On June 27,US President Joe
Biden and other G7 leaders
announced ambitious,
Partnership for Global Infrastructure
and Investment (PGII) plans which
involve mobilizing $600 billion in funding
by 2027 to deliver transparent and
game-changing infrastructure projects in
developing countries. PGII appears to be
the re-launch of Build Back Better
World (B3W)plan, which was
announced by the G7 in 2021, with stated
aim of narrowing the $40 trillion
infrastructure gap in the developing
world. Most of the analysts see this
move as a counter to China’s Belt and
Road Initiative (BRI).
Central theme of US led West, anti
BRI narrative, is to paint this initiative
as a ‘Debt Trap Creating Instrument’
with twin aims of forcing the countries
in debt to accept world order with
Chinese character and gaining control of
strategic infrastructure assets located in
that unfortunate country(s),for reconciling
the unpaid debt. However, it is also
noteworthy, that BRI is an initiative,
through which China declared that it
possesses the power to grab the opportunity
and take charge before others
(West) could act. 2013, the year of
launch of BRI belonged to the period
during which US happened to be heavily
committed in West Asia and
Afghanistan and Europe enjoyed the
geopolitical slumber from which it was
rudely awakened by the Ukraine
Conflict. Thus, the timing of Chinese
initiative, launched for filling the geoeconomic
spaces vacated by the developed
nations was impeccable.
This analysis is based on data contained
in two reports. Chinese official
data is sourced from Nedopil, Christoph
(January 2022): “China Belt and Road
Initiative (BRI) Investment
Report2021”, Green Finance &
Development Center, FISF Fudan
University, Shanghai. Second set of data
has been sourced from a report titled,
“Banking on the Belt and Road: Insights
from a new Global Dataset of 13,427
Chinese Development Projects,
authored by Ammar K. Malik and others
and published as AIDDATA Project
Report in September 2021.
BRI is China’s main international
cooperation and economic strategy with
five officially stated goals-policy coordination,
facilities connectivity, unimpeded
trade, financial integration, and
people-to-people bonds. ‘Belt’ represents
the land connectivity through corridors,
which contain routes for multi-mode
transportation system, industrial parks,
pipelines and communication infrastructure,
and ‘Road’ is the maritime route(s)
component of the initiative. According
to the official Chinese information, till
January 2022, 144 countries had signed
Memorandums of Understanding with
China and joined BRI.Vast scope of this
ductile and ambiguous project is reflected
in the laid down timelines, first phase
was expected to be completed, eight
years after the launch, in 2021 and lastphase in 2049.In early stages, many analysts viewed this endeavour
as a Chinese attempt to facilitate the export of surplus domestic
industrial production, securing markets and routes for energy,
and raw material resources and for moving up on the leadership
ladder of global economy. It was estimated that China will develop
comprehensive corridors through which goods and technology
will flow to and from Eurasia and East Asia. Viewed comprehensively,
all Chinese actions, at that stage appeared as legitimate
game plan of a rising nation. Current profile of BRI is at variance
with that analysis, since now this network extends to the various
countries located in almost all continents. In BRI operations
China’s preferred instrument of financial commitment is loan
rather than grant. Since the introduction of the Belt and Road
Initiative (BRI), China has maintained a31-to-1 ratio of loans to
grants and a 9-to-1 ratio of Other Official Flows (OOF)oriented
towards BRI activities to Official Development Assistance
(ODA).Figures given below explain the year on year, investment
profile under BRI, in various regionsIt can be deduced from this data that overa period, focus has
shifted towards the regions of Arab Middle Eastern Countries and
North Africa and construction activities. This is a planned posture
since it accrues twin securities; of the energy source and the sea
lines of communication through which the precious cargo reaches
China. Construction activities are being given priority over investment
(both for merger and acquisitions and in green field projects).
