Michael Kugelman. Asian Affairs. Volume 50, Issue 2. June 2019.

It’s not often that something like the Belt and Road Initiative (BRI), China’s globe-girdling infrastructure and trade corridor project, comes rumbling along. Indeed, BRI represents one of those rare watershed developments for international affairs—something so big and consequential that few corners of the globe, no matter how remote, can afford to ignore it. And that’s because BRI affects, whether directly or indirectly, nearly the entire world.

The scale alone is extraordinary—on both statistical and strategic levels.

BRI boasts the potential to involve more than 60 countries, nearly 4.5 billion people (about two thirds of the world’s population), up to $8 trillion, and around 40 per cent of the global economy. Estimates also peg it to be 12 times as large, in absolute dollar terms, as the Marshall Plan. What makes the scale even more striking is that it comes on top of ample preexisting Chinese investment around the world. According to American Enterprise Institute data, the value of Beijing’s total investments and contracts in Asia, Africa, and the Middle East between 2005 and 2012—the year before BRI was officially launched—comprised billions of dollars. This financing included $10 billion in Pakistan, $14 billion in Indonesia, $20 billion in Saudi Arabia, and $15 billion in Nigeria.

BRI also entails a rising power—perhaps the next superpower—endeavouring to build one of the biggest and most expensive super-projects the world has ever seen. If it achieves its potential, BRI could even pose a threat to the Bretton Woods global economic model that has prevailed since the end of World War II—one dominated by Western-led financial institutions such as the World Bank and International Monetary Fund. Indeed, BRI’s emergence has been accompanied by the establishment of a key new banking institution, the Beijing-based Asian Infrastructure Investment Bank, which counts China as its top contributor.

BRI has the potential to change the world in a big way. And yet, the project also confronts security and financial challenges that are as serious as its potential is soaring. In this regard, BRI is a topic ripe for serious examination.

This issue of Asian Affairs, which marks the second collaboration between the Royal Society of Asian Affairs and the Washington, DC-based Woodrow Wilson Center, features essays on BRI prepared by international researchers who have been tracking the project closely. The essays assess the project’s impact to this point across Asia, highlight its opportunities and challenges, and consider what might be in store in the future. These contributions were originally presented at a conference organized by the Royal Society and the Wilson Center, and hosted by King’s College in London, in January 2019.

Multiple Rationales, Multiple Routes

Beijing’s official motivation for BRI is purely economic: The Chinese government wishes to facilitate greater access to far-flung markets to feed its rapidly growing economy. This entails the robust pursuit of traditional infrastructure development—such as roads, rail lines, ports, and power projects—but also newer types of infrastructure. Under the BRI rubric, Beijing intends to oversee the development of cross-border fibre-optic projects and other modern telecommunications initiatives.

Despite Beijing’s stated emphasis on solely economic rationales, a likely unstated goal of BRI is to leverage investment to expand China’s influence and deepen an already-entrenched global footprint. Some critics have accused Beijing of seeking this influence through malign means, including “debt trap diplomacy,” whereby Chinese loans force indebted host countries to become dependent on Beijing. Such allegations intensified after Sri Lanka, unable to pay loans back to Beijing, signed an entire port over to China in the form of a 99-year lease in December 2017.

Additionally, BRI has sparked suspicion among Beijing’s rivals that the project may eventually include military components, such as basing facilities near BRI-financed ports. Djibouti, which hosts China’s only known overseas military base, is a major recipient of Chinese infrastructure funds. A 2017 Pentagon report on China’s military predicted that Beijing “likely will seek to establish additional military bases in countries with which it has longstanding, friendly relationships.” China has repeatedly denied rumours about a military component of BRI.

Predictably, BRI is a source of concern for the Trump Administration. The project represents one of the most concrete indications of Beijing’s growing presence around the world. This deepening Chinese global footprint is concerning to Washington because the Trump administration regards Beijing as its greatest strategic rival—and as a core national security concern as well. When the Trump White House released its first national security strategy in December 2017, that document described strategic rivalry, not terrorism, as America’s top national security threat.

While U.S. officials haven’t said so publicly, the Trump administration’s Indo-Pacific strategy, announced in 2018, is likely meant to be a response to BRI, and meant to serve as a counter to China’s BRI-fuelled activities. The Indo-Pacific strategy, much like the Obama administration’s Asia rebalance policy, aims to increase U.S resources, both economic and military, in Asia. It also promotes the principles of free trade, open seas, and a rules-based order for the region—thereby drawing a contrast with what Washington perceives to be the predatory lending and trade-unfriendly tactics that fuel BRI’s expansion. While some analysts believe U.S. officials exaggerate the negative implications of BRI—and overstate the idea of a China threat more broadly—the Trump administration is not known for espousing sanguine views about China, its policies, or its intentions.

Broadly speaking, BRI intends to feature two major pathways: A continental road that links China to Europe via South and Central Asia, and a sea corridor that connects China and Europe through the Indian Ocean. These routes entail BRI-related projects in Europe, Asia, Africa, and the Middle East.

