In this article, written by Anne Smith, we’ll take a deep dive into the history, controversy, geopolitical significance, costs, and benefits of China’s Belt and Road Initiative. Enjoy!
Infrastructure: Public buildings that society uses in order to function. The electric grid, sewage systems, and roads are all considered infrastructure. Most of the infrastructure being funded by the Belt and Road Initiative is focused on power generation and transportation.
Belt and Road Initiative: China’s flagship infrastructure project funded by the Chinese government. The stated goal is to improve infrastructure and better facilitate the movement of people and goods within countries and across borders. This is accomplished by providing countries that have signed onto the initiative with low-interest loans that are used for specific infrastructure projects.
Economic Corridors: Specific routes that the Belt and Road Initiative is supposed to invest in. For example, Chinese investment into Pakistani infrastructure is part of the China-Pakistan Economic Corridor. The Belt and Road Initiative is organized around six different economic corridors, all of which are centered around the Eurasian continent
Debt Trap Diplomacy: When one country is in debt to another country, the lending nation can leverage that debt to exert political or social influence over the borrowing nation. This is because the debtor knows that passing policies that the creditor deems favorable may lead to more relaxed debt repayment terms. People have accused the Belt and Road Initiative of being a form of debt-trap diplomacy.
History of the Initiative
The Belt and Road Initiative was created under the Presidency of Xi Jinping in 2013. The project was originally focused on countries geographically close to China but has expanded to include countries all over the world. Currently, over seventy, mostly low-income and middle-income countries have signed on to the Belt and Road Initiative. Most estimates of Chinese spending on the project range between $1 trillion to $8 trillion.
The Belt and Road Initiative was created as a response to the need for infrastructure investment. The Asian Development Bank estimated in 2017 that Asia will need to spend $1.7 trillion annually until 2030 on infrastructure to adequately address poverty and climate change adaptation. The current international infrastructure investment appears insufficient. The Global Infrastructure Hub estimates that, globally, the amount of infrastructure investment will fall $15 trillion short of what is needed by 2040. Although it has not been able to completely erase the need for infrastructure investment, the Belt and Road Initiative was created to address this funding shortfall.
Beyond the geopolitical effects, the high levels of debt associated with the Belt and Road Initiative have severe consequences for participating governments’ balance sheets. Pakistan, a country that is currently indebted enough to require assistance from the International Monetary Fund, owes about 25% of its public sector debt to China–primarily because of their involvement in the Belt and Road Initiative. Zambia finds itself in a similar predicament. China holds a plurality, and by some estimates a majority, of Zambian government debt. Because the country’s already high debt levels made dealing with the financial crisis almost impossible, this November, Zambia became the first African nation to default on debt during the 2020 coronavirus pandemic. China’s use of predatory loans and participant countries’ willingness to take out loans they know they can’t afford has the potential to send governments into financial ruin.
In addition to how the projects are funded, the infrastructure being built by the project is in and of itself controversial. Although China has expanded its efforts to reduce the usage of fossil fuels domestically, the Belt and Road Initiative continues to spend tens of billions of dollars investing in coal abroad. Because coal plants have a lifespan of a few decades, the environmental effects of China’s coal investment will be felt for quite some time. Although investment in electricity generation is necessary for poverty eradication, many see China’s push for clean energy at home and investment in dirty energy abroad as hypocrisy.
Who receives the funding is disliked by many in the international community as well. Unlike traditional development institutions like the World Bank, the Belt and Road Initiative does not require recipient countries to meet certain human rights or rule of law standards. As a result of this “no strings attached” policy, much of the funding winds up going to autocratic nations and many of the projects are rife with corruption.
Belt and Road projects create thousands of jobs, but who gets these jobs is also a matter of controversy. Rather than hiring locals, many of the employment opportunities created by the Belt and Road Initiative are taken by Chinese workers. While this helps the Chinese economy, it does little to improve the economic prospects of the people who actually live in the participant country. This has started to trigger an anti-China backlash. Countries such as Vietnam and Laos have seen anti-China protests erupt and the decision to hire Chinese workers has made the international community more skeptical of China’s stated goal of aiding economic development in participant countries.
