A headline in this newspaper just a week ago said it all: “Dim future seen for Belt and Road programme”. It is in vogue to portray China’s ambitious infrastructure focused plan, embracing at least 80 countries, as a strategy in trouble.
As some would have it, the Belt and Road Initiative’s project stream has dried to a trickle as countries have wised up to the danger of debt traps and threats to sovereignty. They are turning their backs on opaquely structured projects that serve China’s interests far more than those of the host country and provide a dumping ground for surplus Chinese steel and cement in a new form of colonialism.
Critics point to the US$20 billion on-again-off-again East Coast Rail Project in Malaysia, to Sri Lanka’s Hambantota port where Chinese contractors have converted debt into a 99-year lease to operate the port, to controversial hydropower dam projects in Pakistan and Myanmar. They point to dirty coal-fired power plants being built in Serbia, and multibillion-dollar projects being agreed on without transparent, competitive tendering processes.
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US Vice-President Mike Pence warned leaders at the Asia-Pacific Economic Cooperation summit in Papua New Guinea in November: “Some are offering infrastructure loans to governments across the Indo-Pacific … Yet the terms of those loans are often opaque at best. Projects they support are often unsustainable and of poor quality. And too often, they come with strings attached and lead to staggering debt.”
He followed with an even blunter sales pitch: “Do not accept foreign debt that could compromise your sovereignty. Protect your interests. Preserve your independence … Know that the United States offers a better option. We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence. The United States deals openly, fairly. We do not offer a constricting belt or a one-way road. When you partner with us, we partner with you, and we all prosper.”
This is a bit rich coming from a country that has both directly and through the International Monetary Fund sat at the heart of debt crises in South America, across Asia in 1998, and more recently among the Western economies in 2008. That aside, the idea that the Belt and Road Initiative is floundering is nonsense. It remains at the heart of Chinese foreign policy.
It is not going away for good reasons. First, the initiative is not a grab-bag of random big-infrastructure projects but a 100-year vision of how China sees its place in the world as it emerges from a century of poverty, turmoil and introversion to re-engage with the global economy.
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Infrastructure building is seen not just as “good aid”, but also as a critical precursor to boosting two-way trade. Research from the French credit insurance agency Euler Hermes predicts that belt and road projects will this year add US$117 billion to global trade – an additional US$56 billion in exports from China and an extra US$61 billion in imports.
Infrastructure building is seen as a critical stabiliser in deeply unstable parts of the world that, from China’s point of view, are too close for comfort. This is particularly true across the “stan” countries in Central Asia on China’s western borders.
The number of projects counted as belt and road projects in any year will ebb and flow, but the strategy and philosophy behind the programme itself is unlikely to falter: if the aid policies around the world of former colonial powers were built around food aid, China’s strategy is based on helping countries build their own infrastructure.
In 2016, Jin Liqun, head of the China-led Asia Infrastructure Investment Bank (AIIB), noted in the Financial Times: “The Chinese experience illustrates that infrastructure investment paves the way for broad-based economic social development, and poverty alleviation comes as a natural consequence of that.”
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Jin views the AIIB as “an opportunity for China to show it can work with other countries and to better international practice – not just Western practice – so people can be convinced China is a force for peace and prosperity in the world.”
He was talking not about the Belt and Road Initiative, which is run by the Chinese government and mainly employs mainland companies and banks, but about the AIIB, which has 70 shareholders and runs on lines similar to the World Bank or the Asian Development Bank (ADB). But their philosophies come from a common source.
The Belt and Road Initiative is here to stay for another good reason: the need for better infrastructure is gigantic, and largely unmet. The ADB says the Asia-Pacific alone needs to spend US$26 trillion on infrastructure between now and 2030 – that includes not just roads, bridges, ports and power plants, but clean water systems and strong digital infrastructure too.
Putting aside the politically motivated sniping from the US, the bad belt and road press speaks more to the formidable challenges of building “big infrastructure” in countries with fragile governments, ill-founded legal systems and next to no money.
While I admire Chinese efforts to help countries improve their infrastructure, I wish China had been willing to listen more closely to the World Bank, the ADB and other development banks on the challenges of organising large-budget infrastructure projects in developing economies – especially about the fact that the principle obstacle to infrastructure building is not a shortage of money, but identifying and structuring coherent and commercially viable projects.
There is an unseemly eagerness in some quarters in the US to see the Belt and Road Initiative “fail”. This is myopic and counterproductive. Asia’s economies need all the improved infrastructure they can get. Rather than attack China, other rich economies should be complementing its efforts, and educating it away from some of the obvious mistakes it has so far made.
As David Dollar, Ryan Hass and Jeffrey A. Bader at the Brookings Institution recently wrote: “Washington has driven up negative perceptions of China’s Belt and Road Initiative, but has yet to articulate an alternative for countries that are in need of infrastructure.”