Written by Anoushka Patel
Edited by Queenie Lin and Annika Lilja
China has just hosted a high-level summit celebrating the 10th year anniversary of its foreign policy: the Belt and Road Initiative (BRI). Officials and 23 world leaders from all over the globe were invited to Beijing, with Russian President Vladimir Putin and Hungarian Prime Minister Viktor Orban being two of the high-profile attendees.
A signature policy of President Xi Jinping, the BRI is aimed at connecting China closer to its neighbours and trading partners through investment in infrastructure projects and technology, crafting an alternative world order to counter the USA’s waning global influence. With approximately $1 trillion invested into 165 countries, China boasts that it has transformed the development of the world. At the summit, Mushahid Hussain Sayed, chair of Pakistan’s senate defence committee lauded the project for being “economic centric and development oriented,” drawing parallels between China’s BRI and the relative drawback of the US when it comes to investment in regions such as Africa and the Middle East.
The Belt and Road Initiative was first revealed as the “Silk Road Economic Belt” — ”Belt” referring to overland routes— during an official visit to Kazakhstan in 2013. Most of the estimated $1 trillion has been invested into energy and transport projects, such as power plants and railways.
However, the initiative came with its criticisms, and many projects were abandoned, such as the projects in Malaysia worth $11.5 billion being cancelled between 2013 and 2021. Other notable issues include participating countries accumulating unsustainable debt, such as in the case of Sri Lanka and Pakistan. Moreover, the BRI’s reputation has been marred by allegations that it enables corruption in countries that are already ranked high on the global corruption perception index. Such was the case in Kyrgyzstan, where former Prime Minister Sapar Isakov was handed a 15 year prison term on corruption charges relating to his lobbying that helped Chinese contractor Tebian Electric Apparatus (TBEA) secure a $400 million deal to modernise a power plant in the capital Bishkek. However, the plant broke down during the winter of 2018, leaving citizens without heating as temperatures reached minus 30 degrees celsius - the coldest winter the country had seen for a decade.
For China, the BRI has won valuable overseas business for its large state-owned enterprises and strengthened diplomatic ties with the countries in the global south. Those links have in turn increased China’s influence within other international organisations such as the UN and allowed it to advance Xi’s political vision for the world, in which China is taking the lead. Recipient countries such as Pakistan find themselves able to finance projects from power plants to high-speed data networks, and the establishment of the China-Pakistan Economic Corridor has connected Khunjerab in western China to the Gwadar Port in Pakistan’s Balochistan province. But some critics have described China as engaging in "debt trap diplomacy," luring low- and middle-income countries to sign up for expensive projects so that Beijing could eventually seize control of strategic assets.
China has now become the world’s biggest international creditor due to its long-term financing with low interest rates on loans that nations have struggled to receive elsewhere. However, taking out such enormous loans has left countries like Sri Lanka, Djibouti and Pakistan unable to repay their mounting debt. This was the US’s accusation over the controversial Hambantota Port in Sri Lanka, which has now been handed over to China for ninety-nine years. However, there is little evidence to support this idea, and it is worthwhile noting that China accounted for only 10% of Sri Lanka’s $55 billion overall foreign debt. It should also be noted that there was no “debt for asset” swap, meaning there has been no debt written off in exchange for equity. This raises questions as to the validity of claims that China uses “debt trap diplomacy” to ensnare the BRI’s participating countries.
Despite its various controversies, it cannot be denied that China has met one of its biggest goals of the BRI – expanding its influence across the globe. The initiative has around 165 participating countries across Asia, Latin America, Africa and Europe, and China has used its ‘soft power’ to engage with countries in forming closer geopolitical ties. This includes paying for thousands of Chinese university scholarships, cultural exchange programs and Confucius Institutes. China is also aware that amid its own record youth unemployment and real estate crisis, it needs to dial back its foreign investment, including the BRI. In June of 2023, China’s unemployment rate for 16-24 year olds in urban areas hit a high of more than 20% before the government suspended youth employment data. Coupled with China’s relatively slow economic growth post-pandemic and giant property developer Evergrande failing to repay its $235 billion debt, there is currently little domestic appetite for more foreign investment while China grapples with its own problems.
Instead, China has promised to focus on what it describes as “small and beautiful” low investment, high yield projects, such as the 40-megawatt Gulshat solar farm in Kazakhstan and the 281 MWh Merredin solar project in Australia. While China has shown signs of drawing back on large scale projects, the EU and the US are playing catch-up with their own initiatives, including the Build Back Better World, which was launched in 2021. Whether this will be enough to draw countries away from China’s enticing investment project is yet to be seen.
Sources:
Wheeler Andre. “China’s Belt and Road Initiative: Hambantota Port an Example of China’s Debt Diplomacy?” Silk Road Debriefing, 16th January 2020, https://www.silkroadbriefing.com/news/2020/01/16/chinas-belt-road-initiative-hambantota-port-example-chinas-debt-diplomacy/
Stanway David. “China’s Belt and Road plans losing momentum as opposition, debt mount study.” Reuters, 29th September 2021, https://www.reuters.com/world/china/chinas-belt-road-plans-losing-momentum-opposition-debt-mount-study-2021-09-29/
Dr. Christop Nedopil. “China Belt and Road Initiative (BRI) Investment Report HI 2022.” Green Finance & Development Center, FISF Fudan University, July 2022, https://greenfdc.org/wp-content/uploads/2022/07/GFDC-2022_China-Belt-and-Road-Initiative-BRI-Investment-Report-H1-2022.pdf
Cash Joe. “Leaders gather in China for a smaller, greener Belt and Road Summit.” Reuters, 16th October 2023, https://www.reuters.com/world/china/leaders-gather-china-smaller-greener-belt-road-summit-2023-10-16/
Fazl-E-Haider Syed. “China’s big gamble in Pakistan: A 10 year scorecard for CPEC.” Lowy Institute, 1st August 2023, https://www.lowyinstitute.org/the-interpreter/china-s-big-gamble-pakistan-10-year-scorecard-cpec