Once portrayed as China's yellow brick road to regional dominance, a decade later, Xi Jinping’s Belt and Road Initiative falls short of the wonder of Oz. In its inception, it was illustrated to be a reincarnation of the age-old Silk Route, boasting novel infrastructure and economic benefits, although the efficacy of these so-called benefits continues to surface. Critics argue that China`s generosity is merely a debt trap for strategic political gain as South Asian states like Pakistan and Sri Lanka grapple with the repayment of these loans. Despite the emerging issues in the projects, it seems that states like Georgia are strengthening their ties.
So what is the Belt and Road Initiative?
In 2013, the President of the People's Republic of China Xi Jinping, during a State visit to Kazakhstan, an APEC summit, and an East Asia Summit in Indonesia, called for an ambitious bipartite project to create a trade network for the exchange of goods, services, culture and ideas along the age-old Silk Route.
While the first part is an economic belt segment wherein railroads and gas pipelines would interweave the Eurasian region, the second part is the maritime Silk Road segment consisting of a chain of seaports that link China with Africa. Moreover, research suggests that trade could increase by about 1.7% and 6.2% globally through transport projects. Economies could expand to over twice their size if reforms address trade barriers and cultural bonds may be created by facilitating Chinese educational opportunities as well.
While liberalists argue that this initiative would facilitate free trade, cooperation, and interdependence in the global order, realists perceive the Belt and Road Initiative (BRI) as China`s strategic manoeuvre to bolster its standing in the global hierarchy by amplifying its geopolitical power and influence. The question remains: which school of thought seems to have accurately predicted China`s behaviour?
Boasting a myriad of benefits, the Eastern Giant entered into Memorandums of Understanding with over 50 countries within four years of launching the project. At present, the BRI has expanded into a total of 149 countries that, including China.
Pakistan, the pioneer
At the forefront of the launch of the BRI stood Pakistan. With foreign investments growing meek, the projects proposed under the flagship initiative of the China-Pakistan Economic Corridor (CPEC) proved to be beneficial.
Encompassing energy, transportation infrastructure, the Gwadar port, and the establishment of economic zones in the vicinity of these projects, the $62 billion investment is set to reach a whopping $65 billion.
According to the Chinese Foreign Ministry, CPEC has facilitated the creation of over 192,000 jobs, the generation of 6,000 megawatts of electricity, the construction of 510 kilometres of motorways, and the expansion of the national transmission network by 886 kilometres over the past decade.
But has it actually proven to be as financially rewarding as thought? Pakistan was forced to lease the Gwadar port for 40 years because they were having trouble paying back their loans. The once vigorous momentum of CPEC projects has significantly slowed down in recent years as a result of the COVID-19 outbreak, terrorist attacks on Chinese investors, and rising inflation. Pakistan is now heavily indebted as a result of this deceleration. China and various Chinese state banks are currently owed a staggering 30% of the country`s total external debt of $100 billion.
However, this is not the only instance of a potential Chinese debt trap. Another case in point is the South Asian nation of Sri Lanka, which often serves as a cautionary tale for the global community.
China’s Hand in Lanka
Sri Lanka`s Hambantota Port, initiated in 2008, was primarily financed by a loan from China`s EXIM Bank (Export–Import Bank of China) that could not be repaid due to political instability in the island nation. As a result, the state had to lease its port for 99 years.
However, China`s hand in the island doesn`t stop there. As reported by AI Jazeera, CHEC Port City Colombo (Pvt) Ltd, the company responsible for developing Port City Colombo, is a subsidiary of China Harbour Engineering Company (CHEC), which in turn is a subsidiary of China Communications Construction Company Limited (CCCC), in which the State holds a majority stake.
While the project is said to increase employment opportunities for locals, as in the Hambantota port, 65% of the saleable reclaimed land will be held on a 99-year lease by a majority state-owned Chinese company. This situation leaves locals worried about sovereignty and potential negative external influences. These sentiments aren`t restricted solely to the South Asian region. Reports of potential Chinese debt trap diplomacy in the African region are also growing.
Is Africa in a debt trap or China in a debt trap?
Infrastructure projects, including ports, railways, and power plants, have reportedly been facilitated through Chinese loans. However, the terms and conditions of these agreements are not widely known to the public. Additionally, the investments in the states such as Djibouti have led to a surge in Sino-dominant external debt, raising long-term concerns about Chinese influence.
Despite these concerns, private and state investments generate significant benefits for African nations and seem to bring about more good than harm. In fact, analysts from Chatham House, an International affairs think tank, suggest that it is China that might be caught in a debt trap by Africa. With pending loan payments looming and domestic debt on the rise, clear evidence shows that China is facing trouble. However, the Western narrative of China adopting debt trap diplomacy does not seem to be subsiding, and these fears are pushing States to minimise Belt and Road investments.
Euro-Sino tensions
European states, such as Italy, are eagerly attempting to withdraw from the initiative. Despite forging economic ties, exports to China have not witnessed dramatic growth, while Chinese exports have grown significantly. Similarly, Chinese investments in Italy have declined since joining the BRI, and the expected benefits do not appear to have materialised. Moreover, there lies the obvious concern about Beijing's alignment with Russia in the context of the conflict in Ukraine and the potential geopolitical implications it may hold in the European order. This issue has gained prominence due to military exercises conducted between Russia and China in the Sea of Japan in recent months. It must be noted that Russian Defence Minister Sergei Shoigu and Chinese Communist Party Politburo member Li Hongzhong were in attendance at North Korea's Victory Day parade. During this parade, North Korea displayed nuclear missiles, prohibited by the United Nations Security Council, an integral part of the leading global institution for liberal policies.
Nonetheless, neutral states in the Ukraine-Russia conflict, like Georgia have further strengthened ties with China and its BRI initiatives. This may pave the way for additional bilateral economic and political partnerships, including infrastructure development and the Middle Corridor. The agreement also calls for the advancement of Georgia's Anaklia port, which could function as a vital transit hub for BRI-related trade.
The strength of the BRI in Europe extends beyond just the Balkans. With major investments in Greece, such as the expansion of the Piraeus port, and in Portugal, particularly in the port of Sines and the energy sector, the BRI has indisputably made a positive impact. So, is it a boon or a bane?
Conclusion
Unlike Western investment schemes, China's loans have fewer restrictive conditions and do not emphasise on liberal democratic norms or political stability. However, they pose equally weighty risks. While these loans encourage engagement with politically unstable or authoritative states, the downside is that debt repayment may lead China to seize valuable and strategic assets, as seen in Laos, which had to surrender a majority stake in its national electric grid, thereby solidifying its position as a regional great power. With states consistently rescheduling debt repayment and China's economy and international alignments already collapsing, the line between boon and bane is thus very thin. As a result, China's Belt and Road Initiative (BRI) is right on the brink of the latter.
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