The coronavirus pandemic of 2020 has exacerbated the problems that the Belt and Road Initiative was already dealing with for years. Failure to resolve these issues could have grave consequences for China’s economy and domestic politics.
Will the coronavirus pandemic help or hinder the “Belt and Road Initiative”? In spring 2020, worldwide speculation was rampant as to how the ambitious Chinese infrastructure and investment programme would adapt to the rapidly developing global pandemic. It appeared indisputable that the Belt and Road Initiative (BRI), also known as the “New Silk Road”, had been thoroughly infected with the virus. The attempt to quell the outbreak of SARS-CoV-2 became top priority around the world; supply chains involving both materials and people were disrupted by lockdowns; and investors became reluctant to part with their money, meaning that numerous projects were thrown into jeopardy. The outbreak of COVID-19 also provided US president Donald Trump with further ammunition for his campaign to discredit China and convince the more than 100 countries involved in the BRI that the country is reckless, selfish, and authoritarian.
Uwe Höring is a political scientist, journalist, and board member of the Stiftung Asienhaus in Cologne, Germany. He has worked on China’s role in the globalized world with a focus on the Belt and Road Initiative for quite some time. He is author of the book Der Lange Marsch 2.0. Chinas Neue Seidenstraßen als Entwicklungsmodell (VSA, 2018) and runs the blog Silk Roads, Geopolitics, and the Global South.
The escalating trade war with the US may well emerge as a further handbrake on the BRI’s progress. At the end of August 2020, sanctions were imposed on two dozen state-owned enterprises, including industry heavyweights such as construction company China Communications Construction Company (CCCC), which is involved in the expansion of a range of transport routes and ports as hubs along the maritime stretch of the New Silk Road between Asia and Europe. Restrictions on US technology exports could hamper efforts to set up a digital Silk Road and slow both the Chinese economy and plans to place it on a high-tech foundation.
Currently, the government in Beijing is feverishly attempting to use immediate financial relief to limit the damage caused to their image by the intransparent way that information was conveyed at the beginning of the pandemic. However, some of the problems that COVID-19 has exacerbated existed before the pandemic. If the BRI’s prospects for recovery actually did dwindle and even vanish to the extent they threaten to, this would have dire consequences for China’s economy and internal political sphere.
A Crisis at Once Political and Economic
Baogang He, political scientist at Deakin University in Australia, points to the “absolute prioritization of domestic political interests”, an aspect too seldom examined in the international discourse concerning the BRI in comparison with analyses focused on international economic and political relations. This is true of commentary on the formulation of the initiative since 2013, when it was first announced by Chinese Communist Party leader and head of state Xi Jinping, but also for analyses of the possible consequences of problems or even concrete setbacks that would emerge.
One of the challenges the government in Beijing found itself faced with was how to deal with the economic issues that had been worsening since at least the 2008 financial crisis and were producing diminished rates of growth. This also threatened a crisis of legitimacy for both state and party, whose credibility was essentially tied to economic growth, reducing developmental disparities between different regions, and increasing prosperity.
The state-led capitalism that, starting in the early 1980s, produced an enormous economic boom and the improvement of living standards for large parts of the population, is now coming up against its limits in numerous sectors; we are seeing excess production capacity with respect to construction materials such as steel and cement, for example, but also high-speed trains and power generation equipment. A response has been to plough billions into state programmes in order to boost domestic demand and provide economic support to regions such as Xinjiang in the west, Heilongjiang in the north-east, and Yunnan and Guangxi in the south-west, with the aim of thereby closing the gap between them and the Beijing area, as well as the booming coastal region in the south-east. In addition, these provinces also became hubs on the New Silk Road as it continued on its way towards neighbouring countries, opening up access to raw materials, markets, and locations for investment through new transportation links and economic corridors. Economically, the BRI is thus a central pillar in China’s strategy to secure future growth by facilitating its increased integration into supply and production chains.
Internationally, the government has been confronted with an intensified policy of containment on the part of the United States which began over 10 years ago under the aegis of President Barack Obama and Secretary of State Hilary Clinton. One of the instruments used to try and isolate China was the Trans-Pacific Partnership (TPP), since scuttled by President Trump, while another was (and is) an accelerated build-up of military capability. In response, Beijing University political scientist Wang Jisi advocated a “westward march” in 2012 in which China would strategically re-orient itself towards Eurasia as a way of decreasing the likelihood of direct confrontation and provide itself with alternatives should supply chains operating on sea routes become disrupted.