Collectively, these two pathways include five envisioned routes: The New Eurasia Land Bridge, stretching from China’s Jiangsu province to the Dutch city of Rotterdam; a China-Mongolia-Russia trilateral economic corridor; a China-Central Asia-West Asia Corridor, linking China and the Arabian Peninsula; a China-Indochina Peninsula Economic Corridor—connected by land and sea—extending from China’s Pearl River Delta and Chinese rail routes into the ASEAN countries; and the China-Pakistan Economic Corridor (CPEC), connecting China’s Xinjiang province to the Gwadar port in southern Pakistan. CPEC is arguably the most operationalized of these routes, with China already having completed several new BRI-financed power projects in Pakistan.

A sixth envisioned project, the Bangladesh-China-India-Myanmar Economic Corridor, will face difficulties being absorbed into the BRI rubric because India—China’s regional rival—has expressed serious misgivings about BRI. New Delhi has expressed its formal opposition to CPEC, citing Chinese investment projects in Pakistan that extend into disputed territory claimed by India.

Very Real Risks

Supporters of BRI, including countries like Pakistan with close ties to Beijing, emphasize the project’s potential advantages: Better infrastructure in poorly integrated regions; more electricity generation in energy-insecure areas; new local employment opportunities generated by upsurges in Chinese development projects; and overall the ability to bring more prosperity and stability to troubled parts of the world. It’s hard to oppose results like these.

However, major obstacles threaten the emergence of these positive outcomes. One is security. BRI is envisioned to pass through some of the world’s most unstable regions. While some volatile countries along the BRI route—such as Pakistan—have enjoyed security improvements in recent years, several others on or near BRI’s various pathways—including Iraq, Syria, and Afghanistan—are dangerously unstable or at war. To be sure, Beijing has demonstrated a willingness to tolerate large amounts of risk in its foreign investments; in past years it has made agricultural and infrastructure investments in volatile African nations, including South Sudan and the Democratic Republic of Congo. Still, China will struggle to build out BRI in areas mired in conflict or where terrorists hold sway.

Another risk is water shortage. Many areas of South Asia and the Middle East are dangerously water-insecure. Pakistan has one of the lowest rates of per capita water availability in the world. And yet it is in Pakistan where China is engaging in some of its most intensive infrastructure development—a pursuit that requires ample quantities of water. One of BRI’s signature projects—the development of the Gwadar port—is taking place in the bone-dry province of Baluchistan. Today, Gwadar’s water supply is largely dependent on tankers that truck supplies in from a dam nearly 100 miles away—clearly not a sustainable solution to water insecurity.

The biggest risk for BRI is financial: The very real possibility that host countries will be unable to pay loans back to Beijing. A 2018 study by the Center for Global Development (CGD), using criteria such as a country’s public debt-to-GDP ratio and the concentration of that debt with China as creditor, identified 23 countries judged to be at high risk of “debt distress” from additional BRI-related financing. These nations are quite geographically dispersed, with 10 from Asia, seven from the Middle East and Africa, and six from Europe and Eurasia. Eight of these countries are singled out for being of particular concern.

These eight particularly at-risk nations include Djibouti—a nation with public external debt that constitutes a whopping 85 per cent of GDP, with much of this debt owed to China Exim Bank. Another, Montenegro, has a projected debt-to-GDP ration of 83 per cent, with much of this debt emanating from a large motorway project mostly funded by Exim Bank. The list of eight is rounded out by Asian countries, including, significantly, Pakistan. CGD notes the possibility of future Pakistani public debt ratios of 70 per cent, and it flags reports that Beijing is charging Islamabad interest rates that are twice as high as those assigned to other countries.

Ominously for Beijing, several countries, fearing financial risks, have backed out of some of their BRI commitments to China. Most famously, in 2018, Malaysia’s new government—riding an anti-corruption wave that helped catapult it to power—cancelled $20 billion in China-funded projects. Also, over the last year, Bangladesh and Myanmar, among others, have walked back or renegotiated earlier commitments to China, citing prohibitive costs.

Whither BRI?

In sum, BRI is flush with potential, and burdened with risk. And yet, despite generating banner headlines and attracting ample attention from policymakers, there’s also much that’s not known about the initiative. China, being the authoritarian state that it is, does not make much information about the project publicly available. The contracts and other legal agreements governing the financing aspects of BRI are highly opaque.

The lack of information about BRI complicates efforts to forecast its fate. Will Beijing manage to work around the challenges of security and natural resource constraints? Will it renegotiate loans with host nations to make the project more financially viable? Will it push ahead in the event of sustained financial risks, or will it pull the plug on the project? These are difficult questions at this point.

With the passage of time, more clarity may emerge. After all, BRI is still a relatively young initiative. For now, however, the project should be seen for what it is: A big, flashy, once-in-a-generation phenomenon that could chart new heights and have a transformative impact on international affairs—or come crashing down to earth, a flash in the pan done in by outsize expectations and insurmountable obstacles.