How Is the Belt and Road Initiative Advancing China’s Interests?

How Is the Belt and Road Initiative Advancing China’s Interests?
How Is the Belt and Road Initiative Advancing China’s Interests?
How Is the Belt and Road Initiative Advancing China’s Interests? Top

    The Belt and Road Initiative (BRI) is Chinese president Xi Jinping’s signature foreign policy project aimed at strengthening China’s connectivity with the world. It combines new and old projects, covers an expansive geographic scope, and includes efforts to strengthen hard infrastructure, soft infrastructure, and people-to-people ties. As of October 2023, the plan touches 151 countries with a combined gross domestic product of $41 trillion and some 5.1 billion people.1

    Unpacking the Belt and Road Initiative

    By supporting a diverse array of initiatives that enhance connectivity throughout Eurasia and beyond, Beijing is seeking to strengthen economic and security interests while bolstering overseas development. At the first Belt and Road Forum in Beijing in May 2017, President Xi Jinping noted that, “In pursuing the Belt and Road Initiative, we should focus on the fundamental issue of development, release the growth potential of various countries and achieve economic integration and interconnected development and deliver benefits to all.” 

    The BRI is an umbrella initiative spanning a multitude of projects designed to promote the flow of goods, investment, and people. The new connections fostered by the BRI could reconfigure relationships, reroute economic activity, and shift power within and between states. In March 2015, the Ministry of Foreign Affairs disseminated an action plan (issued by the National Development and Reform Commission) that fleshed out specific policy goals of the BRI. These included: 

    • Improving intergovernmental communication to better align high-level government policies like economic development strategies and plans for regional cooperation.
    • Strengthening the coordination of infrastructure plans to better connect hard infrastructure networks like transportation systems and power grids.
    • Encouraging the development of soft infrastructure such as the signing of trade deals, aligning of regulatory standards, and improving financial integration.
    • Bolstering people-to-people connections by cultivating student, expert, and cultural exchanges and tourism.

    BRI partner countries have largely found the most attractive elements of the BRI to be its provision of hard infrastructure. The Asian Development Bank (ADB) estimates that the developing countries of Asia collectively will require $26 trillion in infrastructure investment to sustain growth. Through the BRI, China has sought to use its considerable economic means to finance and carry out these infrastructure projects around the world. In the first 10 years of the initiative (2013-2023), China inked roughly $1 trillion worth of investment and construction deals with BRI countries.  

    Leveraging these needs against its economic strength may garner China significant political gains in partner countries. Notably, many of the areas targeted by China suffer from underinvestment due to domestic economic struggles, and they often register low on the United Nations Human Development Index (HDI). Myanmar and Pakistan—two countries heavily targeted by the BRI—ranked 149th and 161st out of 191 countries in terms of HDI in 2021. 

    China marked the BRI’s first decade with the Third Belt and Road Forum for International Cooperation. Read ChinaPower analysis of the forum and the meeting between Xi Jinping and Vladimir Putin that took place on the sidelines.

    To support the BRI, Beijing has injected massive amounts of capital into Chinese public financial institutions, such as the Chinese Development Bank (CDB) and the Export-Import Bank of China (EXIM). These banks enjoy low borrowing costs, as their bonds are treated like Chinese government debt with very low interest rates. Additionally, they have access to lending from the People’s Bank of China, allowing them to lend cheaply to Chinese companies working on BRI projects. 

    This easy financing enables China’s state-owned enterprises (SOEs) to offer highly competitive bids for projects against foreign companies that might be more financially constrained. For instance, in 2015, Japanese construction companies lost out to their Chinese counterparts in a bid to build a high-speed rail project in Indonesia. Discussing the reasons behind its choice, the Indonesian government cited Chinese financing from the CDB, which came with fewer strings attached.  

    The high-speed railway was officially launched on October 2, 2023, shortly before the third BRI forum. This $7.3 billion project shortens the travel time between Jakarta and Bandung from three hours to less than one hour, and there are talks about adding stops to the railway. It should be noted, however, that this project was expected to be completed in 2019, but a series of issues such as land acquisition and licensing delayed the project. 

    One of the biggest BRI megaprojects to date has been the “flagship” China-Pakistan Economic Corridor (CPEC), a 3,000-kilometer corridor that runs from the far-western Chinese city Kashgar to the coastal Pakistan port city Gwadar. CPEC comprises a wide array of infrastructure projects including highways, railways, pipelines, and optical cables, but much of the planned investment for CPEC has gone to energy projects like power plants. Zheng Shanjie, Chairman of China’s National Development and Reform Commission, noted that CPEC is “an important loop in the larger chain of the Belt and Road Initiative and would enable the possibility of a 21st Century Maritime Road.” 

