Belt and Road Meets International Pushback

Beijing’s Belt and Road Initiative (BRI), the world’s largest infrastructure investment project to date, has raised concerns ranging from worldwide expansion of political and military influence, risks of cyber-espionage across Asia and Europe, exacerbated political tensions in South Asia, and unhidden discrimination against African workers. A particularly strident concern is that China is ensnaring countries in debt. Earlier this week, citing debt sustainability, Sierra Leone became the first African nation to cancel a BRI deal.

Despite Beijing spending nearly $700 billion across over 60 countries over the last half-decade, BRI has recently been met with both domestic and international backlash. From Christopher Balding at Foreign Affairs:

[…] Many Chinese complain of the initiative’s wasteful spending. Internationally, some of the backlash is geopolitical, as countries grow wary of Beijing’s growing influence. But much of it is simply political. Unlike Western lenders, China does not require its partners to meet stringent conditions related to corruption, human rights, or financial sustainability. This no-strings approach to investment has fueled corruption while allowing governments to burden their countries with unpayable debts. And citizens of many BRI countries have reacted with anger toward China—an anger that is now making itself felt in elections. Far from expanding Chinese soft power, the BRI appears to be achieving the opposite.

[…] One reason is that countries have become wiser to the financial terms associated with BRI. In the early stages of the initiative, many countries perceived Chinese capital as free—or least low-cost—money. In reality, China often lent above market rates from concessional lenders, such as the World Bank, that had slowed lending because of their concerns about rising debt levels. In Pakistan, official interest rates (as set by the central bank) are upward of five percent on debt while some BRI projects are guaranteed returns of at least 30 percent.

[…] By contrast [to Western donor agencies], China’s refusal to require reasonable safeguards for its BRI projects has nourished authoritarianism, corruption, debt, and the pursuit of economically unsustainable or nonviable projects. As strong evidence has emerged of corruption in major investment projects, citizens in BRI countries have come to see China as both benefitting from and facilitating this corruption.

[…] Intellectuals, such as the Tsinghua University law professor Xu Xangrun, have also raised concerns about the perception that Beijing is promoting foreign aid ambition at the expense of domestic spending. Others, such as the political scientist Zheng Yongnian, have warned that the rhetoric around BRI is likely to make other countries fear that China is seeking hegemony. Still other Chinese analysts have criticized the lack of local standards covering everything from financial sustainability to environmental impact. Given the controlled media, it is possible that some of this public criticism of Xi’s signature foreign policy initiative may be a shadow critique of Xi himself. Ironically, the program intended to promote Chinese soft power is prompting an unprecedented level of domestic and international concern. [Source]

This rising tide of concerns has prompted discussions between Australia, the U.S., India, and Japan to establish their own joint regional infrastructure plan; Trump recently created a international development finance body that was primarily designed to counteract China’s investment projects. In particular, Europe is increasingly working to fend off potential undue influence. In September, EU High Representative for Foreign Affairs and Security Policy Federica Mogherini released the EU’s strategy for connecting Europe and Asia, which Erik Brattberg and Etienne Soula at the Carnegie Endowment for International Peace mark as Europe taking a “significant step toward a cohesive approach to the BRI.” Brattberg and Soula go on to describe how China’s investments are breaking up European unity, and how the EU is responding:

Some of these activities have provided China with a political foothold enabling it to influence EU policies. For example, in June 2017, Greece blocked an EU statement at the UN Human Rights Council criticizing its human rights record, the first time the union failed to make a joint statement at the UN’s top human rights body. In March 2017, Hungary refused to sign a joint letter denouncing the reported torture of detained lawyers in China, breaking EU consensus. And in July 2016, Hungary and Greece sought to block any direct reference to China in an EU statement about the ruling by the Permanent Court of Arbitration in The Hague that struck down its legal claims in the South China Sea.