As Wang Jisi’s widely read article shows, the question of how to deal with these challenges was the subject of intense discussion within the People’s Republic. Academic think-tanks, government ministries, party committees, and commercial enterprises all put forward a wide range of suggestions. Under Xi’s political leadership, these were condensed into an “ambitious holistic approach” (Baogang He). The references made to the historic Silk Road is a classic example of how the narrative was steered and controlled. The BRI works to integrate the policy of domestic economic expansion pursued since the beginning of the new millennium with the worldwide expansion of Chinese corporations into an outward-facing economic and political mega-project capable of exerting considerable influence on global affairs.
According to Baogang He, it was also an opportunity for Xi to “concentrate, expand, and legitimize” his power both within the party and the state apparatus. With the BRI as his signature project and the adoption of “Xi Jinping Thought” into the statutes of the Communist Party in autumn 2017 he was able to consolidate his role as leader. According to Min Ye, “The cohesion of messages was based on ambitious nationalism, speaking to the rise and modernization of the Chinese nation.”
Since 2013, this framework has been the conduit for an immense mobilization of financial capital and state-run enterprises, and to a lesser extent also private companies, diplomatic initiatives at various levels, and a number of public relations campaigns. Alongside government agencies such as the powerful National Development and Reform Commission (NDRC) and supra-ministerial consulting bodies (“Leading Small Groups”), which are often directly controlled by Xi Jinping and according to an assessment made by think-tank metrics have become key decision-making forums within the party, provincial governments also play a special role: authorized with wide-reaching powers, they use the BRI as a pretext for expediting their own projects and thus local economic development, which Min Ye sees as a “good explanation of the bulk of the BRI’s popularity within China itself”.
Due to the seemingly infinite number of people involved and the tendency to subsume more and more projects and countries under its banner, the BRI’s implementation is also determined by a wide variety of interests and independently-authorized projects, some of which are in direct conflict with one another. This helps explain contradictions that exist between official statements, such as one which describes the BRI as “green and clean”, and the activities actually occurring in the real world, such as wide-ranging investment in coal-fired power stations and the use of other fossil fuels. The seemingly all-powerful state and party bureaucracy frequently fails to co-ordinate, control, or even regulate the countless array of activities occurring beyond China’s borders; nor is it able to prevent competition or pointless projects and conflicts or address grievances that damage the reputation of the BRI and thus of China as a whole.
Problems with the BRI
Thus Xi Jinping’s prestige project and intended trademark has lost much of its aura in the seven years since it began. The Chinese PR machine had billed the BRI as representing no less than a new, more just phase of globalization, one which would drive massive amounts of economic growth and foster greater international understanding. Billions in financial contributions for infrastructure and industry were promised. This raised expectations even in many western countries. Some may have hoped that China’s success in using modern infrastructure to raise itself to the position of global economic power was something that could be repeated. Here it was now, demonstrating how it could rapidly build roads, harbours, train lines, and dams in other countries as well—while western financiers and private concerns increasingly withdrew.
Enthusiasm in many countries was quickly dampened by fears of growing Chinese influence and desire for geopolitical power. Criticisms of corruption, a lack of transparency, and sloppy project execution grew, and there were protests against negative environmental and social outcomes and rising debt levels, which only worsened following the outbreak of the coronavirus pandemic. Chinese investment declined, the construction of numerous projects such as coal-fired power plants in Bangladesh or railway lines in the Philippines were halted, and the governments of Sri Lanka and Malaysia were able to renegotiate deals and obtain better conditions. Doubts about the BRI’s grand promises and subsequent loss of credibility were intensified by the pandemic and ongoing trade wars.
