The Belt and Road Initiative (BRI) is often cited as being the brainchild of the current Chinese premier Xi Jinping, who first announced the project in Kazakhstan during 2013, where it was first termed the ‘Silk Road Economic Belt’. It is also often referred to as One Belt One Road. Essentially the BRI is a huge infrastructure project backed monetarily from Chinese banks and funds, the total capital for the project is estimated to reach 900 billion dollars. The only factor that meets the ambitious monetary backing for the project is its geographic reach, with the project sprawling over Asia, Africa, the Middle East and Europe. The Chinese arguments presented for the project can be seen by recent comments from Liu Xiaoming (the People’s Republic of China’s (PCR) ambassador to the UK) who argues that it aims to foster trade and sustainable development. However recent criticisms accuse the project and Chinese foreign policy of burdening developing countries with unserviceable debt. Such criticisms of the project and the cancelation of various other initiatives by host countries threaten to derail the project.
How large of an issue is the debt in the One Belt One Road project? A recent study by the Centre for Global Development found that across the 68 host countries, 23 where of risk for debt distress and in eight countries the BRI projects would significantly add to this distress. This report adds to the criticism around BRI financed projects. Major international figures such as Christine Lagarde, the managing director of the International Monetary Fund, warned that they could ‘lead to a problematic increase in debt, potentially limiting other spending as debt service rises, and creating balance of payments challenges’. A more critical approach came from Rex Tillerson, former secretary of state, who earlier this year accused China of ‘predatory loan practices’. A major cause for concern around the increasing levels of infrastructure debt resulting from BRI and other Chinese loans, is the lack of a transparent framework. Another criticism comes from a strategic perspective with a growing fear that China could use the increasing leverage of this debt for geopolitical ends, especially in the Indian Ocean. An example which is often highlighted by proponents of this criticism is Hambantota’s Magampura Mahinda Rajapaksa Port constructed with a Chinese funded program, which lay idle after completion. Moreover, after 80% of the ownership of the port was sold to a Chinese company it has since been used to dock Chinese submarines. Debt can be seen to permeate every aspect of the RBI and give rise to several concerns around sustainable development and geopolitics.
Is the amount of Chinese debt a critical issue to the success of RBI? Firstly, can Chinese lending be classed as predatory? Researchers from the University of Boston and John Hopkins University have amassed a database of Chinese loans in Africa from 2000-2015 which totalled $95.5 billion. Deborah Bräutigam argues that most of the loans in the database were productive in terms of the much-needed infrastructure they provided in transport and power generation. Although the database extends far before the timeframe of the RBI, it highlights that despite criticisms around the transparency of Chinese lending policy it provides much needed capital for infrastructure in many host countries.
There is evidence that some recipients of large Chinese backed projects are starting to question their utility. The most recent example of this has been the fate of such projects in Malaysia. Following Mahathir Mohamad’s surprising electoral victory in May, projects such as the $20bn East Coast Rail Link have been cancelled. The reason given for the cancelation of the project was that Malaysia could not afford it. Indeed, many African countries are also being pushed back against such debt and are hoping to write it off or offer natural resources and assists to repay it. Therefore, some of the criticisms of the levels of debt involved in RBI projects and Chinese foreign policy are beginning to be espoused by some of the host countries themselves as they begin to come under the strain of their ballooning debt.
It can, therefore, clearly be seen that many issues exist with the RBI’s programme for development in terms of not only the rising levels of debt but the lack of transparency which is needed for sustainability. Many host countries will continue to see Chinese backed infrastructure projects as providing much needed investment with lower conditionalities than that of other creditors. However, the ballooning amount of debt for host countries does pose a considerable threat to the future success of the RBI as host countries begin to develop concerns around their balance sheets and sovereignty.