Is China's Belt and Road Initiative working?

It has been more than six years since the launch of China’s vast global infrastructure project, the Belt and Road Initiative, and in that time, a lot has happened, to put it mildly.

The World Bank estimates that more than $500 billion worth of road, railway and other projects are planned or underway.

“Its progress has been quite impressive,” said Donghyun Park, an economist at the Asian Development Park, speaking to TRT World in his personal capacity on the sidelines of this year’s Rhodes Forum.

“Overall, it has really made a lot of headway. It is firmly established in the global economic landscape.”

In Pakistan, around $19 bn worth of energy and infrastructure have supposedly been completed or commenced under the China Pakistan Economic Corridor (CPEC), the BRI’s flagship project. And it is not just Chinese allies, like Pakistan, which have embraced the initiative.

The BRI encompasses much of the globe, with more than 130 countries signing on. While Beijing’s rival, India, still opposes the BRI because it runs through disputed territory in Pakistan, other adversaries, such as Japan, are involved. And Beijing recently inked a deal bringing Italy into the BRI, the first G7 member to join.

China’s commitment to the BRI “continues to be very strong,” said Bruno Macaes, Portugal’s former Europe minister and author of The Dawn of Eurasia and Belt and Road, who spoke to TRT World in between sessions at this year’s Rhodes Forum.

“In some respects, it is actually ahead of schedule and delivering results earlier than Chinese authorities expected”.

Mixed bag

However, the initiative has had “some ups and downs” in recipient countries, Macaes said, including debt problems and allegations of corruption. There are also concerns that BRI projects lack transparency and environmental sustainability. The US-China trade war is causing a “retraction” Macaes said, especially as most BRI projects are financed in dollars.

To address problems with the BRI, President Xi recently unveiled a “reboot” of the initiative at China’s Belt and Road Forum in Beijing. State-owned enterprises, which are by far the largest investors in BRI, will face greater oversight, while environmental standards and anti-corruption safeguards will be enhanced.

Some criticisms of BRI are “very much exaggerated,” said Donghyun Park. To blame China for high levels of debt and corruption in host nations is “scapegoating BRI for problems that these countries already have,” he said.

China is not responsible for the economic downturn in Pakistan, for example, which is currently undergoing a severe balance of payments crisis.

“Pakistan’s economic malaise goes well beyond BRI,” he said. Taking on more debt would exacerbate Pakistan’s problems, but BRI is not the “root cause”.

Overall, CPEC has been beneficial, but it is necessary to “pause and reassess”, and the project should be “scaled down a little.”

While some criticisms of BRI are overblown, there are “legitimate concerns” about lack of transparency and sustainability, Park told TRT World. The new environmental focus is “absolutely the right direction for BRI to go,” he said, but it is too early to know if the reboot is fundamental or merely a "cosmetic" move to appease the international community.

Wang Huiyao, president of the Center for China and Globalisation, a Beijing-based think tank, said the BRI is doing “relatively well” noting that many countries had signed on to the initiative with good results.

However, he conceded that “it’s not a perfect project, it certainly has a lot of shortcomings.”

The greatest threat facing the BRI is negative public opinion in host countries, according to Bruno Macaes. A pattern has emerged of political parties winning elections on an anti-China platform. Malaysian political parties openly campaigned on criticising Chinese influence, and Pakistan has made moves to halt or downsize Chinese projects.

Devolve

The BRI needs to become “more democratic” Macaes said. Projects must utilise more local labour and try to benefit the lives of ordinary people. China has already attempted to popularise CPEC by introducing healthcare and education components.

“The BRI cannot be rigid and inflexible. It has to be responsive to shifts in public opinion,” Macaes said.

Beijing must also loosen its control of BRI and devolve more power to recipient countries. Instead of the current system whereby Beijing maintains bilateral relations with each of those countries in a hub and spoke system, there should be collaborative projects between China and other nations in third countries.

BRI would have “greater chances of success in a more multilateral framework,” Macaes said, although China would lose some control over the initiative. “If it does not get more devolved it will run into bigger and bigger problems,” he told TRT World, adding that he sees “some awareness of that in Beijing.”

