Belting out a new tune or going down the same old road?

(File)Workers walk at the construction site of East Coast Rail Link (ECRL), a Chinese-invested railway project part of the Beijing 'Belt and Road Initiative', in Bentong, Malaysia. Image: Reuters/ Hasnoor Hussain

This year, we celebrate—or castigate, depending on your point of view—the decadal anniversary of China’s Belt and Road Initiative (BRI). At its birth, it was christened “One Belt, One Road” (a name it retains in Mandarin), but the term conjured up images of the Middle Kingdom imposing its centrality onto the rest of the world, which led to a hurried rebranding. Public relations aside, however, the BRI continues to provoke equal measures of approbation and concern.

Part of the reason why the BRI continues to evoke such mixed sentiments is because the plan has never been all that well-defined. When announced by President Xi Jinping during an official visit to Kazakhstan in Sep 2013, reference was made to the historical Silk Road, a network of trade routes that linked Chinese civilization to the rest of Eurasia. But the subsequent scramble by both mid-level government bureaucrats and outward-looking business enterprises looking to ingratiate themselves to the effort has led to a proliferation of projects that have somehow been shoehorned into the BRI. To date, no fewer than 150 countries boast BRI infrastructure, including roads, railways, ports, airports, bridges, dams, power stations, you name it. The umbrella has even extended to programs intended to promote cross-border trade and finance, and sometimes related policy.

This diversity need not be detrimental to the success of the overall endeavor. But the driving force behind why Chinese officials and companies alike have been so keen to hoist countries onto the BRI bandwagon are more rudimentary. The BRI was originally conceived as a means of recycling the nation’s excess savings into more productive use, besides parking these funds in low-yielding U.S. Treasury bonds. With demonstrated expertise in building and construction, it seemed like a no-brainer to export this capital-intensive model to developing countries that were starved of both high-quality infrastructure and its associated financing. In exchange, China would enjoy natural resources and agricultural commodities—the mainstay of many of these countries’ export baskets—at competitive prices. Everybody wins.

Alas, reality turned out to be more complex. Despite being a developing economy itself, China overestimated its capability in ushering through construction projects in challenging institutional environments. After all, tackling corruption, regulatory red tape, and bureaucratic inefficiency is generally more straightforward (albeit less forgiving) in an authoritarian state like China. In contrast, the messy democratic processes common to other emerging market environments would frequently throw off project timelines and targets. Projects were occasionally chosen to benefit special interests, making population buy-in harder to secure. Faced with inordinate delays and risk of failure, desperate supervisors would resort to importing more familiar Chinese labor, but this would in turn trigger protests by local workers, who regarded the practice as abhorrent, and sometimes tantamount to neocolonialism.

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Worse, accusations started swirling about how the BRI was simply a thinly-veiled scheme to ensnare nations into taking on debt they couldn’t afford, and when certain projects failed, the resulting workout—which would typically confer to China operational (if not ownership) rights over these key infrastructural assets—would leave a bad taste in the mouth. This was the case even in likely good-faith cases, such as the Hambantota port deal, where the Chinese were called in by the Sri Lankans themselves in a desperate bid to eke out profitability from the otherwise-failing project. Try as they might, the Chinese seem unable to convince the rest of the world that they were merely acting as reasonable (if tough) development partners and financiers.

Where does this leave China?  

China has thrown a good deal of cash into the BRI; the flagship lending institution for the initiative is the Asian Infrastructure Investment Bank (AIIB), along with a separate Silk Road Fund, which is focused on business investment. The former was initially capitalized at $100 billion, and the latter at $40 billion. Their sheer size—the AIIB commands about half the capital that the World Bank does, and two-thirds that of the Asian Development Bank—speaks to how seriously China regards the BRI.

But the Xi administration isn’t in the business of aid. Exaggerated developmental claims aside—China argues that 420,000 jobs have been created, and 40 million lifted out of poverty, as a result of BRI-related stimulus—the goal is still return on investment. To be fair, for every BRI project that has come in with lukewarm returns—such as Hambantota, or a slew of scuppered rail plans in Malaysia—there have also been others that have enjoyed better returns, such as the revitalization of the Greek port of Piraeus, or have even garnered mostly plaudits, such as the Laos-China railway. On balance, the BRI hasn’t been a panacea for the country’s evaporation of domestic investment opportunities, but it hasn’t been an abject commercial or diplomatic failure, either.
 
Jamus Jerome Lim is Associate Professor of Economics at ESSEC Business School, Asia Pacific.