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An Interview with Jonathan Hillman

On June 28, 2018By Jacob MardellIn Belt and RoadFeaturedInterview

Jonathan Hillman on the challenges facing the Belt and Road – we talk Asia’s needs, BRI’s branding, and how other actors should respond to Beijing’s advances on the Eurasian supercontinent. 

 

 

Jonathan Hillman is a fellow with the CSIS Simon Chair in Political Economy, and, crucially for us, the director of the Reconnecting Asia Project. If you’re reading this blog, you’ve probably already come across the great work of ReconAsia. If not, then I highly recommend heading over to their interactive database and bookmarking it post-haste.

CSIS’s Reconnecting Asia project has been mapping infrastructure projects on the Eurasian supercontinent for several years now. They’re not limited in scope to China’s efforts, but the Belt and Road, as the most ambitious Eurasian infrastructure initiative, clearly features prominently in their work. In fact, Jon is one of the world’s go-to experts on the Belt and Road Initiative, and he’s given some great testimony before the U.S.-China Economic and Security Review Commission on the initiative.

It was therefore a privilege to get to pick his brains on the topic, and I’m delighted to share the fruits of that conversation here:

 

Jacob Mardell: So I’ll start with a simple, but difficult question that I quite enjoy asking people – What is the Belt and Road?

Jonathan Hillman:  To me the Belt and Road is a few things. For a start it’s Xi Jinping’s signature foreign policy vision.

And that’s really a vision for putting China at the centre of everything. Through hard infrastructure – roads, rails, etc. – soft infrastructure, trade deals, people-to-people connections. What all these things have in common is connectivity. China really wants to connect – to become more central in all those dimensions.

But the Belt and Road is also really a brand. And because there’s really no strict criteria for what’s in and what’s out, there are plenty of interest groups that have been repackaging what they do as Belt and Road related. Even the official definition of the Belt and Road has been expanding. Since it was unveiled in 2013, they’ve added an Arctic dimension, they’ve added cyberspace, the digital silk road – even outer space, so this thing is just defying gravity.

I think it’s a great question, and as you can tell I don’t have a succinct answer. The Belt and Road is intentionally vague and expansive, and as analysts, I think we have to resist the urge to impose order where, by design, it doesn’t exist.

JM: It’s the hardest thing to define. But at Reconnecting Asia you don’t attempt to label things as Belt and Road in your database do you? I mean, you’re not tracking just Chinese investments, you’re tracking pretty much everything.

JH: Yeah, we’re trying to track any major infrastructure develop across the supercontinent of Eurasia.

That’s a geographic framing that we adopted because our project was inspired by Dr. Zbigniew Brzezinski, a former National Security Adviser and scholar who did a lot of thinking about that region and very persuasively made the case that Eurasia has been the proving ground for great powers throughout history.

So for now at least, we’re going deeper in that area, putting aside North America and Africa, South America, although obviously BRI does aspire to go to all those places too.

JM: But how does the Belt and Road measure up to other initiatives in the database? I’ve got a quote from you here – “China is often the biggest spender, but is not the only consequential actor”. I think that’s an important point to make because I feel we often pay… almost too much attention to the Belt and Road.

JH: I think that’s right. It’s an enormous thing to cover and I can empathize with people who decide to only track Belt and Road projects, but doing that in a vacuum means you don’t really have anything to compare it to.

And these initiatives are going to either succeed or fail based on their ability to either compete with, or to co-opt and work with other efforts.

Just in terms of sheer activity, people are often surprised to learn that, in our data, Japan is outspending China in several Southeast Asian countries, and that makes sense: Japan is the incumbent and has been building infrastructure in that region for longer and at a larger scale than China has, until recently. Of course, since that change Japan has doubled-down on its efforts.

So that’s one region in which you see this competition occurring. There’s also an increasing amount of tension in Central and Eastern Europe – between China and incumbent spenders. The countries that belong to the EU do have access to funding that makes Chinese activities look very limited… But the countries that don’t – they’re in play.

JM: So I’m one of those people who only tracks the Belt and Road. And sometimes I get worried that it’s just the fact I’m in a kind of Belt and Road bubble – but I feel that the Belt and Road is remarkably more successful than other initiatives, at least when it comes to perceptions. I often use the example of the EU massively outspending China in Hungary, yet no-one even having heard about TEN-T

So, do you agree that the Belt and Road has been successful in this regard, and do these perceptions matter?

JH:   I think that they’ve been successful in the fact that, as a brand, BRI taps into the number one priority for a lot of countries, that is, development. And so that’s been very effective – to have this orientated as something that will help countries develop.

