The Belt And Road Initiative: Viability And Global Implication Of Modern Silk Road
About the Belt and Road Initiative
In 2013, Chinese President, Xi Jinping announced the launch of the Belt and Road Initiative (BRI). This project, described as a “Silk Road for the 21st Century” would be the worlds largest infrastructure project, encompassing 65 countries over 3 continents, comprising of 32% of world GDP and 63% of the world’s population. The goal of the initiative was to enhance land-based trade between China, Central Asia, Russia and Europe, as well as maritime trade through the Indian Ocean, Persian Gulf and Mediterranean Sea. It consists of a series of overland railways and expressways, natural gas pipelines, power grids, ports and other infrastructure projects. As of 2019, a total of USD890 billion has been spent, with an estimated USD4 trillion budgeted for the next few years.
Though initially welcomed internationally and praised as an ambitious attempt to enhance global trade, the BRI has recently faced global blackish (Lo, 2016). With many accusing the Chinese government of predatory lending to countries that cannot afford to pay back their debts and using the economic initiative to secure its political and military interests, as well as broaden its soft power. This article will examine the viability of this initiative, as well as the global implications and ramifications of its success. It acknowledges that the BRI is the not “Silk Road of the 21st Century” complex economic initiative to further Beijing’s political and military interests, which may take decades to complete. Therefore, that it is too soon and too difficult to accurately determine its viability and global implications (Deloitte Insights, 2018).
Viability
Economic
A major aspect of the BRI involves lending large amounts of money to poor, less developed nations with high levels of corruption. The “One Belt One Road” Big Data Report states that many of China’s infrastructure projects under BRI face greater scrutiny and criticism than those funded by non-Chinese developmental banks like the World Bank (Wu and Pan, 2018). This is rooted in international concern that these projects are a way for China to purchase greater influence globally, seen in how Sri Lanka’s involvement in the BRI resulted in the country losing control of the Port of Hambantota for 99 years. In 2018, the managing director of the IMF stated that the BRI was showing some signs of progress, however, also warned partner countries of the major debt risks involved in the joint projects. The director stated that the BRI could potentially provide countries with much needed FDI and infrastructure development, but these countries must realise that these investments will come with strings attached. None the less, with careful management of finances and discussion of terms when negotiating, governments are able to protect themselves and avoid high debt with China (Wu and Pan, 2018).
It is also unknown if the Chinese economy can afford to keep providing these high-risk loans to less developed nations. The BRI projects are financed by Chinese policy banks, with some subsidisation from commercial banks. China is currently loaning billions of dollars to its neighbouring countries during a time of domestic economic slowdown (Hart-Landsberg, 2019). If the BRI fails to stimulate China’s economy, it has the potential to be disastrous for the economy. While major financial institutions such as the IMF, EU, WB and OECD; and international banks i.e. Deuche Bank have expressed varying degrees of financial support for BRI projects, the vast majority have funded by Chinese government owned enterprise (Deloitte Insights, 2018). Fears regarding China’s already sluggish global economy, exacerbated by a potential trade war with the US, has placed increased pressure on officials to approve BRI projects with little political and financial risk assessment or market research. With the BRI progressing at such speed, it is unknown if the country’s finance and banking institutions are co-ordinated enough to manage its multiple projects (Hamieiri and Jones 2018).
Additionally, foreign states are also concerned about the lack of transparency regarding details of the infrastructure projects and the potential benefits for partner countries. Under the BRI, projects must be managed by Chinese firms, built with Chinese labours with Chinese materials, with 89% of Chinese funded transport infrastructure projects contracted out to Chinese firms (11% to foreign firms). There is little done to improve the industrial or productive capacity of its partner country, only providing enhanced transportation, communication and access to energy resources.
Thus, the economic viability of the BRI is still unknown and the potential benefits of the projects still difficult to determine (Wu and Pan, 2018). While the basic requirements such as funding and labour are readily available, the more intricate details of financing, construction and management are still near impossible to assess.
Geo-political
In the years since the announcement of the BRI, Western governments have been facing increased pressure to sign on or risk potentially getting left behind. However, before doing so, they must recognise that the BRI is not just an economic initiative, but also a geo-political one (Nordin and Weissmann, 2018). While it is too early to accurately predict the long-term effect the BRI will have on the international stage, it would be fair to assume that it will offer China increased energy security, greater opportunities to exert its military presence and enhanced diplomatic relationships with its neighbouring countries. However, these potential benefits are countered by the heightened security risks that come with greater exposure; terrorism, international hostility and heightened regional rivalry.
There has been increasing backlash towards the BRI, with projects facing increasing hostility and scepticism. This is evident in Malaysia’s 2018 election, where the dinner, Mahathir Mohamad was vocal about his criticisms of Chinese projects and the negative impact it had on Malaysia debt levels. This increasing uncertainty is also reflected in the EU, where 27 of 28 ambassadors to Beijing signed a report stating that the BRI goes against the EU agenda (Nordin and Weissmann, 2018). Furthermore, the elevated levels of debt accrued by smaller counties is a cause of concern. With many countries, Pakistan, Djibouti, Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan in particular, predicted to be unable to pay back their debts. These countries may find themselves in a similar situation as Sri Lanka, where they enter unfavourable deals in order to pay off their debt.
