Xi risks losing control of Beijing's sprawling strategic investment drive
Jonathan HillmanSeptember 14, 2018 07:00 JST
Sri Lanka has handed over control of Hambantota port to China to clear debt -- raising fears about sovereignty. (Photo by Marwaan Macan-Markar)
Five years ago, President Xi Jinping unveiled the Belt and Road Initiative, a vast investment scheme cloaked in the rhetoric of cooperation that was designed to pave the way for China's transition to great power status.
Instead, it has become a roller coaster that Beijing itself is struggling to control.
The BRI's highs came early and have been mainly diplomatic and symbolic. Large and often unrealistic numbers touted for Chinese investment under the BRI have attracted more than 80 countries to the effort. Several countries have announced their intentions to link their development strategies with the BRI. Conflating demand for investment with approval of the BRI, Chinese officials have even claimed it is a new and improved form of globalization.
The BRI's lows are more recent and deep, touching issues of security and sovereignty. Concerns are rising about unsustainable debt, unstated strategic motives, corruption, bias toward Chinese companies, and negative environmental and social impacts. Among western officials, many agnostics have become skeptics, and many skeptics have become critics. These complaints are growing even in BRI partner countries, with Malaysian Prime Minister Mahathir Mohamad raising the specter of "a new version of colonialism."
Unless these concerns are addressed, the BRI brand will become toxic.
It is difficult to tell how seriously Chinese officials take these reactions. On the one hand, Chinese officials have started to acknowledge that the BRI is facing challenges. "We need to constantly improve our working methods," one senior official said last week. On the other hand, China's eagerness to expand the BRI has been its own worst enemy. When Sri Lanka's Hambantota port was handed over to Chinese companies, for example, China's official news agency, Xinhua, tweeted, "Another milestone along path of #BeltandRoad."
An even more fundamental question is how much control Chinese officials actually have over the BRI. Our research suggests they may be losing their grip. According to Chinese officials, the BRI includes six economic corridors that will carry goods, people and data across the Eurasian supercontinent. As Xi said at the BRI Forum in 2017, "The goal of building six major economic corridors under the Belt and Road Initiative has been set, and we should endeavor to meet it." But our research shows Chinese investment is just as likely to go outside five of the six corridors as within them.
The China-Pakistan Economic Corridor, or CPEC, is the exception that proves the rule. CPEC has been viewed as the BRI's flagship corridor, and our data suggest it is the only corridor with significantly higher numbers of projects than non-corridor areas. But CPEC is also the only corridor that connects China with a single country. For example, the China-Central Asia-West Asia Corridor requires Chinese officials to coordinate with seven countries. Each country has its own customs processes, convoluted land rights and other challenges to navigate. In these respects, CPEC is less challenging to coordinate.
The lack of activity within China's other five corridors suggests interest groups within and outside China are skewing Xi's signature foreign policy vision. Within China, interest groups at the regional, local, and company level are incentivized to repackage their existing work as supporting the BRI and pursue new activities under the same banner. Every province and region is jockeying for the economic and political spoils that come with advancing an initiative now enshrined in the Communist Party constitution.
Evidence of mission creep is everywhere. The BRI brand has been extended to fashion shows, art exhibits, marathons, and domestic flights. Chinese medical researchers are pushing for the inclusion of oral health promotion into the BRI. Russian state media trumpets "transnational" marriages between Russian and Chinese partners as advancing the BRI. It is telling that some of the BRI's most enthusiastic supporters have little do with its core functions.
Private companies have been eager to wave the BRI flag as well. Last year, a U.S.-based boutique exchange-traded fund issuer was purchased by a Chinese company and then unveiled an ETF with the stock-ticker symbol OBOR. Citigroup, HSBC, J.P. Morgan, Standard Chartered and others have publicly unveiled BRI strategy teams. Most major consulting companies have rolled out reports, positioning themselves as guides for navigating the BRI.
The need for guidance is understandable. The BRI that was launched five years ago is not the same at the BRI that exists today. In the past five years, policy statements have stretched the BRI to the Arctic, cyberspace and outer space. The reaction of most people upon learning about the BRI is amazement at its general scale, followed quickly by confusion about its specifics. The BRI promises it will be everything for everyone. But the further it expands, the less it means.
To put the BRI on a more stable path, Beijing should introduce criteria for what projects qualify. Xi has said the BRI will not become a "Chinese Club," a Sino-centric political grouping. Accordingly, China should stop pressuring countries to join and focus on raising the bar for individual projects. A shift in focus from country membership to project performance would help persuade skeptics that the BRI is serious about promoting global development rather than China's geopolitical agenda.
For their part, skeptics, including U.S. officials, should consider options for selective engagement. China's development banks have signaled they want to improve the quality of Chinese-backed projects by partnering with foreign lenders. Washington should take them up on that, through participation in the World Bank, the Asian Development Bank and European Bank for Reconstruction and Development. Moving from opposition to selective engagement could allow skeptics to help redefine the initiative on their own terms.
Japan is moving in the right direction with cautious engagement. Despite being among the earliest skeptics of the BRI, it has announced plans to support cooperation among Japanese and Chinese companies working in third countries. These arrangements provide a window into China's approach, and even more importantly, a seat at the table.
The BRI's first five years demonstrate that engagement brings influence. Chinese officials might control the dial on BRI rhetoric. But on the ground, the BRI has been defined less by those who announced it than by those who have appropriated it. Beijing's control problem presents an opportunity for its partners and competitors.
Jonathan Hillman is director of the Reconnecting Asia Project at the Center for Strategic and International Studies in Washington, D.C. Find him on Twitter @HillmanJE.