Even before the outbreak of the coronavirus pandemic, discussion and debate concerning the BRI was at fever pitch among China’s strategic circles, as reported in The Diplomat magazine in autumn 2019. On the one hand, there was a deep sense of pride at having convinced the first G7 nation to become involved in the initiative: Italy. Equally, however, there was a great deal of concern regarding an “excess of ambition”, which political scientist Zheng Yongnian described as a “fatal error”. There were too few experts, it was said, to operate successfully in so many different countries at once; investment levels were too high; the amount of financial risk for banks and companies too great. Social media, meanwhile, bemoaned the fact that money was being given to corrupt governments for prestige projects despite a lack of domestic spending to meet regional needs.
There was also the sense that the jockeying for geopolitical dominance could spiral out of control. Should the BRI become unnecessarily politicized, this would also spark fear and concern and lead to counter-measures from the USA or the EU aimed at hindering not only the success of the BRI but China’s rise overall.
In fact, the government has signalled a willingness to adapt to the various players, interests, and concerns that shape the initiative’s implementation: at the second Belt and Road Forum (the summit for governments involved in the BRI attended by a large number of high-ranking officials) in Beijing in April 2019, the hosts endeavoured to react to growing criticism and rehabilitate the initiative’s initial appeal: in the future, financial sustainability and the interests of recipient countries would receive greater consideration.
Private capital from within China and abroad along with international financial institutions were invited to take part on an equal footing. Along with the promise of an improvement to information-sharing and the establishment of mechanisms to facilitate mediation, this rhetoric also was also met with approval by existing financiers such as the World Bank and the Asian Development Bank. Observers had already begun to speak of a shift towards a “BRI 2.0”.
Where Does the Global South Fit into All of This?
Economically, China has so far emerged from the coronavirus crisis a clear winner. According to journalist Wade Shepard, a long-time observer of the BRI’s development, the pandemic may “actually become a boon for the Silk Road”. The majority of other observers are also of the view that the BRI will remain an essential pillar of China’s foreign policy, since it remains necessary for economic and political reasons and for the legitimation of the Party and bureaucracy. Further integration into the international economy also offers the opportunity to counterbalance the threat of becoming isolated from the USA and Europe as a result of the ongoing trade war.
Politically, however, Beijing comes out looking more like a member of the losing side. A decisive factor will be how the BRI countries worst affected by the crisis act in response. Shepard’s assessment, also shared by many others, is that the majority will remain in line, as sticking with China is the only way they see themselves being able to overcome the crisis. Resistance and impediments to progress could increase, however, as could individual governments’ sense of confidence and a growing insistence on the protection of their own interests.
At the same time, the project has been overtaken by the battle for geopolitical hegemonic supremacy—whose intensification is at least partly the result of China’s more aggressive approach to foreign policy, its insistence on the right to make territorial claims in the East China Sea, its drastic interventions into Hong Kong and the expansion of its overseas military presence. In an interview with Swiss newspaper Neue Zürcher Zeitung on 29 September 2020, Kevin Rudd put forward the view that foreign policy hawks in both the Democratic and Republican parties in the USA have become convinced that “under Xi, China wishes to supplant America in its global leadership position”. The European Union has also struck a firmer tone in recent months, with EU Foreign Minister Josep Borrell labelling China a “new empire”. Pessimists see the beginning of a new “cold war” and, in the case of Ingar Solty from the Rosa-Luxemburg-Stiftung, looming military conflict.
Key for the impending potential showdown will be who the countries of the Global South choose to side with; in essence, whether the Chinese government succeeds in preserving and strengthening the alliances it has forged in recent years, many of which are grounded in the BRI. The issue of debt will also play a key role. “How Beijing treats its debtors will be a test of its worth as a global leader,” says Jacob Mardell of the Berlin-based Mercator Institute for China Studies (MERICS). Generosity in this regard would make sense politically, and underscore the “South-South solidarity” so frequently invoked by Beijing.
Another important aspect is how Beijing will react to the numerous challenges domestically. According to Rudd—whom the Neue Zürcher Zeitung describes as one of the best-informed experts on China in the western world—despite the significant increases in power by both state and party achieved under Xi Jinping, opinion does vary among China’s leadership elite, who are also willing to voice dissatisfaction with unnecessary spending and the concentration of power. “Foreign policy doves think that China is not yet ready for a complete decoupling. So they try to slow the process down.” Whether the conflict between China and the USA continues to escalate or possibilities for co-operation begin to emerge instead will also depend on the actions of the latter’s new government, for whom the New Silk Road could also play an important role.