Why countries might want
out of China’s Belt and Road
China has never spared any effort
to portray its “Belt and Road Initiative,” a grand trillion-dollar-plus
global investment plan, as a positive vision for the world. Last year,
China released cringeworthy videos
featuring children who were, somewhat unrealistically, excited by the idea
of infrastructure investment.
“The future’s coming now,” a group
of children sang in one clip. “The Belt and Road is how.”
But not everyone is convinced that
Belt and Road is such a great plan — either for China or the countries in
which it’s investing. And with Malaysia announcing
Tuesday that it has shelved two major infrastructure projects being built
by Chinese companies because of high costs, many more leaders around the
world may be wondering whether Chinese investment is actually a good deal.
It may be simpler to start with a
more basic question: What is the Belt and Road? Given the vague way
that Beijing has described the program, it’s surprisingly hard to find an
answer. Many have found it easier to think of the initiative in
terms of its scale and ambition: Beijing has called it the “project of the century,”
while others have compared it to the Marshall Plan, Washington’s stimulus
package for a war-ravaged Europe (though the Belt and Road is many
times bigger).
Workers stand on a container as cranes
operate at the One Galle Face project developed by China Harbour
Engineering Co. in Colombo, Sri Lanka. (Atul Loke/Bloomberg News)
It’s actually not a single thing,
but rather a catchall term for investments in more than 60 countries around
the world. The purported aim of that network is to better connect China
with its trading partners. In practice, it usually involves getting foreign
countries to take out large loans from China to build vast infrastructure
projects, which are then typically built by Chinese companies.
All of that is quite obviously in
China’s interests. In the short term, it’s able to use some of its excess
industrial capacity abroad as its own economy slows. In the longer term, it
could help internationalize Chinese companies and give Beijing a critical
role in how global trade operates.
There’s also a powerful political
motive: A Pentagon report released last week said
that China was trying to “develop strong economic ties with other
countries, shape their interests to align with China’s, and deter
confrontation or criticism of China’s approach to sensitive issues.”
Even so, many foreign partners were
eager to sign up for the Belt and Road — largely because the loans tend to
come with far fewer restrictions than those from Western countries.
But Malaysia’s decision shows how
the plan can come apart. For one thing, Belt
and Road projects have sometimes made no economic sense. In Sri Lanka,
China poured money into an airport designed to handle 1 million passengers
a year. Now it has been dubbed the world’s emptiest international airport.
“Business is so slow that the airport has made more money from renting out
the unused cargo terminals for rice storage than from flight-related
activities,” wrote Bangkok-based writer
Brook Larmer.
Another Belt and Road project in
Sri Lanka, a deepwater port, is now in the hands of a state-owned Chinese
company on a 99-year lease after
it failed to attract enough business to make its loan payments. This could
swell into a bigger problem: A study released by the Center for Global
Development in March suggested that Djibouti,
Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and
Tajikistan would also struggle to repay Chinese Belt and Road loans.
To critics, this is a feature of
China’s plan, not a bug. China, they say, is planning to bully smaller
countries with “debt diplomacy” — and some even go further, suggesting that
perhaps the plan is for China’s military to make use of all these belts and
roads one day in the future. (It should be noted, however, that debt-fueled
projects that make no commercial sense can be carried out within China, as well).
What’s certainly clear is that the
ambiguity of the Belt and Road is a major concern for its current and
prospective participants. Beijing doesn’t release a central list of
projects or the funding they’ve been given, and key parts of the process —
such as bidding on contracts — are generally kept opaque. In Malaysia,
where the deals were cut under former prime minister Najib Razak, officials
now say they were made to bail out a Chinese state investment fund plagued
by graft. Razak left office in May and was arrested in July on corruption-related charges.
The Belt and Road still has its
admirers. Experts
have pointed toward some projects, such as an oil pipeline in
Myanmar and rail networks in Kenya, that seem to be worthy capital
investments. And countries will certainly come knocking on Beijing’s door
as long as there’s easy money to be had. Turkey, in the
middle of an economic downturn and a dispute with Washington, may be next.
But Malaysia’s high-profile
decision to back out of projects shows how quickly the tide can turn
against China’s vision. Indeed, to many, Beijing’s dream of a new future is
starting to look uncomfortably like nightmares of the past. “We do not want
a situation where there is a new version of colonialism happening because
poor countries are unable to compete with rich countries,” Malaysian Prime
Minister Mahathir Mohamad said at a Monday news conference in Beijing.
The discontent may come from within
China, too. A string of defaults on Belt and Road loans could cause Beijing
fiscal problems, and risky loans to foreign countries are now a tougher
sell for President Xi Jinping as the domestic economy faces its own issues.
If a serious downturn hits while China is showering cash on projects
abroad, Bloomberg’s Shuli Ren
warns: “You can expect a revolt."
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