Considered the most ambitious infrastructure project in modern history, almost eight years after the launch of the Chinese Communist Party’s Belt and Road Initiative (BRI), we analyze what its initial objectives were and the status of some of the projects initiated to see if the Chinese Communist regime achieved its goal of expanding its influence in the world.
In 2013, CCP leader Xi Jinping announced the launch of the BRI as a project that would bring prosperity to all nations through millionaire investments in infrastructure, building railroads, ports, cities, power plants, dams, roads and so on.
With prosperity, the initiative hoped to increase trade between China and Europe, passing through Africa, while benefiting also other countries along the route by collecting taxes and eventually bringing about new investors with the growth in population and infrastructure of these strategic points.
Some journalistic analyses indicate that the prospect of host countries increasing their GDP by up to 5 percent as a result of the initiative has been one of the major motivators for them to join the BRI.
Speaking of proportions, the official narrative of the vast majority of the media is that the BRI investments add up to 40 percent of global GDP. These figures result simply from adding up the gross domestic products of the participating countries and it is a symbolic figure; they cover 65 percent of the world’s population, here again a symbolic sum of the populations of the participants; and it would use 75 percent of the energy reserves.
But according to an analysis by Wade Shepard of Forbes, the veracity of these figures is highly questionable because there are no publicly stated key performance indicators, no overall institutionalization, no formal membership protocols, no founding charters, and no development timeline that is measured not in mere years, but in decades, or even centuries.
In other words, BRI lacks public documents or established rules that allow for scrutiny by third parties or independent bodies that are dedicated to assessing the effectiveness of the project both economically and actually in the short or long term. However, looking at the track record of the Chinese communist regime, this was perhaps always its intention.
The South American country Argentina, for example, ‘officially’ joined the Belt and Road initiative in February and media reports simply stated that the two countries ‘signed a memorandum of understanding’.
The lack of transparency of the initiative has been a point of criticism from researchers, governments and journalists alike in assessing the BRI as a whole.
Shepard also questions the ambiguity that defines which projects are part of the BRI as currently even many countries in South and Central America have announced Chinese infrastructure investments as part of the BRI, when in practical terms they have nothing to do with connecting Asia to Europe and rather appear to be part of China’s expansion around the world.
The BRI was conceptually based on the ancient Silk Road, a road connecting Asia to Europe along which wealth and culture were imported from one continent to another, albeit in a rudimentary way.
But the BRI was envisioned as something much more ambitious: instead of routes, the CCP promised ‘economic corridors’, which are roads, bridges, ports and railroads that connect with sea routes, cutting by up to half the time it currently takes for a cargo ship to get from China to Europe.
What are the economic corridors within the BRI?
The six economic corridors within the BRI are:
1. China-Mongolia-Russia, which runs from China to the city of St. Petersburg.
2. Eurasian Land Bridge, which runs from Shandong Province to Denmark.
3. China-Central Asia-West Asia, which runs from Kazakhstan to Turkey.
4. China-Indochina Peninsula, running from Henan Province to Malaysia.
5. Bangladesh-China-Myanmar, running from the port province of Guangdong to Bangladesh.
6. China-Pakistan, whose ends are the city of Urumqi in Xinjiang, and the port of Gwadar in Pakistan.
The mention, description and analysis of these economic corridors is of utmost importance because they are almost exclusively the only elements of the initiative that the media, including the Chinese state-owned media, have mentioned as being an official part of the initiative and through them an assessment of its progress can be made.
Progress of BRI projects seven years later
The corridor connecting the Arabian Sea on the Pakistani coast with the city of Urumqi in Xinjiang was one of the most important BRI announcements that even to this day the authorities of both countries maintain as one of the most important developments within the initiative.
The China-Pakistan economic corridor is considered the flagship of the BRI, theoretically it was to connect China directly to the Arabian Sea with a port in Gwadar that would considerably shorten the distance to Iran, one of the CCP’s major oil suppliers.
According to a Bloomberg report, currently only one third of all CPEC infrastructure projects have been completed and of the most important, the Gwadar port, is completely stalled.
The Gwadar port appears to be of strategic importance to the CCP, even though it is not commercially viable.
Gwadar is an extremely impoverished area if not the poorest province in Pakistan, its main population is of a different ethnicity than the majority of the country so it has been plagued by violent conflict and the city is heavily protected by the military.
Drinking water is scarce in the area and electricity is also a scarce resource, so installing a commercial port and luxury residential area does not seem feasible and in fact to date has not worked, although there are other reasons that will be evaluated later.
Pakistan currently owes the CCP almost $6 billion in loans which is more than 5 percent of its foreign debt, yet none of the projects have generated revenue for Pakistan, the country’s GDP has been in steady decline for years and there have even been massive protests from local residents because building a highway would limit or cut off access to the sea for many who make a living from fishing.
In Malaysia, another strategic point within China’s sea routes to Europe, Africa and Central Asia, the CCP announced in 2014 the construction of a forest city in the state of Johor, armed on an artificial island (Melaka Gateway), a railroad that would connect Kuala Lumpur to Singapore, and several pipelines to transport gas and oil.
