B. R. DeepakUpdated : September 23, 2018, 6:12 AM
File photo of leaders attending the Belt and Road Forum waving at the Yanqi Lake venue on the outskirts of Beijing, China on 15 May 2017. REUTERS
India and China need to work out modalities for strengthening and deepening cooperation.
The Belt and Road Initiative (BRI) completed five years on 7 September 2018. It was on this day that the concept was first proposed by Chinese President Xi Jinping during his speech at the Nazarbayev University, Kazakhstan. A month later, he proposed the 21st century Maritime Silk Road, which envisages the building of hard and soft infrastructure, from the Indo-Pacific to Africa, including transport, energy, water management, communication, earth monitoring, economic and social infrastructure, thus turning the concept into a “Belt and Road” formulation. In 2015, during the Bo’ao Forum for Asia in Sanya, Hainan, China rolled out an action plan that enunciated five major goals of the vision in terms of promoting policy coordination, facilitating connectivity, uninterrupted trade, financial integration and people-to-people exchanges.
China also announced the establishment of a Silk Road Fund with $40 billion, which was increased to $54.40 billion during the Belt and Road Forum for International Cooperation in May 2017, attended by 1,500 delegates from across the world. On the occasion, the Development Bank of China and the Export-Import Bank of China pledged to inject $124 billion in the BRI to support infrastructure, financing and industrial capacity. China also signed 76 mega projects, trade cooperation deals with 30 countries, and agreements related to unimpeded trade with 60 countries along the Belt and Road. The newly established Asia Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB), where China has major stakes were also pronounced as financial institutions supporting the initiative.
Various arguments are put forth by analysts as far as the historicity, geo-economics and geopolitics of the new Silk Road are concerned. Taking stock of the BRI in the last five years, Ning Jizhen, deputy director of the National Development and Reform Commission (NDRC) and director of the National Bureau of Statistics (NBS), revealed on 28 August 2018 that China’s total trade with the BRI countries as of June 2018 had reached $5 trillion. China invested $28.9 billion, and created 240,000 jobs in these countries. Ning Jizhen revealed that as of now, 103 countries and international organisations have signed 118 cooperation agreements with China on the BRI. The implementation rate of these projects, according to Ji, has reached 95%. The focus has been on the “six economic corridors”, of which China-Pakistan Economic Corridor (CPEC) is the flagship, where the work is supposedly progressing smoothly. The construction of the China-Laos Railway, the China-Thai Railway and the Hungary-Serbia Railway has been progressing steadily; construction work on some sections of the Jakarta-Bandung high-speed railway has been initiated, and the Gwadar port could be operated to its full capacity. Other rail projects such as Djibouti-Addis Ababa and Mombasa-Nairobi have been completed.
I have pronounced the BRI as China’s global rebalancing in terms of geo-economics, geo-civilisation, governance and geopolitics in my latest book, China’s Global Rebalancing and the New Silk Road (Springer 2018), albeit China doesn’t subscribe to the element of geopolitics in it. I have argued that the BRI is indispensable to globalisation and deepening of reforms in China; no wonder the concept has been embraced by many developing countries and China has become the largest trading partner of 25 countries along the route. China’s trade with BRI countries has grown at an average annual rate of 1.1%, even as world trade has registered a negative growth. The initiative is also aimed at civilisational rebalancing and enact the “Silk Road Spirit” of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefits. The BRI is synonymous with the circulatory movements of ideas, technology, commodities and people along the ancient Silk Road that enriched Asian and world civilisations. As regards the educational exchanges, Ning Jizhen said that in 2017, there were more than 300,000 international students from the BRI countries studying in China, while more than 60,000 Chinese students went to study in these countries. It is estimated that by 2020, the number of two-way tourists between China and the BRI countries will exceed 85 million. The BRI remains an antidote to anti-globalisation and protectionism and fundamental to the global industrial chain. The initiative must be seen in tandem with Xi Jinping’s advocacy of building a community of shared future for mankind and the Chinese dream, which are integral to China’s regional as well as global economic development.
