Belt And Road Initiative – China’s Economic Tool For Global Political Colonisation

Between 1985 and 1996, the economy of Thailand grew at a healthy annual average rate of 9 per cent. Inflation in these years, at any point, did not exceed 5.7 per cent. Around May 1997, the Thai currency fell victim to a series of speculative attacks. Refusing to devalue the currency, the Thai leadership witnessed a tremendous fall of its economy, setting off a chain reaction that encompassed the entire region, and is today known as the 1997 Asian Financial Crisis.

Eventually, the International Monetary Fund (IMF) issued a bailout programme for Thailand. It came with a series of conditions including higher taxes, fiscal discipline, and shutting down of financial institutions which had made poor investment choices.

The conditions were termed harsh by the Thai leadership, but they had no option but to accept them. The United States (US), which had bailed out Mexico in 1995 under a similar economic atmosphere, refused to do the same for Thailand – a lesson that proved critical to China’s global ambitions 15 years later.

The New Global Order

The post-1945 liberal order is beginning to rust. US President Donald Trump’s “America first” ideology, trade sanctions, and resulting tariff wars with China and Europe, and the inward-looking philosophy have left the position of a new global leader wide vacant. The Chinese are already making a case for themselves.

Today, China is replicating the Marshall Plan across Africa, South Asia (Myanmar, Sri Lanka, Pakistan), Latin America, and Europe. Unlike the US, which helped countries decimated between 1939 and 1945 and to keep them at bay from the communist umbrella of the Union of Soviet Socialist Republics (USSR), China derives its motivation for economic charity from the idea of political consolidation the world over.

Evoking the Silk Route past to give the Belt and Road Initiative (BRI) a historical flavour, the Chinese have been using the rhetoric of development to affirm and reaffirm its viability. South America, South Asia, Europe, and Africa, with their relatively younger populations, infrastructural deficiency, open market, and potential for development, have been on the Chinese radar since the launch of the BRI in 2013.

The world order from the beginning of 1945 was dominated by the economic powers of the West, led by the US. Institutions like the International Energy Agency, a group of world’s leading oil-consuming nations, which don’t include China and India, the world’s first and third-biggest consumers, are examples of how the West-led liberal order continues to ignore the economic realities of today.

The Coming of the ‘Belt and Road Initiative’

The initiative began with the launch of the Asian Infrastructure Investment Bank (AIIB), whose aim is to fill in for the multi-trillion-dollar deficit in developing nations to assist them with their infrastructure needs. Unlike the IMF, the loans from the bank come without the intricate terms and conditions of the IMF on fiscal, monetary, social, economic, or environmental policies. The AIIB, in China’s view, aims to be a far more accessible alternative to the IMF and other multilateral lending institutions of the West. Money is the foundation of China’s ‘Sinocentric global order’.

Interestingly, China’s approach towards the BRI is similar to the one it has domestically. Projects, grand in scale and exceeding in quantity, are sanctioned without evaluating their long-term viability. Driven by the ease of lending from state-backed banks and lenders, Chinese construction firms are taking over the world. Against 2002, when these firms accounted for only 25 per cent of the development lending in China, the firms in 2016 accounted for over 75 per cent of the borrowing. Between 2011 and 2013, China used more concrete than the US did in the entire twentieth century.

Apart from the AIIB, the China Development Bank (CDM) and the Export-Import Bank of China (CEXIM) have facilitated lending for large-scale projects abroad. By 2016, the total assets of CDM and CEXIM exceeded those of the International Bank of Reconstruction and Development, European Bank for Reconstruction and Development, African Development Bank, Inter-American Development Bank, Asian Development Bank, and the International Finance Corporation by 350 per cent.

What enabled the Chinese lenders to go global was the lack of urgency on the part of the IMF and the World Bank. For instance, the Power Africa initiative under the Obama administration was sanctioned in 2013. By 2017, not a single dollar had been added as allocation, and the current programmes were revamped to suit the initiative. All paper and no play.

