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China’s Belt and Road Partners Aren’t Fools

Chinese finance is attractive for good, practical reasons.

BY JACOB MARDELL | MAY 1, 2019, 3:40 PM

Workers take down a Belt and Road Forum panel outside the venue of the forum in Beijing on April 27, 2019. GREG BAKER/AFP/GOOGLE IMAGES

Bojan is three months unemployed, and his wife earns just 120 euros a month—not nearly enough to feed a family of four. He blames Serbia’s increasingly authoritarian president, Aleksandar Vucic, for his troubles. He also blames the European Union, which he says is Vucic’s ultimate master. He describes Brussels as a vaguely imperialist entity that demands too much of Serbia while delivering little. “And China?” I ask. “China is good. China is here to help,” he says.

That story is surprisingly common among Serbians, who largely view China as a reliable business partner and the country’s billion-dollar Belt and Road Initiative (BRI) as a wonderful economic opportunity. English-language coverage of Belt and Road largely targets the flaws of the initiative—principally that it lacks transparency, promotes poor standards, and deals in “debt trap diplomacy.” The critical tone contrasts dramatically with the mood on the ground in many countries touched by the BRI. Critics of Belt and Road tend to see the initiative as a conscious exercise in power projection. They are not necessarily wrong, but this focus on Beijing overlooks the agency of local decision-makers and fails to comprehend their attitude toward Chinese funding.

Local conditions drive the BRI on the ground. As disingenuous as Beijing’s “win-win” rhetoric may sound to skeptical ears, Belt and Road projects do often service the real needs of host countries at the same time as they satisfy the commercial interests of Chinese companies. It is easy to emphasize Beijing’s strategic intent while forgetting the fact that partner countries say yes to, and in most cases propose, the projects that constitute the BRI. The initiative is of course an entirely China-centric initiative, but the countries involved are not passive and unwitting recipients of Chinese designs. Beijing is often the convenient lender of last resort for projects that governments are determined to finance.

Belt and Road’s big picture is tied to Chinese ambitions, both domestic and global. But it also consists of thousands of projects in scores of different countries, and there is inevitably a great degree of variance among them. Looking at the common characteristics of successful projects provides guidance, and identifying the conditions for failure means the ability to make better, more targeted criticisms of the initiative as a whole.

The Sino-Serbian “friendship bridge” in Belgrade captures what can be good about the BRI. Built by the China Road and Bridge Corp. and financed with a Chinese loan, it was delivered on time, at a reasonable price, and serves a clear economic purpose, slashing commuters’ travel time across the Danube from more than an hour to just 10 minutes.

A failed cartonboard factory in Dobrush, Belarus, shows Chinese development finance and management in a poorer light. According to Olga Kulai, a Minsk-based analyst with experience working for Chinese companies, the Dobrush project failed due to a lack of local oversight. The Chinese contractor lacked experience, and because the project was tied to a Chinese loan and privileged by Presidential Decree, a number of the usual legal obligations were waived. As a result, development fell short of Belarusian construction standards, and the contract had to be terminated. Many Central and Eastern European projects have suffered from similar problems, but others have been at least partial successes, and locals are often willing to bear the costs.

In Bosnia and Herzegovina, the Export-Import Bank of China has promised the state electricity provider a $687 million loan to finance a lignite coal-fired power plant that the EU is none too happy about. In Montenegro, China is building and financing a very expensive highway that has also ruffled feathers and welcomed accusations of irresponsible financial management. But Bosnians are adamant that the coal plant, Tuzla 7, is absolutely necessary.

When I questioned Anto Domazet, an economics professor at the University of Sarajevo, about the environmental implications of Tuzla, he told me defensively that Germany had modernized all its plants a decade ago. According to Domazet, canceling the project “was not an acceptable option” for a developing country so rich in dirty lignite coal. With many financial institutions restricting or having banned coal finance, China was the only viable option. Similarly, the Montenegrins went cap in hand to the EU for finance to build their Bar-Belgrade highway. They got some money but not enough for the mountainous, technically challenging route, which is seen as a vital connection to Serbia.

The recent Belt and Road summit in Beijing saw the Chinese authorities putting a strong emphasis on managing the socio-economic impact of BRI projects—but it’s the pragmatic, profit-driven side of Chinese investment that often made the schemes attractive in the first place. In Western Europe and America, this self-interested development model is often seen as a negative characteristic of the BRI, but in many poorer countries, pragmatism is preferred to Western paternalism.

This is true on the African continent, but it is also a prevalent attitude within Europe—especially in Balkan countries that actually see Chinese crony capitalism as a palatable alternative to EU strings-attached finance. Sarajevo’s finance minister and former ambassador to China, Amel Kovacevic, said China is “trying to trade, not to convert or sell their ideology.” Kovacevic acknowledges that “China won’t question whether you actually need a road built,” but he admires that business minded mentality, asking, “How can you blame someone for working in their own interest?”

In Serbia and in Bosnia, almost everyone I’ve spoken to—both officials and members of the general public—view the BRI in a positive light. While some officials can seem naive in their wholesale adoption of Chinese propaganda, many are savvy operators who simply see China as an easy touch for no-questions-asked credit. As one official put it, the relationship with China is “not a marriage, it’s a one night stand.”

Naturally, this no-questions-asked development model leaves ample space for corruption—this is both part of the BRI’s intrinsic appeal and a serious problem. But this is not the whole story. Chinese finance is also attractive because it provides a hassle-free option for governments that wish to implement national projects of their own choosing. There is an emotional dimension to this offering, especially when contrasted with Western finance, which is perceived to dictate terms and prescribe rigid, pre-approved models of development. As a local (and pro-EU journalist) in Sarajevo told me, “Brussels has spent 20 years telling us what to do, and we have nothing to show for it.”

China, on the other hand, is a relatively unknown quantity. It arrives baggage-free and promises engagement on terms of mutual respect. When Brussels or Washington frets over Balkan countries becoming victims of Chinese influence and chides them for irresponsible practices, it only serves to reinforce this deep-rooted perception of paternalism.

Jacob Mardell is a freelance writer currently traveling through Belt and Road countries.


https://foreignpolicy.com/2019/05/01/china-belt-road-partners-serbia-belarus-debt/

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