According to a report by The Diplomat, the vast majority of these projects have been canceled or are stalled, mainly due to issues related to corruption and lack of transparency in the agreements for the construction of the projects.
The forest city or the Melaka Gateway, a luxury housing project with ‘green’ technology and a modern port for extra-large cargo ships is located in the Strait of Malacca, a strategic point for the transport of oil and gas to China.
Since maritime traffic in the area is dominated by Singapore, usually an ally of the United States, the construction of the port in the Strait of Malacca will allow the Chinese regime to import gas and oil without fearing possible sanctions from the U.S. government.
Although looking at satellite images of the area one can see the artificial island already constructed with some buildings, the initiative is currently stalled.
The project was widely criticized for its environmental impact since the artificial accumulation of sand endangered the marine fauna of the region, in addition to affecting the fishing of local residents.
Experts also pointed out that building a luxury housing complex so close to Kuala Lumpur, the country’s capital, where such facilities already exist, was unnecessary.
In addition, the prices of the homes were so expensive that few Malaysians could afford them and it was therefore speculated that they were intended for Chinese millionaires, although to date very few apartments in the project have been sold.
In 2018, with a new president in power critical of Malaysia’s relations with China, a review of all BRI initiatives was undertaken.
The East Coast Rail Link (ECRL) was canceled after it was discovered that the previous president had inflated the contract price. Later, through negotiations, the new president managed to cut the cost initially from US$16.2 billion to US$5.3 billion to restart the project.
Two gas pipelines worth $2.3 billion also canceled. Although the railroad has been reactivated, none of the projects in Malaysia have been completed and the country has not seen the promised economic fruits either.
Khorgos Gateway, Kazakhstan
Another BRI flagship is the Khorgos Gateway, located on China’s border with Kazakhstan where the CCP built a rail link to ship its exports to Europe.
While in this case, reports indicate that the infrastructure promised by the initiative has been completed, with residential areas and stations for freight trains, the promise of economic benefits for Kazakhstan does not seem to be coming as expected.
Considered one of the most inaccessible places in the region because it is thousands of kilometers from the sea and has no cities nearby, the installation of a freight train station some 8,000 kilometers from Europe only seems to serve as a way for China to export its goods, as the trains are loaded with Chinese goods but return empty from Europe, a sign of the unbalanced trade between China and the rest of the world.
Sri Lanka, Uganda, Serbia
Other infrastructure projects include a port city in Colombo, Sri Lanka, a hydroelectric plant in Karuma, Uganda, and a highway in Serbia.
According to a BBC report, for the construction of the port city in Colombo, Sri Lanka borrowed US$8 billion from the CCP, so the port is currently under concession to a Chinese company.
The geographical location of the port in Colombo is another important point on the sea routes that China needs to access Central Asia and then continue on to Europe.
The Karuma hydropower plant in Uganda is not a point of interest for China within the BRI structure but it is also a project that has not been finalized and local reports indicate that in June of this year the plant will be operational.
In Montenegro, the CCP began construction of a 40 km section of a 400+ km highway that would run from Montenegro’s port of Bar on the Adriatic Sea to Belgrade, the capital of neighboring Serbia.
The initiative is stalled because Montenegro’s government was unable to repay the billion in loans it took from Chinese banks to build it, and according to an NPR report, the country’s former justice minister, Dragan Soc, said that once completed, the road will lead nowhere anyway.
Why BRI’s initiatives have failed
Having analyzed some of the most important BRI projects, we can see that so far none of the initiatives have brought the promised economic fruits and prosperity.
So what are the benefits of the BRI for the Chinese communist regime? It is a complex answer that gives rise to various theories.
One of the most criticized points of the way the Chinese Communist Party (CCP) develops its initiatives within the BRI, by Western standards, is the lack of transparency in the agreements it signs with host countries.
First of all: there is no bidding process. More than 90 percent of the projects are carried out by state-owned companies from China, which is said to have 7 of the 10 largest construction companies in the world. Only a few are awarded to local companies, but always in cooperation and/or supervision of the Chinese.
This also implies that China brings in its own workers who, in turn, take their wages back to China.
This also gives rise to corruption: costs are set by the Chinese companies themselves, which have been criticized for, as in the well-known Malaysian case, inflating prices.
Many of these companies, as Johanttan Hillman of the Strategic Center for International Studies points out, “have been debarred from the World Bank and other multilateral development banks for fraud and corruption, which covers everything from inflating costs to giving bribes.”
Local rulers gain a good reputation for announcing infrastructure construction, although most do not get to see them completed, but the whole process is managed by the CCP.
Secondly: the question of loans. While the funds come from major Chinese banks such as the Import and Export Bank of China (Exim), the Industrial and Commercial Bank of China (ICBC), and the China Development Bank, on many occasions the CCP creates joint ventures for the sole purpose of providing the loans, preventing the debt from appearing on the country’s books, i.e. the debt does not exist for China.