The Chinese lending process, however, comes with limited restrictions. The political viability of the project is prioritised over its economic sustainability. Thus, the combination of easy state-backed lending, an authoritarian leadership looking for economic colonisation, and a complete disregard of local norms dictate the approach of China’s BRI.

The Chinese State Outside China

For the local communities across the world, BRI comes with the presence of the Chinese diaspora. Already, the 50 million Chinese residing outside China and Taiwan exceed the population count of Kenya, Spain, and Saudi Arabia. If the Chinese outside China and Taiwan were to be incorporated into a separate nation, their size would be twice that of Australia and four times that of the Netherlands.

Scattered in numbers, the Chinese are now beginning to form significant communities in states around the world. Thirty-two million are residing in Southeast Asia alone, constituting cheap labour in many countries – Australia, with its elaborate mining operations, a million; Pakistan, because of the China-Pakistan Economic Corridor, 400,000; South Africa, 300,000; and Brazil, 250,000. Nine out of 10 of these 50 million residents are not residents, and yet, they are starting to have a say in the local policy-making process.

The high numbers of residents enables China to conduct its foreign investment traffic. For instance, in Indonesia, the 3 per cent Chinese residents account for 90 per cent of the trade between China and Indonesia. The connect with the diaspora, even if they are residing in a nation like Argentina, binds them to the dream of the Chinese leadership. The BRI is not only aligning countries but also local communities, one step at a time.

To facilitate this exchange, there is an Overseas Chinese Affairs Office. Reaching out to scientists and academicians abroad, this governmental body is evoking a sense of nationalism among the diaspora abroad. The Chinese identity, along with its infrastructure projects, is now being sold as a brand to local communities.

The power of the Chinese identity can be gauged by the incident that occurred on US’ United Airlines when a Chinese-American was ill-treated by the staff on board. However, there is another side to the identity, too. In New Zealand, a sitting parliament member was investigated for ties to the Chinese intelligence. Australia, where China has a considerable stake in mining operations, has faced similar cases.

During the British Raj, the policies for colonised India were drafted keeping in mind the English population in India. China, today, plays the same card across the globe. Thus, to safeguard its population of 400,000 in Pakistan, the state has gotten the local agencies to crack down on terrorist groups. Tomorrow, they could influence domestic policies the world over once their economic pockets grow deep enough. It’s not a matter of if, but when.

The Socio-Economic Influence of BRI

Money plays a significant role here. China is pledging investments amounting to $1.25 trillion worldwide, more than 12 times the cost of the Marshall Plan. As always, with high investments comes a greater need to ensure the safety of those investments. The Chinese have a plan for this, too.

Known as the State Council Information Office (SCIO), this government body is responsible for curbing propaganda or truth that does not suit the BRI narrative. The mere mention of SCIO is enough to threaten any blogger or journalist in China, but their power transcends the Chinese mainland.

The SCIO monitors reports by Chinese journalists abroad. The monitoring is not restricted to BRI alone, but any news that threatens to expose any wrongdoing within the state. For instance, in 2010, a Chinese-Canadian was kept under detention for two years for filing a report that showcased the inflated returns of a company which had investors from the US.

From editors of The New York Times to Bloomberg, editors and journalists have often faced difficulties in getting visas to China. Some have even been reprimanded by Chinese diplomats abroad. In 2013, one of the largest media conglomerates in the world, Disney, was forced to change the script of Iron Man-3, as it featured a Chinese antagonist in the original storyline. The movie went on to make $21 million on its opening day in China apart from making a billion dollars worldwide.

Political Colonisation via Economic Consolidation

In Sri Lanka, China started with the aid of $37 million in 2005 after India and the US refused to offer any help to the ruling government. By 2008, the aid had increased to $1 billion. In 2013, a $1.4 billion plan for the Hambantota Port was put into play. Between 2005 and 2012, China had issued $5 billion worth of loans to Sri Lanka, at a rate higher than that of the World Bank. By 2014, Sri Lanka was paying China $30 million each year in interests alone. With more than 66 per cent revenue spent on repaying the loans to China, Sri Lanka finds itself economically colonised.