Again, it serves two purposes for China. Construction ensures adequate
availability of infrastructure for developing economic corridors
and lesser investment conveys that China is not interested in hijacking
the economy of the recipient country. Post pandemic, BRI has
taken a serious hit due to strict isolation posture adopted by China to
prevent the spread of virus, but its leadership remains deeply committed
to the BRI. It appears that, internally an assessment of BRI
has been carried and course corrections are in way. It was indicated
in February 2022 by Politburo Standing Committee member Han
Zheng, Chairman of the Leading Small Group responsible for the
Belt and Road when he advised, Chinese banks and companies to
focus on projects that “improve people’s sense of gain in participating
countries,” and for the leadership to seek “greater alignment” of
the BRI and domestic macroeconomic strategies, while strengthening
“risk monitoring and prediction”.42 Low- and Middle-Income
Countries (LMICs) now have levels of debt exposure to China, more
than 10% of their GDP. Increasing levels of credit risk have created
the requirement of instituting stronger repayment safeguards by
China. Chief among these safeguards is collateralization, which has
become the linchpin of China’s implementation of a high-risk, highreward
credit allocation strategy. For securing energy and natural
resources that it lacks, and maximizing investment returns on surplus
dollars and Euros, China has rapidly scaled up the provision of
foreign currency-denominated loans to resource-rich countries.
These loans are collateralized against future commodity export
receipts to minimize repayment and fiduciary risk and priced at relatively
high interest rates (nearly 6%).Recent official Chinese reports
also indicate that more volume of BRI projects of ‘Medium and Small’
size is being undertaken and lesser number of ‘Mega’ projects are
being initiated. Green energy projects are also receiving priority. BRI
community countries fall in debt trap for many reasons, some are of
course related to aggressive Chinese loans policies but other reasons
which include faulty domestic macroeconomic structures and
processes, internal security situation, high levels of corruption and
poor project monitoring and execution capabilities also contribute
significantly towards their economic predicament.
Volume and scale of Chinese global economic activities and
Western delayed response are pitched at asymmetric levels. In first
two decades of the 21st century annual International Development
Finance commitments averaged around $85 billion an year and
China has outspent the U.S. and other major powers in the ratio of
2-to-1or more. While US led democracies lend with various caveats
related to the system of governance, monetary and fiscal policies of
the receiving countries, human rights and many other parameters,
Chinese focus remain firmly fixed on trade and ascent to leadership
position in global finance. Chinese economic interaction is not
restricted by the nature of leadership or the living conditions of
humans in the country chosen for investment, if it meets all or some
of the China’s requirements – raw material, energy, market for produced
goods and opportunity for projecting hard and soft power.
An illustration of how the BRI may be an instrument for China to
project its hard power is the signing of security pact with the Solomon
Islands, an act clearly aimed towards reshaping the strategic balance
in the South Pacific, where security is currently dominated by
Australia and the US. While the pact was not formally connected to
the BRI, both China and the Solomons (which joined BRI in 2019),
repeatedly referred to the same while negotiating the security deal,
which indicates that the two are linked.Chinese media platforms
work overtime for utilizing the BRI as a soft power tool. Party cadres
have been instructed to ‘tell the BRI’s story well’ as part of a broader
effort to ‘tell China’s story well’.
US and China have joined the battle for being the leader of world
economic order in very difficult global circumstances. While US desperately
wants to cling on to the number one position, China has for
all practical purposes created a large BRI block for achieving its
ambition. In Chinese vision, through the Belt and Road will flow the
‘Made in China 2025’ products, which later be standardized as per
their ‘Standardization Plan 2035’.US and Europe will be financially
committed for reconstruction of war-ravaged Ukraine and creating
resources for managing the security of NATO countries, in the future.
These circumstances have loaded the dice in favour of China.
Countries like India which have clearly expressed their disinclination
of joining BRI, will obviously be benefited by the West joining the
arena of global infrastructure financing, but as of now since lending
terms of PGII and other similar plans are not clear, it is difficult to
assess the quantum of such benefit. It should also be appreciated
that, irrespective of West inspired narratives, the Chinese efforts of
shaping the global economic environment as a component of its
Grand scheme for claiming the leadership pole position is a serious
and high impact event with wide implications for world order and
Signing off for the week, by mentioning an interesting book on the
subject, ‘Belt and Road, A Chinese World Order’ by Bruno Macaes.
Brigadier Rajiv Mahna YSM, SM, VSM is an Indian Army
Veteran who has chosen to remain a student for the lifetime