To access part I of the BRI Series: The Hosts’ Perspective: Realpolitik of Compulsion over Choice for BRI
With the catastrophic impact still unfolding a year after the first wave of infections, we can only estimate the ‘gargantuan’ impact that such an “anthropogenic” calamity is bound to have on the geopolitics of the day. The fallout from Covid-19 underscores the crisis of credibility and capability for the present-day order.
The West-led “Idealist” model of governance built on collaboration and cooperation has collapsed and has resulted in bitter struggles of power, de-globalization, and political and economic warfare. The pandemic is no less momentous than the post-world war years in terms of loss of life and capital and yet the present leadership has squandered the task at hand. The well-established Social Contract between the ‘Developed North’ and ‘Underdeveloped South’ has been breached and the ‘Commonwealth’ has no other option but to discard the ‘Leviathan’. As, Thomas Hobbes, the pioneer of Social Contract remarked, “covenants, without the sword, are but words” because at the end, a toothless sovereign is not better than none.
Plutocratic world order: All for All
One way or the other, the multilateral organizations have failed and this has intensified the debate on the utility of bilateral agreements over multilateral ones. At least the bilateral ones are not masked in the moral hypocrisy of the powerful few. The de-humanizing side of the world order is evident in the ‘developed’ west dragging its feet on the proposal of India and South Africa for a timely waiver of certain Intellectual Property Rights over Covid vaccines, drugs, and therapeutics.
Despite the affirmative news from the USA and European Union, Germany’s lackluster response to it highlights that any positive development on this front is months away. This attempt to protect a patent regime that safeguards the interests of a ‘Godly’ syndicate of Pharma giants, in these exceptional circumstances is nothing short of Plutocracy.
Further, the domino effect induced by the rampant spread of the virus has unmasked the promises of global citizenry and the unfortunate reality is that of ‘all against all’.
In lieu of the failed West, any helping hand is more than welcome, including China. In a race for survival, the incumbent political class of the world is ready to disassociate the politics of power from the economic and commercial opportunities that can be easily accessed through the Belt and Road Initiative (BRI). Therefore, a self-centered fight against the pandemic and the cruel realization that the virus is here to stay have, enabled China to steer clear of the mishandling of the virus to become a partner in fighting it. China’s increasing role and weight in the world not only promises immediate relief but also a financial rebound for the severely mutilated economies. Though concerns of economic coercion and fiscal sustainability have taken a toll on the credibility of the Chinese mega scheme of BRI but still, the diabolical world order of the day has given a new lease of life to it.
From Nurturing Pandemic within borders to developing solutions: China’s Perspective
The origin of a virus that has effectively killed millions of people should not remain a mystery but here we are. The WHO-appointed independent panel sadly misses its objective in scrutinizing the role of China and effectively puts the onus away from China onto the world by pointing that the cause of failure is the absence of a “forceful and immediate responses in most countries” in the month of February 2020.
The biggest tragedy is not the great debacle of the World Health Organisation which was supposed to be the first line of defense but the combined moral degradation of the world which even after a year after has not been able to push back against the rogue elements for a transparent inquiry into the pandemic.
So truth be told, the quest for the origin of the pandemic at the moment far overshadows the immediate loss of lives for the majority of the world. From the initial nationalistic fervors of holding China to account for its innumerable lapses in the forms of censoring information on the virus to understating its impact, the Chinese party-state seems to have turned over the tide and now the question of the day is on the recurrence of the catastrophic waves of infections across the globe.