BRI also gets more attention simply because it’s China, at least in the Western press…

The only polling I’ve seen about perceptions of Belt and Road was a poll cited in Chinese state media, so I’m not really sure what to make of it, but among countries with the highest level of public awareness of BRI, I think India was at the top with something like 40%.

And that doesn’t mean they’re all positive impressions, right? I do think that what was initially an attractive, positive vision, is now generating a little backlash too – you can see that playing out in domestic politics in countries like Malaysia.

JM: Yeah, I was going to mention your article, published in May I think, on the clouds gathering around BRI, the mood souring on the initiative… I wanted to ask – is this a long term trend, or is this a cyclical thing? You know, is this going to change for good, or is it the same old politicising of China issues for a domestic audience…

JH: I think it is a fundamental challenge China faces with this initiative because they’ve been successfully in raising expectations and getting countries to say that they’re interested in participating, and now they’re faced with having to deliver heaven to earth.

They’ve made a lot of promises and the reality of these projects are very difficult to deliver, even in the best business environments – but they’re going places most investors wouldn’t dare go. And maybe they figured this all out and will reap the rewards of having risked all that, but I would expect that there will be more trouble ahead.

JM: So what do you think are the prospects that Beijing will be able to adapt? It strikes me sometimes, that a lot of what is creating political backlash against the BRI is just pure clumsiness and naivety. So I guess my question is, will Chinese companies be able to overcome this backlash, this changing mood, by learning and adapting?

JH: I mean I hope that they’ll learn. I think that the region has a huge need for infrastructure.

I’m a supporter of quality infrastructure – it needs to be done the right way. And yeah, I hope that some of these early missteps are learning experiences. In the grand scheme of things it needs to.

Thinking about what developing Asia needs – you know, there are different estimates out there – Asian Development Bank puts it at 26 trillion dollars between 2016 and 2030, and BRI, even in its largest and most exaggerated forms, won’t come close to meeting that. So that still leaves this need for involvement from other countries.

I think you’re right to think about this, not as a one off, but a series of interactions, and a back and forth. And all of these actors have an opportunity to learn and adjust their strategies.

JM: I read this article in Foreign Affairs, Fukuyama was one of the co-writers I think, and one of the main points was that Western multilateral development banks (MDBs) at some point became too risk averse and cautious in their lending and that Chinese policy banks are sort of… stepping up to the plate where Western institutions have failed.

So, you’re talking about this huge gap, and you said you’re a supporter of quality infrastructure, but given there is this huge gap, shouldn’t these MDBs be aiming to become a little bit more like Chinese policy banks? Should they move towards prioritizing development? Is there any room to move that way?

JH: That’s a terrific essay, and two of the authors, Bushra Bataineh and Mike Bennon with the Stanford Global Projects Center, did a conference with us last December, and they do great work on, basically comparing Western and Chinese approaches to infrastructure. And through those cases you do see that traditionally MDBs will still be conducting risk assessments while the Chinese counterpart will be off to the races. They’re much more willing to get something going, and deal with risks as they surface, rather the MDB approach of medicating them up front.

But I also think there is a reason why the MDBs do these risk assessments – it’s not because people like doing more paperwork. It’s history and the experience and the costs of not doing that. Still, there’s definitely room for them to improve. And my hope is that – both organisations and individuals can improve through competition. Because, again going back to that financing gap – China can’t do it alone. And I also do think there are things China could learn from the MDBs.

JM: So China doesn’t have the money to plug this massive gap obviously, but does it even have the resources to continue the Belt and Road along its current course?

JH: Yeah, I think it’s telling that estimates of the Belt and Road range pretty dramatically. Even ones that are quoted in reputable media sources. You know, at one point the most common number was 1 trillion. At some point that became 4 trillion and then, at some point – 8 trillion. I have a theory about how that happened, but none of these numbers are tied to what China is spending currently, or is able to spend.

So yes, they can play an important role, especially in smaller countries where these loans are already having a big impact. I think you can already see that – it doesn’t take all that much in macro terms to have an impact on some of these developing economies.

But China’s problem is that this is all state driven, and the real fire power resides within the private sector, and maybe with sovereign wealth funds. So far, they have not done a great job of mobilising private sector investment.

JM: And then, I guess the argument there is that they need to become more transparent, etc.

JH: Yeah and the challenge is, they’re also going to these very risky places, where you have to promise investors a reward that’s commensurate with that risk.

JM: What’s your take on “debt trap diplomacy”? And is it the result of State Owned Enterprises (SOEs) strong arming policy banks into lending for dodgy projects, or is there, like, strategic intent on the part of Beijing?

JH: I mean, intent is always going to be very difficult to prove. But, China is not the first country to use loans in this way. There are historical examples. So I do think, these loans have -putting aside intent – strategic implications.

