China’s Belt and Road Initiative is gaining attention.What are Xi Jinping’s true objectives?
〝I think that Xi Jinping wants to tie the world to China.〞
Despite Xi’s ambition,the BRI is meeting challenges.
〝The reason is because Chinese government is asking price too high–sometimes they are demanding 90%of the profit。〞
Most important of all,will it shift the power center from the US to China?
Welcome to《Zooming In》.I am Simone Gao.At the Japanese CPAC meeting last year,Steve Bannon said,〝The U.S.media and the West in general have willfully ignored clear signs China plans to take over the global economy on authoritarian terms,〞and he said it’s〝more than awarning to the West.〞He was talking about China’s Belt and Road Initiative.Despite Xi Jinping’s ambition,what is really going on with this project?No nation in recent history has ever been successful in dominating both land and sea at the same time.Can China do it?And will it be able to shift the world power center from the US to China?In this episode of《Zooming In》,we will explore these questions and more.
Chinese President Xi Jinping announced the Belt and Road Initiative(BRI)in late 2013.China claims they’re establishing amodern day Silk Road.It is reminiscent of the historical Silk Road that brought tremendous economic success to the Han and Tang dynasties.The initiative aims to cover apath that stretches across China,Central and Eastern Europe,and Africa,targeting over 64 countries.China claims that BRI does not have an agenda to fix China’s own industry overcapacity issues,but rather to boost the economic and investment growth through building infrastructure projects in some of the less developed nations.
But an April 18,2018,Washington-based Center for Advanced Defense Studies(C4ADS)report suggested something different.It claimed that the vast buildup of military forces in project locations〝appear to generate political influence,stealthily expand China’s military presence,and create an advantageous strategic environment.〞
On April 17,2018,German press Handelsblatt Global reported that〝Twenty-seven of the 28 national EU ambassadors to Beijing have compiled areport that sharply criticizes China’s〝Silk Road〞project,denouncing it as designed to hamper free trade and put Chinese companies at an advantage.〞
Despite China’s grand ambition,BRI is clearly facing difficulties.On April 15,2018,the South China Morning Post reported that the ambitious Chinese Belt and Road project is already running into financial trouble in Africa.Li Ruogu,the former president of Export-Import Bank of China,recently said that the countries involved simply don’t have the money to pay for it.Many countries already are deep in debt.CNBC reported that Wang Yiming,deputy head of the Development Research Centre of China's State Council,said that although many projects were funded by major financial institutions,there was still ahuge funding gap of up to US$500 billion ayear.
In spite of the financial risks,China pushes forward.Does it want to achieve goals besides economic expansion?Let’s hear my discussion with Daily Beast columnist Gordon Chang and Senior political commentator Chen Pokong.
〝What do you think Xi Jinping really wants to achieve with the Belt and Road Initiative?〞
GORDON CHANG:I think that Xi Jinping wants to tie the world to China.The Belt and Road Initiatives were essentially intended to connect the great cities of China’s east coast to the European markets.But the concept has really expanded,because now they talk about apolar silk road,a Latin America silk road.So,essentially,this whole idea of Belt and Road has gone global.
If this is really amanifestation of Xi Jinping’s global ambition,it makes strategic sense.China can most easily expand its sphere of influence from the western Pacific Ocean to Eastern Europe.Why?Because the whole Pacific rim is dominated by America,together with Canada,Japan and Australia.It will be very hard for China to compete with them head to head.However,it’s adifferent situation if this route extends from central Asia to eastern Europe.By sea,it’s from the south Pacific Ocean to the Indian ocean,and then from the Red Sea to the Mediterranean Sea.American influence is relatively weak in this region.But as Isaid before,there has never been anation in recent history that could dominate both land and sea simultaneously.Let alone the financial risks this project poses to China.So,even if the Belt and Road Initiative makes strategic sense,is it viable?If China is not quite ready for it,why the rush?Let’s hear from Chen Pokong.
〝Why is China in such arush to push forward an effort that has so many financial risks?〞
〝Xi Jinping and Chinese government do believe they have an economic urgency to rush to push forward the Belt and Road plan,because they are eager to
to shift China’s surplus production outward in order to transfer the burden of crisis and risk in China’s economic recession.As the world’s largest exporter,China now is facing domestic economic imbalances and industrial over-capacity,especially China’s domestic growth slows and the demographic dividend is disappearing.Xi Jinping and Chinese government also believe that Belt and Road Initiative can help them to promote China’s GDP growth,which,they think,is essential to the security of the regime.As Isaid before,the Chinese government always put their regime’s safety as the top issue.
