China's Belt and Road Initiative

Impacts on Asia and Policy Agenda

Pradumna B. Rana, Xianbai Ji

• Publisher: Palgrave Macmillan
• Year: 2020
• ISBN:
  9789811551710
• Topic: Business
• Subtopic: International Business
• Index: Business

The Belt and Road Initiative (BRI), officially unveiled in 2013, is Chinese President Xi Jinping's signature foreign and economic policy initiative to achieve improved connectivity, regional cooperation, and economic development on a trans-continental scale. This book reviews the evolving BRI vision and offers a benefit-risk assessment of the BRI's economic and geopolitical implications from the perspective of Asian stakeholder countries, using both qualitative and quantitative research methods. Among the value added of the book is first an online perception survey of opinion leaders from Asian participating countries on various aspects of the initiative. To our best knowledge, the survey is the first of its kind. Second, the book presents the simulation results of a computable general equilibrium model of the world economy to estimate the potential macroeconomic impacts of the BRI as a whole and those of its constituent overland and maritime economic corridors. Third, the book makes ten key evidence-based policy recommendations on how to enhance the prospect of a successful and mutually beneficial BRI 2.0 to both China and stakeholder countries.

© The Author(s) 2020

P. B. Rana, X. JiChina’s Belt and Road Initiativehttps://doi.org/10.1007/978-981-15-5171-0_1

Begin Abstract

1. China’s Belt and Road Initiative: Introduction and Overview

Pradumna B. Rana¹ and Xianbai Ji¹

(1)

S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore, Singapore

Pradumna B. Rana

Email: [email protected]

Xianbai Ji (Corresponding author)

Email: [email protected]

Keywords

Belt and Road InitiativeSilk RoadConnectivityEconomic corridor

End Abstract

1 Introduction

In September 2013 on a state visit to Kazakhstan, Chinese President Xi Jinping encouraged China and Central Asia to jointly build a Silk Road Economic Belt (SREB) to turn their ‘good political relations, geographical proximity and economic complementarity into drivers of practical cooperation and sustained growth’ (Xi 2013). Less than a month later, addressing the Indonesian Parliament, Xi spoke of developing the 21st Century Maritime Silk Road (MSR) that can transform oceans from a barrier to exchange into a bond of friendship. Initially grouped together as the ‘One Belt, One Road’, the SREB and MSR are now collectively referred to as the ‘Belt and Road Initiative’ (BRI). The founding premise of the BRI, as promulgated by Beijing, is to promote economic prosperity, mutual learning, and world peace through enhanced physical, financial, and human connectivity across the Asian, European, and African continents and their adjacent seas. Labelled by President Xi as ‘a project of the century’, the BRI has captured the world’s imagination instantly and become China’s landmark foreign and economic policy initiative (Rolland 2017).

Since the beginning, China has proclaimed the BRI to be a business proposition that will result in win-win situations¹ for all participants, given the world’s massive appetite for infrastructure financing. The latest estimate by the Asian Development Bank (ADB) notes that Asia alone needs to invest approximately $26 trillion between 2016 and 2030 to meet its infrastructure shortfall (ADB 2017). The Global Infrastructure Outlook, a Group of 20 initiative prepared with Oxford Economics (2017), puts Asia’s annual infrastructure financing gap at $275 billion. This compares with roughly $18.5 billion in annual lending by the World Bank to Asia and another $29 billion by ADB in 2017. There is clearly a gap in the market. While the BRI by itself will not be able to fill this gap, it has kick-started a new cycle of infrastructure spending in Asia and beyond.

China’s announcement of the BRI was followed by Japan, the United States and Europe, individually or cooperatively, stepping up infrastructure investment and development efforts in the Indo-Pacific and the Eurasian regions. As such, the World Bank (2019) suggests that the BRI can substantially improve trade, foreign investment, and living conditions for citizens in the participating countries as well as the global economy at large.

However, the BRI presents many risks such as debtor countries not being able to service BRI-related debt and potential damages to environment due to mega-scale BRI projects. Also, in the usual Chinese style, the BRI vision was announced with few details and the concept sounded vague and difficult to understand. Mass and chaotic campaigns followed where everyone pitched in with frenzied enthusiasm to meet their superiors’ wishes. Such efforts, in some cases, have led to low-quality and mismatched projects, duplication, conflicts of interest and corruption (Ang 2018). Another salient accusation is that Beijing deliberately pursues malicious ‘debt trap diplomacy’ to project undue political influence over sovereign nations that borrow from China under the BRI.² The United States has been particularly critical of the BRI’s allegedly neo-colonial connotation, with Vice President Mike Pence (2018) lashing out at China for constructing a ‘constricting belt’ and a ‘one-way road’ that would drown BRI countries in a ‘sea of debt’. Prominent Asian holdouts such as India likewise assert that the BRI is a web of influence activity, driven by the impulse of reconstructing a Sino-centric world order rather than a responsible aspiration of providing global public goods using Chinese funds (Chellaney 2018).

