By Hiroshi Watanabe / Special to The Yomiuri Shimbun
China has been promoting what English-language media refer to either as the “One Belt One Road Initiative” (OBOR) or as the “Belt and Road Initiative” (BRI).
There is no established single way yet of naming the mega regional development initiative.
China itself officially defines the Chinese character for “belt” as “overland route” and the one for “road” as “sea route.” But I as a Japanese using Chinese characters am still having some difficulty getting used to the official definition. Although China emphasizes that the land route referred to in the initiative means the restoration of the Silk Road, the ancient network of East-West overland trade routes, this road is formally called the Belt in the initiative.
Anyway, the initiative is an important component for realizing Chinese President Xi Jinping’s vision called “the Chinese Dream.” It can be interpreted as a display of China’s hegemonic ambition.
In geopolitical terms, the idea may make other countries wary of China’s influence. For my part, I was once in favor of the idea because it called for enhancing regional connectivity across Eurasia by facilitating the development and utilization of a vast railway network across the continent.
Seaborne transportation continues to account for a great deal of trade flows in the world. Yet, given that Eurasia has multiple landlocked countries, it is important to develop and utilize railways in the region to facilitate regional development.
When the initiative was first proposed in 2013, there were fewer than 100 trains running between Europe and China every year. Nowadays, Europe and China are connected by about 10,000 trains a year. It is also true that Beijing has been trying, more or less, to finance regional development projects in western China on its own instead of attempting to rely on foreign financial resources alone as in the past.
However, recent developments show that there are projects that were chosen in the name of the Belt and Road Initiative (BRI) that have actually turned out to bear little relevance to the initiative’s purpose. Many of them, for instance, have nothing to do with the improvement of transportation infrastructure. As a result, it has to be said that China has been recently veering widely away from the original purpose of launching the initiative — namely improving country-to-country connectivity in Eurasia.
We have now heard remarks from the Chinese side that the initiative can be extended to parts of Africa and even to South America. This not only means that the definition of the regions to be covered by the initiative is becoming blurred but also indicates that China is strengthening the nature of the initiative to fit its now-global hegemonic vision.
It has been apparent since its launch that the BRI has limitations in implementing development projects, considering the combined amount of financial resources available from China’s state-owned financial institutions, the government-owned Silk Road Fund and the Chinese-led Asian Infrastructure Investment Bank (AIIB).
Further, as the outbreak of the new coronavirus began in Wuhan, China suffered a sudden halt to its economic growth. The BRI is therefore likely to find it difficult to meet an increase in requests for development project financing. Because of this, there is increasing concern that, in the end, Eurasia may eventually be left sparsely dotted with a limited number of BRI projects in place.
Since the AIIB was established in late 2015, it has not developed much expertise in screening project ideas and proposals on its own. A majority of the projects it has financed have actually been arranged as cofinanced ones with the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development.
Even so, the existence of the AIIB has not been a negative development because the world now has yet another “purse” for infrastructure investment. Given the current circumstances surrounding the AIIB, it is desirable for the bank to return to where it started as an institute to facilitate Eurasia’s regional connectivity.
The AIIB’s inaugural president, Jin Liqun, taking advantage of his experience with and expertise gained at international organizations, has been endeavoring to run the bank as a disciplined multilateral institute. Now, he is inevitably having a hard time due to the Chinese economy’s sharp slowdown and the deteriorating circumstances surrounding his organization.
There is concern that the eventual retirement of Jin, whose five-year term can be renewed once, may result in the tightening of China’s political grip on the AIIB.
Cautious responses are now apparent among European countries that joined the AIIB after being induced by Britain’s self-centered decision to become the first Group of Seven (G7) country to join the bank in order to lure Chinese yuan-related business activities.
A bird’s-eye view of the latest attitudes of countries toward the BRI makes it clear that Central and West Asian countries continue to support the initiative, as they are highly likely to be chosen for BRI project sites. On the other hand, countries in Europe and North America, and Japan, are increasingly alert to the rise and spread of the hegemonic characteristic of the initiative. Likewise, countries in South Asia, which were regarded as natural BRI project sites from the beginning, have also changed attitudes toward the initiative.
In South Asia, some earlier China-financed projects have already ended in failure because of insufficient screening and on-site inspection, causing the pace of further project implementation to slow down.
Two main factors are to blame for such failed projects. First, recipient countries became eager to have far-fetched projects under the encouragement of “good news” — foreign capital inflows — and inflating development plans to a certain extent. Second, the financing packages offered by China actually comprised long-term, low-interest loans for less than their expected amounts, with the balance provided by China’s private-sector banks, thus forcing recipient countries to face heavier-than-expected interest payment burdens.
India remains particularly cautious about the fact that China has been advancing the maritime side of the BRI in its neighboring Indian Ocean countries of Sri Lanka and Bangladesh, both of which India regards as within its own sphere of influence,
To begin with, India has taken a critical stand on the maritime corridor proposed by China. New Delhi argues that, while it recognizes that the Silk Road existed in history as a network of trade trails in central Eurasia, it cannot agree that a maritime network of trade either beginning or terminating in China ever existed in the Indian Ocean or in any other ocean in history.
In late 2017, Sri Lanka agreed to hand over a strategic port to China on a 99-year lease after the port project implemented with Chinese money turned out to be a loss-making one, making debt servicing difficult. India reacted angrily to the Chinese modus operandi and criticized China in the strongest tone, portraying Beijing’s approach as “debt-trap” diplomacy. India accused China of saddling Sri Lanka with unsustainable debt incurred with an unfeasible infrastructure project with an aim to acquire concessions essential for its blue-ocean strategy.
Meanwhile, as mentioned earlier, countries in Europe are increasingly wary of the BRI, but I have to note that there are at least two exceptions. In March 2019, Italy — which has been in dire fiscal straits — became the first G7 country to join the BRI, making itself eligible to receive infrastructure investment from the China-led initiative. In a related development, Greece, having suffered from a prolonged fiscal crisis, has continued to rely heavily on financial aid from China for a few years now. As such, it can be possibly said that Italy and Greece — the two nations with the longest histories in Europe — are in the process of changing from “developed countries” into “once developed countries.”
In my view, there is no need for Japan — which continues to have a vital stake in stable cooperation, collaboration and trade with countries in Asia, if not Eurasia as a whole — to take the risk of promoting the BRI as long as China keeps utilizing it to intensify its hegemonic clout.
Nevertheless, Japan may take a different — and positive — approach if it is clear that BRI projects can definitely be effective in helping not only recipient countries but also their neighbors improve regional connectivity without causing environmental pollution.
It is true that China needs to do a lot more effort to advance technological development and that it is inevitably unaffordable for even China to finance all BRI projects on its own. With due diligence about such realities, it is advisable for Japan to take part in thoroughly planned, viable projects by providing its technological and financial resources.
Watanabe is president of the Tokyo-based Institute for International Monetary Affairs, a post he has held since 2016. From 2013 to 2016, he was governor and chief executive officer of the Japan Bank for International Cooperation. He was also vice finance minister for international affairs from 2004 to 2007.