The Belt and Road Initiative (BRI), launched by President Xi Jinping in 2013, represents China’s ambitious effort to connect East Asia and Europe through extensive infrastructure projects spanning roads, railways, and ports, with extensions into Africa, Oceania, and Latin America. This initiative, often dubbed the New Silk Road, involves over 140 countries, encompassing about 75% of the world’s population and more than half of its GDP. The BRI aims to enhance global connectivity and stimulate economic growth by developing economic corridors, transportation routes, and digital infrastructure. Key projects include the China-Pakistan Economic Corridor and Southeast Asia’s inaugural high-speed railway in Indonesia.
Despite its potential benefits, the BRI has encountered significant criticism. Critics point to issues such as lack of transparency and concerns over creating debt dependency among participating developing nations, which China disputes. As of early 2024, the initiative has secured over 200 cooperation agreements with more than 150 countries and 30 international organizations, underscoring its widespread influence and reach.
Origins & Ambitions
The BRI comprises six land corridors for urban growth, connected via road, rail, energy, and digital infrastructure, alongside the Maritime Silk Road focused on port development. Initially introduced as the “Silk Road Economic Belt” by President Xi Jinping in 2013 during a visit to Kazakhstan, the BRI seeks to revive historic trade routes. Despite criticism regarding environmental impact and sustainability, efforts toward a greener BRI have emerged. Initiatives like the 2018 Green Investment Principles (GIP) mandate climate risk mitigation and promote green investment targets. However, challenges remain, with ongoing coal projects like the Labota No. 7 coal plant in 2024 and proposed ventures in Gwadar, Pakistan, drawing scrutiny. Despite setbacks, investments in sectors like mining, technology, and renewable energy are expected to drive future growth.
Economic Benefits
China has reaped substantial economic benefits from the BRI, by enhancing trade and securing vital resources such as oil, gas, and minerals from partner countries. Trade between China and BRI nations has surpassed $19.1 trillion over the last decade, significantly enhancing China’s exports and economic resilience amid global uncertainties. Despite concerns over increased CO2 emissions, BRI investments aim to promote sustainable development. However, issues such as debt accumulation and global economic shifts pose ongoing challenges.
Challenges & Failures
The concept of “debt-trap diplomacy” gained prominence following Sri Lanka’s experience with China, making it a critical case study. The conventional narrative suggests that China extended loans to Sri Lanka to construct the Hambantota Port on the southern coast, anticipating Colombo’s debt distress. This, the story goes, allowed Beijing to take control of the port, ostensibly for strategic purposes, including potential use by the Chinese navy. Indian analysts argue that the BRI is a tool for China to advance its strategic interests in South Asia, with ambitions such as establishing a Chinese naval outpost, a strategy described as ‘salami-slicing’. US analyst Constantino Xavier summarizes this view, noting that China typically finds a local partner, accepts financially detrimental investment plans, and uses the resultant debt to either acquire the project or gain political leverage.
The fate of the Hambantota Port, leased to a Chinese company for 99 years, has been a focal point in debates over the BRI. Western analysts and media have cited Hambantota as evidence of China’s debt-trap strategy, intended to seize control of critical infrastructure. The port was envisioned to alleviate pressure on Colombo and serve as a logistics hub for ships needing refueling, maintenance, and supplies. Initially, Sri Lanka sought Indian financial support for the port, but India deemed the project commercially unviable. Subsequently, in 2006-07, Sri Lanka negotiated a commercial loan with China, which was initially unable to fund the project due to other commitments. The Export-Import Bank of China eventually agreed to finance 85% of the first phase with a $306 million, 15-year loan at 6.3% interest, including a 0.3% administration fee.
Financing for the second phase, negotiated post-2008 financial crisis, saw significantly lower rates, around 2%, given the then-low LIBOR rates. Sri Lanka, faced high-risk premiums due to ongoing internal civil conflict, secured this funding without Chinese pressure or incentives for new borrowing at lower rates. The Sri Lanka Ports Authority managed Hambantota from 2012 to late 2014, with minimal traffic and failed bunkering services due to a lack of international partnerships. The port’s inability to generate sufficient revenues was compounded by poor governance, limited commercial activities, and failure to attract vessels, leading to a $304 million loss by 2016.