The situation is far worse in Pakistan, which finds its economic sovereignty at the mercy of China or the IMF, depending on where newly elected Prime Minister Imran Khan turns for help first. The CPEC is also finding China on the wrong side of India, given it passes through the disputed region of Jammu and Kashmir.

However, it is Africa and Latin America where China is placing its big bets. In Kenya, the Chinese have built a $3.2 billion 300-mile railroad between the commercial cities of Nairobi and Mombasa. At four hours and 30 minutes, the rail link is faster than the fastest connection in the US. In Guinea, a $526 million dam has been built that has enabled the nation to have surplus power. In Ethiopia, $475 million rail system has been built in the city of Addis Ababa. The continent houses hundreds of such infrastructure projects. The loans for these projects have come from CEXIM.

Africa also offers China a hub for cheap income. Also, the wealth of natural resources in Africa enables China to invest heavily in their mining operations, and thus, make more money. As its largest trading partner, China traded $128 billion worth of goods in 2016 against $48 billion by the US.

The projects come at a political cost. For instance, African states that recognise Taiwan as a legitimate nation receive three projects less from China each year. In the United Nations (UN), the African countries agreeing with the Chinese perspective receive two projects more each year. Given that the UN General Assembly works on a one-vote, one-nation rule, China will be able to turn the UN resolutions easily to favour its interests.

In South America, China is threatening the American sphere of influence with investments in mining, technology, and telecommunications. From 2015 to 2019, Chinese investments are projected to be at more than $250 billion along with another $500 billion in trade. Already, for Brazil, Peru, Chile, and Argentina, China is the largest trading partner.

In Argentina, China has built a $50 million satellite programme to probe the farthest side of the Moon. After the fall in oil prices, the presence of China was seen positively by the volatile economies in the region. For Argentina, which was suffering from a recession in 2009, a $10 billion Chinese investment was seen as a much-needed bailout.

With Brazil and Chile, China has been engaging via naval drills. In Bolivia, Chinese products have displaced local manufacturers, given their cheap cost. Political pressure from Beijing also ensured that most of the countries in Latin America snapped ties with Taiwan, starting with the Dominican Republic and Panama.

Hiccups For An Otherwise-Healthy Body

The BRI has hit a few roadblocks in recent months. Most recently, Malaysia decided to cancel projects worth billions with the Chinese. In Myanmar, the 4,000-acre Kyaukphyu Special Economic Zone is already becoming a cause of concern for the government, given its debt size. The Sino-Myanmar oil and gas pipeline, which enabled the Chinese to bypass the Malacca Strait, is also facing protests from the local government. Pakistan and Sri Lanka’s local communities are already voicing their concerns. However, these are only a few hiccups for an otherwise-healthy athletic body.

China’s BRI is not charity, for it comes with significant loans with varying interest rates. As it happened in the mainland, the Chinese are going to run out of projects to sanction, of rivers to build dams on, of cities to link via expensive railways and roads, and of ports to host their submarines and ships. Many of these projects will enable better living for the local communities, as evident in Pakistan’s Gwadar port area, but at what cost?

For cheap capital today, countries across the globe are putting their political and economic sovereignty at stake. Sometime in the future, 20-30 years from now, when loans shall have to be repaid, many countries will have nothing but their political freedom to spare, for most of these projects are not economically viable, as Sri Lanka learned the hard way. Sadly, it might be too late for most countries to make any course correction.

BRI: A Global Bubble

While China’s adopted economic children will lose their freedom, China, as the once generous parent, will find itself in debt at home and abroad. It may gain political rights over these nations, but it shall be without any money to invest, and thus, the entire family will be in one big soup.

For the world, the unprecedented and unregulated rise of China may pose a serious threat when a recession strikes. Quite like the 2008 crisis, the impact will be worldwide. However, when the chickens come home to roost in China, the consequences will be far more disastrous.

Till then, people may marvel at the building capacity of the Chinese.

It’s another bubble, after all, just packaged well.