The BRI is Dead? Long Live the BRI?, Part III – The Cracked Belts and Forked Roads Blocking Realization of the BRI Dream
China, as you would expect, Belt and Road Initiative (BRI) participants and proponents, and even data support some of the positive sentiment in, if not the logic of, the previous blog in this four-part series on the future of the BRI, which highlighted numerous factors likely to continue propelling the BRI.[1] To illustrate, China’s official news agency Xinhua proclaimed a few days ago that the BRI “has yielded substantial benefits and achieved initial success in promoting shared development and prosperity for participating countries.”[2] It and others laud the BRI for delivering infrastructure widely, plugging capital and supply chain gaps, increasing trade, advancing every manner of exchange through better connectivity, and improving lives.[3] According to recent statistics, BRI FDI and contracting remain substantial and/or increasing, even if both are not past levels, with analysts asserting Chinese FDI and infrastructure activities have just shifted in geographic and sectoral focus as well as individual project size.[4] For their part, BRI participants like Cambodia, Egypt, Indonesia, Hungary, and South Africa continue to evidence ongoing interest in the BRI and, indeed, to seek enthusiastically more BRI funding, investment, and contracting from China and Chinese companies.[5]
Excessive optimism, though, is risky because BRI financial challenges, while often exaggerated, are very real. Aside from the overused case of Sri Lanka, there is no shortage of BRI countries requiring billions of dollars of interest reductions, payment extensions, or principal cuts. Among them are high-profile participants like Cambodia, Egypt, Ethiopia, Kenya, Nigeria, Myanmar, Pakistan, and Laos.[6] China’s ability to address debt issues is bounded by its modest current growth rate, the high indebtedness of its local governments and real estate firms, severe demographic challenges, its persistent concerns about capital outflows, and competing funding demands, as well as its unwillingness to write off debt due to, among other things, fears others may demand relief.[7] Another limitation flows from the constrained financial situation of Chinese companies that play a major role in BRI projects.[8] And we cannot forget that many BRI countries are developing countries with archetypal developing country economic woes such as poor finances, high debts, structural economic imbalances, trade deficits, and underdeveloped revenue collection systems that will hinder their ability to borrow and repay loans and to contribute the moneys needed to ensure BRI project success.
Domestic political challenges have been a bane for the BRI for quite some time yet BRI optimists often ignore or downplay them.[9] Challenges range from political instability/terrorism to changes in government or government leaders to separatism to elections to elites exploiting BRI projects to suit their particular political and economic needs. Pakistan is a poster child of all of these challenges with marquee BRI projects like Gwadar seriously affected.[10] Such challenges have been witnessed individually or collectively, in various degrees, in BRI participants like Ethiopia, Iraq, Kenya, Malaysia, Maldives, Myanmar, Sri Lanka, and Tanzania and, in these and other countries, they have stopped, delayed, and/or disfigured BRI endeavors.[11] As well, they have made China cautious about moving forward or initiating new, related BRI projects.[12] Domestic political challenges have reared their head in another way. To elaborate, rising domestic sensitivities about Chinese involvement in critical infrastructure have, among other things, sunk seaports, put railways off track, and cut off telecommunications endeavors.[13]
Indisputably, international politics also influences if and how the BRI unfolds as well as what results it produces. Due to its long-standing territorial dispute with China, displeasure with Chinese multifaceted and ongoing support for India’s arch adversary Pakistan, and angst about Chinese inroads in its backyard, the Indian Ocean Region, India, for example, rejects participation in the BRI and, in facts, works to counteract or to turn others against it.[14] China’s territorial and maritime disputes in the South China Sea influence, in varying ways, the likelihood and extent to which BRI projects can advance in the Philippines, Vietnam, and Malaysia.[15] Worries about the BRI’s political and economic effects globally as well as in their neighborhoods have led the US, the European Union, and Japan to offer BRI alternatives such as the US’s Build Better Back World, Europe’s Global Gateway, and the Indo-Middle East Economic Corridor (a venture involving the US, Europe, India, and Middle Eastern Countries), to charge that China’s BRI is bad for, to list a few, finances, governance, and the environment, and to lobby BRI participants to consider more carefully the implications of their involvement in the BRI.[16] These counter- initiatives, even though they have flaws, have the potential to prevent countries from embracing the BRI, to limit the intensity of their embrace, and to run individual BRI projects off the road or delay them.
Despite the seeming contradiction between this blog and the prior one, they indeed fit together well. To be clear, this blog does not imply the death or massive downsizing of the BRI, but rather serves to lay out in detail why the BRI will not advance dramatically in the future. This is important because China and BRI participants, in some cases, still are expecting, without due reflection, the BRI to boost (massively?) their growth rates, accelerate industrialization, increase trade, transform their economic structures, and diversify their economies.[17] Furthermore, Chinese and BRI participant companies still fantasize, often naively, dramatic BRI-driven export, manufacturing, business, resource, and contracting opportunities. Essentially, this blog functions to pull the train whistle to awaken those going beyond the cautious optimism laid out in the second blog or perhaps drawing uncalled-for succor from it.
