Five years on, the BRI is still being perceived as a debt trap

China needs to ponder long and hard about how to stop the BRI from being perceived as a 'debt trap'

Five years since President Xi Jinping laid out his grand vision for the Belt and Road Initiative (BRI), the implications of China’s economic supremacy has brought about marked questions over the impacts of its rise as a potential global superpower. These questions apply particularly to whether China, based on its present trajectory, may soon supplant the United States’ hold over the international system as it increasingly comes to challenge it.

China has gone to great lengths to distance itself from the US, in terms of its approach towards international politics. A key cornerstone of its foreign policy has always been based on the principles of non-interference in the internal affairs of other states. This has often been presented as a direct anti-thesis to the long history of US led interventions witnessed across the Middle East, Latin America and key regions in Asia. Within the post-Cold War scenario, China’s insistence on non-interference in the internal affairs of states, and greater inclusivity within the international system has served as a rallying cry against what many have termed as US Imperialism and unilateralism.

However, the many intricacies of China’s newfound ability to project power overseas have brought with them their own set of challenges in direct contradiction to the above principles. Powered by its massive economy, China’s investments under the BRI spanning across Europe, Africa, The Persian Gulf, and large swathes of Asia, have caused feverish speculation, amongst both proponents and critics alike, as to the true motives behind its financial largesse. China has repeatedly justified its investments in under-developed countries as part of its vision for global economic development. Yet, in whatever way China has manoeuvred to ensure that these investments remain secure and true to their objectives, it has had to continuously ward off the perception that it is laying the foundations of a new form of imperialism.

Particularly with respect to the BRI, these perceptions of Chinese Imperialism are rooted in what numerous analysts have termed as China’s ‘Debt Trap Diplomacy.’ Citing the cases of the Hambantota Port in Sri Lanka, the Bar-Boljare highway in Montenegro and the China Pakistan Economic Corridor (CPEC) in Pakistan, a growing number of critics have pointed out that these projects, while being funded through highly attractive and concessional loans from China, are leading to unsustainable levels of debt for these countries. It is argued that with mounting debt in the guise of BRI funding, these countries would likely be reduced to being mere client states, with their sovereignty firmly in the grasp of Chinese creditors.

Citing the cases of the Hambantota Port in Sri Lanka, the Bar-Boljare highway in Montenegro and CPEC in Pakistan, a growing number of critics have pointed out that these projects, while being funded through highly attractive concessional loans from China, are leading to unsustainable levels of debt for these countries

This issue of Chinese Debt was once again brought forcefully into the international spotlight, owing to a dramatic shift in Malaysia’s foreign policy towards China. The newly elected government under Mahathir Mohammad recently cancelled a series of large investment projects that were being implemented under the BRI framework. These comprised of the $20 billion East Coast Rail Link, as well as two natural gas pipelines worth $2.3 billion. All of these projects were deemed as unaffordable by the new government, based on the ensuing debt that would have followed.

Speaking at a press conference in the Great Hall of the People in Beijing, Prime Minister Mahathir stated clearly that he did not want a situation where there was a new version of colonialism based on unequal relations. His entire visit to China last week was geared towards delicately balancing Malaysian interests with respect to China’s sustained push towards realising its BRI ambitions. He went to great lengths to lay the blame on his predecessor’s mismanagement of the economy, claiming he was confident that China would understand Malaysia’s present fiscal constraints, and its inability to afford such projects at this time.

It is worth noting that during the run-up to the Malaysian elections, Mr Mahathir had centred his election campaign on calling for greater oversight over Chinese funding. This was based under widespread allegations of corruption regarding the mismanagement of BRI project funds under his predecessor Mr Najib Razzak. Partisan politics aside, Mr Mahathir’s statements bear a striking resemblance to the election rhetoric of another newly elected leader in yet another key BRI partner country.

On the other side of the Indian Ocean, the newly elected Prime Minister of Pakistan, Mr Imran Khan too had campaigned for greater oversight over the management of BRI funds under the massive China Pakistan Economic Corridor (CPEC). These were part of a series of allegations levelled against his predecessor, former Prime Minister Nawaz Sharif who also is accused of widespread corruption and mismanagement of the economy. Pakistan’s rampant debt crisis has been attributed in part to Mr. Sharif’s mismanagement. Since assuming power, Mr Imran Khan has been delicately balancing increasing calls for greater transparency and oversight over CPEC projects, all the while ensuring that the bonhomie between Pakistan and China remains intact.

The parallels between Prime Ministers Imran Khan and Mahathir Mohammad present a highly interesting comparison, specifically within the context laid out earlier in this discussion. Both politicians have more or less defined their political identity as being staunchly against the last few decades’ of US imperialism.  Both came in to power on a surging wave of populism, on the promise of fighting corruption and providing better oversight over the economic direction of their countries. Both, while being initially sceptical of Chinese investments, were quick to acknowledge and provide a reaffirmation of China’s role in their respective national development. Mr. Khan’s direct appreciation of Chinese assistance in his speeches as well as his tweets in Chinese, directly point towards his attempts at alleviating Chinese suspicions regarding his commitment to the BRI. Mr. Mahathir’s visit to Beijing, as one of his first overseas visits as Malaysia’s newly elected Prime Minister, also present a similar story. By positively engaging with China immediately after assuming office, both leaders have attempted to directly address any misperceptions that may have arisen from their pre-election rhetoric.

Both leaders however, while whole-heartedly welcoming Chinese assistance, have also taken a much more measured response in terms of ensuring that their own countries’ interests achieve precedence. Looming debt and the maintenance of sovereignty still remain at the forefront of their political agenda, regardless of the commitments made by past governments. That is still the crux of the message being delivered to China by both countries.

Taking into consideration its experience over the past five years, China should take a long hard look at how to stop its Belt and Road Initiative (BRI), from being perceived as a ‘debt trap’. While the BRI’s critics have been quick to equate this aspect as a key characteristic of growing Chinese Imperialism, its proponents are still facing difficulty in financially justifying the grand scale of the BRI to their impoverished constituencies.

If China is to truly chart a more inclusive path to global leadership via the BRI, it must let its diplomatic goodwill take precedence over the economic reality of being a creditor to it indebted allies. If not, it would likely lose its ability to stand in contrast to what itself refers to as the US’s imperialist hold over international politics; all, in spite of China’s strict adherence to its long cherished principles of ‘non-interference’, and respect for the sovereignty and territorial integrity of its allies.

The writer is a Research Associate and Program Coordinator for the China Study & Information Centre (CS & IC) at the Strategic Vision Institute, a non-partisan think tank based out of Islamabad. He can be reached at waqas@thesvi.org

Published in Daily Times, September 3rd 2018.