Cristian Carrillo - Teen Aspect - July 15th, 2022
While presently outside of mainstream conversation, China’s Belt and Road Initiative remains a matter of immense global geopolitical importance. Launched in 2013 by Chinese President Xi Jinping, the BRI, sometimes also referred to as China’s One Belt One Road, is an infrastructural development plan aimed at boosting international cooperation between member countries and China. Even aside from its goals, the initiative’s sheer scale in and of itself ought to make the plan a more frequent topic to address for political commentators, given the 146 member nations who have already signed the Memorandum of Understanding signifying membership (Green Finance & Development Center, 2022).
Regardless, the Belt and Road Initiative has inspired onlookers to coin the term “debt-trap diplomacy” in reference to China’s approach with the plan. To examine the inner workings of the BRI, China’s four state-owned banks lend to other state-owned companies to carry out these projects. The issue arises from the fact that 89 percent of these projects are given to state-owned Chinese companies, while only 7.6 percent are given to local companies (Center for Strategic & International Studies, 2018), essentially neglecting private-sector development in recipient countries. Instead of emboldening local businesses to jumpstart and then continue local infrastructure development, the initiative mainly funnels the funding back to Chinese firms, leading many critics to note that the so-called development program may be only self-serving on a Chinese front. These claims are only strengthened by some questionable financing methods for these projects. Take, for instance, Sri Lanka, who ended up surrendering their Hambantota Port and 15,000 acres of land around it to China on a 99-year lease to finance the $8 billion debt incurred from BRI projects.
In fact, the amount of “hidden debt” to China because of these infrastructure projects has grown to $385 billion (Denton, 2021), only made more concerning by the realization that this is debt outstanding from lower and middle-income countries. If this is the case, it begs the question: why so have many countries decided to join the initiative? In truth, the return on investment has convinced many policymakers across the world that joining is worth the debt. Kyrgyzstan stands as a shining example of what these projects may offer countries, as every $1 in additional foreign direct investment from the BRI so far has generated some $0.05-$0.10 in annual export flows and $0.90 in import flows (Mogilevskii, 2019), sustainably growing the country’s economy proportionally to every dollar that is received. With this pace, every dollar invested into Kyrgyzstan through the BRI is set to generate around 10 times its value in economic activity over a decade, a clear and unmistakably strong return. On top of just economic activity, membership in the Belt and Road intrinsically fosters a stronger economic connection between member countries and China, which still remains a top global exporter. For many member countries, the opportunity to substantially develop infrastructure and increase economic activity, all while adding a trading partner who can reliably supply cheap goods is too valuable to pass up, regardless of the debt that encompasses the arrangement.
Evidently, the initiative itself stands to be mutually beneficial to both member country and donor, yet it is for this very reason that the Belt and Road raises concerns among onlookers. The expansion of a country like China, a nation with frankly no regards for human rights, may spark more countries to move closer to China ideologically on top of just economically. For that very reason, other countries have banded together in an attempt to counteract China’s growing influence with their own infrastructural development plan to rival the BRI, most notably with a recent G7 meeting pledging to jumpstart a $600 billion Partnership for Global Infrastructure and Investment. With this major move, only time will tell if this new attempt can counter the established giant that is the Belt and Road, but at the very least, this new plan stands as an ideological counter to China more than just a geopolitical one, and it is that very difference that ought to set the plan up for success; a BRI stripped of the fears of debt-trap diplomacy and Chinese expansion stands poised to uplift countries and citizens globally for years to come.
Wijeratne, D., Rathbone, M., & Wong, G. (2018, January 22). Belt and Road Initiative Graphic [Digital Image]. Strategy+Business. https://www.strategy-business.com/feature/A-Strategists-Guide-to-Chinas-Belt-and-Road-Initiative
Green Finance & Development Center. (2022). “About the Belt and Road Initiative (BRI).” Green Finance & Development Center. https://greenfdc.org/belt-and-road-initiative-about/
Center for International & Strategic Studies. (2018, January 25). “China’s Belt and Road Initiative: Five years later.” Center for International & Strategic Studies. https://www.csis.org/analysis/chinas-belt-and-road-initiative-five-years-later-0
Denton, J. (2021, September 29). “There is $385 billion in ‘Hidden Debt’ from China’s Belt and Road Initiative, study finds.” Barron’s. https://www.barrons.com/articles/chinas-belt-and-road-initiative-hidden-debt-51632922403
Mogilevskii, R. (2019). Kyrgyzstan and the Belt and Road Initiative (pp. 11-20, Working paper No. 50). Bishkek, Kyrgyz Republic: University of Central Asia Institute of Public Policy and Administration. https://www.uca.int/Content/Downloads/UCA-IPPA-WP50_Kyrgyzstan%20and%20Belt%20Road%20Initiative_ENG.pdf