The Belt and Road Initiative has also come under fire for its lack of effectiveness. Many of the project’s corridors require coordination across multiple countries whose different regulatory standards make that collaboration very difficult. Estimating how much is being spent on the Belt and Road Initiative is difficult because the initiative is very nebulous. Although the project is supposed to primarily build infrastructure along certain corridors, an analysis done by the Center for Strategic and International Studies found that this is rarely the case. The Belt and Road Initiative is sometimes seen as ineffective because it encompasses too many disparate projects that share little more than a name. The initiative’s effectiveness is also starting to be impaired by a growing awareness of predatory loans. Dislike of debt is increasingly encouraging countries to forgo signing on to the initiative.
Benefits of Joining the Belt and Road Initiative
The main reason why countries join the Belt and Road Initiative is that they need better infrastructure. Many people living in developing countries lack access to electricity. Their governments taking out loans and using them to build power plants can lead to numerous improvements in their everyday lives. Electricity makes manufacturing and agriculture more efficient, lowering the prices for goods and increasing the number of employment opportunities. According to the Borgen Project, roughly ⅓ of the world’s population lacks access to adequate roads. Governments receiving Chinese help in improving the quality of roads makes it easier for people to be able to go to school, the clinic, or a place of employment. Like all development projects, one of the goals of the Belt and Road Initiative is to improve the lives and economic situations of the people in the countries that it is serving.
Even developed Belt and Road members can obtain benefits from increased infrastructure spending. Greece has one of the lowest levels of infrastructure spending in the EU and its infrastructure is beginning to lag as a result. Chinese financing can help Greece fill in that gap. Italy has the 4th worst infrastructure amongst developed countries and has many pieces of transportation infrastructure that are too old to function properly. In the summer of 2018, one bridge in Genoa was so old that it collapsed and killed 43 people. Many inspectors believe they have found other unsafe bridges. Additional funds for transportation infrastructure will help Italy avoid another deadly collapse.
Joining the Belt and Road Initiative also makes it easier for countries to trade goods. The World Bank estimated that, once fully completed, the Belt and Road Initiative could boost global trade by between 1.7 and 6.2 percent. The ability to more freely exchange goods expands economic opportunities and allows countries to specialize in goods that they can more easily produce. Because of this, the World Bank projects that the Belt and Road Initiative has the potential to increase the global incomes by 0.7 to 2.9 percent.
China has a desire to be more influential internationally. Xi Jinping wants China to become the champion of the Global South by creating institutions that aid economic development in lower-income countries and provide alternatives to the ones established by Western high-income countries. Much of China’s motivation for creating the Belt and Road Initiative stems from this desire.
In international relations, a country’s ability to influence others through its reputation is often called soft power. In addition to improving the infrastructure of other countries, the Belt and Road Initiative seeks to improve Chinese soft power. When countries receive funds from the Chinese government or citizens see Chinese funds being used, they become much more likely to perceive China as a country out to do good in the world. Although this effect might seem small, because the countries that have signed on to the initiative makeup ⅔ of the world’s population, the Belt and Road Initiative holds the potential to win over the hearts and minds of billions. This could lead to more countries siding with China when they vote in international organizations–and more countries being reluctant to criticize China.
The primary source of funding for Belt and Road infrastructure projects is loans. Despite the interest rates frequently being low, many countries wind up borrowing more than they can pay back. This has led many international observers to accuse China of engaging in debt-trap diplomacy. One common example is the port of Hambantota. The Sri Lankan government borrowed more than they could afford to construct the port. As a result, they ended up leasing a 70% stake in the port for 99 years to a Chinese company because they could no longer afford to service the debt associated with the port. This made many people nervous because, although the port is for commercial purposes, Chinese influence over a port in what was formally considered India’s backyard represented the potential for China to use debt traps maliciously. Some analysts warn that China may be attempting to use debt traps to take control of infrastructure in key strategic areas.
