Economy

China’s belt and road initiative veers off track

Chris Cracknell Chris Cracknell

Originally announced in 2013 to great interest throughout the world’s business community, China’s ambitious Belt and Road Initiative (BRI) aims to assemble a new infrastructure network to connect 80 countries in trade partnership. Such a vast undertaking was bound to hit difficulties sooner or later, but the growing list of vocally dissatisfied countries is creating genuine reason for concern.

The Malaysian Prime Minister caused a stir on his recent visit to China, complaining of a “new version of colonialism” being imposed on the region, as he cancelled over $20 billion worth of Chinese projects in his country. The episode seemed to crystallise a frustration shared by many countries, that China is using high price tags and demanding loan conditions to siphon resources from the countries where new infrastructure is being built.

For similar reasons, countries like Tanzania, Bangladesh and Hungary have also ordered a reduction in business with China – or cancelled it outright. Sri Lanka, unable to pay its debt to China for a newly constructed port, had to transfer management of the port to China as part of a 99-year lease. Myanmar threatened a similar cancellation in its (successful) effort to negotiate a reduction in payment obligations. Pakistan, a long-time Chinese ally, is also pushing for a similar re-negotiation to ease its own debt obligations, while seeking emergency IMF assistance for help with its current debt.

The value of trust

Beyond the price tags and loans for construction projects, many countries are voicing concern that China will use the BRI to dump surplus goods on foreign markets. The EU has furthermore complained to the World Trade Organization that China has overstepped its bounds by forcing technology transfer as a condition for market access. And each of these areas of friction continues to develop while the US-China trade war is simultaneously playing itself out.

In principle a smoothly-running BRI would represent a revolution in trade efficiency, linking markets far and wide to facilitate a new era of economic growth. The growing unease that surrounds its development, however, suggests buyers’ remorse among many countries concerned about overpaying for what amounts to a trade-based Trojan horse. Across Africa, for example, country after country finds itself making debt payments to China in exchange for construction projects whose benefits have yet to be seen.

China will need to work hard to regain the trust of its trading partners before it loses control of its own initiative. A delicate balance must be struck between nations, where win-win deals can strengthen ties for a prosperous future. Too many win-lose deals can result in losing the very influence that a country is trying to gain – and ultimately result in lost time and effort that will be capitalised upon by one’s rivals.

New belt, new road?

With all of the above as backdrop, the EU has entered the planning stages for its own version of a Eurasian infrastructure network. The extent to which it will actually be developed, or be in conflict with China’s BRI, is yet to be seen. But sooner or later, China’s dealings with fully capitalist markets will also include the lesson that competition can be a powerful motivator for improvement.

For a country with global ambitions, China has many of the key attributes needed to achieve its aspirations. But the essential lesson holds across world affairs just as surely as it applies to business, or to life in general. It may be tempting to go it alone, and only look out for yourself. But putting in the effort to build a team of genuine allies, is simply a more effective way to manage things in the long run.