While the insular approach to international policy of the Trump administration has offered Beijing the chance to further enhance its soft power. There has been heightened rivalry between China and its neighbouring countries following the announcement of BRI (Deloitte Insights, 2019). India has voiced its opposition to the China-Pakistan Economic corridor, as China’s developing relationship with Pakistan has the potential to undermine India’s plans to be the major player in the South-Asia region. Japan too has expressed concerns as to how China’s new expansionist approach to foreign policy has the potential to shift the power dynamics to from Japan-US towards China. Australian defence experts are apprehensive towards China’s message of neo-liberalism and trade; and are worried about how increase reliance on China will impact on strategic issues such as the South China Sea. These concerns are not entirely unfounded, as Beijing’s foreign economic policy are closely tied with its political and military interests. There have also been numerous efforts by neighbouring countries to counter China’s power in the region, with Beijing excluded from the Trans-Pacific Trade Partnership, the Transatlantic Trade and Investment Partnership and the EU-Japan agreement (Lo, 2016).
Thus, while many countries have actively supported BRI and welcomed Chinese investment, there has been increasing hostility and scepticism towards its projects, as they benefit Beijing more than the partner country. This approach undermines the message of the “Silk Road for the 21st Century” and may prove to be a significant barrier for Beijing to continue with current projects and find future partners.
Global Implication
China
BRI will allow Beijing to promote economic growth in western parts of China, which have not seen the same level of economic development as its eastern provinces (Zhartay et al., 2018). It will also allow China to secure alternative trade routes for its oil and energy imports, as it will no longer be dependent on the ports on its eastern seaboard for trade. Furthermore, as China develops relationship with foreign nations through BRI, it furthers its military and security interests through sharp power. In time, this will allow China to become a legitimate threat to the dominance of the United States.
However, this newfound power will come with certain risks, as China will allow itself to become a greater target in the international stage. Furthermore, this global shift in power away from the democratic liberal order cause other actors to try and counter China’s rise. This is evident in the recent and purposeful exclusion of China in regional trade agreement negotiations (Lo, 2016). Beijing will need to take proactive steps to ensure it maintains its global standing.
Partner Countries
If successful, the BRI will reshape the face of global trade, placing greater emphasis on developing countries in Central Asia, Eastern Europe and Africa and raise the standard of living for over half of the world’s population (Kohli, 2017). It has the potential to provide much needed infrastructure to partner countries, strengthening their economic dependant, opportunities for trade and reducing levels of unemployment (Zhartay et al., 2018). However, its success will mean the continued presence of corruption, human rights and environmental violations and the rule of dictator’s in Zimbabwe, North Korea, Niger, Angola and Burma.
Additionally, these countries will likely be beholden to China, and thus forced to promote Beijing’s economic, political and military interests globally (Deloitte Insights, 2018). Already evident in its current relationship with Africa, where Beijing trades economic loans for political favours. In recent years, African countries have increasingly voted with China at UN General Assemblies, in correlation with increased Chinese investment into the continent (The Economist, 2016). Therefore, partner countries have a significant amount to gain through the success of the BRI, however, this may come at the cost of some of its independence.
Neighbouring Opposing States
The BRI’s success will lead to increased China-Pakistan military ties, which will be of concern to other neighbouring countries, India, which has had a historically strain relationship with Pakistan. Increased militarisation of BRI routes will help protect Beijing’s foreign economic interests, however, has the potential to anger partner nations.
Opposing counties may feel pressure to participate in the BRI, for fear of missing out on major economic growth and infrastructure development opportunities, especially those located in Eurasia. Or they may feel increasingly threated by the changes that the BRI and Beijing are proposing, causing them to take more extreme action in opposition. This could lead to more countries joining the Quad (an effort by the US, India, Australia and Japan to counter the growing influence of China and the BRI).
It is difficult to predict the impact that the BRI will have on opposing states. However, it would be safe to assume that there will always be some apprehension towards it, regardless of its success.
International Powers
The success of the BRI will undoubtably disrupt the current international liberal order. It will ensure the security of China’s economic, political and security interests, making Beijing a significant threat to the current US dominated international order. It will demonstrate the success of the one-party system, undermining the efforts of the West to put democratic, two party states into power. It may also lead to a wider spread adoption of one-party systems, especially among BRI partner states.
Current major international players may take more active steps to counter Beijing’s rise to power, creating a rivalry between the two states. This is evident in the recent China-US trade war, where each country attempted to curb the economic growth of the other.
Conclusion
Currently, it is still too early to determine the viability and impact of the BRI on the international stage. While many projects have been approved, with some predicted to complete by the end of 2019, it is unknow to what degree Beijing’s vision for a “Silk Road for the 21st Century” can be fulfilled. While it does benefit partner countries, it is clear the BRI is not so much a new Silk Road but rather a politically motivated economic initiative created with the main goal of furthering China’s domestic interests. Its success will have the potential to cement China’s position as a global superpower and as a legitimate threat to the dominance of the US, as well as bring its partner countries to the forefront of global economic trade. However, if China does wish to stay faithful to the idea of a “Silk Road for the 21st Century” then they must allow all counties the opportunity to benefit equally from the initiative.
