Photo: World Economic Forum, flickr.com
The incremental coverage and commentary on China’s technological advances, military expansion and development policies by the world media have evoked significant discussion about China’s rise as a global power. China has been making gains in terms of global influence and power. Most commentators speculate this rise to be a result of major economic and governmental decisions taken by successive leaders since the Civil War in China that ended in 1949. Currently, China is one of the largest economies of the world, and has the world’s largest population and fourth-largest territory. China has held prominence in the Asian region since becoming a member of the United Nations and later, a permanent member of the UN Security Council. Engaging in massive trade deals with Latin America and Africa in 2008 was a major step in its establishment as a world power alongside the European Union and the United States. China’s Belt and Road Initiative (BRI) is a development strategy which involves infrastructure development and investment in over 150 countries and investment in international organisations around the world. Global experts identify it as a step in China’s attempts to become a superpower by gaining strategic, economic and military advantage across the globe.
What is the Belt and Road Initiative (BRI)?
The Belt and Road Initiative is a multi-billion-dollar project which aims to connect Asia, Africa and China through land and maritime networks. It will comprise of a ‘belt’ of overland corridors and a maritime ‘road’ of shipping lanes. President Xi Jinping announced the idea in 2013, derived from the spirit of Silk Road, an ancient trade route established during the Han Dynasty 2,000 years ago that connected China to Central Asia, Africa and Europe. President Xi’s vision includes the creation of a vast network of railways, energy pipelines, highways and streamlined border crossings. For example, initiatives include new highways in Pakistan, a rail terminal in Kazakhstan, a seaport in Sri Lanka, and bridges and roads in rural Laos. BRI will expand the international use of Chinese currency, while new infrastructure in many developing countries could ‘break the bottleneck in Asian connectivity’. China also plans to build 50 Special Economic Zones (SEZ), modelled on the Shenzhen SEZ.
The economics of the BRI
The initiative is projected to cost over $1 trillion. There are many different estimates by varying sources about the total amount that has been already been spent. According to one such estimate, China has already invested over $210 billion, the majority of which has been spent in Asia. Despite the investment from China, there is vast speculation over China’s ulterior motives behind the project and investment. Chinese firms are engaging in construction work across the globe on an incomparable scale. They have secured more than $340 billion in construction contracts around the world.
The combined population of all the countries involved in BRI is over 4.4 billion: the project touches about 62% of the world’s population. Trade between China and BRI countries between 2014 and 2016 totalled about $3 trillion. Supporting such a diverse spread of development initiatives that enhance connectivity throughout Eurasia and beyond can serve to strengthen Chinese economic and military interests. The development overseas would probably just remain a by-product.
Benefits for China and the countries involved
Analysts around the world have unravelled the considerable economic and political gains that China can yield from the BRI. The BRI is an umbrella initiative, covering a multitude of investment projects designed to promote the flow of goods, investment and people. This would realign global relationships, redirect the flow of economic activity, and shift power between states. The Asian Development Bank estimates about $26 trillion of total investment to enable developing countries of Asia to sustain growth momentum, eradicate upoverty and respond to climate change. China has already pledged $1 trillion to the project and has invested massive amounts of capital into Chinese public financial institutes like the Chinese Development Bank and the Export-Import Bank of China. Such institutes have low borrowing costs, enabling them to lend money cheaply to Chinese companies working on BRI projects. Such financing options allow Chinese state-owned enterprises to offer highly competitive bids against foreign companies which might be more financially constrained.
Many areas targeted by China suffer from underinvestment or near economic stagnation due to domestic economic struggles. They consequently register low on the United Nations Human Development Index (HDI). Pakistan and Myanmar are two such countries, ranking 147thand 145thglobally on the HDI. Such countries stand to benefit greatly from the infrastructure development projects and accelerated trade via the routes created. Italy became one of the latest countries and the first of the G7 to join the initiative. This is seen to be the result of re-entering a recession at the end of 2018.
There are many BRI projects in the pipeline, some completed, some underway, others have been announced or are either under consideration or under negotiation. One example is the China-Pakistan Economic Corridor, which will include highways, railways, pipelines and optical cables, with over half of the total investment going to energy projects such as power plants. There have been significant benefits to Pakistan, making it a symbol of the benefits that participating countries can derive from the BRI. However, there are also reasons for the countries involved to be concerned.
Criticism and speculation around the BRI
The biggest concern about the project is the involved countries’ economic debts to China, better known as the ‘Debt Trap.’ Many countries have started worrying that China has cleverly forced them into a debt trap, and that this might be a form of economic colonialism. The main cautionary tale is that of Sri Lanka. In 2010, Sri Lanka agreed to pay a Chinese state-owned corporation $1.5 billion to build a new port. In December 2017, the Sri Lankan government agreed to lease the port along with the surrounding 15,000 acres to the corporation for 99 years, due to their inability to repay that debt. This lease alarmed many Asian and Western policymakers who understand it to be a major Chinese strategic foothold in the Indian Ocean. Many worry that Sri Lanka is now caught in a debt trap and may be forced to lease more assets in the future. The Sri Lankan government has momentarily been successful in negotiating a ban on the stationing of the Chinese navy at the port, but cannot guarantee the enforcement of the ban forever. Eight more countries were found to be at serious risk of being unable to repay their loans to China. Critics worry about the use of this debt trap diplomacy as a means of gaining strategic advantages, such as regarding territorial disputes or human rights violations. For example, in 2011, China wrote off a debt owed by Tajikistan in exchange of 1,158 sq. km of territory which was earlier disputed.
