It is hard to appreciate the size, scope and ambition of China’s “Belt and Road” initiative (BRI). It seeks to fill a multitrillion dollar infrastructure investment gap. It aims to link East and West, not only economically but also culturally as it revives and reanimates centuries-old trade routes that created the modern world. It is a modern foreign policy gambit to extend Chinese influence and status, restoring its place as the Middle Kingdom on Earth. And finally, it has become a cornerstone of the Chinese Communist Party’s legitimacy and the signature initiative of supreme leader Xi Jinping.
Yet it was hard not to miss, amid the praise and celebrations at the Second Belt and Road Initiative International Forum held last week in Beijing, a sense that those ambitions should be scaled back. Chinese pride at the success of the BRI and the presence of 37 heads of state and top officials from 100 countries at the forum was tempered by the resistance to the project that has been generated since its launch six years ago. To its credit, Beijing appears to be listening to critics and adjusting the BRI to ensure that it benefits all participants, rather than just China.
Xi first announced that his government would build “a new Silk Road” in 2013. That project then became the “One Belt, One Road” initiative, which morphed into the BRI. If the name has changed, the ambition has not: Throughout, it has been “the project of the century,” with the goal of investing trillions of dollars in infrastructure project as far away as Latin America. A total of 126 countries and 29 international organizations have signed up to become members of or support the BRI. More than 1,800 projects are reportedly already underway.
China’s Ministry of Commerce estimates that Chinese enterprises invested more than $90 billion in BRI countries between 2013 and 2018, an average annual growth rate of 5.2 percent, a critical inflow of funds at the same time the United Nations reckons that global foreign direct investment is falling, and has reached the lowest level since the 2008 global financial crisis. The World Bank has projected that BRI projects, when complete, will reduce shipment times and trade costs of BRI members between 1.7 percent and 3.2 percent, and 1.5 percent and 2.8 percent, respectively, while boosting income growth in local areas by 1.2 to 3.4 percent and globally by 0.7 to 2.9 percent.
Those impressive numbers do not tell the entire story, however. Critics have noted that the terms of Chinese loans are often onerous and unsustainable, prompting concern that Beijing is promoting debt traps to ensnare recipients and force the handover of key assets at bargain prices. Exhibit A in the case against China is Hambantota Port in Sri Lanka, which the government there handed over to Chinese creditors in 2017 for 99 years after the country could not make interest payments on its $8 billion debt. Since then, governments in Malaysia, Myanmar, Nepal and Pakistan have either refused deals or demanded their renegotiation.
The danger of unsustainable debt is magnified when the deals are struck in a less than open and transparent manner. Transparency has been lacking in many BRI deals and the prospect of corruption is ever present in such circumstances. Debts are virtually impossible to repay when substantial portions of the initial loan are pocketing by individuals and used for other purposes.
A third criticism of BRI is that it is not “green” — that a majority of projects promote fossil fuels rather than renewable technologies and the associated investments do great damage to the environment. For example, one study revealed that the total of coal power, nuclear power and hydropower BRI loans is almost seven times greater than the amount of loans to solar and wind projects.
The Chinese leadership has heard this criticism. In remarks to the forum participants last Friday, Xi said that “we must adhere to the concept of openness, greenness and cleanliness.” Other Chinese leaders promised to hold extensive consultations and promote “mutual learning” between China and its partners. The final declaration mentions the word “green” seven times. Signatories “underline the importance of promoting green development,” and “encourage the development of green finance including the issuance of green bonds as well as development of green technology.” “Green” was not mentioned in the final communique from the first BRI forum held two years ago.
Japan has not formally joined the BRI, as it remains suspicious of Chinese intentions. Skepticism is warranted; opposition is not. Japan’s government has pledged to work with China on third country projects and has promoted cooperation between the BRI and other regional investment institutions, such as the Asian Development Bank. Japan should work with China to fill the yawning regional infrastructure gap, encouraging truly sustainable development that meets local needs.