Especially after Sri Lanka, China’s investment and influence over transportation infrastructure in the Indian Ocean became notable. Like with many Belt and Road Initiative related issues, there exist two competing narratives. Some, including the Chinese government, claim that this investment is just trying to promote interconnectivity and economic development in the region. They prefer to use the term “Maritime Silk Road”, in reference to the trade routes of the Silk Road. Those who are more skeptical of Chinese intentions often use the term“String of Pearls”. They believe that Chinese actions in the Indian Ocean are primarily intended to further China’s economic and military interests in the region. They argue that providing funds for ports will give China access to more places and that China could potentially use this access for military purposes.
Effects of COVID-19
The economic crisis associated with the coronavirus pandemic has reduced the capital China has available for investing in projects. It has also reduced the willingness of countries that are already running up high deficits to take out more loans. The amount spent on the Belt and Road in 2020 is projected to fall significantly short of 2019’s investment.
Despite these challenges, the Belt and Road Initiative is important enough for the Chinese government to continue to operate, albeit with different goals and places of investment. China has recognized that public health technology is likely to experience increased demand in a post-COVID world. It is not unreasonable to expect increased investment in the Health Silk Road, a Belt and Road project created in 2017 to increase access to healthcare technology. Additionally, COVID-19 has disrupted global trade and made people more cognizant of the risks associated with overdependence on a single country. As a result, China may invest in transportation infrastructure in Southeast and North Asia, in an effort to reduce the risk of a single supply chain disruption being highly disruptive.
The international community’s opinion of the Belt and Road Initiative, and their response to it, has been mixed. Some countries, especially poorer ones that benefit immensely from Chinese infrastructure investment, have signed onto the initiative and applaud Chinese efforts. Russia regards the Belt and Road highly, mostly because of its disdain for Western institutions. Other countries, especially those who fear that China’s rising influence might threaten their own, dislike the initiative.
Unsurprisingly, one of the fiercest opponents of the initiative is India. The Belt and Road Initiative has dramatically increased China’s influence in South Asia through projects in Pakistan, Sri Lanka, and Bangladesh. India has decided to respond to increased Chinese investment by increasing infrastructure funding of their own in the region. India has provided billions of dollars in infrastructure funds to Afghanistan (which hasn’t signed onto the Belt and Road Initiative yet), Bangladesh, Thailand, and Myanmar. India has, along with the similarly-minded Japan, created the Asia-Africa Growth Corridor that aims to improve ports in parts of Asia and Africa.
The United States has pursued a similar strategy. Although the US isn’t in Asia, as the world’s largest economy and arguably the most powerful country, the US has become concerned with China’s rising influence. In 2018, Congress passed the Better Utilization of Investments Leading to Development (BUILD) Act, which created an agency to provide $60 billion worth of investment into infrastructure abroad.
Europe’s response to the Belt and Road Initiative is mixed. Some countries, like Italy and Greece, have fully embraced and signed on to the initiative. Others are more skeptical. French President Emmanuel Macron believes that the Belt and Road Initiative is an exploitative project meant to make participating countries subservient to Chinese influence. German Chancellor Angela Merkel has expressed doubts about China’s intentions with the initiative. The EU as a whole started providing alternatives to Chinese investment through their Connectivity Strategy.
There currently exists a massive need for infrastructure funding and launching a massive infrastructure investment campaign is China’s imperfect attempt at ameliorating that. The project has been widely criticized for being motivated by Chinese desires to become more influential by funding non-environmentally friendly infrastructure projects in unvented countries with loans they can’t pay back and this criticism is fair. Like with any foreign policy initiative, the intentions and actions of the Belt and Road are neither completely benevolent nor completely malign. How much China is motivated by wanting to aid other countries and how much it is motivated by more malign desires is up to the individual to decide.