In late April, representatives from more than 100 countries, including 37 leaders of foreign governments, were in Beijing to attend the second “One Belt One Road” Forum for International Cooperation.
In the eyes of the Chinese hosts, it must have been a great success compared with the inaugural forum in 2017 that drew 29 foreign government leaders.
Now renamed the “Belt and Road Initiative” (BRI), the One Belt One Road Initiative put forward by Chinese President Xi Jinping in 2013 and fully launched in 2015, is a vision to create a China centred economic zone stretching from China to Europe via land transport routes across the Eurasian continent and from the Pacific and Indian oceans to the Mediterranean Sea through maritime connectivity.
China has planned or begun undertaking a huge number of overseas infrastructure development projects, but it has neither clarified which ones are related to the BRI nor disclosed the financial scale and financing terms and conditions of each project.
In a speech at the Beijing forum, Xi said, “More than 150 countries and international organisations have signed agreements on Belt and Road cooperation with China.” Chinese news media said Chinese companies have directly invested more than $90 billion in countries along the Belt and Road routes so far, while the initiative’s loans have now amounted to $440 billion.
The People’s Daily Online, the official website of the Chinese Communist Party, said countries along the Belt and Road routes have recognised the initiative as a “platform for international cooperation” and it has created completely new markets and employment opportunities in those countries.
It is natural for China to say with much fanfare that the initiative has been successful. It is true that when Xi introduced the strategy, it was widely welcomed by developing countries as a new source of funds for their massive infrastructure development. But both the Chinese and their counterparts have now encountered many issues.
Cutbacks on Projects
It is said that there are more than 2,000 Belt and Road-related cooperation projects. Many of them have hit snags, become targets of international criticism, or had to be reviewed.
For example, when he returned to power in May 2018, Malaysian Prime Minister Mahathir Mohamad began reviewing a China backed project to build a rail link along Peninsular Malaysia’s east coast. In April this year, Malaysia revised the contract with China to reduce its financial burden by trimming the overall construction outlay to two-thirds of the original cost.
In Myanmar, a China-backed plan to develop a deepwater port in Kyauk Pyu on its west coast has already been downsized to one-fifth of the original cost. For China, the port is part of a strategic project to have a trans-Myanmar corridor from China’s southwestern Yunnan Province to the Indian Ocean.
Behind the cutback was Myanmar’s worry that if it went heavily into debt to China, it would only repeat the mistake Sri Lanka made earlier in its strategic port development project with Chinese loans. In July 2017, Sri Lanka had to agree to hand over Hambantota Port to China on a 99-year lease, as it could not afford to repay the Chinese loans it had borrowed for the project.
In January this year, Pakistan told China to delete a major power plant construction project from a list of China-Pakistan Economic Corridor cooperation projects.
Some diplomatic commentators point to “toughness” on the part of countries as a reason for a series of setbacks for China in its infrastructure development drives. I would like to figuratively compare what has happened to China’s ambitions to a scenario in which a Go/Weiqi player tries to build and expand a “moyo” (framework) in which that player has great influence and can potentially turn it into his or her “Ji” (territory). However, China’s campaigns to expand as much “moyo” as possible may not necessarily result in a sought-after “Ji” outcome. I would say that the countries are making their own moves to protect their “Ji.”
Now, let us consider the challenges faced by the BRI.
In October, U.S. Vice President Mike Pence, speaking at a leading U.S. institute, criticised China for using so-called “debt-trap diplomacy” to spread its regional influence. He said China “is offering hundreds of billions of dollars in infrastructure loans to governments” in many parts of the world to make recipient countries become insolvent and agree to repayment-in-kind pledges, in the case of Sri Lanka, to “deliver the new port directly into Chinese hands.”
In an apparent effort to respond to such criticism, Xi said in his April speech that China would seek to cooperate with “high-quality, sustainable and reasonably priced” infrastructure projects in the BRI. This sounds good but it is not sufficient to dispel concerns about the Chinese strategy.
The basic policy of the initiative Xi revealed in 2013 aimed at setting in place a new framework for facilitating “regional economic integration” through the development of infrastructure “connectivity” among countries. It matters a great deal what kind of rules or frameworks are established.
There are two ways of creating such rules the unilateral or imperial approach and the multilateral approach.
In the case of multilateral negotiations, a group of countries discuss and agree to a set of rules with which all parties must comply. The Trans-Pacific Partnership trade agreement is a good example.
On the other hand, in the event of the imperial approach, a big power unilaterally formulates new rules for each specific policy area and tries to impose them on other countries. A typical example of this is China’s Law on the Territorial Sea and the Contiguous Zone of 1992. In the name of exercising its sovereignty over its territorial waters under the law, China has tried to force neighbouring countries to accept its territorial claims in the South China Sea.
Power talks in the world of international politics. In reality, international regimes are created in a way convenient to big powers, irrespective of whether the decision comes out of the unilateral or multilateral method. Nevertheless, there is a manifest difference between the two approaches. A multilateral agreement binds all parties to it. In contrast, under the imperial method, a big power can choose to alter any rule at any time when it finds the rule is no longer convenient.
Not only the Chinese leader but also U.S. President Donald Trump, who puts “America first,” may think that “hegemons” like themselves are entitled to create the rules at their own discretion. It is such an attitude that has emerged as the root cause of the problems concerning the Belt and Road Initiative.
Projects of, by, for China
I would like to refer to two of these problems.
First, to provide more accessible infrastructure projects to developing countries, Xi said in the April forum that China would “welcome the participation of multilateral and national financial institutions in BRI investment and financing.”
But there have been too many China-backed infrastructure development projects with Chinese companies as the winning bidders, employing Chinese engineers and workers and deploying Chinese machinery to construct ports and other facilities.
The Organisation for Economic Cooperation and Development strictly restricts tied aid financing. However, China is not bound by the organisation’s discipline, as it is not a member of the Development Assistance Committee, an arm of the OECD mandated to improve aid policies globally.
What kind of aid rules is China willing to follow? Does China intend to set its own rules and, whenever problems arise, enter into bilateral negotiations with each recipient country?
Second, China also uses economic cooperation as leverage to politically influence and pressure other countries.
Xi has often said China “will remain on a path of peaceful development,” yet it is also well known that the country remains resolved to “never forsake legitimate rights and interests or sacrifice core national interests,” such as national sovereignty, security, territorial integrity and developmental interests.
As far as the South China Sea territorial disputes are concerned, China says it will seek a peaceful solution to them through dialogue and negotiations. But, at the same time, it has not stopped pressuring neighbouring countries to come to terms with its territorial claims by utilising economic cooperation on the one hand and signalling its resolve to resort to the use of force on the other.
However, neighbours such as Vietnam and the Philippines, which have been at loggerheads with China in territorial disputes for many years, have not fallen silent.
Philippine President Rodrigo Duterte, who is said to be “conciliatory” to China, visited Beijing in April to attend the Belt and Road Forum. When he held a summit meeting with Xi, he called on China to respect the 2016 ruling in favour of Manila by the Permanent Court of Arbitration in The Hague over South China Sea territorial claims.
Xi is unlikely to change China’s stance on territorial disputes. But Beijing is wrong to operate according to the logic that, because China is the biggest country, small countries should just listen silently and accept financial rewards.
As long as China thinks and acts this way, the international community will not appreciate any China centred order in the region or world.