Introduction
The Belt and Road Initiative (BRI) is an ambitious development strategy developed by the people of China in 2013 and is the cornerstone of President Jinping’s foreign policy. BRI used the Silk Road concept, launched several decades ago in the Han dynasty, as an inspiration to develop a network of trade routes. According to Lai et al., 2020, BRI is recognized to be the most ambitious global economic vision in recent history. BRI comprises massive transport networks using roads, railways, airports, and transnational electric grids. BRI seeks to connect Asia with Africa, Europe, the Middle East, and many other regions through land and maritime massive infrastructure projects. BRI consists of a trans-continental passage route that connects China with Asia, Russia, and Europe via land and a recent maritime Silk Road that links China with the South Pacific and Eastern Africa (Carmody, 2020). The main aim of this ambitious project is to improve regional integration and improve trade to facilitate economic growth. Lai et al., 2020 state that BRI is a strategy China uses to expand worldwide clout and a part of China’s vision to re-establish the country’s past greatness. BRI has five significant priorities: policy coordination, financial integration, connecting people, infrastructure connectivity, and unimpeded trade. As of March 2020, the number of countries that joined this project was 138.
The Belt and Road Initiative has increasingly been associated with large investments in infrastructure sectors such as roads, railways, and telecommunication networks. According to Brautigam, 2019, the Belt and Road Initiative highlights approximately four trillion U.S. dollars in infrastructure investments in over 60 countries with a total population of over 4 billion and a global GDP of 40%. However, recently BRI development investments, especially in developing countries, have raised serious issues of concern about debt sustainability. China is outspending major powers such as the U.S., which is becoming an alarming issue as many nations plunge into massive debts. With an annual expenditure on international development ranging at 80 billion, people are actively speculating whether BRI is a trap rather than aid to establishing her economic dominance in the international market. This paper aims to provide a comprehensive argument that China’s Belt and Road Initiative is not using the debt trap diplomacy to establish it dominance in the international financial market.
Debt-Trap Diplomacy
Critics of BRI accuse China of using “debt-trap diplomacy” to attract poor and desperate developing nations into accepting unsustainable loans to develop their nation’s infrastructure. They hypothesize that they use the ‘debt trap diplomacy’ to lure third-world nations. Then when they are experiencing financial challenges, China can seize the assets established hence expanding their military or strategic reach. The Chinese debt-trap diplomacy first emerged from Sri Lanka’s experience. The narrative accounts that China lent money to Sri Lanka to initiate the development of port Hambantota with the knowledge that Colombo was likely to encounter debt issues. It then theorizes that this gave China authority to snatch the port in exchange for the lent money, allowing the Chinese navy to use it. Critics argue that through BRI, China aims to hound strategic objectives to establish a Chinese naval camps as part of a “Salami-slicing technique” (Brautigam, 2019). They also assert that China will likely seek to leverage its possession for strategic gains. According to Brautigam, 2019, China finds local partners in dire need of financial support. This makes them accept their destructive long term development investments and later use the debts to obtain the projects, military and political leverage in said nations. This conventional narrative has several misconceptions, and to show that China’s BRI is a financial aiding strategy not debt diplomacy, we will use the narrative of economic statecraft and the recipient-drive process to further explain its financial developments in international markets.
Economic statecraft
China’s BRI is a commercial and economic venture, not a geostrategic one (Carmody, 2020). Although critics argue that political influences heavily influence China’s BRI, the truth is that the government does not provide the project with concrete plans and desired outcomes. The government only provides BRI with general guidance on how the system is steered towards broader objectives and does not provide detailed outcomes of the system. In fact, the BRI is a profit-seeking process predominantly filled by economic agencies rather than political and diplomatic agencies (Carmody, 2020). This clearly highlights the initiative’s strong stand toward aiding and funding overseas developments of State Owned Enterprises (SOEs) and not towards geostrategic influences. For instance, Chinese leaders can surely share information about spending initiatives such as pledging $ 50 billion in loans and export credits to Africa and a $ 2 million aid to Pacific Island. However, interested economic agencies always establish specified and detailed strategies to reinforce these initiatives. Ultimately, in BRI, projects are often initiated using the “bottoms-up” piecemeal approach, meaning they are assessed in a case-by-case manner rather than a top-down manner (Carmody, 2020). Leaders who would like to strengthen their relationships with a certain country have the power to encourage agencies to aid certain projects in the said country, making it easier to obtain permission from BRI. However, specific projects that will be funded are still evaluated bilaterally and bottom-up. Policy banks may stall or reject participation even when top political powers support particular projects.
Hypothetically speaking, the Chinese President could order a certain SOE to initiate a project. Yet, the agency representing SOEs, also known as SASAC, still has the authority to reject the suggested project if it is not profitable. This points out that SOEs or agencies participating in initiating and implementing Chinese infrastructure development projects are not just instruments of economic statecraft; they are also profit seekers, which created surplus capacity due to poor governance (Singh, 2020). SASAC’s main responsibility is to maximize and safeguard value assets, and even though SOEs comprises of CPC nominees, their outcome is assessed against economic objectives. SOEs are profit-seekers. In other words, their overseas ventures seek to expand and secure future revenue streams. Therefore SOEs reject unprofitable projects while saddling national frameworks to support others. Ultimately, CDB and EXIM are known to be profit-based financial institutions, thus showing why Chinese loans are often more expensive than other traditional development banks. Therefore, it is right to conclude that the said debt traps are not created by the policies of the Chinese government but rather by Western lending monetary policies and domestic policy decisions.
