China’s Belt (Tightening) and Road (to Nowhere) Initiative Update

A part of the first rail line linking China to Laos, a key part of Beijing's 'Belt and Road' project across the Mekong, in Luang Prabang, on Feb. 8, 2020. Aidan Jones/AFP via Getty Images

Commentary

In October, the world endured a barrage of propaganda from communist China’s state-run media in support of Chinese leader Xi Jinping’s Belt and Road Initiative (BRI), a massive international infrastructure and economic development program that began with great fanfare in 2013.

Despite the happy talk during the recently completed third Belt and Road Forum for International Cooperation in Beijing, all isn’t sweetness and light with the BRI, also known as “One Belt, One Road.”

Let’s examine the issue.

The BRI

Widely publicized in 2013 as Mr. Xi’s first major initiative, the BRI consisted of two major components: the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

The main objective is to develop a global transportation infrastructure consisting of roads, ports, railroads, bridges, and so forth that are controlled by communist China, with the various “roads” serving as spokes in a wheel that service the hub (mainland China). These two-way streets are intended to convey the natural resources and raw materials needed to fuel Chinese manufacturing concerns at home while supporting the export of finished Chinese goods to overseas markets worldwide.

During the 10 years of its existence, the tentacles of the BRI have spread to 149 countries, including China. To give some idea of the magnitude of the initiative, Statista reported that “in total Chinese investment in countries of the Belt and Road Initiative (BRI) pared down to around 67.8 billion U.S. dollars, a slight year-over-year decrease [due to the COVID-19 pandemic]” with actual Chinese outward foreign direct investment in BRI countries at $24 billion in 2021.

BRI Turns 10

This year’s BRI Forum for International Cooperation in Beijing celebrated the initiative’s 10th anniversary. On Oct. 26, Mr. Xi made additional promises for the BRI, as reported by The Conversation, including future green development and promotion of “integrity-based cooperation” (sharing BRI details and compliance information).

Right on cue, Chinese state-run media spun a happy tale of the 10 years of BRI to highlight the forum:

On Oct. 16, Global Times touted “ten years of miraculous BRI development.”

On Oct. 21, Global Times echoed Mr. Xi’s promise of “another ‘golden decade’ of BRI cooperation.”

On Oct. 24, People’s Daily boldly claimed that “Belt and Road cooperation [is] on [the] right side of history.”

BRI Happy Talk Turns to Frowns

Cracks are forming in the BRI facade. Various countries are learning that China’s BRI investments are heavily tilted toward Chinese interests, not those of recipient countries. Roughly one-third of all BRI investments per year are made up of actual Chinese outward foreign direct investment (FDI). The remaining two-thirds aren’t FDI grants but loans from the Export-Import Bank of China or the China Development Bank that recipient countries must repay.

Recipients are frequently forced to satisfy their loan obligations by granting the Chinese long-term exploitation rights for rare earth elements, hydrocarbons, and other commodities and/or long-term lease arrangements for ports, railroads, and other infrastructure developed using those BRI loans.

A Chinese research vessel entered Sri Lanka's Chinese-run southern port of Hambantota on Aug. 16, 2022, despite concerns from India and the United States about its activities. Ishara S. Kodikara/AFP via Getty Images

The latter is exactly what happened at Sri Lanka’s Hambantota port when China received a controlling 99-year equity stake in the port in 2017, as reported by the Center for Strategic and International Studies. So much for “miraculous development” under the BRI, as the benefits skew toward communist China.

Other countries have frowns, too.

Italy

After four years of participation, Italy pulled out of the BRI in an announcement made by Prime Minister Giorgia Meloni during the G20 meeting in New Delhi in September. Italy was the first country to officially leave the BRI, and the geopolitical ramifications are significant for the world, as China has been focusing considerable resources on penetrating (and influencing) the European Union.

A key goal in Italy’s memorandum of understanding to join the BRI didn’t materialize: to rebalance Italy’s unfavorable trade balance with China. The reality is that Italy’s bilateral trade deficit with China is more than $10 billion larger now than in 2019.

Portugal

Portuguese relations with China began in 1513, with Portugal paying rent to the Ming Dynasty to establish a trading hub on the island of Macau. China views Portugal as a linchpin and gateway to Europe and the large markets representing former Portuguese colonies in South America and Africa, including Brazil, Angola, and Mozambique. Thus, it must have come with some shock that, in taking a cue from Italy, “the [Portuguese] government of Prime Minister António Costa, a socialist, has quietly moved back toward the North Atlantic consensus and stepped away from its previously cozy ties with Beijing,” as noted by the Center for European Policy Analysis. A contributing factor is the Chinese regime’s ongoing intimidation of Taiwan and the Philippines.

Laos

China became the largest investor in Laos through the BRI with an initial investment of $5 billion spread across 745 projects in 2013.

“Laos is struggling to repay the billions it borrowed from China to fund the hydroelectric dams, trains and highways, which have drained the country of foreign reserves,” Japan News reported last month. As a result, “Lao people have begun to express unprecedented discontent online, targeted at China and their own government.”

Philippines

As tensions in the West Philippine Sea around Scarborough Shoal rise, “the Philippines has dropped a funding deal with China for three rail projects” totaling $5 billion, as reported by Asia Financial on Oct. 30. Asia Times further noted that “nearly all of China’s key investment initiatives in the Philippines are now in doubt due to both economic and political factors.”

Geopolitics trumps BRI economics in the Philippines.

Concluding Thoughts

Despite the fanfare from Mr. Xi and Chinese state-run media surrounding last month’s Belt and Road Forum, the BRI has become “a euphemism for wasteful spending, environmental destruction and untenable debt,” according to a Forbes report quoted by The Washington Standard. Throw in rampant corruption, too, as a 2017 McKinsey study focusing on Chinese relations with Africa found that “between 60 percent to 80 percent of Chinese companies in Africa admitted to paying bribes” to receive favorable contractual terms.

Lastly, since 2015, China has had to extend emergency loans to BRI countries—such as Mongolia, Egypt, Pakistan, Sri Lanka, and Turkey—with some of those loans being rolled over and extended for several years in a row, as reported by Zero Hedge on Oct. 31.

“The share of China’s borrowers in distress has increased so steeply in recent years that 60 percent of the country’s overseas lending portfolio supported these countries in 2022, up from just 5 percent in 2010,” the report reads.

Buyers of BRI happy talk, beware!

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.