What has China’s Belt and Road initiative accomplished after a decade and $1tn spent?

China’s Belt and Road Initiative: A Game Changer for Global Infrastructure

When you give roses to others, their fragrance lingers on your hand, Xi Jinping told guests at the 10th anniversary celebration of his Belt and Road Initiative in Beijing last week. “Helping others is also helping oneself.” Even as China’s president played the exuberant host, welcoming world leaders from Russia’s Vladimir Putin to Indonesia’s Joko Widodo at the Great Hall of the People, an undercurrent of geopolitical animosity directed at the US was evident. He did not mention Washington by name, but when he said that “ideological confrontation, geopolitical rivalry and bloc politics are not a choice for us”, the target of his comment was clear.

For Xi, the two-day forum to celebrate the flagship $1tn global infrastructure initiative — the biggest multilateral development programme ever undertaken by a single country — was a chance to further embed China’s influence across the developing world. Dignitaries from countries that have received investment under the programme also lavished praise upon it.

The BRI: A New Era for Infrastructure Financing

“The Americans spent $6tn on the so-called war on terror and the Chinese in the last 10 years spent $1tn on 3,000 projects all over the world,” says Mushahid Hussain Sayed, chair of Pakistan’s senate defence committee. “So that’s the difference,” he adds. “They [the Americans] were security-centric, military-oriented. The Chinese are economic centric, development-oriented.”

Wang Yi, China’s foreign minister, also threw down the gauntlet to the west. Namechecking supposed alternatives to the BRI, the US “Partnership for Global Infrastructure” and the EU’s Global Gateway programme, Wang said he was confident in Beijing’s abilities.

“Some say that these initiatives can compete,” he told reporters. “Maybe we could have a competition globally about who can build more roads, railways and bridges for developing countries, who can build more schools, hospitals and sports stadiums for the ordinary people in low-income countries,” Wang said.

“We have the confidence that we are able to deliver,” he added.

The BRI: Challenges and Criticisms

Yet over the course of a decade, China’s initiative to finance and build infrastructure in mostly poorer countries has attracted a chorus of criticism. Many projects have been mothballed, others have resulted in developing countries building up unsustainable debts and corruption has besmirched the programme’s image.

China’s capacity to deliver large infrastructure projects has never been in doubt. But the questions that critics of the BRI, who are mostly outside China, are asking is whether the project has been worth the tremendous cost and whether it can continue to operate as it has in years to come.

China’s BRI Scorecard

For China, the BRI has won valuable overseas business for its large state-owned enterprises and strengthened diplomatic ties with the countries in the so-called global south. Those links have in turn increased China’s influence within other international organisations such as the UN and allowed it to advance Xi’s political vision for the world.

Recipient countries such as Pakistan find themselves able to finance projects they could never have dreamt of under old-style foreign bilateral or multilateral aid programmes, from power plants to high-speed data networks. But critics say the projects can become a debt trap and increase the economic dependency of many states on Beijing.

“The BRI served multiple purposes,” says Yunnan Chen, a researcher at ODI, a public affairs think-tank. “It was seen as China’s offer of public goods to the world and particularly to the developing world by providing infrastructure finance.”

An upsurge in financial distress over recent years in several BRI recipient countries has obliged Beijing to fork out huge sums for bailouts. This has raised the question of whether Beijing, in spite of all its rhetoric praising the BRI, is in fact quietly rethinking the whole scheme.

“There has clearly been a pull back as well as a greater risk aversion by China’s policy banks and China’s policy insurer,” says Chen. “I don’t think this means an end to the BRI as a narrative. But the rhetoric has shifted already. We are seeing more mentions of small and beautiful projects . . . [and] a green BRI that is more sustainable.”

Successes, Failures, and Governance Shortcomings: The Case of Pakistan

The example of Pakistan — the biggest national recipient of BRI funding — is illustrative of the successes, failures and governance shortcomings that are hampering China’s ambitions to lead the developing world, analysts said.

New data compiled for the Financial Times by Janes, the defence intelligence company, shows that 40 per cent of the projects in the China-Pakistan Economic Corridor (CPEC) — lionised in July by Xi as “an important flagship” for the entire BRI — have run into troubles including corruption, cost overruns, funding shortfalls or adverse environmental impacts.

Of these troubled projects, at least 20 per cent have been delayed indefinitely or cancelled outright, the Janes data shows. The biggest projects have tended to be the worst hit, with about half of the highway and hydropower schemes encountering difficulties and all of the railway and mining undertakings similarly running into trouble, according to Janes.

At the outset, an infusion of Chinese loans to build infrastructure seemed to promise a new future for one of Asia’s most impoverished countries. Projects like the $1bn Thar coal power plant and 13 other energy schemes helped alleviate crippling power shortages. New motorways boosted commerce between cities. Fibre-optic cables brought modern communications to mountain towns.

“In some senses, it was an absolute game changer,” says Bilal Gilani, executive director of Gallup Pakistan, a consultancy. He added that China was bringing in almost as much foreign investment into energy alone than “what Pakistan received as FDI in total in various sectors in 25 years prior to CPEC”.

But overall, the $62bn programme agreed between Beijing and Islamabad in 2015 has fallen far short of its vision, analysts say. The ambition that new infrastructure would help turn Pakistan into a global manufacturing hub has yet to be realised, for instance.

“[We hoped] to get some Chinese companies to invest in Pakistan, in our special economic zones and then to export,” says a former Pakistani official, who declined to be identified. “That never took place. It’s OK to borrow money and build infrastructure, but it’s more difficult to bring investors into our zones to make stuff and sell it.”

This lack of follow through from Chinese private companies has arguably been CPEC’s biggest shortcoming. Analysts say that few Chinese businesses have shown an interest in setting up factories there, depriving the Pakistani government of the foreign currency earnings needed to service its non-rupee borrowings.

Hussain argues this is not necessarily the fault of CPEC. “Sometimes our people, and our bureaucracy, our officialdom or our policymakers become lazy and they feel they have a sense of entitlement,” he says. Whatever the cause, the outcome is that Pakistan is now home to what Gilani calls a “graveyard of economic zones” whose “plots are empty”. The share of manufacturing in the country’s GDP has stagnated at around 13 per cent since CPEC started.

Grand strategic imperatives have also foundered on cold reality. A crucial early motivation behind CPEC was China’s dream of building a modern-day Silk Road, one that would boost economic growth and enhance its geopolitical influence. However, as challenges persist, China’s Belt and Road Initiative is facing scrutiny and is being forced to adapt and evolve.

Read More of this Story at www.ft.com – 2023-10-22 04:00:45

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