(Part One)
Thewesternbalkans
A Slow Death?
In response to the question of where the Belt and Road Initiative is headed, China experts from various countries make two main assumptions:
- Deprioritization or slow death of the Belt and Road Initiative, originally called in China One Belt, One Road.
- Displacement of the BRI by China’s new Global Development Initiative (GDI). The GDI was proposed by Xi Jinping in 2021 to achieve all 17 Sustainable Development Goals: eradicating poverty and hunger, providing universal access to clean energy, reducing inequality, reducing pollution, etc. This initiative and the BRI are known as China’s “Twin Engine.”
Both assumptions are wrong:
On the first point – of course, there is a reorientation in terms of the amount of investment, sectoral focus, or type of projects. But the BRI brand cannot but remain a priority, as it is formally included in the Constitution of the Communist Party of China and is associated with the legacy of Xi Jinping.
On the second point, the GDI and the BRI are different pillars in the building of the “community of shared future for mankind”. There is a coincidence in some project areas. But these are different brands, whose approaches, financing and implementation are different.
In 11 years, 150 countries and over 30 international organizations have signed a document on cooperation on the BRI. After the first phase of the BRI, which was marked by huge and rapid investments in poor Asian and African countries, ended, the Chinese leadership is considering a new strategy.
The challenges
The need to refocus on a narrower strip of strategic goals of the BRI was caused by the following circumstances:
– A number of countries have assessed that the BRI is first and foremost a “debt pit” for the participating countries and a smokescreen for China’s global economic dominance, and only then a strategy for development and connectivity. According to them, the goal is to expand China’s influence in foreign countries and regions through debt dependence, leading to long-term leases of property to the Chinese. The financial stability of some of the countries with the highest debt under the BRI, including Djibouti, Sri Lanka, Mongolia, Laos and Kyrgyzstan, has been undermined by the difficult terms of servicing loans. This has given rise to latent opposition among a number of countries to the BRI.
– China has been forced to make adjustments to the BRI strategic initiative and to review a number of projects in different countries, after some (Malaysia) decided to freeze major BRI projects for financial reasons, while others (Pakistan and a group of African countries) have asked Beijing for consultations to review major projects and the terms of the BRI. A number of governments are attempting to renegotiate existing agreements or are reluctant to enter into new agreements with China. The core motivation for most countries is that Chinese aid should be for industrialization and poverty alleviation rather than infrastructure development, as well as China’s insistence on state guarantees for projects and Beijing’s preference for providing loans rather than investments.
– The increasingly negative perception of the BRI among participating countries has been caused by the transformation of the BRI from an idea focused on connectivity and infrastructure development into a global strategy for expanding Chinese influence. The SCO and Eurasian Economic Union member countries support the BRI, but due to the large differences in economic potential with China, they tacitly refrain from closer cooperation with China.
– Strong external pressure (USA, India, etc.) is also contributing to the rethinking and modification of the BRI. China underestimated the resistance to the initiative from the US, India, the EU, Japan and some of the recipient countries. India was the most consistent in rejecting the initiative from the outset, while the US and EU initially welcomed it but then showed reservations, especially Washington.
– Washington is concerned that in the longer term, China could use the BRI to gain influence or control over strategically important infrastructure corridors in sensitive areas of the world. It is not excluded that China will use its investments in European ports and terminals to form support bases that will be used in the security sphere, to protect Chinese overseas interests, including for military purposes. The fears are that China will try to apply to Europe the experience of Sri Lanka (the port of Hambantota) and other Asian and African countries. China is copying the experience of the USSR (using merchant ships to eavesdrop on NATO communications) and Russia (Venezuela). The trajectory is being followed of transforming economic interests into political influence, and political influence into military presence.
– Beijing has failed to attract a major European country as Italy, as a leading partner in the relations with the EU under the BRI initiative. Some European countries have focused on developing specific projects with the Chinese side, seeking selective economic benefits from the BRI.
– BRI projects are not attractive to private investors and 95% of investments are from large Chinese state-owned enterprises. One third of BRI projects in South and East Asia and BRI ports on the Indian Ocean coast have no financial results, but are prioritized for geopolitical reasons and due to China’s security needs.
– In some countries, participation in the BRI is becoming a topic of political and electoral struggle (Indonesia, the Philippines), and among the local population in a number of countries there is concern that these investments may lead to adverse consequences if they are not subject to strict control and regulation. In other countries (Pakistan), opposition to the BRI was accompanied by violent actions. Thus, instead of stabilizing the situation in the border areas of China, the BRI is drawing China into regional conflicts.
– The political goals of the BRI are not being achieved. Some of the countries that have fallen into debt crises related to BRI projects are seeking solutions with the help of the IMF and are falling under Western influence, which is undesirable for China.
– Domestic criticism has also emerged in China, especially among intellectuals, for wasting funds abroad on the background of unresolved domestic problems, especially the issue of poverty. The excessive inflating of the number of projects has led to the dilution of the initiative and the weakening of the Chinese government’s control capabilities.
– Domestic Chinese problems. China itself is facing problems with non-performing domestic loans, which increases the threat to the country’s banking system. In China, domestic debt has been steadily growing, financial difficulties have increased, and foreign exchange reserves have begun to decline. In general, BRI financing has sharply decreased after 2017. Large Chinese commercial banks have almost stopped granting loans under the BRI, and political banks have severely limited it.
(End of Part One)
