Who picks up the trillion-dollar tab for China’s Belt and Road?
Beijing’s grand infrastructure project will require US$5 trillion in the next five years alone. If it succeeds, everyone wins. If it fails, guess who loses...
China’s leaders never lack for ambition. Yet perhaps most ambitious of all is President Xi Jinping ( 習近平 ). His “Belt and Road Initiative” is arguably the biggest and most ambitious development plan the communist nation – and perhaps the world – has ever conceived. It exceeds even the Marshall Plan the United States used to rebuild Europe after the second world war.
In general terms, the initiative aims to facilitate and speed the economic growth of China’s less-developed western region, thus serving China’s interests as a whole.
But it is also a plan with global vision. It involves 65 countries across the three continents of Asia, Europe and Africa and covers 60 per cent of the global population and about one third of global economic output.
It comprises an infrastructure network of ports, bridges, canals, roads and rails, built and operated with Chinese participation, that will link the Middle Kingdom with the larger part of Eurasia and Northern Africa. The large-scale nature of the plan should help stimulate global economic growth amid a persistent slowdown. But the ultimate objective is political, as part of Xi’s “China dream” to revive his country’s status in history.
There is, of course, a great deficit in infrastructure and connectivity in the region the initiative is aimed at.
Puffing across the ‘One Belt, One Road’ rail route to nowhere
China’s experience in infrastructure development can provide an excellent example to the developing world, as many of the Belt and Road countries – such as Mongolia, Laos, Cambodia, Kyrgyzstan, Pakistan, Tajikistan, Bangladesh, Nepal, Myanmar, and India – are among the bottom-ranked countries when it comes to infrastructure.
The real concern is this: where will the money come from? The initiative is expected to require at least US$5 trillion in the next five years alone. In Asia, the initiative will need US$2.5 trillion over the next decade.
WATCH: China’s Belt and Road Initiative
Currently available funds from China-backed international institutions – US$40 billion in China’s Silk Road infrastructure fund; US$100 billion in the Beijing-based Asian Infrastructure Investment Bank (AIIB); and US$50 billion in the Shanghai-based New Development Bank (NDB) – represent just a fraction of what is needed. Even the World Bank, which focuses on infrastructure development in developing regions, lends only about US$40 billion to US$50 billion annually.
Western lenders, international investors and even Chinese private enterprises are unlikely to dance to Beijing’s political tune – they make investment decisions by assessing risk and return. That means China’s state-owned enterprises will have to play a key role. Thus, if fully implemented, the plan will suck the funds from the Chinese economy.
Opinion: Can China ever exorcise its phantom growth numbers?
The geopolitical risks are myriad, as the plan covers some of the world’s most politically unstable regions, from Southeast Asia to Central Asia, the Middle East and Africa, where ethnic, religious, political and military conflicts are frequent and tense.
Asia’s balance of power remains fragile given the heightened tensions between China and the US, as well as escalating rivalry among the regional powers of China, Japan, Russia and India.
The initiative may also complicate China’s territorial disputes with many of its neighbours, especially in the strategically important South and East China Seas.
Politically and diplomatically, China’s huge investment in the Belt and Road projects has the potential to be worth every penny by increasing Beijing’s regional and global influence. But it also has the potential to cost the country dearly economically if such massive investment projects are not run well.
If the whole project succeeds, every participant wins. But if it fails, it will be China – more specifically its tax payers – that bears the lion share of losses. ■
Cary Huang, a senior writer with the South China Morning Post, has been a China affairs columnist since the 1990s