Coming up,What has the Belt and Road Initiative accomplished so far,and what is the response from Western nations?
The Belt and Road Initiative is set to be completed in the mid-21st century.It’s still in its early phases.From aWestern perspective,BRI plans are extremely vague.Finding alist of projects that have been completed in the past 5years is difficult.During last year’s Belt and Road Forum,China listed 270〝concrete results.〞They were mostly signed documents.
Another Chinese governmental source said about 50 state-owned enterprises have invested or participated in almost 1,700 projects.
In January,2018,the International Finance Forum,in collaboration with Central Banking–conducted aBelt and Road Survey of central banks from more than 25 countries and regions.And this is some of the things they found.
〝Just under half of central banks described the BRI as a‘once-in-a-generation’initiative.Nearly three-quarters of those surveyed said the BRI has not yet resulted in greater investment from China than already expected.But as Isaid,92%of respondents expect the BRI to bolster domestic growth during the next five years.In terms of geopolitics,The BRI is expected to create the greatest friction with the EU(42%)and the US(33%).〞
Despite the tension with the EU and the US,The Belt and Road Project has enhanced China’s global image.It’s developing political,economic,and industrial ties with two-thirds of the globe.It’s increased Chinese influence in akey region of the world.
This makes some worry.
These geopolitical shifts have revitalized the Quadrilateral Security Dialogue.It was first established in 2007 between India,Japan,Australia,and the United States.China’s increasing assertiveness in the South China Sea and expanding maritime strategy spurred the realignment.The four countries have slightly different perceptions about China’s threat.But there are some key issues they all agree on:freedom of navigation,maritime security,and respect for international law.The United States,in particular,is trying to counteract Chinese influence since it withdrew from the Trans-Pacific Partnership(TPP).
Our guest Gordon Chang does not believe the Belt and Road Initiative is economically viable.Here is my discussion with him.
〝What’s your comment on the first 5years of the Belt and Road Initiative?Has it been successful?〞
〝Belt and Road Initiatives have been successful in the sense of creating alot of hype,a lot of excitement.But when we start to look at the reality of it,they have not really fulfilled promise.You know,we had this month aformer head of the Chinese Export-Import Bank say that alot of the Central Asian countries along the Belt and Road are not able to meet their financial commitments.And part of this is the Belt and Road is just not economically viable.When Iwas practicing law in Hong Kong in the 1980s,I didn’t do finance work or infrastructure work,but Iknow that my firm did.And everything that could be financed was financed by the market.And that’s continued to be true.What the Belt and Road attempts to do is to finance stuff that the market wouldn’t touch,which means that,essentially,China wants countries to pay to accomplish Chinese foreign policy goals.This might work in the short term,but Idon’t think it’s going to work long term.So what we have right now is alot of excitement,but really when you look at the problems facing Belt and Road,something which is not economically viable,which is maybe strategically important for China,but not important for other countries,I don’t think it’s going to work out in the long term.〞
〝Do you think the West should worry about the Belt and Road Initiative?〞
〝There are alot of things to worry about in China.Belt and Road is pretty low on the list of things we’ve got to be concerned about.If the Chinese want to spend money on arailroad in Central Asia,that’s fine,in asense,because every dollar they put there is one fewer dollar that they’re going to put into building asubmarine or frigate or supporting their military in some way.So,yes,we should be concerned,but nonetheless,there’s alot of other things China’s doing much more worrying.〞
Let’s hear what Chen Pokong has to say.
〝What is the biggest problem the BRI poses for China?〞
〝There is abig risk for Chinese investment.According to the Belt and Road initiative,China is investing alot of money in the regions or countries where the politics is not stable and the security is weak.If conflicts,turmoils,and sudden changes occur,Chinese investment could turn into huge loss.And all the loss will be the Chinese people’s loss,but the Chinese people have no rights to prevent Chinese government from doing anything risky.This is absolutely unfair to the Chinese people.Actually,the Belt and Road plan is now facing anumber of obstacles and failures.Not only Western countries have cold-shoulder to this plan,but also the countries which are close to China or friendly to China also have more and more suspicion and rejection to this plan.For example,Pakistan,Nepal and Myanmar rejected some hydropower plants or dam projects funded by China because of local opposition.The reason is because Chinese government is asking price too high–sometimes they are demanding 90%of the profit,or because the Chinese loan has tough or strict condition,or because the projects can harm the environment.So these projects are rejected or canceled in these countries.〞
Coming up:How does the Belt and Road Initiative benefit the countries it’s in,and does it help regular Chinese citizens,or only the elites?