    Pakistani leaders also view CPEC as important. In the face of a slowdown of CPEC projects due to geopolitical tensions, Pakistan Prime Minister Imran Khan took controversial steps in October 2019 to push forward the development of CPEC and provide tax exemptions for the state-owned Chinese Overseas Ports Holding Company, which operates Pakistan’s Gwadar Port. 

    CPEC is intended to connect the land-based Silk Road Economic Belt with the Maritime Silk Road, and Gwadar Port is an important part of this effort. The Pakistani government leased it to the Chinese Overseas Ports Holding Company until 2059. China quickly developed plans for expanding and upgrading the Gwadar area, but progress has been slow. The new Gwadar International Airport was due to be completed in 2023, but the timeline has been delayed to 2024. Similarly, the plan to create the Gwadar Free Zone for Progress has been stalled. The proposed free zone will encompass 2,281 acres when completed, but as of 2023, it only spans 60 acres. 

    How China Gains from the Belt and Road Initiative

    The BRI has the potential to yield considerable economic and political gains for China. Many of these have been explicitly acknowledged in China’s official policy communiques, such as the expansion of China’s export markets, the promotion of the Renminbi (RMB) as an international currency, and the reduction of trade frictions like tariffs and transport costs. 

    Additionally, developing and connecting hard infrastructure with neighboring countries aims to reduce transport times and costs. Establishing soft infrastructure with partner countries will allow for a broader range of goods to be traded with fewer regulatory hurdles. Raising capital for these infrastructure projects by issuing bonds in RMB also encourages its use in international financial centers. In particular, China’s lower-income western provinces stand to gain as the creation of overland economic connectivity with Central Asia promises to boost growth there. 

    Many of the potential benefits of BRI are less publicly articulated. For instance, some of China’s SOEs— such as cement, steel, and construction companies—have built up significant capacity (expanding factories and hiring workers) to serve China’s booming domestic economy. As China’s economy has matured and slowed, these companies have sought out productive uses for their resources overseas. Similarly, China has a large reserve of savings that is not being invested productively. Investing in large-scale overseas infrastructure projects enables China to export its excess savings and put its SOEs to work

    In the long-term, the BRI could help re-orient a large part of the world economy toward China. Increasing the amount of trade, investment, and connectivity between China and countries throughout Eurasia will also render these countries more dependent on the Chinese economy, increasing China’s economic leverage over them. This may empower China to more readily shape the rules and norms that govern the economic affairs of the region. 

    The BRI can also win China political gains. Beijing may be able to exploit its financial largesse to influence partner country policies to align with its own interests, particularly in certain countries in Central and South Asia that lack good governance and robust rule of law. Some countries that are part of the BRI rank unfavorably on Transparency International’s Corruption Perceptions Index, an index running from 0, indicating very high corruption, to 100, indicating very low corruption. Based on scoring from 2022, BRI partner countries with particularly poor Corruption Perceptions Index scores include Turkmenistan (19), Pakistan (27), and Sri Lanka (36). 

    Accepting Chinese capital has come with expectations that Chinese companies will then be contracted to manage infrastructure, giving them at least some influence over critical infrastructure. For example, Chinese state-owned conglomerate COSCO Shipping owns a majority share of the Port of Piraeus—Greece’s largest port and a “flagship” BRI project.  

    From China’s perspective, investments into strategic locations help diversify China’s transport network for critical resources like oil, gas and other goods. This helps reduce dependency on maritime chokepoints, such as the Strait of Hormuz and the Strait of Malacca, through which China currently receives much of its energy supplies and goods flow.  

    Partner countries can likewise reap concrete benefits. Fulfilling the infrastructure needs of these countries helps speed development by better enabling them to export their products to overseas markets, which can further boost job creation and foster stable growth. Other potential sources of infrastructure finance, such as the World Bank, tie lending to conditions that recipient governments may feel encroach on their sovereignty, such as stipulations that governments limit spending to a certain level or enact anti-corruption measures. Chinese investments have been historically less likely to require recipient countries to adhere to such conditions. 

    However, several countries have been unable to repay large loans for BRI projects. More than 90 percent of all countries classified as “low income” or “lower middle income” by the World Bank are member countries of the BRI. As these countries have taken on loans from China, many are struggling to repay them, with some having to turn to the International Monetary Fund for financial support. Countries including Sri Lanka and Zambia became burdened with soaring interest payments on loans and were forced to default. China has also been accused of hiding additional loans within their agreements, resulting in even larger loan amounts. 

