Business / Economy | ANALYSIS

Xi Jinping's wins and losses at second Belt and Road Forum

Bloomberg

Chinese President Xi Jinping hosted some 5,000 delegates from across the globe at a Belt and Road Forum in Beijing last week to discuss his signature infrastructure project, which began in 2013 to rebuild ancient trading routes across Eurasia. This year’s gathering eschewed the pageantry of the inaugural summit in 2017, as Beijing tried to address international criticism by toning down its rhetoric and tightening oversight.

Here are three takeaways from the summit, and how Xi fared in the international spotlight.

A chastened Xi

Compared with his keynote speech two years ago, Xi was more muted on the “Belt and Road” initiative’s growing presence in other countries. The president stuck to discussing steps China is taking to clean up the project, and vowed “zero tolerance” on corruption.

People’s Bank of China Gov. Yi Gang said the central bank would “build an open, market-oriented financing and investment system,” and the government released its analysis framework for debt sustainability.

Xi didn’t announce new numbers on upcoming investment into the program, though he said $64 billion worth of deals were signed at last week’s forum. In 2017, he said China would add 100 billion yuan ($14.8 billion) to the Silk Road Fund and two state-owned banks would provide special loans for BRI projects worth 380 billion yuan in total.

This year’s joint statement — released after Xi chaired a round table with participating leaders — repeatedly called for “high-quality” projects and standards. The 2017 communique didn’t use the phrase. The document also encouraged developed nations to invest in “connectivity projects” in developing countries, and said cooperation “will be open, green and clean.”

“International lenders will not invest in a project that has not been de-risked or is not financially viable,” said Daniel Russel, vice president for international security and diplomacy at the Asia Society Policy Institute. “China’s challenge now is to demonstrate that the forum’s lofty rhetoric about ‘Green BRI’ and ‘Clean BRI’ has been translated into action throughout the Belt and Road.”

Rehabilitation signals

China’s efforts to rehabilitate the image of the initiative did have some success, drawing eight more heads of state to this year’s conference.

Malaysian Prime Minister Mahathir Mohamad, previously one of the biggest critics of the initiative in Southeast Asia, said his country is fully supportive and stands to benefit from its BRI project. Earlier this month, Malaysia struck a deal with China to resume the East Coast Rail Link project for 44 billion ringgit ($10.7 billion) — down from 65.5 billion ringgit — after deciding to terminate it in January.

In March, Italy became the first Group of Seven country to sign up for the BRI, a big win for Beijing that also raised alarm bells in the region. At last week’s forum, developed countries including Austria, Switzerland and Singapore signed up for so-called third-party market cooperation. Japan, France, Canada, Spain, the Netherlands, Belgium, Italy and Australia have already signed the document, agreeing to help build infrastructure in developing countries.

“The attendance of some EU countries leaders show the projects are attractive to some developed countries which also have their own domestic economic issues,” said Suisheng Zhao, executive director of the Center for China-U.S. Cooperation at the University of Denver’s Graduate School of International Studies. “Since the trade war with the U.S. broke out, China has re-examined its leverage in its relations with major countries and readjusted some accordingly.”

Trade message

While Xi made no mention of the ongoing trade war with the U.S. in his speech on Friday, a large part of it alluded to the major issues in the negotiations — such as cleaning up state subsidies, reducing nontariff barriers, boosting imports and protecting intellectual property.

China won’t engage in currency devaluation that “harms others,” Xi said in the speech. The phrase mirrors language he’s used to describe China’s diplomatic policies. Bloomberg News reported earlier that the U.S. was asking China to keep the value of the yuan stable to neutralize any effort to soften the blow of U.S. tariffs.

While he reiterated Chinese talking points about opening up, Xi specifically highlighted the significance of implementation, another sticking point in the China-U.S. trade talks. “We will establish a binding enforcement system for international agreements,” Xi told the forum. U.S. Treasury Secretary Steven Mnuchin has said the two sides have “pretty much agreed on” a mechanism for sticking to the trade deal.

“It’s clear that Xi sought to use this year’s Belt and Road Forum as a platform to pursue multiple objectives: to re-brand the Belt and Road and also to telegraph to the United States that he is prepared — rhetorically, at least — to address American concerns that have led to the current trade confrontation,” said Daniel Kliman, senior fellow in the Asia-Pacific Security Program at the Center for a New American Security.

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