News Analysis
China’s Belt and Road Initiative (BRI) is a “debt trap” and “data trap,” according to British MI6 chief, Richard Moore. Eight years into the program, the BRI is littered with half-built bridges, unfinished projects, overbudget railways, roads to nowhere, significant debt, and angry people.
“The ancient silk routes embody the spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit,“ Chinese leader Xi Jinping said at the opening of the Belt and Road Forum in May 2017.
At no point did Xi mention the benefits that the multibillion-dollar BRI would bring to the Chinese people, nor did he even allude to establishing a Chinese-led world order, displacing the United States as the predominant global power, gaining access to natural resources, controlling other countries through debt traps, buying friends, and establishing a network of overseas military bases to secure the Chinese Communist Party’s (CCP) hegemonic ambitions.
The UK’s MI6 chief called China “the single greatest priority,” saying that Beijing was using its money through the BRI to “get people on the hook,” expand its influence, and erode the sovereignty of other countries.
Launched in 2013, the BRI is Xi Jinping’s plan to expand China’s reach globally, with roads, maritime routes, telecommunications, computer grids, and banking networks that would run through most of the world’s countries. Currently, 142 nations have joined the BRI, signing a memorandum of understanding (MOU) with China.
The basic BRI model is that China provides loans, often at high interest rates, to countries to build infrastructure such as highways, power generation stations, railroads, and airports. Most of the construction work is carried out by Chinese companies using Chinese labor and Chinese raw materials. As part of the terms of the agreement, Chinese companies associated with the BRI don’t pay taxes to the local government for the first several years.
Many countries sign on to the BRI because they have nowhere else to borrow. Two-thirds of BRI countries are riddled with debt and plagued by a sovereign credit rating below investable grade. Some of them actually have credit ratings on par with junk bonds, while others are deemed politically unstable. For them, China becomes the lender of last resort.
Forty-two of the poorest BRI countries already owe China 10 percent or more of their gross domestic product (GDP). The eight most indebted countries—Laos, Angola, Kyrgyzstan, Djibouti, Suriname, the Maldives, the Congo, and Equatorial Guinea—owe 30 percent or more of their GDP to China.
Research conducted by the College of William & Mary’s AidData found that 35 percent of the BRI infrastructure projects were confronted with major implementation problems, corruption, labor violations, environmental degradation, and protests. Not only are countries plagued with BRI debt, but in many instances, the projects remain unfinished.
In Kenya, the government is challenged with a debt emergency because of an overbudget BRI railway. The Mombasa-Nairobi Standard Gauge Railway was meant to run 290 miles, connecting the city of Mombasa, Kenya, which is located along the Indian Ocean, with the Kenyan capital, Nairobi. Instead, it ended in a small village 75 miles from Nairobi, because China withheld $4.9 billion in funding.
Montenegro is now home to “the road to nowhere.” A highway was only half-built because the Chinese won’t move on to the next phase of construction until the first part is paid for. As a result of Chinese lending, Montenegro’s public debt now exceeds 100 percent of its GDP.
The CCP cut off funding for a high-profile railroad in the Kazakh capital, Nur-Sultan. Kazakh officials said they would now have to borrow from domestic banks to come up with $1.9 billion to finish construction.
In many countries, BRI mismanagement, corruption, and lack of benefits for locals have led to widespread distrust and even hatred of the Chinese. In the Solomon Islands, citizens stormed the presidential palace and torched buildings in the country’s capital city of Honiara’s Chinatown. In Malaysia, anger over corruption in BRI projects led to the ouster of the country’s prime minister. Irate Burmese residents burned down Chinese factories in Burma (also known as Myanmar). Sri Lankans protested when their government had to surrender the country’s airport and largest seaport to China because of an inability to repay BRI loans.
Moore claimed that 20 percent of infrastructure projects in Africa are funded by China and that 30 percent of those are built by Chinese companies. Not everyone in Africa is happy about the Chinese investments. Chinese workers were attacked at a railway project in Kenya. Gambians torched a Chinese fishmeal plant. Chinese managers were murdered at a clothing factory in Zambia. Chinese businesses were burned in Nigeria. And Uganda is in danger of having to hand over Entebbe International Airport to China because it has failed to make debt payments.
Brad Parks, executive director of AidData, said loans from China aren’t about “common prosperity,” but rather they’re commercial loans, designed to earn a profit. By contrast, the United States and most Organization for Economic Cooperation and Development (OECD) countries grant developmental loans with low interest rates. The average BRI loan has an interest rate of 4 percent, as opposed to 1 percent for OECD loans. Additionally, OECD loans are transparent, while BRI loans aren’t.
Chinese loans don’t all come directly from the CCP. Instead, they’re parceled out across various lending institutions. Consequently, it’s very difficult, even for the borrower, to trace and quantify all of the loans and to determine how much is owed to whom and on what terms. This opaque lending system has led to underreporting. By some estimates, total debt to China among low-to-medium income countries is underreported by an amount equal to 5.8 percent of GDP, according to AidData.
BRI investment peaked in 2015 and has been in steady decline ever since, hitting an all-time low in 2020. A combination of a severe economic downturn, the pandemic economy, bad press, and increasing negative sentiments toward Beijing may inspire developing nations to look to the West and to countries such as Japan and South Korea as more reliable development partners.
The debacle of the BRI demonstrates how U.S. policies of prudent investment and targeted economic aid can be more beneficial to developing countries in the long run. In 2018, the BUILD Act was approved, establishing the U.S. International Development Finance Corporation (DFC). The DFC aims to set a better standard for foreign investment and to help strengthen governance models in recipient countries through new investments from the private sector. Other alternatives to the BRI are the Biden administration’s Build Back Better World (B3W) and the EU’s Global Gateway program.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
