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The Hosts’ Perspective: Realpolitik of Compulsion over Choice for BRI ; By Samanvay Pandey

Image Courtesy: Wikimedia Commons

Article 02/2021

The Belt and Road Initiative (BRI) has always been a two-edged sword, with participation from the powerful quarters of the world to the hostile authoritarian closed countries. It has indeed formulated a ‘heterogeneous order’ based on the aspirations of the developing world for upward mobility to bypass the binary contradictions of the ‘Developed North’ and the ‘Under-Developed South’ whereas for China the venture promises a global recognition.

As of March 2020, 138 Countries have joined the BRI by signing a Memorandum of Understanding (MoU) with China. This includes 38 countries from the Sub-Saharan African Region, 34 countries from Europe & Central Asia (including 18 countries of the European Union), 25 countries from East Asia & Pacific region, 17 countries from the Middle East & North African region, 18 countries from the Latin America & Caribbean region and the remaining 6 countries from South East Asia. As per the World Bank classification, only 33 participating countries belong to the High-Income group and out of the remaining, 40 countries belong to the Upper-Middle-Income group, 40 countries to the Lower-Middle-Income group, and 25 to the Low-Income group.

The participants of BRI have been walking a tightrope oscillating between the possibility of success and risk of failure. So, with all the hesitations, doubts, and non-participation of some of the largest economies including the likes of the United States and India despite the high-levels of persuasion and temptations, it becomes clear that the host nations were aware of the possible dangers associated with the BRI and their reason for participation at the first place throws light on the larger political and economic maneuver of China in wake of the inherent limitations of the host nations. With much to lose, devoid of any help and no alternative in sight, BRI promised so much; therefore it was a risk which at that moment had to be taken.

To comprehensively understand the mobilization behind this grand scheme, we need to decipher the applicability of the scheme with regard to the pre-BRI scenario, its enabling structure, and the subsequent prospect of benefits.

  1. The pre-BRI situation: Grim realities

The world at large was optimistic about growth picking up yet cautious enough to not invest whereas China building upon its decades of high economic growth and political stability was becoming aggressive under the new head – Xi Jinping. The successful organization of the Summer Olympics 2008 among other things was living up to the hype of ‘China Dream’. The world had scarce resources and even scarcer intent to explore the untapped regions and China at large enjoyed a positive image, a success story to be emulated and a keen advocate of multilateralism. Precisely, three important factors shaped the initial discourse.

  1. China’s beguile through currency

The underlying reason for the appeal of BRI in terms of its acceptance among nations is that China has aroused their nationalistic fervors and struck the right chord by appealing to its ability to invest while also highlighting the inability of the other developed half. The China model appealed to the local populace as well as the broader political consensus, it capitalized on its deep pockets, and to be fair, the regions it specifically targeted were more or less non-existent or under-tapped in the global supply chains. China was very flexible in terms of its appeal, as for the rich, it promised seamless growth and opportunities whereas for the impoverished, it promised a bridge to development. It was as if China was offering a ‘free buffet’ which hardly anyone would have thought of refusing.

  1. Host countries’ domestic woes

The inherent insecurity of failing to achieve the desired economic growth coupled with a realistic appraisal of the ‘unconditional’ investment, it was obvious for the already struggling economies to take a chance with this grand strategy. Indeed, a fair assessment of the financial status of the member nations of BRI and their suitability for foreign investment highlights that most of them donned a negative or worse outlook. For instance, Pakistan has a B3 negative rating from Moody’s Investors Service yet it has received the maximum funding under the BRI for its CPEC project which is likely to reach in excess of $60 billion by the time it is finished, equivalent to about 20% of Pakistan’s nominal GDP in 2020.

  1. Hesitation of the ‘West’ and absence of any ‘reasonable’ alternative

Undoubtedly, the hesitation to invest and engage in the developing world was partly responsible for pushing them to China in the first place and China’s hegemonic plans have been covertly or overtly aided by the reluctance of the West to act in a world order that is inherently accustomed to suit West. Further, it was a well-established fact that the institutions of yesteryears were no longer effective in supporting the infrastructural requirements of the developing countries yet the frustration regarding the ‘Bretton woods system’ was time and again sidelined. The other emerging centers of power were busy in setting their house in order with little or no space for overseas adventurism.

A major impetus to this calling was given by the fact that the USA despite being skeptical of the initiative wasn’t overtly cautioning against it. Instead, China and the USA shared cordial economic if not overall relations with bilateral trade witnessing exponential growth and China muscle-flexing in the South China Sea against visible yet comparatively softer USA’s policy of Taiwan.  Amidst all the rhetoric, there was hope that China unlike its socialist predecessors would enjoy better terms with the capitalist US. So, BRI for them wasn’t about picking sides but a lucrative option to benefit from both.

  1. The Structural ‘incapacities’ of BRI

Despite the fact that the BRI was a brainchild of the president and a central feature of the Chinese foreign policy; there was a daunting level of ambiguity regarding the ‘means and end’ of the grand project from the very beginning.  The project metaphorically and literally promised everything that any aspiring nation would have dreamt of. Further, this lack of information was detrimental in executing deals with politically unstable regimes with a lot of things passing under the table. To this day, there isn’t a comprehensive official record enlisting the projects executed under the BRI with the capital involved. This ambiguity allowed the hosts to deliberate and formulate country-specific terms with little or no accountability and transparency adding to the delight of the communist regime infamous for the same. It was as if the Chinese model was getting repackaged and rebranded for global markets.

