The Belt and Road Initiative (BRI) is now in its 10th anniversary, as Beijing rolls out the red carpet for world leaders for the anniversary forum amidst growing economic volatility and future uncertainties in its geostrategic fate.
This forum is particularly important for Xi’s prestige, as this remains his personal brainchild and a projection of his leadership and strategic insight. Xi’s initiative was originally envisioned as a massive physical and digital infrastructure project in connecting China with Europe, Asia and the rest of the world, which later became an infrastructure financing tool in flexing Beijing’s financial muscle and using it to further strengthen its soft power and economic sway especially in the Global South and in eating into the Western dominance in Europe.
Laden with controversies ranging from its debt trap to it being the ultimate geopolitical strategy in elevating the Chinese Dream and in diminishing the Western order, it now faces a new frontier of challenges and future strategic returns. Beijing also realises that countries are now struggling to pay back the high costs, which will worsen the credit standing of Beijing’s already challenging financial climate.
While Putin led the global leaders to be in this summit, the dwindling relevance of the BRI and rising wariness and scepticism especially in the Western world and a larger swath of the Global South have threatened the legacy and reliance by Xi on this domain in boosting his internal acceptance amidst a growing twin challenge of socio-economic downturn and increasing energy, technology and security vulnerabilities with rising number of once reliant global players on the Chinese financial and economic might and the BRI now being sceptical and highly concerned on the exposure risks.
Of the more than 130 countries going to the summit, the most senior representative from the EU is Viktor Orbán, Hungary’s prime minister, who is a keen partner of Beijing as compared to his counterparts in the EU.
The reaffirmation of the ties at the BRI Forum is meant to further solidify the current alternative order and challenge to the Western system, made more pressing by the concurrent crises in Ukraine and Israel.
Putin’s attendance reflects his strategic manouvre to rely ever more deeply on Beijing to form a consolidated front in challenging the Washington led Western order, although he himself is wary of the future setbacks and potentiality of Beijing being an Achilles heel for Moscow.
The last time Putin visited Beijing was just before the invasion of Ukraine. Beijing remains a safe passage for Putin, as China is not a member of the International Criminal Court (ICC) who has issued an arrest warrant for him.
Cognisant of the need to strengthen the alternative front to the Western order, Putin needs Xi to be on board, although realising that Xi himself is treading carefully on managing future ties with Moscow despite the no limits commitment forged.
While Beijing is eyeing Moscow’s military capacity in distracting the West and continuing the simultaneous two-front open conflict with the West in the future that will ease Beijing’s military dealings with Washington when it comes to GTaiwan, Xi is mindful of the danger ahead. Food and energy security remain the other vital dependence factors for Beijing, but Moscow as it stands for now will need Beijing support more. Putin tried to align with Beijing’s response to the Fukushima wastewater discharge by joining in to restrict imports of Japanese seafood.
In the G20, Xi’s absence is seen as a snub of the West and this BRI forum is hoped to promote the integrated front of Beijing-Moscow in serving as the trusted and credible alternative in a multipolar worldview, with the BRI as the bastion of preserving and expanding Beijing’s credibility and as the lifeline for key players in the Global South.
Xi’s BRI Salvation
This reliance on the BRI as the economic tool in moulding these players’ allegiance and in expanding Beijing’s geostrategic umbrella in serving its global expansion and in challenging the West’s dominance has produced intensified returns in the initial phase. However, this momentum is now in jeopardy with Beijing’s own internal systemic economic stumbles, the West’s fightback in restrictions and embargos and values-based courting of these players, and the BRI recipients’ internal discontent and debt realisation. Italy, the only G7 country to have signed up to the BRI, has been considering withdrawing.
The US and other G7 members last year have responded to the BRI by launching the $600 billion Partnership for Global Infrastructure and Investment (PGII).In a recent report published by Boston University, China’s finance institutions provided about $331billion to recipient countries between 2013 and 2021, and have resulted in many of the recipients being subject to significant debt distress.
Beijing has spent about $240bn bailing out countries who have struggled to repay their BRI debts, according to separate research produced earlier this year.
More than $90 billion worth of Chinese investment in commercial terms in the BRI projects has now been facing insurmountable problems, according to the statistics from the American Enterprise Institute think tank. Among the issues raised are from outright cancellation to indefinite delays, which are mainly from political requirements and errors by Chinese firms.