[…] There are mixed feelings about the Belt and Road Initiative in Europe. The EU is growing more skeptical and apprehensive of China’s intentions and the way that some projects are being carried out. In April, all member states’ ambassadors to Beijing (except for Hungary’s) signed a statement saying that the BRI “runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.” Nevertheless, maintaining unity remains an exercise fraught with difficulties. Several member states—including first Hungary and more recently Greece—have broken rank and signed bilateral memorandums of understanding with China on BRI cooperation. And while other EU countries such as France, Germany, and to a certain extent the United Kingdom remain, or even grow more, skeptical of the initiative, Italy has gone the other way, with its new government recently stating its intention to be “China’s first G7 partner on belt and road” and promising to sign a cooperation deal by the end of 2018 that would include sectors such as railways, airlines, space, and culture.

[…] In contrast to the BRI, the initiative put forward by the EU seeks to establish a normative framework and rulebook for connectivity projects, with a strong emphasis on sustainability and respect for the rules-based international system. The principled dimension of the project is also apparent from its intention to be comprehensive, to embrace all aspects of development, and to put “people’s interests and rights . . . at the core of any policy.” Another area where the EU seems keen to distance itself from BRI methods is financing. While China is accused of conducting “debt-trap diplomacy” through stringent loan-repayment conditions, Brussels promotes multilateral arrangements that take debt sustainability into account, and resorts to both public and private funding mechanisms.

[…] The EU’s position on the BRI is also based on engagement with China rather than an attempt to isolate it. From the European perspective, the BRI has the potential to be hugely positive as long as it adheres to EU market rules as well as to international requirements and standards, and also complements EU policies and projects. In a recent speech before the European Parliament, Mogherini stated that “only if we engage together with China, we can make our interests, our goals and our vision on connectivity converge.” While the EU wants to distinguish its approach on connectivity from the BRI’s philosophy, it has also been careful to highlight possible synergies and complementarity. The official reaction from China to the EU’s new initiative has also been mostly positive. [Source]

More on China’s influence in Europe can be found in a two-part interview with MERICS scholars, and via a piece by Martin Hála on Chinese influence in , both from CDT.

A key element of the Belt and Road is the $62 billion China-Pakistan Economic Corridor (CPEC), which has long drawn criticisms due to its heightened security concerns, its traversing through the contested region of Kashmir, and fears of neocolonialism. Imran Khan, Pakistan’s recently elected prime minister, announced ahead of his upcoming state visit to Beijing that he wishes to “bring about a significant shift” in CPEC projects from infrastructure to agriculture, job creation, and . To address concerns that BRI may lose its footing without Pakistan, The Diplomat’s Shannon Tiezzi opines that Pakistan is looking for a new model of cooperation, not an end to it:

So reports that Pakistan wants to rethink the project have sparked a flurry of speculation that the Belt and Road is losing its shine even in capitals friendly to Beijing. The truth of the situation is more complicated: while Khan does want a major shift in the way CPEC is being conceptualized, he is still betting heavily on Chinese investment and aid to jumpstart Pakistan’s economy. While CPEC as Khan envisions it would require flexibility from Beijing, cooperation with Khan could actually lead to a BRI model that is both more sustainable for and more enticing to host governments around the world.

[…] The change in emphasis is a substantial one, though. CPEC to date has been almost entirely overshadowed by infrastructure projects. The government of Pakistan’s official CPEC website, which offers an overview of all CPEC projects to date, lists 15 “energy priority projects” worth over $21 billion and eight infrastructure projects (five roads and three railways) worth over $13 billion. That doesn’t include infrastructure projects linked to the development of Gwadar port and the surrounding area; port construction, along with a related expressway and international airport, will add another $520 million to CPEC.

By contrast, there are no projects listed that directly relate to Pakistan’s agriculture sector, a major priority for Khan, even though agricultural development is also pegged as a “key cooperation area” in the Long-Term Plan.

