An Absentee United States Makes Way for China’s Belt and Road Initiative
China’s Belt and Road Initiative (BRI), perhaps the most ambitious infrastructure and investment project to date, is well underway with an estimated USD$900 billion worth of projects already planned or underway across Asia, Europe and Africa. This initiative is the brainchild of Chinese President Xi Jinping who aims to establish a modern day Silk Road stretching over both land (the Silk Road Economic Belt) and sea (the 21st Century Maritimeii Silk Road) with the aim of better integrating China to its trade partners and enhancing regional connectivity.
Since its announcement in 2013, the initiative has been met with both scepticism and enthusiasm. The initiative has grown to include over 70 countries that account for a quarter of the world’s GDP, iii but exactly what the long-term plan for China is and how much it plans to invest in the project has been shrouded in mystery. Estimates range from 1 Trillion to 8 trillion USD, with some pundits saying that the project is a ploy to establish a series of Eurasian vassal states dependent on Chinese capital and infrastructure. The transfer of the strategic Hambantota port to China on a 99-year lease by a debt-laden Sri Lanka in 2017 is a notable example of this and what critics call, ‘debt-trap diplomacy’ – where vulnerable countries are provided with loans and investment with the underlying intention of extracting economic/political concessions.
Despite this and criticism of China using the BRI as a geopolitical tool to establish influence in developing countries throughout Asia and Africa, the BRI has many positive aspects in terms of helping to fund and build much-needed roads, railways, ports and power stations in areas that are otherwise unable to meet their infrastructure needs. For developing countries such as Pakistan, Kyrgyzstan and Ethiopia, accepting Chinese loans and investment is much more attractive than accepting loans from institutions such as the IMF which often come with strings attached concerning issues such as human rights and democracy v.
Despite its advantages, the BRI is still a work-in-progress. Although it has launched an unprecedented wave of investment across Asia and Africa, concerns have grown within countries over the amount of debt they are taking on for investment to go ahead. Malaysia for example, has cancelled three pipeline projects as well as suspended the East Coast Rail Linkvi, citing concerns over the country’s fiscal health and allegations of fiscal mismanagement. Another example that confirms this newfound cautiousness towards the BRI is Imran Khan’s Pakistani Government cutting Chinese investment in its flagship China-Pakistan Economic Corridor (CPEC) by USD $2 billion, citing concerns over the huge debt Pakistan has taken on.
Such concerns regarding transparency in BRI projects have provided an opportunity for the United States to counter Chinese investment through multilateral partnerships between its allies in Asia as well as the newly passed BUILD Actvii. The trilateral partnership between Australia, Japan, and the US announced in July 2018, coupled with the creation of the US International Development Finance Corporation (IDFC) as a result of the BUILD Act, is a clear signal of intent to minimise China’s strategic influence and provide countries with alternative sources of financing. It’s the hope of the US that these initiatives will prioritise quality investment and transparency and is very much about aiming to attract private sector investment in developing countries to counter Chinese public investment and what some critics might perceive as predatory lending.
Japan also plays a pivotal role in tempering Chinese influence. In addition to partnering with the US and Australia, Japan has also embraced the BRI hoping to pragmatically engage with China and ensure good governance in future projects, thus reducing the likelihood of failed projects.
Despite its drawbacks, the BRI and China’s growing engagement with Asia and Africa is ultimately a net benefit, particularly for countries who lack developed infrastructure. This benefit will also come from greater competition in infrastructure investment from the US and other countries who are understandably nervous about China’s growing strategic and geopolitical influence, which should only serve to benefit development in countries that have long been neglected. However, the United States must ensure its commitment to its initiatives in Asia and Africa which currently seems unclear given its ‘America-first’ approach characterised by its withdrawal from the TPP and tariffs levied on its trade partners. In a time where US economic influence globally is in decline, China has emerged as a serious contender in challenging the USA’s hegemony and its traditional status as the champion of free trade.