In line with its “wolf-warrior diplomacy”, two distinct aspects of China’s soft power offensive in the times have been:-
Celebrating the success of controlling the internal covid-19 outbreak. Though in a highly censored media, the optics of the Chinese state creating hospitals and other infrastructure swiftly were often used to convey the supremacy of the Chinese way. Xi labeled it as the “people’s war” and the Ministry of Foreign Affairs was quick to convey that it set an ‘example’ for the world and it was ready to “actively share its experiences in prevention, control, and treatment of the epidemic”
The second aspect has been its assistance to other nations in form of medical aids, financial and human resources. Though, the majority of it has been transactional and often clouded with allegations of sub-standard pieces of equipment. Nonetheless, ‘a drowning man will clutch at a straw’. China has effectively tried to incorporate its mostly transactional and purely business aid as a mark of responsibility on its part, and that too when others squandered.
To be fair, the fight against Covid is far from over. Yet, the frustrated gentry is as disappointed as it was with the state of affairs a year back. The abject certainty is that none of the states have been able to tidy up things completely and have witnessed the recurrence of virus at unprecedented levels. It is crystal clear that no one is going to fight others’ battles and that too when the West is inherently hoarding more than just vaccines.
With much to lose and little to gain from creating a wedge, the nations are again tilting towards China. After all, the political incumbents across the globe are well aware that the failure to control the pandemic will result in their ouster. This threat of domestic political consequences looms high in their mind and consequently to stay in power they have to act fast and smart, not necessarily virtuous.
BRI, an Oasis at risk: Pre-Pandemic
The highly ambitious Belt and Road Initiative (BRI) as the signature project of President Xi has been at the center of the Chinese foreign policy since its inception in 2013. Despite being a multi-billion dollar scheme with legible infrastructural developments and interests by the stakeholders, the scheme appears to be a covert case of “Pump and dump”. The ever-changing goalposts of the scheme with numerous structural fallacies that converted into tangible debt traps, militarization of infrastructural developments amid economic coercion have raised eyebrows on the sustainability of the project. Even before the pandemic, it appeared that more or less, China-powered and funded mission will soon hit a snag. The manifold increase in non-performing assets under the project has intensified the Covid induced financial stress with many of the recipient nations receiving a cold shoulder on requests of immediate debt relief. While local resistance to the increasing influence of Chinese partners in several host nations of BRI was becoming a feature, the balloon of unsustainable lending for BRI primarily by the government policy banks, state-owned banks, and the sovereign wealth funds of China was already pulling the declining economic growth rates of China and it appeared that the end was near.
Refashioned BRI: In light of a Post-Pandemic order
But the Complacency of the West and infighting of the rest have provided a new lease of life to BRI. BRI projects sensing the mood went into hibernation in the summer of 2020 and returned to the scene with a new approach. Will this be the BRI 3.0?
The Chinese leadership is well aware that the failure of BRI in terms of ‘return of investment’ for the state will lead to questions, though it is true that the Communist Party doesn’t care for international approval on this, still it cannot jeopardize the domestic support. The 19th National Congress CPC session in 2017 has made it clear that Xi is here to stay and Xi and his pet project symbolizes the “Chinese Dream”.
To mitigate the fast-approaching scrutiny, Beijing’s official acknowledgment was that of a temporary and limited impact on the BRI. Very soon, the unmasking of the global supply chain presented a supply chain dominated by China, which China effectively used to push its “mask diplomacy” on the agenda. In fact, Foreign Minister Wang Yi promised a “Health Silk Road” and opined that “By aiming for high-standard, people-centered and sustainable progress, we will make the Belt and Road a model of development, cooperation, and health for all involved.”
It is now evident that in the coming times, the developing countries are bound to suffer huge economic losses. Thus, putting more pressure on already distraught economies who will resort to vying for potential investment and BRI again, due to lack of mistrust on Western aid and absence of a substantive alternative will be the front runner.
So, China from its earlier approach of Wholesale Social Engineering which reflected its obsession with overnight complete changes as evident with its past revolutions in the domestic sphere has shifted to a Piecemeal Social Engineering model. Under this, China is departing from its ‘one-size-fits -all’ approach to a more sophisticated approach of establishing successful models and then marketing it on the promise of replicating it, of which the China–Pakistan Economic Corridor (CPEC) is the first choice. CPEC for the past year has been the axis of discussions on BRI.