Multilateralism and Development have indeed become a ‘plastic term’; they can be attached to anything to provide it a positive outlook. As pointed out earlier, the financial profile of the host countries wasn’t suitable to receive such an investment, and adding to that their poor performance on democratic and human rights indicator with high levels of authoritarian characteristics and subsequent political instability pointed to the bigger political ploy to thwart the progressive democratic transition and weaken the ‘sanction diplomacy’.  A multilateral institution imbibed on principles of development comprising majorly the authoritarian regimes among others was a win-win situation for both China and the host countries. The present-day decay of the multilateral institutions including the United Nations Human Rights Council (UNHRC) highlights the glaring power of such groupings to not only bypass the scrutiny but also to gain prominent positions.

It is visible that this grouping transcends the theories of ‘Sphere of Influence’ to essentially establish an overseas military presence in a sustained manner. Time and again, China through official dialogues and declarations has reiterated that it is indeed looking forward to an overseas presence through a comprehensive security mechanism structured on the lines of BRI. The establishment of Djibouti as a fully functional dual-use overseas base in 2017 underscores its ambitions. It is not an exaggeration to believe that such a presence would be crucial for the politically volatile host nations in consolidating a favorable political consensus.

  1. The prospect of transcending benefits

The developing world is at a crucial juncture, their role on the world stage is getting redefined and their impressive progress in the realms of economic development, governance, and technological innovations is creating new opportunities or challenges with regard to a significant infrastructural gap, urbanization, pollution, and climate change. These require massive investments not only in terms of capital but also knowledge exchanges through the transfer of technology and it is a well-known fact that these are indeed a herculean task.

So, BRI not only appealed through the unsolicited capital but also promised a decentralization of technology. Undoubtedly, the Chinese had their conditions but the biggest relief for some was that they need not be a democracy, to begin with. For nations devoid of economic ammunition and muscle to pull itself out of the fast-approaching financial crises, the Chinese banks promised a ray of hope. Though they weren’t the first choice but the others were simply unwilling. To that end, China was their only option and they were aware that ‘nothing comes from nothing’ and for BRI to have strategic objectives was nothing unusual. The geo-economic and geo-political risks were negated for the prospects of multi-billion economic corridors stretching across the world.

The BRI transport infrastructure is believed to significantly increase the GDP of the participating nations. In case of absence of a direct correlation between foreign trade and investment, the spillover effect of the investment on a common infrastructure is going to positively impact the accessibility and cost of transportation. The tremendous size and scope of the untapped potential of the participating regions are well evident through the gap between the potential and the actual figures as estimated by the 2019 World Bank Report titled “Belt and Road Economics” in the BRI corridor economies for trade being 30 percent below potential and FDI being 70 percent below potential.

It is in these grim realities that it is widely believed that the BRI projects can bridge the gap by expanding trade, stimulating foreign investment, and improving living standards by reducing poverty. The complementary policy reforms and technological interventions promised a leap. However, the result has been skewed and heterogeneous.

The cash for BRI has been a piece of cake; the Chinese banks which are effectively state-owned have become the highest cross-border lender with BRI being the single largest receiver. The China Development Bank and the Export-Import Bank of China being at the forefront of BRI dominate the ‘development’ lending over global institutions like the World Bank and Asian Development Bank. From a distant third position in international lending in 2008, the Chinese banks now dominate the international market. Thanks to their huge balance sheets and state support, they are flooding the world with high-risk investments by disregarding the financial, political, and environmental ramifications. Adding to this, the issue of ‘hidden debt’ by the Chinese state and its banks point to the off-radar lending among other financial irregularities to increase the appeal of the BRI.

BRI, a road to redemption or a China Dream success story?

For the developing world, it is not only a grand scheme ushering in an era of sophisticated interconnectedness and subsequent economic prosperity but also a roadmap for ‘redemption’. The developing world sees it as a chance to redeem themselves and overcome their domestic woes to outshine their competitors. Contrary to the merry prepositions, BRI is much more than a collaborative ecosystem of development but a grand project destined to emulate the success story of the China Dream.

Central to China’s “National Rejuvenation”, BRI is China’s ‘global brand’ and a personal creation of Xi. For it, to slowdown is a failure for the Chinese signature. Through BRI China has been effectively trying to mask its external dependencies for the continuous growth of the mighty Chinese ‘empire’ and any lack of participation or pessimism regarding it are bound to be countered by the Chinese ‘wolf-warrior’ diplomacy. It is a Chinese investment that will someday or the other have its way. Considering the fact that the majority of the participating members have week fiscal positions, underdeveloped financial apparatus, and are junk rated, ‘Debt-trap diplomacy’ is very much a reality.

So, BRI for the obvious reasons is not really a ‘win-win’ platform but a relationship established on appealing yet unequal terms with ramifications for the whole world. Unlike the Chinese prophecies, BRI is not a ‘harbinger of change’ in the dawn of an equitable multilateral international order instead the stark reality has been the cruel realization of the ‘Chinese Dream’ of a “Sino-centric world order”. The naked reality is that if something Chinese seems too good to be true, it probably isn’t.

(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)

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