And at the same time, I think that there is room for a little more research into the dynamics of that… Because there is a tendency to assume that if China is pursuing a project that doesn’t appear to make economic sense, then it must therefore have some hidden strategic rationale, when in fact, there are also interest groups that just like to build things.

And the politics of infrastructure is a huge driver – on both sides, on the Chinese side and within these partner countries. I worry sometimes that our assumption is to rush to assume that if something is not economic, it must be strategic, and that if a project fails, then China wins. That might be true in some cases… but I also think that overlooks the costs that China bears – there’s a little nuance that’s missing there.

JM: A somewhat related question – and I’ve only just been thinking about this, so sorry if it isn’t well thought out… Critics of the Belt and Road very much take the line that, if China rolls out the BRI according to, you know, international standards, then they’re fine with it. That it’s not BRI per se that’s the problem, but the implementation. But do you think that this is the case? Or is it that Western European governments, etc., actually just have a problem with the who, with China?

JH: I think… you’d have to imagine a world in which all of those various conditions, those qualifications that you hear, are being met. And it’s difficult for me… I mean, we’re not there yet.

You are right that, if for some reason China got there, theoretically the goal posts could be moved again. But we’re not there yet. It’s tough for me to imagine, just because I do agree with many of those caveats. In my personal opinion, it shouldn’t be about who is doing something, but rather the quality of their work, and the process that they go through.

JM: So, sector-wise on the Belt and Road. Power plants, railroads, digital, people-to-people, what do you think is the most important part of the package, or at least the most interesting from your perspective?

JH: In our database, we have just done transport projects so far, and we’re going to add power plants in September – not too far away. So the transportation and the energy sector – in terms of the data I’ve seen – is the largest. But if your question is what’s the most interesting…

We are also going to eventually add ICT and telecommunications infrastructure and I think that’s interesting because it raises questions about standards setting – we’ve mentioned standard setting already, but telecommunications really get at things like privacy and freedom of speech. And China is certainly at one end of the spectrum, in the way that they view that technology domestically, so there are broad and important implications for ICT.

And I don’t want to overlook the fact that the Belt and Road does involve these people to people connections, but I think it is fair to say that infrastructure is the major, if not the leading dimension of it right now.

JM: My last question is about the Free and Open Indo-Pacific.

Now, in your congressional testimonyyou say that we need to ‘operationalize’ these concepts – so I just wanted to ask what you thought the prospects for the Free and Open Indo-Pacific were? Especially under Trump.

JH: Sure, so I know that there have been productive conversations with US partners and allies in that geographic region. Obviously – Australia, Japan, India, New Zealand too. And there’s interest in cooperating, in trying to expand the availability of alternative forms of finance for developing countries.

I think that’s really important – because otherwise all we’re doing is criticizing something without offering an alternative, and essentially all you’re doing is asking leaders – who have their own constituencies to take care of – to just decline projects. And that’s not a realistic political proposition.

The challenge with that is, that a free and open Indo-Pacific isn’t going to be free – in terms of cost. And this is a domestic political challenge for the US, because we struggle to cobble together 200 billion to spend on infrastructure at home, and naturally, some people will ask, “well, why should we be increasing our infrastructure spending abroad when we haven’t even done that adequately at home yet?” But I don’t think it should be an either or proposition.

The other challenge with the free and open Indo-Pacific framing, is that – I do think it concentrates on a very vital area, but it misses out Central Asia and Eastern Europe, which – if you are thinking about the Belt and Road – is basically China’s bridgehead into Europe. And so I think we need to come up with some sort of policy for dealing with that.

And then finally, as you alluded to, it’s difficult to promote a free and open anywhere if you’re not, through your behaviour, advancing policies that are consistent with that – so trade policy is the huge outlier here. Trade policy should be part of the solution, part of promoting a free and open Indo-Pacific, but… we’re not offering a positive economic vision on trade yet.

JM: So you’re not overly optimistic then?

JH: You know, I think that the interest among other countries is there… I think… there just really aren’t a lot of policy details underneath the bumper sticker of the Free and Open Indo-Pacific. That doesn’t mean they can’t be worked out. But it’s going to take a financial commitment, and it’s going to take a trade policy that’s consistent with what we’re trying to promote.

JM: I’ve got a name for it at least – just stealing the Japanese term – the Free and Open Quality Infrastructure Partnership for the Indo-Pacific.

JH: Right. Yeah, I think Japan is obviously… They’ve been a step ahead, if you look at global reactions to this. They’ve got a competing partnership programme, they’ve got this broader construct, and they’ve been taking on more leadership in advancing the TPP minus the US. So I think all of that is closer to what we’re trying to promote.

JM: So maybe Japan can be the optimistic note to end on, thank you!


http://thechinaroad.co.uk/2018/06/28/an-interview-with-jonathan-hillman/

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