China seems to have learned the lesson that unilaterally financing unsustainable projects only leads to cases of corruption, bankruptcies, and a bad name. The increasing realization in the host nations about the ever-increasing non-performing assets with Sri Lanka’s Hambantota port being a prime example is something that China wants to counter because as per the data from the Organization for Economic Co-operation and Development (OECD), as of Q2 – 2018, China’s non-performing assets (NPA) across BRI projects have exceeded $101.8 billion.
To preserve this symbol of China’s emergence, China is not interested in initiating new projects under BRI because it would lead to inescapable questions on re-financing or re-negotiating the terms of credit. Ghana which was the first in Africa to overtly seek a debt-relief package has initiated discussions on similar lines in the African Continent, followed by South Asian partners such as Maldives for deferred payments. In absence of a coherent implementation strategy and financial discipline, the Chinese state is faced with no other option but to halt the ‘funding bonanza’.
China is not at ease because it not only has to posture itself as a superpower at the world at large but also it has to cut back on its most prized asset to focus on its domestic development to escape the middle-income trap.
Regardless of its earlier benevolence of building anything build-able in the host nations, China will take its sweet time to analyze the short term impact of the project. For China, the systematic underreporting of its credit and the dubious lending for BRI mainly by its state-sponsored institutes has created a “hidden debt” problem under which it is more likely to face a “Creditor’s trap”. The absence of an official document enlisting the lending is both a boon and a bane for China, on one hand, it accentuates the ‘image problem’ of China which as per Harvard Business Review is supposed to be the world’s largest official creditor with the Chinese state and its subsidiaries lending about $1.5 trillion in loans and trade credits to more than 150 countries around the globe which easily surpasses the traditional lenders such as the World Bank, the IMF, or all OECD creditor governments combined. But, on the other hand, international institutions don’t have a complete picture of how much countries around the world actually owe China and worst of all, under which terms or conditions. For ensuring political and social stability in the mainland, China can effectively use economic coercion for the settlement of the outstanding dues. It is obvious that in the coming time, many of the BRI projects financed under the lending upswing will fail, there will be cases of bankruptcies and insolvencies, what really worries is the question, who foots the bills?
Will China get its return of investment is a matter of concern because for Xi to engage in a grand scheme with not much to show will not only damage his standing in the domestic audience but also encourage them to rethink their support to the 19th National Congress CPC session in 2017 which reversed the time tested system of succession between the ‘power elites’ by not having a “successor-in-training”. Xi will need more than soft power push and add-on narrative to maintain his image.
For President Xi and his domestic audience, the show must go on
Politics for the Communist party is all about optics, to not only establish but also effectively censor a state as big as China is no less a wonder, and that too when the Chinese Diaspora is one of the largest and too well ingrained in the liberal democratic order outside China.
The Party not only has to worry about fresh challenges stemming in the domestic politics but also ensure that the Chinese state-society equilibrium is well in place and running. For China, it is not afraid to lose friends in the realm of international politics but what worries it, is the potential de-legitimization of the ‘opaque’ Chinese state in Chinese society. Its wolf-warrior diplomacy especially with Australia over the recent fallout from BRI has made it evidently clear that at the moment, it is least bothered to lose a few friends in comparison to a ‘silently’ brewing internal crisis. After all, there are no permanent friends or permanent enemies in international politics; it is all a transaction, based on certain calculations.
For China, at the moment, power is much like economics and what it has to do is just maintain or manipulate the demand-supply equilibrium in its favor. In the end, “might is right” and China is well aware that you necessarily don’t have to be powerful; you just have to look like one.
(Samanvay Pandey is a Research Intern at Chennai Centre for China Studies. He is an Undergraduate student of Political Science at Hindu College, University of Delhi. His areas of interests include Geopolitics & Strategy, Defence & Security and China’s Foreign Policy. The views expressed are personal)