July 28, 2023
Good morning. In today’s either/view, we discuss whether China’s Belt and Road Initiative has been a success. We also look at the township policy of Uttar Pradesh, among other news.
📰 FEATURE STORY
Ten years of China’s Belt and Road Initiative – What’s the verdict?
When Hu Jintao’s tenure as general secretary of the Chinese Communist Party (CCP) ended in 2012, China’s foreign reserves were soaring. Driven by its membership in the World Trade Organisation and Hu’s growth-led, inward-looking policies, the economy reached unparalleled heights. But something was sorely amiss: legitimacy in geopolitics. This, tied with the growing sense of income inequality and mass poverty, became the basis for Xi Jinping, the successor, to weave a Chinese Dream – to restore China’s greatness.
The Belt and Road Initiative (BRI), introduced in 2013, embodied that dream. At the time, it was heralded as one of the most ambitious connectivity and cooperation initiatives. But recent studies show that the BRI’s path over the last ten years hasn’t been entirely smooth. It has run into trouble in many areas, not the least of which is its inflated bailout lending. It has been a decade since the BRI’s beginnings. What should we make of it?
Through BRI, China aims to invest trillions of dollars in business, infrastructure, and development across Asia, Europe, and Africa. Inspired by the Silk Road, this ambitious project seeks to build a vast web of connectivity, including roads, railways, telecommunications, energy pipelines, and ports, to spur development and economic growth in over 140 countries.
The BRI represented the pinnacle of the Chinese Dream, offering a path for national power to reach its full potential. The 2,000-year-old Silk Road connected China, Central Asia and the West in an affluent network of trade wherein merchants carried Silk from China to Europe to dress wealthy patrons. Hu Jintao had earlier alluded to reviving such an initiative, but it never materialised.
Xi Jinping’s modern-day equivalent is divided into two components, the Economic Belt and the Maritime Road. It will connect China’s underdeveloped hinterland to Europe through Central Asia on land. At sea, it will link Southeast Asia to China’s southern provinces through ports and railways.
To finance the project, China launched the Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB) in 2014 and 2015, respectively. The Silk Road Fund, funded by various state Chinese institutions, amounts to approximately US$40 billion, while the AIIB, with an estimated US$100 billion, focuses specifically on infrastructure projects in Asia.
Notably, the China-Pakistan Economic Corridor (CPEC), estimated at $65 billion, stands out as one of the largest BRI projects connecting China to Pakistan’s Gwadar Port.
Overall, China has already spent around $1 trillion on BRI initiatives, with estimates suggesting expenses could eventually reach as high as $8 trillion.
However, the BRI has not been without challenges and controversies. India, in particular, has expressed concerns over China’s geoeconomic strategy, fearing unsustainable debt burdens for its Indian Ocean neighbours and potential regional dominance. India has pursued its own development assistance projects in neighbouring countries.
Japan, balancing its interest in regional infrastructure development with long-standing suspicions about China’s intentions, approaches the BRI cautiously. Meanwhile, Western powers have come to view the BRI as a Trojan Horse, a geopolitical campaign guise as economic connectivity.
To counter it, in 2021, US President Joe Biden and the G7 launched the Build Back Better World Initiative (B3W).
VIEW: It’s shaping up
Let’s talk about the BRI’s domestic achievements. The past decade has allowed it to align more systematically with national aspirations. The land-based corridors integrate with Xinjiang’s development and western China’s globalisation, while the sea-based corridors tie closely with the Greater Bay strategy – to develop a top-notch investment cluster – and maritime expansion in eastern China. Chinese state-owned enterprises are expanding investments in the green economy, digital infrastructure, construction, and railways.
As a foreign policy instrument, the BRI has made China a heavyweight emergency financier to debt-ridden countries. Data shows that since 2000, over 20 countries have received more than $240 billion in bailouts from China. $185 billion of this was between 2016 and 2021. In a way, it has dethroned the United States as a reliable financier for low and middle-income countries. As a global lender, it hasn’t equalled the International Monetary Fund yet, but it’s getting there. Also, much of the debt is state-owned, and thus, the risks of a financial crash are low.
It’s significant for China’s vision to become a regional and global superpower. When the BRI was nascent, global attention revolved around the American and European dreams. The internationalisation of the Chinese Dream through BRI signalled China’s economic prowess and changing power dynamics. Beijing leverages the BRI as an additional multilateral cooperation platform, complementing the G20 and the Shanghai Cooperation Organisation. It has allowed China, to some extent, to set new international norms of global economics and politics.
COUNTERVIEW: Bogged down by its own weight
Countries undertaking significant debt for infrastructure upgrades view BRI funds as a potential trap. In Ghana and Zambia, BRI loans were part of their debt burdens which caused a sovereign default. It hasn’t gone without notice that debt to China has surpassed 20% of the GDP in some countries. For instance, Kathmandu initially approved 35 projects under the BRI, but in 2019, they wanted only nine. Nepal emphasised its preference for grant or soft loans instead of high-interest loans with short repayment timelines.
China’s status as a major emergency lender has led experts to speculate about its destabilising impact on the economy. It’s also highlighted some fundamental flaws with BRI projects, like opaque bidding processes and political backlash. Take the CPEC, for instance. It’s not really a success story. The project’s progress has slowed since 2018 due to security and economic challenges. Militant attacks targeted Chinese investors, prompting calls for improved security. Economic ties between the two rely heavily on debt with high interest rates, adding to Pakistan’s financial burden – its external debt exceeds $100 billion, with a third of that owed to China.