There’s also concern that China’s commercial presence around the world will eventually turn into a military presence. In 2017, China established its first overseas military base in Djibouti. Analysts point out that almost all ports and transport infrastructure can be built for dual use – for both commercial and military purposes. In January 2019, the Pentagon said that China was using its expanding military, trading and infrastructure network to attain global influence. Projects in Pakistan that were purely for commercial and peaceful purposes have become covertly military in nature. In December 2018, the New York Times reported a review of confidential documents regarding China’s BRI-related activities in Pakistan. The documents revealed plans for a special SEZ to increase the construction of Chinese fighter jets in Pakistan. The two countries will also jointly build navigation systems, weaponry and other military hardware facilities in Pakistan.
Lack of transparency has resulted in reports of corruption in the execution of project under the BRI. Critics also highlight the lack of environmental concerns and lack of efforts to ensure sustainable development. BRI projects in Central Asia, Pakistan and Myanmar are also projected to lose money due to underutilisation and might end up causing more harm than good. This is because the initiative is long term but requires investment in the meantime.
What to make of BRI and where is it headed?
BRI is a masterstroke by China in its attempts to gain global influence. Although it began as an investing and lending program, it has turned into an embodiment of everything China does abroad, blurring lines between economics, politics and military. China is filling a funding gap for developing countries, where no other major economy or organisation was willing to do so. With new countries still considering joining the initiative, it hasn’t lost its attractiveness. The BRI still is a win-win initiative which facilitates better infrastructure projects and economic growth to participating countries, while allowing China to gain global strategic significance. For countries across the globe, the BRI still holds the allure of being a grand strategic plan that involves connectivity and better economic and trade opportunities with other countries, while the involvement of so many countries ensures that the initiative is not centralised in its approach. A major challenge for China will be addressing and solving all the problems being pointed out by other countries. The most important step forward will be for China to give up control to make the initiative increasingly democratic and participatory for all the countries involved.
The Second Belt and Road Forum (BRF) concluded in Beijing on April 27, 2019. It aimed to review the progress of BRI and was attended by 37 heads of state/government. President Xi discussed China’s vow to clean up the project and adopt a ‘zero tolerance’ policy on corruption. Regarding the concerns about debt trap diplomacy, the Governor of the People’s Bank of China said that the central bank would ‘build an open, market-oriented financing and investment system,’ and the government released its analysis framework for debt sustainability. There was also call for ‘high-quality’ projects and standards. Developed nations were encouraged to invest in connectivity projects in developing countries. Steps have been announced to exert more control on the program, including a more muted publicity drive, restricted use of the BRI brand, clear rules for state owned enterprises, and the building of overseas auditing and anti-corruption mechanisms. China has stepped up its efforts to counter allegations that BRI is just an attempt to gain global influence by presenting an inclusive narrative that deals with criticism from all involved parties and is willing to act upon the criticism for improvement. It is vowed that all cooperation, investment and will be transparent, clean and green. The forum seemed like a makeover of the initiative in an attempt by China to ‘clean up’ its act.
Observers have argued that the changes and proposals that China have presented may turn out to be superficial and may not actually go deep enough to fix the issues at hand. A real effort would probably include more concrete steps: the termination of projects that have generated significant problems; the writing off of debts of countries that are in precarious financial situations due to lending from China (or steps to further aid those countries financially); and the reduction of Chinese ownership of projects to below 50% by bringing in high-quality international partners.
Being a powerful long-term vision, the major benefits of the project will be evident only in the long run. Many projects are still in the planning phase and probably won’t be completed for several years. The success of the first wave of projects will be crucial for both the initiative and China. BRI has the potential to facilitate stronger economic and political bonds throughout the region, and maybe even throughout the globe. All said, it is bound to grant China more influence in world politics and a a greater capacity to guide the development of the international economic and political system.
China also plans to set up international courts in Shenzhen and Xi’an, the former hub of the original Silk Road, to resolve commercial disputes regarding BRI. Such courts could serve as vehicles for China to write new rules, establish institutions reflecting Chinese motives, and gain an influential voice on the global platform. Establishment of an international organisation may also lead to the establishment of multiple other such organisations under a central agency (something like the UN) with China at its centre.
As for the speculation and criticism, they cannot be ignored. Critics are right in pointing out the possible hidden motives behind BRI. If they don’t want to lead China to a position of a superpower or a dominator of global politics, all countries need to be alert and participate in the project with caution. They need to play an active role in demanding more power and make it a more cooperative and decentralised initiative.
Anant Saria is a freelance writer with a Journalism major. He is particularly interested in International Relations and Human Rights. He will pursue his Masters in International Studies and Diplomacy at SOAS University of London from 2019 to 2020.