by Dr. James M. Dorsey
Pakistan was not the only country to push back at China’s approach towards Belt and Road. Nepal joined Pakistan last November in withdrawing from dam projects because of China’s commercial terms.
Karakoram Highway, which connects China and Pakistan, photo via
Wikimedia Commons
BESA Center Perspectives Paper No. 965, October 3, 2018
EXECUTIVE SUMMARY: China,
in an implicit recognition that at least some of its Belt and
Road-related projects risk trapping target countries in debt or failing
to meet their needs, has conceded that adjustments may be necessary.
The Chinese are responding to pushback on the Belt
and Road Initiative by conceding that changes may be required. “It’s
normal and understandable that development focus can change at different
stages in different countries, especially with changes in government,”
Wang Jun, deputy director of the Department of Information at the China
Center for International Economic Exchanges told the Chinese Communist
Party’s Global Times newspaper. “So China can also make some strategic adjustments when cooperating with these countries, but it’s definitely not a reconsideration of the B&R (Belt and Road) Initiative.”
The Chinese concession, initially made public in an August 27 speech by President Xi Jinping and reaffirmed by the Global Times, came
in the same week that Pakistan, during a visit of Chinese foreign
minister Wang Yi, demanded that China expand its US$50 billion-plus
investment in the China Pakistan Economic Corridor (CPEC). The CPEC is
the single largest country infrastructure investment related to the
People’s Republic’s Belt and Road Initiative. Pakistan insists that it
be expanded to include manufacturing and poverty reduction projects.
The change in China’s approach towards Belt and
Road would, in the case of Pakistan, involve a substantial recasting of
CPEC that would appear to position Pakistan as a raw materials supplier
for China, an export market for Chinese products and labor, and an
experimental ground for the export of the surveillance state China is
rolling out, particularly in its troubled northwestern province of
Xinjiang.
The focus of Chinese investment takes on added
significance as Pakistan weighs options to solve its financial crisis.
Those options include a request for up to US$12 billion in assistance
from the International Monetary Fund (IMF), which would involve a
straitjacket for structural reform.
An IMF assistance package would require Pakistan
to provide chapter and verse of the finances of Belt and Road-related
projects that have so far been kept under wraps.
Mr. Wang, the foreign minister, seemed – despite
the statements suggesting change – cautious in his response to the
Pakistani demands. He indicated that an expansion, if not a
reorientation, of CPEC would not be immediate. “The two sides have
agreed that the CPEC cooperation will gradually shift to industrial
cooperation,” Wang said during his visit.
Pakistan was not the only country to push back at
China’s approach towards Belt and Road. Nepal joined Pakistan last
November in withdrawing from dam projects because of China’s commercial terms.
More recently, protests against the forced resettlement of eight Nepali villages have
apparently persuaded CWE Investment Corporation, a subsidiary of China
Three Gorges, to consider pulling out of a 750MW hydropower project. CWE
said it was looking at canceling the project because it is “financially unfeasible.”
Malaysian prime minister Mahathir Muhammad
has suspended or canceled US$26 billion in Chinese-funded projects since
his election victory in May.
Similarly, Myanmar is negotiating a significant
scaling back of a Chinese-funded port project on the Bay of Bengal from
one that would cost US$7.3 billion to a more modest development that
would cost US$1.3 billion in a bid to avoid shouldering an unsustainable
debt.
China has written off an undisclosed amount of
Tajik debt in exchange for its ceding control of some 1,158 square
kilometers of disputed territory close to the Central Asian nation’s
border with China’s troubled northwestern province of Xinjiang.
Zambia, following in the footsteps of Sri Lanka,
which was forced to give China a major stake in its port of
Hambantota because it could not service its debt, was left this month
with no choice but to hand over control of its international airport as well as a state power company.
The Chinese concession also comes amid increased
international attention on China’s crackdown on Turkic Muslims in
Xinjiang, including the rollout of its 21st century Orwellian surveillance state.
The concession is part of a concerted effort to downplay the geopolitical nature of the Belt and Road Initiative and stress its sustainable development and job creation aspects.
Ray Washburne, president and CEO of the Overseas
Private Investment Corporation (OPIC), an intergovernmental agency that
channels US private capital into overseas development projects, earlier
depicted the Belt and Road Initiative as a ploy by China to ingratiate
itself with other countries by funding infrastructure projects.
China ”is not in it to help countries out, they’re in it to grab their assets,”
Washburne said. He charged that China was intentionally plunging
recipient countries into debt, then going after “their rare earths and
minerals and things like that as collateral for their loans.”
That view persuaded Greenland this month to select a Danish rather than a Chinese company to build and upgrade three airports.
“The big fear is that even a small Chinese
investment will amount to a large part of Greenland’s GDP, giving China
an outsized influence that can be used for other purposes,” said Danish
foreign and defense policy scholar Jon Rahbek-Clemmensen.
Rahbek-Clemmenen’s concern reflects a widespread
belief that the sheer scale of Belt and Road, involving up to US$1
trillion in investments in scores of countries across the globe, lends
it significant geopolitical attributes irrespective of what Chinese
leaders may have had in mind.
A recent study by the Washington-based Center for
Strategic and International Studies (CSIS) argued that Belt and Road is
driven by “interest groups within and outside China [that] are skewing
President Xi’s signature foreign policy vision.” The study argued that
the positioning of the initiative persuaded Chinese local and regional
authorities as well as companies to brand their activities as Belt and
Road-related to gain economic and political advantage.
Earlier, the Washington-based Center for Global
Development warned that “there is…concern that debt problems will create
an unfavorable degree of dependency on China as a creditor. Increasing
debt, and China’s role in managing bilateral debt problems, has already
exacerbated internal and bilateral tensions in some BRI (Belt and Road
Initiative) countries.”
BESA Center Perspectives Papers are published through the generosity of the Greg Rosshandler Family
BESA Center Perspectives Papers are published through the generosity of the Greg Rosshandler Family
Dr. James M. Dorsey, a non-resident Senior Associate at the BESA Center, is a senior fellow at the S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University and co-director of the University of Würzburg’s Institute for Fan Culture.
Source: https://besacenter.org/perspectives-papers/china-belt-road-pushback/
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