Wang Huiyao said that China should co-finance regional, multilateral projects with other institutions, such as the World Bank, so that “risk is shared”. He would also like to see India involved in the BRI and said it would be great to involve the US too. The US-China trade war is acrimonious because there is “no big incentive for both countries to work together.”

The Chinese government has tried to bring in more ‘third-party partner’ companies to pool risk and expertise, but with limited success. Of all the contractors involved in Chinese infrastructure projects, 87 percent are Chinese, 7.6 are local, and only 3.4 are foreign companies, according to a 2018 report.

Another problem facing China is the precarious global economic situation. The US-China trade war launched by President Trump has undoubtedly hurt the Chinese economy. However, it might benefit BRI in the long-term by forcing China to diversify its trade away from the US to other countries, according to Donghyun Park.

“There are fundamental differences between the US and China. They are not going away anytime soon,” said Park, “China has to strengthen its relationship with the rest of the world.”

Bruno Macaes agreed that the trade war “could perhaps have some positive consequences” for China by forcing a “rebalancing from the US market into other markets.”

A ruse for military expansion?

Beijing has long been suspected of using BRI to expand its global political and military influence under the guise of a seemingly benign economic initiative. Some commentators predict a “string of pearls” of Chinese military installations in the Indian Ocean Region, in Pakistan, Sri Lanka, Maldives and elsewhere.

American officials have accused Beijing of using ‘debt-trap diplomacy’, forcing debt onto developing countries that cannot meet their obligations and have to hand over control of strategic infrastructure. The classic example is the Hambantota port, which Sri Lanka ceded to China when it could not repay its loans.

However, Hambantota is “the only example” of Beijing seizing strategic assets in this way, said Donghyun Park.

Concerns that the BRI is a geopolitical, not an economic project, are “exaggerated” he said.

Accusations of debt-trap diplomacy have been repudiated by other experts, including Deborah Brautigam of Johns Hopkins University.

The security dimension of BRI is “very much secondary” said Bruno Macaes, and there is little evidence that China is trying to develop a network of overseas military facilities, noting that China has one naval base in Djibouti and might have a small outpost in Tajikistan, while the US has over 800 foreign military bases.

However, he does not believe the BRI is a purely economic initiative.

“It is a highly political project whose main goal is to increase China’s political influence in many of these countries.” Beijing’s “ability to divide the EU” is already evident, he said, referring to the “17+1” group of China and East and Central European states.

According to Macaes, Beijing intends to establish a new world order replacing the US-led ‘liberal international order’.

“China is offering a new order and offering itself to lead it,” he said, although details of what that order might look like are currently rather vague and “utopian.”  

Not everyone agrees that China is trying to dominate the world. “China is not trying to create a new world order, nor does it have the power to do so,” said Donghyun Park. While the Chinese-led AIIB is sometimes seen as a threat to the ADB, Park dismisses such talk as “ignorant nonsense.” The ADB finances some BRI projects and the two banks cooperate.

But the AIIB is “very small in its scope and operations,” Macaes said and is not nearly as important to BRI as the dominant Chinese state-owned banks. Elements of the Chinese system, such as the AIIB, have been designed to interface with western institutions and present a “soft image of China” while others are much less transparent.

The Chinese model is multi-faceted, versatile, and adaptive. “Parts of the system work in different directions, with different goals,” Macaes said. “It is a very flexible model where the parts are not entirely homogenous and work for different purposes, and a more effective system because of that”.

Wang Huiyao denied that China was trying to replace the US-led world order.

“Even though the system was largely designed by the US, China never said we’re going to replace that,” he told TRT World. “China always said it supports multilateralism,” he insisted, noting that Beijing is the second-largest donor to the UN and a strong supporter of the WTO.

Gabriela Ramos, chief of staff of the OECD and Sherpa to the G20, said that China had engaged constructively in a multilateral format, giving the example of the Paris climate agreement.

“We had very good outcomes when China engaged,” she said, referring to the G20.