Following a government change in January 2015, which halted port activities, Sri Lanka faced increasing pressure to meet IMF conditions. In July 2017, the government entered a public-private partnership with China Merchants Port Holdings, not a debt-equity swap, to restructure the port’s operations. The Hambantota port’s failure was largely due to Sri Lanka’s emerging economy status, inadequate managerial skills, and lack of international collaboration. Once these issues are addressed, the port’s future will look promising. Despite regional and multilateral reluctance, China’s financial support exemplified the spirit of the BRI.
A New York Times report suggested that China lured Sri Lanka into a debt trap through the BRI, but historical records show that the port project began in 2007, predating the BRI’s 2013 launch. The lending was not part of a strategic plan. While the BRI aims to enhance economic cooperation, facilitate production flows, and optimize resource distribution, it has faced criticism from vested interests and malicious actors. The narrative around Hambantota has often been distorted, casting China in a negative light.
BRI in 2024
The Belt and Road Initiative (BRI) in 2024 remains a beacon of global development despite facing significant challenges and criticisms. China continues to drive the BRI forward with resilience, emphasizing sustainability and strategic initiatives aimed at fostering international cooperation and connectivity.
China’s commitment to greening BRI projects underscores its proactive stance towards environmental sustainability on a global scale. By prioritizing green energy solutions and enhancing infrastructure efficiency, China aims to reduce carbon footprints associated with BRI developments. This approach not only aligns with global environmental goals but also enhances China’s reputation as a responsible global stakeholder.
Trade facilitation under the BRI is poised to make substantial strides, with projections suggesting improved transportation infrastructure that could reduce travel times along key corridors by 12% by 2030. Such enhancements are expected to lower trading costs, benefiting participating nations and boosting regional economic integration.
Pakistan stands as a notable example of BRI’s impact, with initiatives like the China-Pakistan Economic Corridor (CPEC) driving significant advancements in infrastructure, including the ambitious ML-1 railway project. These developments are poised to modernize Pakistan’s trade routes and stimulate economic growth by improving connectivity between seaports and economic zones.
Despite its transformative potential, the BRI faces criticisms and obstacles, particularly concerning debt sustainability in participating countries. Critics often raise concerns about the so-called “Chinese debt trap,” accusing China of burdening developing nations with unsustainable loans. However, a closer examination reveals that while China’s involvement in some projects has contributed to debt burdens, its role is often exaggerated. Reports indicate that China’s share of debt in countries like Sri Lanka is relatively small compared to other international creditors.
Moreover, China has taken proactive steps to alleviate debt burdens in various countries through debt relief programs and loan forgiveness initiatives. For instance, China has forgiven significant debts, including notable cases in Africa and Asia, demonstrating its commitment to supporting sustainable development and fostering equitable partnerships under the BRI framework.
End Note
Despite facing substantial challenges, the fate of the Belt and Road Initiative (BRI) rests on its ability to effectively confront these obstacles, prioritize transparency, and implement sustainable management practices. Issues such as difficulties in local labor integration and resulting social tensions are formidable but not insurmountable. The future success of the BRI hinges on how well these lessons are acknowledged and applied.
To ensure the BRI continues to have a positive impact, Chinese companies must deepen their engagement with local communities, comply rigorously with local labor regulations, and invest significantly in training programs for local workers. These actions are crucial not only for overcoming immediate challenges but also for building trust and fostering stronger community relations. Moreover, enhancing transparency in project implementation and decision-making processes is essential. This will address concerns regarding economic fairness and ensure that the benefits of BRI projects are equitably shared.
Despite its hurdles, the BRI is far from a doomed endeavor. It remains a pivotal force in shaping global infrastructure and economic connectivity. By learning from past setbacks and actively tackling its challenges, the BRI has the potential to evolve into a more inclusive and sustainable initiative. This evolution will enhance its credibility, effectiveness, and positive impact on global economic development and international relations.
