China’s ‘Belt and Road Initiative’: after five years, is the bloom off the rose?

A strategic environment much changed since Xi Jinping unveiled the massive infrastructure plan in 2013 has the country’s top leaders wondering how far this grand enterprise can go

PUBLISHED : Sunday, 07 October, 2018, 8:32pm
UPDATED : Monday, 08 October, 2018, 4:41pm

China credits President Xi Jinping’s massive infrastructure plan, the “Belt and Road Initiative”, with sparking a surge in the construction of railways, roads, bridges and ports across more than 65 countries and regions.

Five years after its launch, however, a litany of risks and criticism and a changing strategic environment have the country’s top leaders wondering just how far this grand and ambitious enterprise can go.

A new sense of urgency was palpable when Xi asked belt and road officials for their reports on the risks facing various projects, a source with knowledge of the gathering early this year told the South China Morning Post.

Is this just the beginning of ‘belt and road’ disputes between China and its partners?

When officials attempted to impress Xi with descriptions of the progress being made on his pet programme, the president interrupted them, insisting they level with him about the risks and difficulties increasingly dogging it, the source said.

When first unveiled in September and October 2013 during the president’s visits to Kazakhstan and Indonesia, the strategy – initially known as the “One Belt, One Road” initiative – was promoted as “a bid to enhance regional connectivity and embrace a brighter future”.

China watchers wary of Beijing, however, termed the proposal a push by the government to seize a larger role in global affairs via a China-centred trading network.

Is China’s belt and road colonialism? Mahathir: not at all

Encompassing 65 countries with a combined gross domestic product of US$23 trillion and total population of 4.4 billion, the belt and road strategy was introduced as a way to advance China’s political interests abroad while reducing its overcapacity problems at home.

Focused on infrastructure, it was to be a model not only for developing countries, but also industrialised nations in Europe and North America that needed to replace ageing facilities and systems.

Major projects include a US$5 billion China-Belarus industrial estate, a US$3.1 billion bridge and railway project in Bangladesh and a US$5.8 billion China-Laos railway.

Other China-funded work in the initiative includes building a US$10 billion refinery in Saudi Arabia; a new city next to the Port of Colombo, the largest and busiest port in Sri Lanka with a total investment of US$13 billion over the next 25 years; and a freight route linking China’s eastern coast with London.

China’s new world order ‘unrealistic’ if built on belt and road alone

But Beijing has many barriers to overcome at home and abroad before it can realise its belt and road ambitions.

At home, doubt has been voiced publicly about whether the belt and road can tangibly improve China’s domestic welfare system. Outside the country, the initiative has been portrayed as Beijing’s attempt to lay a debt trap for smaller nations to increase their reliance on China.

“When the Belt and Road Initiative was launched five years ago, it mainly targeted the Eurasia region,” said Wang Yiwei, an international affairs professor at Renmin University in Beijing. “There was no expectation that it would expand to wider regions that also cover Africa.”

As the initiative grows in scope, Chinese companies and even some local Chinese governments have increasingly branded their projects as part of the belt and road strategy. This trend has sometimes hurt the stature of the overall endeavour.

Why foreign students along belt and road are joining China’s colleges

“The reputation of the initiative is damaged as some people and organisations are trying to export bad assets outside China, and said they are doing it for the initiative,” Wang said.

In its effort to advance a development strategy focused on connectivity and cooperation, China also now faces competition from the United States and the European Union, both of which have been pursuing their own plans to counter China’s expanding influence.

In late July, the US expanded its infrastructure drive in the Asia-Pacific region with new investment programmes that doubled the global spending cap for a proposed merged agency, the US International Development Finance Corporation, to US$60 billion.

The European Union also put forward its own connectivity programme with Asia last month. The EU programme emphasises sustainability and transparency – two features that the belt and road strategy has been accused of lacking.

Critics have warned that poor countries could be mired in huge debt by failing to resist the lure of Chinese money.

EU’s bold move to rival the ‘Chinese empire’ in Asia

“It is obvious for all concerned that sustainable borrowing ratios have far exceeded the norm,” said Abourahman Boreh, a former head of the Djibouti Ports and Free Zones Authority.

“My view is that a diversified portfolio of foreign investors, as well as the continued development and sharing of benefit for the local population, is the only sustainable pathway for developing countries such as Djibouti.”

Sri Lanka borrowed heavily from China to build the seaport of Hambantota, which is still struggling to attract ships. In December, Sri Lankan president Maithripala Sirisena handed over control of the port and 15,000 acres around it to Beijing on a 99-year lease.

Developing countries along the belt and road are often vulnerable because of uncertainties in their legal, political and commercial systems. Problems are likely after any transition of power.

Why Europe and the US cannot ignore China’s belt and road

Malaysian Prime Minister Mahathir Mohamad, for example, cancelled two China-financed mega projects in late August: the US$20 billion East Coast Rail Link and two gas pipeline projects worth US$2.3 billion. Mahathir said his country could not afford those projects and they were not needed.

The recent change in leadership in Pakistan could also see a potential pullback on agreements for the China-Pakistan Economic Corridor, a flagship, multibillion-dollar belt and road project.

But China will not give up the initiative. In a speech that opened the Forum on China-Africa Cooperation in Beijing in September, Xi said China would offer US$60 billion in financial support for Africa, and would cancel unpaid debts for some poor African nations.

Earlier this year, in a seminar to mark the initiative’s anniversary, Xi said China was not seeking a geopolitical and military alliance through the belt and road. He also said Beijing needed to fine-tune the initiative to focus on high-quality projects that would benefit local people.

Belt and road is the only engine for future world economic growth

Analysts said China would adjust the initiatives, with its foreign and commerce ministries offering policy guidance and the National Development and Reform Commission focusing on risk assessment.

Authorities have already been boosting risk assessment and creating a set of data against which to evaluate the projects’ effectiveness. In 2016, a group of Peking University academics began to publish a “Five Connectivity Index” to evaluate China’s overseas investment under the initiative. The effort was sponsored by the National Social Science Fund.

Feng Zhongping, vice-president of the China Institutes of Contemporary International Relations and one of co-creators of the index, said it could offer “a scientific way to better understand progress in the connectivity process”.

The frequency of mutual visits to each other’s countries by leaders of China and belt and road nations, as well as political stability, the legal system, trade figures, currency swaps and tourist numbers are taken into consideration to measure the effectiveness of belt and road investment.

Is China’s belt and road proving to be bumpier than expected?

For example, Russia, Singapore and Malaysia, as well as United Arab Emirates and central Asia’s Kazakhstan are listed as destinations that are best connected to the belt and road. Meanwhile, war-torn Yemen in the Middle East and Bhutan were ranked at the bottom, owing to weak policy communications.

Zhixing Zhang, senior East Asia analyst with Stratfor, a US-based intelligence group, said China had to learn to surmount various obstacles to advance its overseas practices via the belt and road.

“The suspicions and strategic competitions as a result [of it] are also part of the strategic realities Beijing will inevitably face,” he said. “How well Beijing works to adjust its approach and to adapt to the changing strategic environment will ultimately shape the initiative in the future.”

China’s belt and road can’t meet Asia’s infrastructure needs alone

Huong Le Thu, a senior analyst from the Australian Strategic Policy Institute in Canberra, said Beijing needed to address such issues to avoid further damaging China’s reputation as it pursued projects related to the initiative.

“If Beijing doesn’t revise its model of the debt-driven project, it risks the ‘Sri Lanka effect’ – that is, the Hambantota port will become the belt and road’s negative poster child,” Le Thu said.