The Costs of the Belt and Road Initiative

’s Belt and Road Initiative, a trillion dollar-plus global trade and development program that was unveiled in 2013 and enshrined into the Party constitution in 2017, has attracted both international excitement and concern. While Beijing touts the plan as a “win-win” for global trade and cooperative economic growth that will usher in a new era of globalization, the massively ambitious initiative has also raised a host of concerns over its aim to expand Beijing’s global military and political influence, country-specific security issues, and looming debt traps that could arise from BRI deals. At The Atlantic, Chris Horton looks to the port city of Sihanoukville, Cambodia (known as Xigang in Chinese), a key Belt and Road outpost, as an example of the economic, social, and environmental costs and risks that come with deepening ties to Beijing through the BRI:

Many Cambodians I spoke with voiced concerns about Sihanoukville turning into a de facto Chinese colony, and the consensus was that they were being treated like second-class citizens in their own homeland. At one restaurant, when I told a Cambodian employee that I was visiting from Taiwan, he referenced the opposition in other locales where Beijing has sought to impose its will. “Taiwan says no to China, Hong Kong says no to China,” he told me, “but Hun Sen only says yes to China.”

There are roughly as many Chinese as Cambodians in downtown Sihanoukville, perhaps more, and this sudden influx has sent the cost of living skyward. Small, basic rooms that had a few years earlier rented for $25 a month now rent for four times as much in a country where the monthly minimum wage in the garment sector, a key export industry, is just $190. Vegetables, once cheap, are now prohibitively expensive—one roadside restaurant I stopped at charged $8 for a small plate of stir-fried broccoli. Yet few Cambodians appear to have benefited from this economic boom. […]

[…] One of the biggest changes in recent years is the boom in casinos. In Cambodia’s capital, Phnom Penh, NagaCorp holds a monopoly on casino gambling—which is forbidden for Cambodians. But in Sihanoukville, regulations are lax and oversight nearly nonexistent. Around Sihanoukville, casino developments aimed at Chinese—prohibited from casino gambling at home—are being built by Chinese companies with Chinese labor. The irony is stark: Companies beholden to the same Communist Party that forbids Chinese from casino gambling in China are building casinos for Chinese tourists in Cambodia. A year ago, there were 88 casinos in operation, many of them open 24/7, offering shuttle vans for the difficult task of navigating the city’s cratered streets. (The announcement that Cambodia would eliminate the booming online-gaming sector by the end of 2019 sparked an exodus of Chinese, with estimates in the tens of thousands leaving.)

Safety is also an issue: As Chinese investment has surged, public safety has deteriorated. […] [Source]

While Beijing has made environmental sustainability and “greening” a major theme in its promotion of the BRI over the last two years, the environmental cost of relevant energy projects–many of them coal-fueled–have led some analysts to wonder if greenwashing is at play. At The South China Morning Post, a group of international economics, environment, and business academics look at the potential environmental impact of the BRI in Southeast Asia:

The region is a global biodiversity hotspot and home to numerous threatened species not found anywhere else in the world including charismatic megafauna such as tigers and Asian elephants.

But much of China’s belt and road investment in Southeast Asia have come in the form of fossil fuel projects or natural resource extraction – both of which are likely to cause habitat loss, threaten wildlife and increase pollution.

[…] Between 2014 and 2017, fossil fuel investments accounted for 91 per cent of energy-sector syndicated loans by the six major Chinese banks and 61 per cent of energy-sector loans financed entirely by the state-backed China Development Bank or China Exim bank, according to one study.