Obviously, the Chinese initiative, including others such as “Made in China 2025”, has invited backlash from some countries, especially the United States. They have accused China of initiating “neocolonial” policies and establishing a “China centric” order. The issue of government debt in some countries has been hyped and Chinese loans to such countries have been portrayed as debt traps. If one believes in the data provided by Asian Development Bank, Asia will require an infrastructure investment of $1.7 trillion by the year 2030, which is roughly $800 billion per annum. If the West remains non-committal towards investing in the region, people will certainly welcome Chinese investment. For example, the US commitment of investing $113 million in the Indo-Pacific may be a case of too little too late. Nevertheless, some of the concerns are genuine. Some of the smaller participants of the BRI such as Mongolia, Pakistan, Laos, Sri Lanka, Kyrgyz Republic and Tajikistan are deep in debt. China committing $62 billion for CPEC may be difficult for Pakistan to service; the example of Sri Lanka forced to swap over $1 billion for Chinese equity, is an example often cited to highlight the “ills” of BRI. Though the Laos high speed railway may connect China to Thailand, but the cost is too high and Laos may never be able to return the money. Last year, citing “tough financing terms”, Pakistan cancelled the $14 billion Diamer-Bhasha Dam project; Nepal and Myanmar followed suit by scrapping two $2.5 billion and $3.6 billion hydroelectricity projects, respectively. In the same vein, Malaysia too cancelled the East Coast Rail Link and the Sabah natural gas pipeline projects in August, once the new regime under Mahathir Mohamad formed government.
These may be a few aberrations amongst the 21,284 projects the Chinese companies contracted in more than 60 countries between 2015 and 2018, projects that are worth $410.78 billion. China perhaps has come a long way to understand the political, economic, cultural, environmental and legal risks of the BRI projects. Unlike the initial phase of the BRI, projects are weighted for every risk and are subjected to asset-liability ratios and return on capital requirements. Moreover, some of the debt issues may have existed before Chinese investment, therefore, are not necessarily related to the BRI.
Notwithstanding these aberrations, the BRI remains indispensable to globalisation and will further improve the global supply, value and industrial chain by strengthening interconnectivity between countries and regions.
As regards India, though it didn’t participate in the BRI Forum for International Cooperation in 2017, however, India’s development interests remain intertwined with those of China’s. I believe if we answer the following questions, the cooperation on the BRI projects could be feasible.
One, do we agree that there is a huge disequilibrium in the world economic systems, and that neither India nor China can single handedly offset this imbalance? Together in tandem with other developing countries this could be possible. Two, do we agree that both are committed to globalisation and are opposed to protectionism? I believe both have immensely benefited from globalisation. Three, do we agree that there is a proliferation of connectivity initiatives taking place across the region and globe, and that both India and China are at the centre of these initiatives? Will it make sense if the bilateral or multilateral connectivity initiatives are docked together? Four, do we agree that the security boundary between India and China has been sprawling into various domains on land and oceans, therefore, there is a need to establish more dialogue mechanisms? Are not both cooperating on various multilateral forums, especially the Asia Infrastructure Investment Bank and the New Development Bank of the BRICS, which China has said would be the banks funding connectivity initiatives? If the answers to these questions are in the affirmative, I believe that both India and China need to work on a consultation mechanism as regards their connectivity initiatives and work out modalities for strengthening and deepening cooperation. The connectivity initiative of both India and China offers tremendous opportunities to have policy coordination in areas such as infrastructure, energy, transport, power, e-commerce, investment and trade. Needless to say, it would be possible if both think of aligning their development strategies while giving a full play to the “Silk Road Spirit”.
Undoubtedly, BRI is here to stay. It would be further integrated to new technologies such as e-commerce, big data, cloud computing and artificial intelligence to enhance efficiency and efficacy of the projects. Meanwhile, we will see China accelerating the construction of free trade pilot zones, cross-border and economic cooperation zones, etc., along the Belt and Road countries, thus promoting regional economic integration. Can India stay a mute spectator to China’s global rebalancing?