[1] Jean-Marc F. Blanchard, “The BRI is Dead? Long Live the BRI?, Part II- Accelerants Allover with Sporadic Retardants,” Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations Blog, June 18, 2023, https://mnccenter.org/blog/bri-dead-long-live-bri-part-ii-accelerants-al....
[2] “10 Years On, Belt and Road Cooperation Delivers Fruitful Outcomes,” Shine, October 11, 2023, https://www.shine.cn/news/nation/2310117882;
[3] Ibid., Tao Mingyang, Li Xuanmin, and Yin Yeping, “As BRI enters 10th Year of Development, China-Europe Freight Train Set to See ‘Explosive Growth’ in 2023,” Global Times, January 12, 2023, https://www.globaltimes.cn/page/202301/1283707.shtml; Chris Devonshire-Ellis, “China’s H1 2023 Trade with BRI Countries up 9.8%, Chinese BRI Investment Continues,” Silk Road Briefing, August 1, 2023, https://www.silkroadbriefing.com/news/2023/08/01/chinas-h1-2023-trade-wi....
[4] Devonshire-Ellis, “China’s H1 2023 Trade with BRI Countries up 9.8%, Chinese BRI Investment Continues” (August 1, 2023); Andrew Hayley, “China’s Belt and Road Energy Projects Set for ‘Greenest’ Year, Research Shows,” Reuters, August 2, 2023, https://www.reuters.com/business/energy/chinas-belt-road-energy-projects... and Kawala Xie, “China’s Belt and Road Initiative Regains Momentum as Focus Shifts to Smaller ‘High-quality’ Projects,” South China Morning Post, August 5, 2023, https://www.scmp.com/news/china/diplomacy/article/3230094/chinas-belt-an....
[5] See, e.g., Kawala Xie, “Cambodia’s Hun Sen to Head to China in Search of High-Speed Rail Support,” South China Morning Post, January 15, 2023, https://www.scmp.com/news/china/diplomacy/article/3206903/cambodias-hun-... Promit Mukherjee, “South Africa, China Sign Power Deals during BRICS Summit,” Reuters, August 23, 2023, https://www.reuters.com/business/energy/south-africa-china-sign-power-de... and “China to Consolidate Cooperation, Mutual Trust with Egypt: Senior CPC Official,” Xinhuanet, September 26, 2023, https://english.news.cn/20230926/8b40d56d1ebf4c1981125ef6f85eb6ef/c.html.
[6] Shin Watanabe and Ryosuke Hanada, “China Slows Foreign Lending as Belt and Road Problem Loans Triple,” Nikkei Asia, September 20, 2022, https://asia.nikkei.com/Spotlight/Belt-and-Road/China-slows-foreign-lend... Lingling Wei, “China Reins in Its Belt and Road Program, $1 Trillion Later,” The Wall Street Journal, September 26, 2022, https://www.wsj.com/amp/articles/china-belt-road-debt-11663961638; James Kynge, “China Grants Billions in Bailouts as Belt and Road Initiative Falters,” Financial Times, March 28, 2023; Iori Kawate, “Along China’s Belt and Road, Lenders’ Problem Debt Mounts,” Nikkei Asia, June 1, 2023, https://asia.nikkei.com/Spotlight/Belt-and-Road/Along-China-s-Belt-and-R... and Simone McCarthy, “China Has Poured Billions into Africa’s Infrastructure. Is it Now Tightening the Tap?” CNN, September 27, 2023, https://www.piie.com/blogs/realtime-economics/how-serious-chinas-economi....
[7] Wei, “China Reins in Its Belt and Road Program, $1 Trillion Later” (September 26, 2022); Liam Gibson, “Is China’s high-growth era over – forever?” Aljazeera, January 24, 2023, https://www.aljazeera.com/features/2023/1/24/is-chinas-high-growth-era-o... Joe McDonald and Bharatha Mallawarachi, “China Expresses Support for Sri Lanka Ahead of Debt Meeting,” The Diplomat, February 15, 2023, https://thediplomat.com/2023/02/china-expresses-support-for-sri-lanka-ah... and Kawate, “Along China’s Belt and Road, Lenders’ Problem Debt Mounts” (June 1, 2023). Despite all the pessimism about China’s economic situation, there are grounds for expecting a turn for the better. See, e.g., Nicholas R. Lardy, “How Serious is China’s Economic Slowdown?” Peterson Institute for International Economics Blog, August 17, 2023, https://www.piie.com/blogs/realtime-economics/how-serious-chinas-economi....