Wherever one stands in this debate, we see the BRI as a China-led international economic cooperation campaign directed at achieving improved connectivity, regional cooperation, and economic development on a trans-continental scale. Thus, the BRI has great potential to benefit many lower- and middle-income developing countries that are not adequately served by existing infrastructure and strapped for new investment. But for all that, China’s multi-faceted motives behind the BRI must be understood and the multitude of risks and downsides associated with BRI projects addressed. Already written into the constitution of the Communist Party of China in 2017, the BRI is here to stay and is likely to become the defining global economic agenda item for the decades to come. Therefore, whether the BRI emerges as a ‘bonanza’ or a ‘nightmare’ for recipient countries, as Lim (2018) puts it, in the end depends on the policy actions taken by China as well as by BRI participating countries to maximise the benefits and minimise the risks of BRI projects. For the purported win-win potential to come into fruition, China has to come up with new policies and guidelines for the BRI to respond to warranted criticisms in shoring up the BRI’s legitimacy and developmental impact. At the Second Belt and Road Forum (BRF) in 2019, President Xi acknowledged various constructive criticisms and pledged to reform the BRI. Fine tuning and quality control are to be done with emphasis placed on ‘high quality’ projects (Xi 2019). BRI participating countries, for their part, also need to reach an internal consensus on how to engage with China and then adopt policy reforms to create conducive national conditions for making the best use of BRI funds.

In this context, this policy-oriented book studies and investigates the BRI’s impact on Asia and outlines a policy agenda for both China and regional BRI participating countries to work towards an improved BRI 2.0. Specific objectives of the book are to: (1) review the evolving BRI vision, scope, institutions, and progress that has been made on BRI cooperation; (2) conduct a comprehensive assessment of the economic and geopolitical dimensions of the BRI; (3) provide empirical evidence on how BRI countries could benefit from greater transport connectivity and trade openness; (4) identify the major benefits and risks of the BRI from the perspective of countries in Southeast Asia, South Asia and Central Asia; and (5) offer actionable policy recommendations to make the BRI a win-win venture. In terms of methodology, we employ a mixed-method research strategy that incorporates (1) computable general equilibrium (CGE) modelling, (2) perception survey, and (3) desk research and regional case studies.

The BRI is still a work-in-progress. Despite a stated focus on Afro-Eurasia, the BRI is an inclusive concept with geographical malleability, meaning any country that wishes to support the BRI is considered to be a part of it. As a result, China has refrained from issuing an official map of participating countries and is pro-actively reaching out to countries that have not yet signed up to it. Therefore, for the purpose of this book, we consider any country that has signed a BRI memorandum of understanding (MOU) or joint statement with China as a BRI participating (or stakeholder) country. As of October 2019, 137 countries had signed at least one BRI agreement with China, 47 of which are from the Asia-Pacific region (Fig. 1.1). China has also not fully fleshed out the exact criteria for defining what constitutes a BRI project. Hence, in this book, all China-related infrastructure and development projects in Asian BRI countries after 2013 are considered as BRI projects. Estimates of Chinese financing under the auspices of the BRI range from $575 billion to 8 trillion (Hillman 2018). The wide range is a reflection of the amorphous nature of the BRI and the limited data availability.

Fig. 1.1

Continental breakdown of BRI participating countries (as of October 2019).

Source: Belt and Road Portal

2 Origins of the BRI

The BRI concept has a deep historical root. It drew inspiration from the overland and maritime silk roads of the bygone era (Rimmer 2018). Active since more than two-thousand years ago, the historical land-based silk road had two main routes. The northern route stretched from Chang’an (present-day Xi’an) westward to the Mediterranean through great central Eurasian cities of Samarkand, Bukhara, and Tehran. Along this trading route, luxurious goods such as Chinese silk, lacquerware, porcelain, and medicinal herbs; European glassware and coal; Persian dates, saffron, and pistachio nuts; Indian paper, sandalwood, and cotton; and Central Asia’s musical instruments, jade, almonds, indigo, and frankincense were transported to different destinations by laden camels and traded at border markets. And where merchants went, envoys, courtiers, intellectuals, pilgrims, and craftsmen alike followed suit, spreading religions, cultures, and technologies across the connected civilisations. To the south of the northern trans-continental route lay an intra-continental southwestern silk road (Rana and Chia 2017). This road began in Yunnan...

Table of contents

• Cover
• Front Matter
• 1. China’s Belt and Road Initiative: Introduction and Overview
• 2. Proliferating Major Power Infrastructure Initiatives
• 3. Potential Economic Impact of BRI: A Computable General Equilibrium Analysis
• 4. The Perception Survey of Asian Opinion Leaders
• 5. BRI and Southeast Asia
• 6. BRI and South Asia
• 7. BRI and Central Asia
• 8. Policy Recommendations
• Back Matter