China' Belt and Road Initiative turns 10 and "has brought significant benefits."
Debt trap accusations need a rethink.
China has signed BRI cooperation documents with more than 150 countries and over 30 international organizations. It has established more than 3,000 cooperation projects and galvanized nearly 1 trillion U.S. dollars of investment, creating an array of national landmarks, livelihood projects, and milestones of cooperation. According to the World Bank, by 2030, BRI transport infrastructure, if fully implemented, is expected to increase global real income by 0.7 percent to 2.9 percent, lifting 7.6 million people from extreme poverty and 32 million people from moderate poverty. (Text source: Xinhua. Picture source: BBC Merics, 2020.)
The BRI at ten “has brought significant benefits” and will keep pushing the West's buttons.
China’s trillion US dollar Belt and Road Initiative (BRI) is now 10 years old and comprises 150 nations, 75% of the world's population, and half its GDP. Beijing just hosted “The Belt and Road Forum,” which brought it into a glaring global spotlight.
Sometimes called “China's Marshal Plan," the BRI is an ambitious global infrastructure platform to expand connectivity, economic integration, growth, and cooperation across the globe. The BRI also comprises many sub-initiatives, one of the most famous being “The Digital Silk Road,” a program to enhance digital connectivity.
This review by Boston University’s “GDP Center,” hardly a spokesperson for China’s CPC, takes an objective look and likes what it sees:
“BRI has delivered significant benefits to the countries that China has engaged with, but has also accentuated real risks for China and host countries alike.”
👉TAKEAWAYS:
✅ Benefits:
New, additional resources for the Global South raise living standards for many;
Significant economic growth as a result of infrastructure and investment;
Co-creation of a new model of South-South cooperation and developing country agency for development.
⚠️ Risks:
Accentuated debt distress;
Increased carbon dioxide emissions and air pollution;
Risks to biodiversity and Indigenous lands.
🔎 Key Policy Recommendations for China:
Shift its focus from a high volume to a high-impact level of economic engagement overseas.
Adapt its current approach to enable new forms of economic cooperation and opportunities for South-South cooperation, such as establishing a new project pipeline facility to match its unique business model.
Apply new policy frameworks to help prevent and mitigate risk for China and global partners alike.
Data from the Green Finance & Development Center shows that BRI investment in the first half of 2023 has centered largely on countries in East Asia and South America (43.9 percent). When it comes to construction projects, partly financed by Chinese loans, these have focused chiefly on Sub-Saharan Africa and the Arab Middle East and North Africa (combined 69.9 percent). Source: Statista
👊STRAIGHT TALK👊
China’s BRI is a lightning rod for both criticism and praise, often depending on whether the author or pundit lives in the developed or developing world.
What cannot be debated is that the BRI has fundamentally changed the developing world and China’s global relations. This was recognized far too late by the US and the West, who ignored China's BRI for most of the past decade.
The best example of China’s expanding global reach was displayed during the recent BRICS meeting, in which China played a major role in the expansion of six nations, most noteworthy among them Saudi Arabia and the UAE.
China’s new economic reality may force it to focus on smaller and more targeted projects, but its focus on development based on infrastructure, industry, and digital is unlikely to change. Most developing nations need all three.
The challenge to US foreign policy is clear, and former US Secretary of the Treasury Lawrence Summers’ tweet sums it up best:
“There are just a large number of countries that are not aligned with us or that are only weakly aligned with us.
“I heard a comment from somebody in a developing country who said, “Look, I like your values better than I like China’s. But the truth is, when we’re engaged with the Chinese, we get an airport. And when we’re engaged with you guys, we get a lecture.”
Debt trap?
The US counters BRI with accusations of “Debt Trap Diplomacy,” which the paper addresses as it does China’s US$250 bn in debt workouts in the wake of the pandemic. It seems that rather than worrying about a debt trap, it is China that is bearing the burden of significant repayment risk.
China has been bailing out are restructuring debt for BRI borrowers hard hit by the pandemic and US interest rate rises. We have not seen China writing off the loans to zero so far. Source: FT.com
As to the “Debt Trap,” I don’t view developing nations taking on BRI debt as being naïve or dumb. What is undeniably true is that China was willing to work with many nations that the West would not. Western aid comes with a long list of prerequisites that many nations cannot or will not provide.
Were these developing nations trapped? Here again, much depends on your point of view. Given the staggering economic blows to developing nations from the pandemic and US interest rate increases, many BRI nations have trapped China in a neverending cycle of debt workouts. They now have the infrastructure and likely won't pay for it.
President Xi’s eight steps to take the BRI into the future include:
1. Build a multidimensional belt and road connectivity network
2. Support an open world economy
3. Carry out practical cooperation to support high-quality Belt and Road construction
4. Promote green development
5. Advance scientific and technological innovation
6. Support people-to-people exchanges
7. Promote integrity-based Belt and Road cooperation
8. Strengthen institutional building for international Belt and Road cooperation
The US should find it amusing that China is trapped! Still, pre-existing high levels of debt from ongoing or failed IMF loans are often overlooked when analyzing China's debt trap. In most developing nations, when it comes to debt, “this isn’t their first rodeo.” The supposition that they are dumb or gullible is patronizing.
In the end, many developing nations welcomed China’s BRI and have gained from their relationship. Many had nowhere else to go, and if China is the only one offering to build crucial infrastructure, then China gets to build the future.
Supplemental reading:
On the “Debt Trap” or lack thereof: The Chinese ‘Debt Trap’ Is a Myth
The Economist: China’s Belt and Road Initiative will keep testing the West
Chatham House: Debunking the Myth of ‘Debt-trap Diplomacy
Foreign Policy: The Belt and Road Ahead
Asia Times: The plan to keep Belt and Road growing and revving
Official BRI White Paper, the first of its kind produced for the BRI conference: download below
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
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