    Long-term Feasibility of the Belt and Road Initiative

    Despite its expansiveness, the BRI faces significant hurdles. Some offers of investment have been met with skepticism as countries are distrusting of China’s motives.  

    Myanmar has demonstrated hesitation in accepting Chinese investment, reversing course from its prior enthusiasm. In 2011, the government of Myanmar halted construction of the Myitsone dam—one of China’s largest investment projects in the country—due to concerns over growing Chinese influence and potential environmental damage. While the project remains in limbo, China remains one of the largest investors into Myanmar. Since the military junta overthrew Myanmar’s government in 2021, many countries have pulled out their investments, but China has not.  

    India has also expressed significant hesitation toward the BRI. The country has not signed onto a BRI memorandum of understanding (MoU) and its leaders have opted out of all three BRI forums (in 2017, 2019, and 2023). In addition to being generally skeptical of the BRI and Beijing’s strategic motives, one specific major concern is the building of CPEC infrastructure through disputed Kashmir.  

    The greatest BRI skepticism has come from wealthy countries, especially the United States and its key allies. Moods toward the BRI have darkened as Beijing’s relations with leading democracies have cooled. When Italy signed onto the BRI in 2019, it became the only G7 country to do so. However, the Italian government under Prime Minister Giorgia Meloni has signaled Italy’s interest in leaving the BRI, citing a need to rebalance its relationship with China.  

    Reflecting the uncertainty around the BRI, the 2023 Third Belt and Road Forum for International Cooperation saw fewer heads of state or government in attendance than the previous forums. There were only 23 leaders at the 2023 forum, in comparison to 37 in 2019 and 29 in 2017. Attendance from European and Asian leaders saw significant drop-offs in 2023, with top officials from Malaysia, Myanmar, Nepal, Brunei, the Philippines, and Singapore all absent. Hungarian president Viktor Orbán was conspicuously the only EU leader to attend..  

    Click for a complete list of heads of state/government in attendance.

    The BRI has also faced challenges resulting from the Covid-19 pandemic and a domestic slowdown in China. New outbound investments and construction projects to BRI countries dropped precipitously in 2020, the first year of the pandemic, and have yet to recover. In 2022, investment and construction projects to BRI countries totaled $68.3 billion, down about 44 percent from 2018 ($122.5 billion).  

    The pandemic, coupled with a lack of adequate planning, has resulted in some projects being abandoned midway. In 2017, China and Kenya announced a new railway that would connect the port in Mombasa, Kenya to Uganda. As of 2023, the train abruptly stops at a Kenyan town, nearly 200 miles away from the border with Uganda. The railway was meant to boost Kenya’s economy by providing a faster and cheaper method to transport goods. However, a parliamentary report that was released a year after the railway began operating revealed that it would be more than twice as expensive to transport goods via the railway as opposed to by road.  

    As the initiative has evolved, Beijing has signaled a rebalancing away from a heavy focus on megaprojects toward greater emphasis on sustainable “green” development projects, science and technology cooperation, and e-commerce connectivity.   

    China’s State Council Information Office released a new white paper on China’s BRI ambitions in October 2023, a week before the third Belt and Road forum. It outlines the successes of the first decade of the BRI but also shifts the future focus of the BRI away from the large-scale infrastructure projects, such as dams and railways that the BRI traditionally has invested in, towards smaller projects centered on green development, science and technology cooperation, and digital connectivity.  

    Xi’s speech at the forum similarly highlighted China’s commitment to these new characteristics of the BRI. He laid out eight areas of commitments for China: building a multidimensional BRI connectivity network, supporting an open world economy, carrying out practical cooperation, promoting green development, advancing scientific and technological innovation, supporting people-to-people exchanges, promoting integrity-based BRI cooperation, and strengthening institutional building for international BRI cooperation.  

    Part of these eight commitments is the new Global Initiative for Artificial Intelligence (AI) Governance, which strives for “the sound, orderly and secure AI development in the world” through exchanges and dialogue. Statements by Chinese officials have emphasized that the focus on AI will also advance three of China’s other sweeping initiatives, the Global Development Initiative, the Global Security Initiative, and the Global Civilization Initiative. These aim to create new frameworks for global order that better support Chinese interests, and they have become new hallmarks of Xi Jinping’s tenure. 

    As the BRI evolves to meet new conditions, China may be able to build greater influence over other countries and establish a stronger hand in shaping the development of the international economic system. It is important to recognize that the BRI is a long-term plan. While the BRI is already a decade old, it may still be years before its success can be properly judged. Regardless, the BRI can be expected to remain a key element of China’s foreign policy as long as Xi Jinping is the leading force in Chinese politics. ChinaPower