The Belt and Road Initiative is financially risky for China and the countries involved--that is,if they can’t pay back the debt.What are the benefits that outweigh these risks?How does China benefit if the countries can’t pay back their debt?And what’s in it for the average Chinese citizen?Let’s take alook.
The countries taking part in China’s Belt and Road Initiative have some obvious benefits.Many of the developing countries don’t have the money to improve their infrastructure.China’s loans allow them to build up infrastructure quickly.It could also give leverage against traditional regional powers,such as India in South Asia,and Russia in Central Asia.
But there are also many hidden disadvantages.These loans could be debt traps,opening countries up to more Chinese influence.One example of this is Sri Lanka’s Hambantota port.The country couldn’t pay its debt back to China.Instead,it gave China a99-year lease on the port and acontrolling equity stake.
Jonathan Hillman is aFellow and Director of Reconnecting Asia Project at the Center for Strategic and International Studies.He explained Sri Lanka’s debt problem at ahearing on January 25,2018。
〝So Sri Lanka was just mentioned,and Ithink it's afascinating case of both some
of the rewards for China even when things go wrong,and so,you know,in the southern part of Sri Lanka,which Ihad an opportunity to visit just afew weeks ago,there's aport at Hambantota that we're probably all familiar with that was built by Chinese contractors with Chinese financing,and then when the government couldn't pay back the loan,China took equity in the port.They now have a99-year lease,and this is in avery strategic area of the world that's,you know,miles from some of the busiest shipping lanes.And if you go there today,it's,you know,kind of on lockdown.It's been handed over to Chinese companies to run,but there's not alot of economic activity there,and it's adramatic contrast.It's like night and day between that port and the port in Colombo where there is lots of,you know,cargo vessels coming in and out.〞
Just how will these problems work themselves out?Let’s hear my discussion with Gordon Chang and Chen Pokong again.
〝What happens if the countries can’t pay back Chinese loans?〞
GORDON CHANG:I think that we’re going to see acouple things happen.First of all,China will have to convert some of that into equity.China will take some losses.China may get some military bases in places as sort of in payment for loans.We saw alittle bit of this in Sri Lanka,for instance.But what China is going to do is basically end up stretching its finances too thin,largely because these projects,for the most part,are not economically viable.So there’s going to be compromise,and China’s going to take alittle bit of ahit.Maybe abig hit on the places where Belt and Road has really fallen into hard times.
Finally who does the Belt and Road Initiative benefit in the end?Here is what Chen Pokong has to say.
〝What are the benefits of the BRI to average Chinese citizens?Is it like an economic stimulus package for China,or does it mostly benefit Chinese elites?〞
〝As we know China is still an imbalanced country with abig gap between the rich and the poor.What Chinese government should do is to invest more money on its own citizens.For example,there is ahuge need of health care,education,sanitation,and retirement benefits,which so far,have limited funding from Chinese government.What Chinese government is doing now is to invest alot of money abroad.〝Spilling money〞,Da Sa Bi,that is the nickname that Chinese netizens gave to the Chinese government.
Regarding the Belt and Road Initiative,if it is astimulus package for the Chinese economy,the Chinese people have no idea how it works.The Chinese people do not see or feel any advantages this plan has brought to China in the past five years.Actually,the Belt and Road plan may have imply another layer of intentions by the CCP syndicate or red elites.That is Senior Chinese officials and Red elites hope to find an outlet in the international community for their enormous ill-gotten gains through the so-called〝overseas investment〞.For at some extent,this Belt and Road plan may be adisguised money laundering plan.This may be the most brilliant and secretive money laundering scheme in the world today.One of the latest evidences is that Sun Zhengcai,a former Politburo member and Chongqing’s party chief,he was accused on charges of corruption.One of his accusations is using the name of the‘Belt and Road’plan to provide government funds for his mistress,who is also abusinesswoman.〞
China is the 2nd largest economy in the world.No doubt,it is powerful.However,is it wise for it to show itself as asuperpower that could just break into other people’s backyard without any concerns?The European Union,India,even Russia’s reaction is aclear answer to that question.To sum up,the Belt and Road Initiative might make sense from ageopolitical point of view for China,but China is not quite ready for the scale and complexity of this effort,let alone the fact that the world does not trust China’s motivation.Thanks for watching《Zooming In》,I am Simone Gao,and see you next week.