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The road (and belt) travelled so far


BRI is the culmination of the fusing of the twin concepts of “strategic state” and “strategic trade,” which draws inspiration from several millennia worth of recorded history

A general view of China-Kazakhstan Logistic Base in Jiangsu Province on September 17, 2021 <strong>AFP</strong>

A general view of China-Kazakhstan Logistic Base in Jiangsu Province on September 17, 2021 AFP

By Parvez Karim Abbasi

January 9, 2022 10:31 AM

The conventional narrative purporting to explain the rationale behind the Belt and Road Initiative (BRI) emphasizes China’s need to ensure sustained economic growth and prosperity for its nearly 1.5 billion citizens by exporting its surplus capital, industrial capacity and technology abroad to invest in an ambitious, overarching, interlocking framework of trade, investment, physical infrastructure, seamless connectivity, financial architecture, integrated production supply chain, and common technological platform.

The magnitude of the undertaking reflects China’s ambition to create a new world order, parallel if not mutually exclusive to the extant Western one.

BRI is the culmination of the fusing of the twin concepts of “strategic state” and “strategic trade,” which draws inspiration from several millennia worth of recorded history.

The Chinese call BRI  “Yi Dai Yi Lu” (One Belt, One Road) in Mandarin, and it is inspired by the historical Silk Road which connected travellers, traders, preachers, merchandise, ideas, and new discoveries across the known world.

The ancient concept of Tianxia (All Under Heaven) guides the Chinese desire to be the central node or omphalos of the 21st century world order by constructing a virtual Great Wall, which would secure and consolidate an expanding Sinosphere from actual or perceived aggression.

Xi Jinping has invested his entire political capital in championing BRI to consolidate his grip on the rank and file of the century old ruling Chinese Communist Party and to ensure that the populace are inspired and united by the dream of projecting China’s power and prestige abroad.

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The greater the opposition and hostility from the West, the higher is the possibility of the Chinese closing ranks behind the CCP leadership in the face of an existential challenge.

The road to ensuring prosperity for ordinary Chinese citizens such as the cutting edge Made in China 2025 and Chinese companies pushing Fintech through the Digital Silk Road and Digital Currency Electronic Payment system -- have all been fused into BRI.

The future viability of BRI will determine whether the Chinese move for global domination will succeed or not.

Hung jury

BRI has emerged as a highly polarizing strategy. Proponents of the strategy claim it to be a veritable game changer, which empowers resource-strapped small states to address their infrastructural and technological backwardness, without overt sermonizing and haranguing on human rights and political freedom.

Opponents point to hidden clauses, project overruns, environmental degradation, and debt diplomacy.

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Research and analysis on ongoing BRI projects around the world has yet to yield a definitive answer. However, certain patterns have emerged, which can indicate its possible future trajectory.

Debt dynamics

China outspends the US by two to one in terms of annual international financial commitments. Debt rather than aid is the preferred Chinese approach in the international financial market. Ever since the roll out of BRI, China has maintained a 31:1 ratio of loans to grants.

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On average, a typical Chinese loan has 4.2% interest rate with a grace period of around two years and a maturity period of ten years.

State-owned commercial banks such as Bank of China, Industrial and Commercial Bank of China and China Construction Bank play an increasingly important role in financing BRI projects.

Before the commencement of BRI, lending was directed to sovereign borrowers. Post BRI, lending has diversified to state owned companies and banks and private sector institutions.

Distinction between public and private debt gets blurred as most of these loans enjoy host government liability protection. As these loans are not directly provided by Beijing, Chinese debts are often under-reported.

As per available research findings, around $385 billion debt, owing to the Chinese is under-reported.

Then there are questions of hidden clauses and asset seizure by the Chinese under the aegis of BRI. Collateralization of loans as a form of insurance against future export risks to reduce fiduciary and repayment risks is a time-tested financial practice.

Chinese state-owned creditors increasingly rely on a high risk, high reward strategy while providing loans. Countries increasingly look to the Chinese as lender of last resort.

However, often lack of foresight and accountability, incompetence, and corruption in the host country leads to various problems like mothballing of projects, delay in completion, and instances of egregious corruption, retrenchment, or cancellation. 

As per the widely reported findings of AidData, 35% of BRI infrastructure projects faced serious implementation problems like corruption, labour disputes, environmental hazard, and public protests in host countries.

BRI projects on average take much longer than Chinese government financed projects (1,077 versus 771 days).

Between 2013-2021, projects worth $11.58 in Malaysia, $1.5 billion in Kazakhstan, and $1 billion in Bolivia have been cancelled, suspended, or renegotiated.

The Chinese, in their own interest, should better ensure that projects in host countries adhere to internationally acceptable best practices of transparency, accountability, with minimal corruption. This would go a long way to dispelling allegations of debt diplomacy and predatory lending.

Security issues

Security is increasingly becoming a growing concern for the Chinese as they spread their trade and investment around the world.

For instance, 1 million Chinese expats and 10,000 companies operate in Africa. 84% of Chinese investment is carried out in medium- to high-risk countries. Three hundred and fifty serious security incidents against Chinese firms and nationals were reported during 2015-2017. 

It is no wonder that since 2015, Chinese companies have roughly spent $10 billion annually on security firms for protecting their business interests and personnel abroad.

Twenty Chinese private security companies employing over 3,200 staff have been licensed to operate overseas. Most come from People’s Liberation Army background -- military, police, or intelligence, who often lack a nuanced understanding of local cultural and political sensitivity.

These security firms either are entirely or majority state-owned. Thus, we witness rising quasi-military deployment from China across different countries (e.g. DRC, Kazakhstan, Kyrgyzstan, Ethiopia, Somalia), to protect its commercial and strategic interests.

What lies ahead?

With increasing competition from the West including the Build Back Better World (B3W) from US and the Global Gateway initiative of EU and the weaponization of human rights as exemplified by the Global Magnitsky Act, BRI has entered a critical juncture.

Whether the vast, multi-faceted initiative will evolve, or stall will depend on a host of known and unknown factors.

While BRI has given cash-strapped and technologically hamstrung nations a viable alternative, one should remember that it is not a panacea for all economic woes.

The extent to which member states will benefit from BRI depends on careful planning, monitoring and evaluation, good governance and consensus of major stakeholders in the host countries.

But one thing is for certain: BRI, for better or worse, is here to stay for a while.

Parvez Karim Abbasi is Assistant Professor at the Department of Economics of East West University, Dhaka, Bangladesh. He can be reached at parvez_abbasi@yahoo.com.


https://www.dhakatribune.com/long-form/2022/01/09/the-road-and-belt-travelled-so-far


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