The Recipient Side
Moreover, the BRI process has always been recipient-driven. Critics fail to account for the role played by the recipient’s agency in shaping BRI strategy and outcomes (Shaomin & Jiang, 2020). BRI is a recipient-led process that normally starts with requests and propositions from foreign governments that are interested in the initiative. The process sequentially begins with SOEs exploring for international ventures, who then influence governments to request assistance for projects to obtain related contracts. China BRI always emphasizes this key factor to differentiate its development aid from that given by traditional funding programs like IMF (Shaomin & Jiang, 2020). One popular example critics use to say that BRI I a debt trap is the Sri Lanka development of the Hambantota Port project. This project was not initiated by China but by the Sri Lankan government under Mahinda Rajapaksa’s leadership alongside a profit-seeking SOE from China.
Assuming China had a hidden strategy of worldwide connectivity, comprising all the infrastructure development it hopes to establish to strengthen its geopolitical master plan, it cannot possibly coerce nations to accept these projects in their territories. Territories must first accept China’s “master plans” to enable Chinese SOEs to establish their projects (Singh, 2020). They must also agree to the loans financing the said projects. Naturally, recipients only accept projects that will benefit their counties in the long run. China’s BRI extensively acknowledges this and ensures they establish a bilateral interaction to rightfully integrate China’s development projects into the recipient country’s developmental policies and plans. This fact alone highlights how BRI acts per a unilateral Chinese grand strategy but must develop bilateral dialogues with almost 130 BRI partners. And suppose, by any chance, a blueprint existed, even though unofficial maps of the BRI were banned in 2017, in that case, they must be frequently revised to depict these bilateral interactions, however, since BRI had banned unofficial maps.
Additionally, BRI only responds to the genuine and urgent needs neglected by several developments in favor of better governance programs. Chinese development programs result in established feed patronage channels and monetary kickbacks. According to Shaomin & Jiang, 2020, by 2030, approximately $98 trillion is needed in infrastructure development, with a shortfall of almost $20 trillion. However, there is a great possibility that governments interested in BRI are driven by greed and selfish desires. Third-world nations are undoubtedly in need of infrastructure to facilitate economic growth and improve the living standards of their people (Singh, 2020). Developing countries’ leaders have a crucial role in ensuring that these needs are met to avoid constant disputes and maintain domestic legitimacy. However, according to DeBoom, 2019, leaders often direct development expenditure and infrastructure programs toward the regions that benefit. Most of the time, they direct these projects and spending in their ethnic and geographic areas. Chinese projects are mostly used for political benefits due to high regional favouritism. A study by Singh, 2020 indicates that political powers strategically insert their close partners into Chinese grand projects to eliminate kickbacks and maintain loyalty. These corrupt and greedy ways overwhelm logical project planning, resulting in outrageous economic viability with significant adverse social and environmental effects. Many third-world nations lack tools to project viability; therefore, bureaucratic niceties are overshadowed by political greed.
Therefore, rather than BRI being debt-trap diplomacy, shortcomings of this initiative leading to surplus capacity are created by the differences between powerful interests and ineffective governance in BRI and recipients’ countries. Chinese SOEs undoubtedly poor governance of development projects and ineffective planning, and selfish intentions from recipient parties, are causing poorly initiated developments resulting to surplus capacity issue (DeBoom, 2019). Chinese running elites recognize these issues and have developed strategies to control them. Beijing has tightened outbound restrictions as many SOEs do not meet their industrial policies. They banned real estate and entertainment investments because powerful and wealthy parties exploited BRI to enable offshore capital flight.
In conclusion, China’s BRI has been depicted as a predatory strategy aiming to exploit poor nations for geopolitical benefits. This paper, however, demonstrated that China’s BRI is, in fact, a commercially oriented initiative that is not geared toward establishing geopolitical ends. It has also demonstrated that recipient nations are not hapless targets; rather, they shape BRI’s developmental financial outcomes. In addition, BRI uses a bottom-up plan through bilateral dialogues, with outcomes depending on governance issues and interests on both sides.
References
Lai, K. P., Lin, S., & Sidaway, J. D. (2020). Financing the belt and road initiative (BRI): Research agendas beyond the “debt-trap” discourse. Eurasian Geography and Economics, 61(2), 109–124. https://doi.org/10.1080/15387216.2020.1726787
Brautigam, D. (2019). A critical look at Chinese ‘debt-trap diplomacy’: The rise of a meme. Area Development and Policy, 5(1), 1–14. https://doi.org/10.1080/23792949.2019.1689828
Shaomin, X., & Jiang, L. (2020). The Emergence and Fallacy of China’s Debt-Trap Diplomacy’Narrative. China Int’l Stud., pp. 81, 69.
DeBoom, M. J. (2019). Who is afraid of ‘debt-trap diplomacy’? Geopolitical narratives, agency, and the multiscalar distribution of risk. Area Development and Policy, 5(1), 15–22. https://doi.org/10.1080/23792949.2019.1703556
Singh, A. (2020). The myth of ‘debt-trap diplomacy’ and realities of Chinese Development Finance. Third World Quarterly, 42(2), 239–253. https://doi.org/10.1080/01436597.2020.1807318
Carmody, P. (2020). Dependence, not debt-trap diplomacy. Area Development and Policy, 5(1), 23–31. https://doi.org/10.1080/23792949.2019.1702471
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