Third: the recipients of these loans are all impoverished countries already indebted to the IMF and the World Bank, punished by decades of corrupt governments using public funds to enrich themselves.
In other words, from a financial point of view, no organization or country would consider lending money to these countries given their record.
Fourth, but not least, the CCP offers much less friendly terms on its loans. While strong nations such as Japan and France have provided infrastructure construction loans to other countries with a 1 percent rate and a term of up to 28 years to repay the debt, the CCP offers a rate of over 4 percent for ten years.
So what are the benefits for the CCP?
We have already seen that commercially the projects initiated within the BRI have not brought any great economic benefit to the participants. While the CCP is assured in some cases such as the Khorgos portal in Kazakhstan of shipping its imports to Europe, looking at the totality of the initiatives, none are commercially oriented.
So what does the Chinese communist regime gain from these investments?
According to Chinese law, all Chinese state-owned or semi-private construction companies must be built according to People’s Liberation Army (PLA) standards, i.e. whether it is a port, a station for freight trains, highways and so on, they must be prepared to receive military vehicles and equipment.
Looking at the strategic points where the CCP initiated the construction of ports and roads connecting China with Europe, Central Asia and Africa, they all have a dual function.
As the Asia Society Policy Institute points out, Beijing’s approach is to build military bases that also have commercial use, without raising suspicion.
Many of the ports being built within the BRI follow the model that integrates the port with industrial parks and support industries such as shipbuilding and replenishment services that enhance the port’s ability to support Chinese naval vessels.
That is, in the event of military conflicts, the CCP would have the ability to supply its military from any of these points away from its operational base.
It would also allow Beijing to dictate shipping rules in the region and avoid international sanctions usually imposed by the United States.
The ports of Hambatota in Sri Lanka, Gwadar in Pakistan, the Melaka gateway in Malaysia and a military base in Djibouti are all under concession to Chinese companies after these countries failed to pay their debt to China.
An AidData report indicates that the CCP’s real intention behind its unpayable loans is to grab host countries’ natural resources:
“To secure energy and natural resources that the country lacks in sufficient quantities at home and maximize investment returns on surplus dollars and euros, Chinese state-owned creditors have rapidly scaled up the provision of foreign currency-denominated loans to resource-rich countries that suffer from high levels of corruption.”
According to the report, the CCP sets up a complex procedure in which, while issuing a loan to build infrastructure in the host country, it simultaneously sets up an agreement to purchase natural resources.
However, when it receives the resources, the CCP “pays” for them by depositing money in an account it controls, and uses those funds to collect scheduled loan payments.
In other words, when the host country is unable to repay the loan, China will keep the natural resources and the money.
The CCP signed, for example, an agreement with the Cuban Communist Party to build infrastructure on the island. Cuba is known to be one of the largest sources of nickel, in addition to being a country impoverished by decades of corruption.
Other resource-rich countries that also owe millions of dollars to the CCP include Ghana and Zambia.
The final question: Did the CCP gain geopolitical influence?
If there is one thing analysts on both sides of the political spectrum agree on, it is that, with the BRI, the CCP sought to gain influence on the world stage, filling the gaps left by Europe and the United States.
So, did the CCP achieve its goal of positioning itself as a power with the BRI?
First, it is worth mentioning that Chinese banks involved in these deals have begun to feel the impact of lending money without being paid back.
According to a Wion report, the China Development Bank and the Export-Import Bank of China went in 2016 from handing out as much as $75 billion in loans to just $4 billion in 2019, a dramatic 94 percent reduction.
The defaulted loans also resulted in a large number of these Chinese banks involved in financing the BRI being classified as high risk by financial authorities.
In addition, many of the host countries have stopped taking CCP loans, the local population has also started protesting the loss of sovereignty to the advancing CCP, and countries such as Slovenia, the Czech Republic, Romania and Lithuania have demanded to control BRI projects locally or get out of the initiative altogether.
While some analysts claim that as long as the CCP keeps channeling its money into these impoverished countries with promises of prosperity the image of a Chinese power continues to grow, others based on the evidence of these almost eight years since the BRI was launched, claim that the strategy is not yielding the fruits of power desired by the CCP.
The United States and Europe during the G20 announced measures to counter the CCP’s global domination efforts, albeit under more benevolent terms taking into account fundamental aspects such as, determining the amount of money these countries can effectively pay, designing the projects based on local need, opening a legal and fair bidding process, etc., in order to not only not indebt the hosts unnecessarily but to seek the real benefit of their residents.
Another important consideration that has been completely excluded in media analyses is the impunity of the Chinese regime’s leaders and their companies.
While corruption cases have ended with local rulers being investigated, or at least their reputations damaged, Chinese leaders face no scrutiny whatsoever in their homeland: there is no need to worry about winning the vote in China, because there are no elections.
At the same time, while the CCP seeks to establish a ‘savior’ image by lending billions of dollars, or investing it in building in other countries, China remains home to at least 700 million poor people living in rural areas.
Although these hundreds of millions of Chinese have no voice in the international community, the CCP can never become a world power when it cannot even win the hearts of its own citizens or even take care of them.