A World Bank report warns that BRI’s massive infrastructure projects pose environmental and social risks for countries and communities. China pledged to halt overseas coal-fired power plants in 2021, yet non-renewable energy investment still accounts for almost half of BRI spending. With some Chinese companies involved, there are concerns about human rights violations. A report links 39 Chinese mining companies to 102 alleged human rights and environmental violations between January 2021 and December 2022.
- Understanding the Belt and Road Initiative (BRI): An Initiative to Make China Great Again? – European Journal of East Asian Studies
- Westward ho—the China dream and ‘one belt, one road’: Chinese foreign policy under Xi Jinping – International Affairs
- After Doling Out Huge Loans, China Is Now Bailing Out Countries – The New York Times
- China’s Massive Belt and Road Initiative – Council of Foreign Relations
- 10 years of China’s Belt & Road project: South Asia barring India & Bhutan, in a bind over Beijing’s predatory tactics – Firstpost
- Ten Years of the Belt and Road: Reflections and Recent Trends – BU Global Development Policy Center
- Environmental damage from Belt and Road Initiative projects on rise – The Economic Times
What is your opinion on this?
(Only subscribers can participate in polls)
a) The Belt and Road Initiative has been mostly successful.
b) The Belt and Road Initiative has mostly failed.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
India can’t lead the Global South and not feed it
For the Left:
‘Give and take’ is needed to make INDIA effective
🇮🇳 STATE OF THE STATES
Township policy (Uttar Pradesh) – The state government’s New Township Policy 2023 will provide incentives to private developers to enter the state. The policy’s aim is to develop and provide affordable housing, control haphazard development on the outskirts of cities, and improve the quality of urban life. Private developers will now be eligible to develop townships. If the township is less than 50 acres, it’ll only be for residential use. If it’s bigger, it can be used for agricultural purposes also.
Why it matters: The government wants to check unauthorised development across the state, particularly in urban areas. The state has new challenges of urbanisation. In December, the state government announced plans to set up 100 townships in the next five years. In September, the Housing and urban planning department made a case to provide more housing in urban areas since its population is expected to grow by 35% in the next five years.
New liquor policy (Kerala) – Given the growing toddy business in the state, the government wants to capitalise with the newly revised liquor policy. The goal is to revive, publicise, and modernise the toddy industry in Kerala. Among the components of the new policy will be a new Track and Trace system to oversee the transportation of toddy between districts. The government will also promote local cuisine and toddy through toddy shops that will be converted into eateries.
Why it matters: Unadulterated toddy is a unique aspect of Kerala’s tourism push. There’s a sense that the tourism sector could benefit greatly if it can market pure toddy in hygienic conditions. Goa, for example, has been marketing Feni as its heritage spirit. Coconut climbing and tapping can become a tenet of responsible tourism.
Bids for power project (West Bengal) – The state government has invited bids for the ₹4,700 crore 900 MW Bandu pumped storage power project. There has been some delay in the tendering process, but the government is optimistic that a bidder will be finalised in the coming months. The JSW Group has shown interest in the pumped power storage project in the past year with its power portfolio through JSW Energy. The project site is at the Ajodhya Hill Area in the Purulia district.
Why it matters: The government is keen to boost its renewable energy capacity in the state. It currently operates one 900 MW pumped storage power project in Purilia that’s controlled by the West Bengal State Electricity Distribution Company Ltd. Pumped storage power is a flexible source of electricity that can be used to meet peak demand and stabilise the power grid.
Promises to farmers (Madhya Pradesh) – The Congress announced several sops for farmers in the state, including free power and withdrawal of cases registered against them during protests. Trying to replicate its formula in Karnataka, the party is focusing on hyperlocal issues and farmers. Madhya Pradesh Congress Committee President Kamal Nath promised to implement the Krishak Nyay Yojana to provide 37 lakh farmers free power.
Why it matters: The Congress’ strategy is trying to paint the BJP government as anti-farmer in the state. The state government supported the controversial farm laws. In May, the state government launched a campaign to waive farm loans amounting to over ₹2,200 crore which would benefit 11 lakh farmers who defaulted on loans. Last November, the RSS affiliate Bharatiya Kisan Sangh (BKS) criticised the state government over several issues like fertiliser shortages and erratic power supply.
Tackling human-animal conflicts (Assam) – A biodiversity conservation organisation called Aranyak has formed seven Rapid Response Units (RRUs) in some human-elephant conflict areas of the state. They’re located in the eastern areas of Majuli, Jorhat, and Tinsukia. The teams will monitor and mitigate human-elephant conflicts through programmes that engage the local community. The units consist of community members as an early warning system in vulnerable areas.
Why it matters: Over the years, Assam has seen a significant number of human-elephant conflict cases. Much of the forest land in the state has been encroached upon due to the expansion of tea gardens for cultivation. A lot of forest land has been allotted to them as revenue land. For development activities like erecting power lines, mining, and widening roads, it becomes necessary to use or divert forest land.
🔢 KEY NUMBER
$100 billion – According to global management consulting firm Arthur D Little, India’s space industry can reach $100 billion by 2040. This is attributed to India’s growing capabilities to build and launch multiple satellites in lower and higher orbits.