Behind China’s subdued BRI rhetoric

It came as a badly needed shot-in-the-arm for China’s flagship Belt and Road Initiative which has been flagging of late amid concerns it’s a debt-trap and a ploy to boost Chinese political influence. In early April, Malaysia signed on again for the East Coast Rail Link that’ll run from Port Klang to Pengkalan Kubor in another corner of the country. The route’s been slightly shortened and China has promised to build more townships along the way. Most importantly, though, the new price tag is $10 billion, down by almost one-third from the earlier cost which Malaysia’s new government reckoned was grossly overinflated.

The on-again deal with Malaysia was even more welcome news for President Xi Jinping thanks to its timing just before the 2nd Belt-and-Road Forum (BRF), the three-day summit that drew 37 heads of state to Beijing last week. But the agreement couldn’t entirely dispel feelings this was a more subdued gathering than the first BRF, when China appeared to be openly gunning to be global top dog.

China certainly adopted a more nuanced tone, talking about the environment, sustainability, better oversight and anti-corruption measures rather than focussing on the sheer scale of BRI projects. In so doing, China seemed to confirm it’s the world’s rising power, able to trim its sails to prevailing winds while moving inexorably forward. Responding to fears that BRI’s an expensive cover for a strategy of global domination, China’s line was emollient. It has been insisting its projects aren’t debt imbroglios that would give it a semi-colonial hold over countries around Asia.

Simultaneously, China firmly denied charges it was building a network of ports — from Port Payra in Bangladesh to Hambantota in Sri Lanka and Gwadar in Pakistan all the way up to Djibouti on the Horn of Africa — that could be used by its navy . The Chinese, a year ago, also bought Piraeus, Greece’s main port which it hopes will serve as a hub to Eastern Europe and Africa.

In Pakistan too, the Chinese have been listening more and given way to pressure to change track slightly on their China-Pakistan Economic Corridor (CPEC) projects. High on the priority list now for Pakistan is the Rashakai Free Trade Zone in Khyber Pakhtunkhwa. The first phase of the free-trade zone involves developing 159 acres over the next five years and the hope is Chinese entrepreneurs, engaged in auto parts to textiles and light engineering, will cross the border to invest.

From the Chinese side, a state-owned company, the China Road and Bridge Corp, will develop the zone. Two other SEZs, one in Sindh and the other in Islamabad, may be on the cards if the Rashakai SEZ is built successfully.

Pakistan changes stance

Pakistan Prime Minister Imran Khan had initially signalled he wanted to cut back on CPEC projects for fear of assuming too much debt. After taking power, though, he swiftly realised Pakistan wasn’t about to get large investments from anywhere else so he changed his tune. But he has convinced the Chinese it would be better to focus on SEZs that give Pakistan a chance to build industrial skills and create exports to earn foreign exchange. CPEC sceptics note Pakistan will be making heavy loan repayments to China over the coming 20 years. In response, the Chinese have now said they’ll allow duty-free import of 95 per cent of Pakistani products.

The Chinese are, of course, great believers in creating infrastructure in hopes it will fuel economic growth. Since they aren’t a capitalist system requiring instant profits, they’ve built roads, bridges, ports and railway lines where the traffic has taken several years to build up. And that’s precisely what they are doing all over Asia.

Also in Pakistan, the Chinese have agreed to revive over the next five years what’s called the ML-1 rail line from Peshawar to Karachi at a cost of $8 billion. The rebuilt 1,800-km rail line will run high-speed trains at twice current speeds and also allow double the trains. The Chinese have been building a string of power projects in electricity-starved Pakistan and some have already come onstream.

Still, however China may package the projects, debt still looks like being the elephant in the room for many participating BRI nations. On the other side of the Arabian Sea, China has built the Ethio-Djibouti railway connecting landlocked Addis Ababa to Djibouti where the Chinese have also expanded the port. Total bill: around $12 billion for a small country that can’t afford that much and has recently been trying to restructure its loans.

Europe connect

Meanwhile, the Americans are getting antsy about China’s foothold so close to a key shipping lane. It’s important to note too China isn’t just looking at spreading its economic clout around Asia. In March, Xi signed up Italy to the BRI, much to the consternation of Italy’s EU partners.

Even with the more toned-down presentation, Beijing hosted an undeniably grand BRI jamboree. Everyone from Russia’s Vladimir Putin to several African and Asian leaders turned up. Conspicuous absentees were the US and India, though the Chinese pointed out India hadn’t been invited. China delivered a second snub when the BCIM (Bangladesh-China-India-Myanmar) Corridor was dropped as a BRI project at the summit.

Will the blaze of infrastructure-building bring prosperity in its wake? It’s worked in China but the jury’s out on whether it can change the economic scenario of a country like Pakistan fast enough so it doesn’t sink under project debt? (The Chinese always give loans, not aid, which is why countries have to be sure infrastructure being built will pay its way and bring returns). Pakistan posted relatively strong 5.2 per cent growth in fiscal 2018. But the World Bank forecasts growth will slow to 3.4 per cent this year and decelerate to 2.9 per cent next year.

Cross to Europe and a similar story is being played out in tiny Montenegro. There the Chinese have almost completed a 100-mile highway that will cross into Serbia and slash travel-time. But it’s been built over tricky terrain and costs over $3.2 billion. Critics note Montenegro only has a population of 600,000 and won’t have enough traffic on the highway. But the people insist they need the highway for economic growth and that they've done their sums and can just about afford it.

In diplomatic terms, the contrast from Beijing has been startling. While US President Donald Trump has been picking fights with friends and foes alike, the Chinese have put the velvet glove back on and are going out of their way to appear statesmanlike. Trump talks about making America great again. The Chinese are working actively for their place in the sun.

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