Along the same lines, Khan has indicated his interest in special economic zones (SEZs) that could “help the local industry grow, creating huge employment opportunities for the youth,” in Dawn’s words. As with agricultural cooperation, SEZs are already included in the CPEC blueprint, but have seen little concrete progress.

[…] The truth is that Khan – and other leaders in the region – are still very keen on securing access to Chinese money. Khan, for example, is going to China not only to discuss reshaping CPEC but to ask for foreign aid from China to help assuage Pakistan’s looming debt crisis. What’s new is a shift in prioritizing how that money is spent. Where infrastructure was once seen as a country’s ticket to development, now there’s more attention being paid to projects that lead to direct employment opportunities at home. If China can work with Pakistan and Imran Khan to make such a shift in CPEC, the BRI will only grow more attractive to potential partners. [Source]

Scholars are increasingly focusing on China’s use of “sharp power” as a medium of —a new report by Canada’s Macdonald Laurier Institute (MLI) discusses how to defend against this. In particular, Beijing’s influence had been hotly debated in Australia, which has again been thrown into debate earlier today as Victoria signed an MOU enlisting in BRI, making it the only Australian state to support the initiative. Canberra has also walked away from a free trade deal with Taipei after Beijing directly warned officials that it would adversely affect China-Australia ties. Fergus Hunter at the Sydney Morning Herald reports:

“The Chinese government made it clear to me that circumstances had changed between Taiwan and mainland China and that China would not look favourably on Australia seeking to pursue a free trade agreement with Taiwan, as had done some years ago,” Ms Bishop [former foreign minister] told Fairfax Media.

[…] In a statement, Trade Minister Simon Birmingham said: “Taiwan is an important economic partner and Australia’s eighth largest goods export market, however the government has no immediate plans to begin negotiations on a free trade agreement.”

Richard McGregor, a senior fellow at the Lowy Institute, said the retreat on an Australia-Taiwan agreement was “collateral damage” from the change in cross-strait relations since the 2016 election.

“Beijing’s response has been to squeeze and isolate Taiwan at every turn, and stop the island’s government from building closer ties around the world. Hence the pressure on Australia to back away from any FTA,” Mr McGregor said.

The Taiwanese economy is heavily reliant on China and Dr Tsai’s government has sought to reduce this exposure through strengthened ties with Asia-Pacific countries, including Australia. [Source]

Both Australia and New Zealand—the latter of which became the “first Western developed country” to become part of BRI in 2017—have been subject to increasingly pervasive Chinese influence that has extended to the political donations sphere. The most prominent example to come out of Australia was Sam Dastyari, whose ties to Chinese political donors ended his political career and spurred draft legislation limiting foreign political contributions. In New Zealand, Charlotte Graham-McLay reports that Wellington is also considering tightened campaign finance rules following news of political donations from a man with ties to the CCP:

The reported size of the donation, about $66,000, was large by New Zealand standards. But the cash, the lawmaker says, came with strings attached — a promise to add the names of two businessmen to a list of candidates for Parliament — and a plan to disguise the identity of the donor, a man with deep pockets and well-documented connections to the Chinese Communist Party.

[…] Jami Lee Ross, a member of the center-right National Party, accused the party’s leader, Simon Bridges, of fraud by trying to disguise a 100,000 New Zealand dollar donation as smaller, anonymous donations.

By law, the identities of contributors who donate less than 15,000 New Zealand dollars are allowed to remain anonymous.

[…] Mr. Zhang served in the People’s Liberation Army and headed a provincial consultative group for the Communist Party before emigrating to New Zealand in 2000. His “entire life is in the shadow of the Communist Party,” said Chen Weijian, a member of the pro-democracy group New Zealand Values Alliance.

[…] Mr. Zhang’s “positions and relationships” gave the Chinese Communist Party “leverage enabling it to ‘guide’ or simply expect individuals like Zhang to be aligned with the CCP’s policy goals,” said Mr. Martin. [Source]