[8] On CCC’s financial problems, Shin Watanabe, “Ley Chinese Belt and Road Builder Faces Rising Risks, Debt,” Nikkei Asia, October 5, 2022, https://asia.nikkei.com/Business/Markets/China-debt-crunch/Key-Chinese-B.... Multiple examples of CCC’s deep involvement in BRI infrastructure appear in Jean-Marc F. Blanchard, ed., China’s Maritime Silk Road Initiative and Southeast Asia (Singapore: Palgrave MacMillan, 2019); and Jean-Marc F. Blanchard, ed., Chinese Overseas Ports in Europe and the Americas (Abingdon: Routledge, 2024).
[9] I have repeatedly highlight the essentiality of paying attention to domestic politics to understand the BRI’s dynamics. See, e.g., Jean-Marc F. Blanchard, “Probing China’s Twenty-First Century Maritime Silk Road Initiative (MSRI): An Examination of MSRI Narratives,” Geopolitics, Vol. 22, No. 2 (2017), pp. 246-268; Jean-Marc F. Blanchard, “Problematic Prognostications about China’s Maritime Silk Road Initiative (MSRI): Lessons from Africa and the Middle East,” Journal of Contemporary China, Vol. 29, No. 122 (2020), pp. 159-174; and Jean-Marc F. Blanchard, “Belt and Road Initiative (BRI) Blues: Powering BRI Research Back on Track to Avoid Choppy Seas,” Journal of Chinese Political Science, Vol. 26 (2021), pp. 235-255.
[10] See Jabin T. Jacob, “The China-Pakistan Economic Corridor and the China-India-Pakistan Triangle,” pp. 105-136 In Jean-Marc F. Blanchard, ed., China’s Maritime Silk Road Initiative and South Asia (Singapore: Palgrave MacMillan, 2018). Domestic challenges clearly continue. See, e.g., Adnan Aasmir, “Pakistan’s Belt and Road Hub Gwadar Hit by Protest Clampdown,” Nikkei Asia, January 2, 2023, https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistan-s-Belt-and-Road... and Adnan Aamir, “China Spurned Pakistan’s Proposals for New Belt and Road Projects,” Nikkei Asia, October 2, 2023, https://asia.nikkei.com/Spotlight/Belt-and-Road/China-spurned-Pakistan-s....
[11] Blanchard, ed., China’s Maritime Silk Road Initiative and South Asia (2018); Blanchard, ed., China’s Maritime Silk Road Initiative and Southeast Asia (2019); and Jean-Marc F. Blanchard, ed., China’s Maritime Silk Road Initiative, Africa, and the Middle East (Singapore: Palgrave MacMillan, 2021).
[12] “China’s BRI Shuns Russia, Africa to Favor Smaller, Safer Projects,” Global Construction Review, June 2, 2023, https://www.globalconstructionreview.com/chinas-bri-shuns-russia-africa-... and Aamir, “China Spurned Pakistan’s Proposals for New Belt and Road Projects” (October 2, 2023).
[13] Pongkwan Sawasdipakdi, “Thailand’s Engagement with China’s Belt and Road Initiative,” Asian Perspective, Vol. 45 (2021), pp. 349-374; Jens Kastner, “China Belt and Road Dreams Fade in Germany’s Industrial Heartland,” Nikkei Asia, January 24, 2023, https://asia.nikkei.com/Spotlight/Asia-Insight/China-Belt-and-Road-dream... and Sebastian Bersick, “Chinese Involvement in North European Seaports,” In Jean-Marc F. Blanchard, ed., Chinese Overseas Ports in Europe and the Americas (Abingdon: Routledge, 2024), pp. 70-92.
[14] Blanchard, “Probing China’s Twenty-First Century Maritime Silk Road Initiative (MSRI)” (2017), pp. 254; Jacob, “The China-Pakistan Economic Corridor and the China-India-Pakistan Triangle” (2018); and Christopher K. Colley and Sumit Ganguly, “The Evolution of India’s Look East Policy and China’s Maritime Silk Road Initiative” In Jean-Marc F. Blanchard, ed., China’s Maritime Silk Road Initiative and Southeast Asia (Singapore: Palgrave MacMillan, 2019), pp. 219-246.
[15] Blanchard, ed., China’s Maritime Silk Road Initiative and Southeast Asia (2019).
[16] On US efforts to confront the BRI, see Jean-Marc F. Blanchard, “The United States-China Rivalry and the BRI,” Vestnik RUDN International Relations, Vol. 21, No. 2 (2021), pp. 290-305. On the IMEC, see Jean-Marc F. Blanchard, “The Indo-Middle East Corridor (IMEC): Another Connectivity Scheme Headed Off the Rails?,” Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations Analysis, October 4, 2023, https://mnccenter.org/news/indo-middle-east-corridor-imec-another-connec....
[17] Yu Jincui and Xing Xiaojing, “As BRI integrates with Saudi Vision 2030, Chinese Firms Expect a New Peak in Cooperation Following Xi’s Visit,” Global Times, December 8, 2022, https://www.globaltimes.cn/page/202212/1281393.shtml.
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