The sustainability challenge of China’s BRI

Asia World

Author: Yong Deng, US Naval Academy

China is focusing on its commitment to the Belt and Road Initiative (BRI) at the expense of long-term sustainability. In the early stages of BRI, an overriding concern with commitment set off what Yuen Yuen Ang calls a Maoist mass campaign to promote the BRI ‘with frenzied enthusiasm and little coordination’. All provincial governments rolled out their local plans to support the central directive while Chinese companies rushed to justify their projects under the pretext of the BRI.

Chinese billionaire businessman Cheng Wei, the founder and CEO of Chinese mobile transportation platform DiDi, middle, delivers a speech at the Belt and Road Forum for International Cooperation on Cyberspace at the 6th World Internet Conference Wuzhen Summit held in Wuzhen town, Jiaxing city, east China's Zhejiang province, 21 October 2019 (Photo: Reuters/Imagine China/Ni Yanqiang).

Chinese billionaire businessman Cheng Wei, the founder and CEO of Chinese mobile transportation platform DiDi, middle, delivers a speech at the Belt and Road Forum for International Cooperation on Cyberspace at the 6th World Internet Conference Wuzhen Summit held in Wuzhen town, Jiaxing city, east China's Zhejiang province, 21 October 2019 (Photo: Reuters/Imagine China/Ni Yanqiang).Once the BRI was written into the party charter, a mini-debate over the danger of China’s over-extension with the program was silenced. While the BRI has become China’s ‘one hundred year grand plan’, it is being confronted with unforeseen and staggering challenges.

By 2018, debt risk, environmental concern and uncertainties in the global economy started to bring sustainability to the forefront of the BRI conversation. The BRI encountered unprecedented pushback as many Asian countries — Sri Lanka, Laos, the Maldives, Malaysia, Myanmar and Pakistan — struggled with mounting debt. In the Maldives, Malaysia and Pakistan changes of government led to the cancellation of BRI projects. The breakdown of BRI programs in countries from Venezuela to Malaysia, coupled with China’s economic slowdown and the trade war with the United States, raises serious doubts about BRI’s long-term survivability.

At the same time, divisive geopolitics has become an issue. China does not want to get involved in sovereignty issues but is being accused of using the BRI for geopolitical influence. China’s preference for bilateral dealings with individual countries limits the BRI’s cross-regional connectivity. In regions such as the Middle East, China has largely eschewed transnational projects because of its traditional attitude towards the interference required for multinational coordination.

Where it pursues cross-country projects, Beijing emphasises their functional utilities for international cooperation. Elsewhere, China has secured strategic assets through its BRI investments, most notably the Hambantota Port in Sri Lanka and its Djibouti naval base in the Horn of Africa.

The United States, seeing the BRI as Beijing’s geoeconomic instrument to dethrone US hegemony in Asia, has always been sceptical of the project. The Trump administration holds the view that it is long overdue for the United States to lead an international coalition to ‘blunt the momentum of Beijing’s recent initiatives’. To counter the Chinese program, the US International Development Finance Corporation created a US$60 billion infrastructural fund and subsequently rolled out the ‘Blue Dot Network’ initiative, a competing vision for global connectivity focussed on ‘the Indo-Pacific’.

The US trade war with China dealt BRI a blow. The concerted effort to thwart China’s high-tech companies, notably Huawei, has impeded its regional technological ascendancy. The US–China economic decoupling and geopolitical rivalry risks rupturing the global connectivity that BRI seeks to build on.

To help the BRI address its sustainability issues, the People’s Bank of China (PBC) and IMF agreed at the first BRI Forum in 2017 to create the China–IMF Capacity Development Center. Based in Dalian, China, the PBC-funded centre was launched in April 2018 and in its first year, about 150 officials from 45 countries went through the centre’s training programs.

The UN too offered its support and advice. At the second BRI Forum, UN Secretary-General António Guterres underscored the US$1 trillion infrastructural need for the global south and bemoaned the fact that merely 25 per cent of the infrastructure projects set for 2050 had been completed. While calling the BRI an opportunity for developing countries, he also urged  the BRI to become ‘an important space where green principles can be reflected in green action’.

If the key to catch-up growth for BRI economies is to address problems of ‘rent-seeking and cronyism’, then introducing international best practices and global standards to the BRI will be essential for its future. To that end, the Chinese government must be more receptive to international scrutiny. International institutions should not just be a vehicle for promoting the BRI. If engaged properly, they can be instrumental in building it.

With notable setbacks and unprecedented US pushback, the Chinese government seems acutely aware of the sustainability concerns. President Xi Jinping and Chinese officials are emphasising the need to build ‘high-quality, high-standard’ projects that themselves are both green and sustainable. It’s time to turn the BRI into a Gongbihua (meticulous painting), they argue. Chinese companies are considering how best to engage local businesses and enhance public–private partnerships. Beijing has also sought IMF assistance in debt-restructuring for some BRI investments.

If central banking must gain credibility to govern globally in finance by establishing independence and transparency, then the BRI — which is designed for an alternative global governance — must move beyond China’s unilateralism. Independence from the Chinese state is out of the question. But China can embrace greater multilateralism and be more open to ‘generalised principles of conduct’.

In this regard, the success of the Asia Infrastructure Investment Bank is instructive. By many accounts, the Beijing-based bank has followed the best practices of the World Bank and the Asian Development Bank, earning it triple-A ratings from global credit-rating agencies. The BRI should adopt this approach.

China should also join the Paris Club, the international watchdog on lending practices consisting of the world’s leading creditor nations. China has participated in ad-hoc meetings before. But being a full member would help address issues concerning the BRI’s lending standards and transparency, while also helping with debt stress diagnosis and relief coordination.

The sustainability of the BRI will depend on how China manages geopolitics and geoeconomics. Beyond high politics, the BRI is beset by debt and environmental issues. Given the BRI’s centrality to Chinese domestic and foreign policy, Beijing will likely do its utmost to address these issues. The central challenge concerns how to formalise consultation, institutions and rules while still preserving the BRI’s distinctive appeal as an informal platform for expeditious infrastructure building and flexible global governance.

Yong Deng is Professor of political science at the United States Naval Academy, Annapolis, Maryland, and Visiting Professor at the Department of Politics and Public Administration, the University of Hong Kong.