the Chinese, something that they have been steadily edging towards over the past 10 years. This is evident in figures from the World Bank, which show that China’s GDP derived from exports peaked in 2008 and have been on the decline ever since. Their success in achieving this is reflected in the data which shows that exports currently constitute less than 20% of their GDP. Contrasted to other nations such as Germany, who exports a total of 46% of GDP, China is well ahead of the curve when it comes to shifting the driving force behind their economy.

The most positive signal for the Chinese is the value of their consumption expenditure. This was just over $6 billion in 2017, which accounted for over 10% of global consumption expenditure, behind only the United States. Even so, China’s GDP derived from domestic consumption in 2017 was only 39.1%. Contrast this to 68% in the U.S. and 62.2% in India and it is clear that there is incredible potential still remaining for consumption growth within their own borders.

The Chinese will be relying on this shift towards consumption-based growth to pick up any slack from the effects of U.S imposed trade tariffs. Growth in consumption has been further facilitated by Beijing’s recently announced 13 measures to build a vibrant ‘night economy’ and encourage consumer spending. Among these measures are the extension of shopping hours in tourist areas and the development of night shopping markets in all 16 of the city’s districts.

As an indicator of the current consumer power in China, the annual Single’s Day e-commerce and entertainment festival was a resounding success. The gross merchandise value sold in the 24-hour period by Alibaba alone was $38.3 billion – a 26% rise from the previous year. So strong was the Chinese power to purchase, that Alibaba sold more in that single day than Amazon does in a two month period.

Part of this Singles Day success and Chinas strong drive towards a consumption-driven growth model is the so-called “invisible poor” – a new term used to describe young Chinese white-collar workers putting themselves into debt through excessive consumption in a bid to exhibit wealth. Expensive suits, top of the range wines and apartments costing them more than half their monthly salary are some of the prized purchases of these consumers. This socio-economic shift taking place from being a nation of savers to a nation of spenders is a long-term concern for Chinese economists but is providing some short-term torque to the economy.

A bright light in China’s economic future, no matter how long the trade war lasts, is the economic potential lying in their lower-tier cities. These cities that were previously excluded from greater participation in the economy are becoming increasingly more connected through both the Chinese government’s increasing investment in transportation networks and the greater connectivity that 21st-century technology allows.

Economic growth rates in these cities are higher than those in the top tier cities; for example, Beijing and Shanghai both experienced a growth rate of 6.6% in 2018, whereas the lower-tier cities of Chengdu and Xi’an managed to reach 8% and 8.2% respectively. Strong economic growth rates coupled with increasing connectivity of these cities will allow for pent-up economic demand to be released, further supporting the Chinese economy.

Although in the depths of one of the most significant trade wars in recent history, China has put itself in a position to withstand the battle and come out largely unscathed. With their successful shift towards a consumption-based growth model and a mass of pent-up economic potential in their lower-tier cities, the Chinese growth story is as promising as it has ever been.

China Committed to Build CPEC’s Projects as per International Standard

In an agreement with Pakistan, China will build China Pakistan Economic Corridor (CPEC) projects in accordance to international standards. CPEC, or the Chinese-Pakistan Economic Corridor, is one of the earliest projects of the Belt and Road initiative, a global development strategy devised by China to encourage and to participate in the infrastructure development of nearly 152 countries, including Pakistan.

CPEC is an extraordinarily ambitious goal for the entire country of Pakistan, encompassing railways, highways, airports, renewable energy, coal, liquefied natural gas, and agriculture. In 2017, it was valued at $62 billion dollars, although the initial investment by the Chinese was $8.5 billion.

For many observers, the CPEC is the main focus of Xi Jinpeng’s Belt and Road initiative and therefore, there is tremendous pressure for this endeavor to succeed. It is expected to create 2.3 million jobs by completion in 2030 and to increase Pakistan’s annual economic growth by 2.5%. The prevalence of Chinese workers in Pakistan also indicates that this is a boost to China’s economy, especially during the current trade war with the United States causing the economy to slow.

CPEC is Controversial

The CPEC is not without its criticisms and controversies, involving countries as diverse as Malaysia, India, Iran and the contested territory of Kashmir. Although it is the largest foreign investment that Pakistan has attracted since independence, some worry that this is part of China’s vision to rewrite the rules of globalization.

However, China has couched its true intentions by insisting that through infrastructure development, Pakistan might reject religious fundamentalism.

Other concerns include security risks and militant forces as China dismisses claims that they are trying to find easier and more convenient routes to Western China, circumventing Afghanistan and developing alternative routes to Central Asia. Some have suggested that the agreement will result in a trade imbalance in which less expensive Chinese goods will flood the market, leaving the more expensive Pakistani manufactured goods to be ignored.

An influx of cheap manufactured goods will impact any of the advances made in the growth of the Pakistani economy and may create issues for the Pakistani labor market.

The Debt Question

Some of the projects will be completed via loans, in which Pakistan must repay China at a 1.7% interest rate. There are multiple sources of finance, including interest-free loans, private investment, and involvement from the Asia Development Bank.

According to many published reports, Pakistan has suffered consistently from shortages of power. However, with the energy projects of the CPEC now functioning, electricity has been readily available to thousands of households. This is due to the full load operation of the hydro-power stations which have been hailed as “revolutionary”.

As expected, the accessible electrical power has improved the local economies, proving that infrastructure is truly the backbone of the state.

Massive New Projects

A large part of the CPECP involves the Sinohydro Group, which has constructed the necessary buildings and power plants, including the Gomal Zam Dam, Duber Khwar Hydropower Project and the Kohala Hydropower Project.

In a country as poor as Pakistan, riddle by terrorism, poverty, and corruption, there is slow economic growth. In the realms of hydrology and alternative energy sources, Pakistan has a difficult environment, one that is hot and arid. In these conditions, it is necessary for foreign investment to make basic utilities available to the masses, even when hydropower projects demand a great deal of time and money.

Often, the projects must be situated in crowded, poor areas, which contributes to the challenges of establishing the structure and the system.

Residents of the poorer areas are worried that they might be evicted to make room for the construction while others are skeptical that they actually will benefit from any of the promises. Nonetheless, according to Sinohydro, the eco-friendly “greening” of Pakistan is a serious global consideration, especially in light of climate change.

China’s Exports Extend to Design and Construction

Chinese engineers have been fortunate enough to receive years of design education and experience, particularly on overseas projects that must adhere to international rules and standards.

The Chinese companies are fully committed to bringing CPEC into alignment with European and American standards. In this way, Pakistan’s alternative energy sources fall under all standards, making them safe for both the country and the world.

According to Yang Haiyan, Deputy Chief Engineer Beifang Investigation, Design and Research Co, Ltd, a subsidiary of Sinohydro Group, “We are committed to promoting China’s standards for CPEC’s major hydropower projects. “

Official sentiments aside, pure altruism rarely exists in the business world, and therefore, CPEC should be seen as a financial investment by China in a poorer country that will become a brand-new market for their consumer goods.

In addition to this, China will be repaid with interest on their investment. Although they are providing much-needed infrastructure and basic utilities for Pakistan, perhaps they are hoping to cultivate loyalty in what is effectively a captive audience. Definitely a contemporary conundrum, Pakistan will be grateful for renewable sources and modern roads, as will the world, but the question remains, at what price?

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