[…] A number of recent studies have identified some of the potential environmental impacts attached to belt and road developments, especially in relation to biodiversity. […] [Source]

Last month at Sierra, the Sierra Club’s national magazine, Mike Ives also warned of the drastic environmental threat of BRI infrastructure projects, using a project in an already threatened Malaysian island as a case study:

The park is a small part of what scientists say may be the most ecologically interesting complex of wetlands in Malaysia—one that has faced severe environmental threats for much of Tengku’s adulthood. For decades, the Setiu District has experienced a steady encroachment of palm-oil plantations and sand-mining operations as well as upstream logging in the highlands that lie inland from the swamp. All that development has created profits for Malaysian conglomerates and jobs for local workers but has strained the hydrological systems that regulate the delicate balance of fresh and salty water in Setiu’s lagoon and estuaries. It has also fueled erosion, both in upstream forests and along a wide sandbar that separates the lagoon from the sea.

Now comes a new threat: a 400-mile, cross-country railroad financed by the Chinese government that is scheduled to cut through Setiu. Biologists say that the railroad would likely disrupt the waters that flow from the mountains into the lagoon—in the process potentially pushing the wetlands toward their ecological breaking point. Changes in salinity could kill freshwater flora and fauna, they say, while the reduced water flow could exacerbate erosion on the sandbar, allowing the South China Sea to overwhelm the lagoon.

The multibillion-dollar project, known as the East Coast Rail Link, is one of many that fall within China’s Belt and Road Initiative, a colonial-style endeavor that links infrastructure loans with geostrategic diplomacy. […] [Source]

In a Q&A at the Carnegie Endowment for International Peace, the Mercator Institute for China Studies’ Matt Ferchen explains how China’s BRI represents Beijing’s major global push of its alternative vision for international development, one that relies less on aid than on “win-win” economic partnerships. After outlining the differences between the prevailing Western model and China’s innovation as seen through the BRI, Ferchen outlines the inherent risks of the new model:

The debate about China’s model of development and its impact has tended to focus on China’s state-led capitalist approach to foreign economic policy, in which the state, not private enterprises and banks, makes business decisions and controls production.

But in some cases, an altogether different aspect of the “China model” of development has been even more disruptive. In China’s freewheeling, Wild-West version of capitalism, risk-tolerance and rule-dodging can often be sky high. In other parts of Asia especially, the activities of Chinese property speculators, commodity traders (trafficking in goods like jade or teak or methamphetamines), and illicit online gambling dens have been equally or more difficult to track and regulate than any Chinese state-owned enterprise. Coming up with regulatory and policy solutions to this problem is an urgent task for China and many of its neighbors.

[…] The big question is, who is learning what from these processes? Host countries, China, the United States, and other stakeholders with an interest in these issues need to share lessons learned and best practices. And governments, businesses, civil society organizations, and researchers in different parts of the world that are engaged with China’s international development ambitions should all be talking more with one another. [Source]

At Yahoo Finance, Aarthi Swaminathan looks at the United States’ response to the BRI, the creation of the U.S. International Development Finance Corporation (DFC), a taxpayer-funded development agency offering international private sector funding:

“The Belt and Road has really turned into a major focal point for the U.S.,” Andrew Small, senior transatlantic fellow on the Asia program at the German Marshall Fund of the United States, told Yahoo Finance. “The problem has been that [U.S. agencies] haven’t really had the means to mobilize resources to compete.”

[…] Responding to growing criticism over the BRI, Commerce Secretary Wilbur Ross confirmed in early November that the U.S. will invest and trade more in Asia in an attempt to counter the project. Ross also laid out an initiative called the “Blue Dot Network” which would essentially “evaluate and certify nominated infrastructure projects” based on commonly accepted standards. That move aims to address concerns about the sustainability of China’s projects.

The same week, DFC’s predecessor, Overseas Private Investment Corporation’s (OPIC) announced a new plan to work with Trans Pacific Network to build the “world’s longest subsea telecommunications cable” spanning the Indo-Pacific region. That project appears to be taking on Chinese tech giant Huawei, which is doing something similar as part of the “digital silk road.”

[…] “In many ways, you can think of us as an investment bank,” [OPIC COO Edward] Burrier said. “We make investment decisions, we look at the credit and the ability to repay the loans … we’ve made money across our portfolio on an annual basis.” [Source]


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