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Where did you spend Christmas? Mine was spent in temperatures reaching 38-below zero on the frozen lakes and grasslands of Northeastern China. I was there to give a speech on Christmas Day at a conference in Manzhouli on Russian, Chinese and Mongolian economic integration.
Manzhouli is a Chinese city but with a unique pedigree and location. First settled around 1900 by the Russians building the Trans-Manchurian spur of the Trans-Siberian Railway, it was then conquered by the Japanese before China took control after World War Two. It sits at the single point on the map where the borders of China, Russia and Mongolia all converge. Manzhouli’s train and road border crossing between Russia and China is the busiest inland port in China, with most of China’s $50 billion in annual exports to Russia passing through here.
China, Russia and Mongolia are now partners in China’s ambitious new strategic trade initiative known as “One Belt, One Road”, or OBOR, as well as the Chinese-sponsored Asia Infrastructure Investment Bank. The conference was meant to encourage closer trade ties among the three. OBOR is designed in part to redirect China’s investment focus away from more developed countries, especially those participating in the US-led Trans-Pacific Partnership.
Another key component of OBOR, but one often overlooked, is to open up new markets to the most troubled part of China’s industrial economy, the manufacturers of basic products like steel, aluminum, basic machinery and chemicals, turbines, cars, trucks, trains. They all are suffering from acute overcapacity with vanishing profit margins up and down the supply chain.
You may download the seven-page English-language talking points, map and charts from my speech by clicking here.
China does not live in a particularly desirable or affluent neighborhood. It shares land borders with fourteen countries. Russia is by far and away the richest of these countries. Mongolia, with its three million inhabitants most of whom still live in yurts as nomadic herdsmen, ranks third. This gives some sense of how poor many of the places that are now the focus of China’s OBOR, not only near neighbors like Burma and Laos, but also Bangladesh, Pakistan and the struggling post-Soviet Central Asian republics.
At night, there was a banquet for political leaders from the three countries. Afterward, a beauty contest was staged, featuring Chinese, Russian and Mongolian contestants in bikinis and evening gowns. You can see photos here, including ones of me with the Chinese winner and the nine Mongolian contestants. An ice fishing expedition was also organized.
If OBOR does achieve its goal by drawing Russia and Mongolia into a closer economic relationship with China, Manzhouli stands to benefit more than anywhere else in China. As if in readiness, Manzhouli storefronts are in Chinese and Cyrillic, the new airport terminal is in the Russian style, and the main park in the city lorded over by a 10-story Matryoshka doll.
For now, though, no one is seeing much sign of OBOR stimulating greater trade. The main focus for investment in Manzhouli is in tourism facilities to attract Chinese summer vacationers to the surrounding grasslands, China’s finest. This time of year, the cement tourist yurts are empty and the long-haired riding ponies are left to graze and amble in the wind and snow.
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