In view of the rising risks and with increasing scrutiny and heightened Western counteroffers of a moral high ground approach in trade and investments based on principles and transparency, Beijing is now forced to focus on smaller projects and to adapt to the new tune of energy and economic sustainability with green and digital elements in the frame.
It marked a difference when it was in 2013 when Xi tried to cement his global credentials, where Beijing promised to support countries that had not been served by traditional multilateral lenders.
Changing Regional Cards and Chips
China faces pressure from the West and from rising awareness of recipient countries.Key projects will still be maintained, especially on the ones that will give the highest returns to Beijing in the hard power aspect.
For ASEAN, this will be maintained and will be given the higher priority as compared to other regions due to the importance to Beijing in the arena of South China Sea, for Taiwan and in dispelling the overtures and increasing counter responses from the US.
For the projects and geopolitical influence of the BRI in Latin America and Africa, these are geared for long term returns of forward operating bases that will complement the efforts of the long term and larger objective of presenting a globally pervasive and competent order and system that are based on the China centric affiliations in replacing the United States’ model.
In the short run, the Indo Pacific and South Asia and Southeast Asia in particular, will be the key arenas for Beijing both in its BRI and soft power tool and in hard power military step up in serving its two-pronged aim of bolstering its current offensive and defensive capacities in deterring Western threat and responses, and in defending its aims in protecting its interests and bases in the disputed regions and for the ultimate Taiwan reunification.
While Beijing has been reaping the benefits of filling in the gap of the region’s thirst for cheap and easy capital and assurances of investments in elevating infrastructure and socio economic development which are desperately needed by regional regimes, it now faces a bigger hurdle in facing the challenges from the renewed courting by the West, particularly the EU and the US.
Beijing will still hope for its RCEP and push for de-dollarisation to mitigate the risks, and for the lukewarm impact of the IPEF to persistently capitalise on creating the narrative of the structural misplacement of IPEF in focusing on systemic rules rather than the immediate needs and contextual regional differences that play the predominant role in the region choosing the no-strings attached lure of the Chinese capital and support.
However, Beijing is well aware that this no longer remains the case, and adjustments in debt calculations through negotiations have been increasing. Beijing is still strategic in keeping its card and leverage on key players, with the option to increase its chips through wider usage of economic tools and higher negotiation leverage with the potential to threaten to rightly gain the rights of ownership or takeovers of key assets should the debt obligations are not met as part of a larger policy tool and pressure.
This remains a vital tool for Beijing in ensuring it gets the fallback options it needs for key conflict disputes or in preserving current and future ambitions in targeted critical zones including the Indian Ocean, South China Sea and the various new land routes connecting China to the Indian Ocean including the Lao-China high-speed rail project, the China-Pakistan Economic Corridor and the China-Myanmar Economic Corridor.
Realignment of BRI Strategy
Major events shaping the shifting global geopolitical trends including the Ukraine war, the pandemic and the trade war with the US, coupled with the slowing Chinese economy, all impacted on Beijing’s final ambitions.
Beijing has completed BRI deals with more than 150 countries over the past 10 years, with projects ranging from railway infrastructure to ports. Roughly $1tn of investment has been churned out under the BRI, according to the Chinese Foreign Ministry but the bulk to the poor countries has peaked years ago. A decade after the initiative started, the amount invested in Africa has dipped to its lowest level.
The Global Development Initiative (GDI) that has been pushed since last year is one of the answers Beijing has created in establishing the more morally aligned approach in a classical development and socio-economic pillar domain, in distinguishing it from the BRI that is established now as more of a commercial initiative and lenses.
The shift to a more quality oriented tone rather than quantity has been apparent in light of the risks to the BRI future, as stated in a white paper published last week, in which the Chinese government stated that “the ultimate goal of the BRI is to help build a global community of shared future”. These include food security, infectious diseases, artificial intelligence and climate change, rather than just economic development.
This new push is in line with the other concurrent agenda settings to replace the Western order, including the Global Security Initiative and the Global Civilisation Initiative, with Xi calling for the creation of “a new culture for our times”.
In view of the risks, Xi is pushing to make the BRI smaller and greener, transiting from mega projects like dams to a more high-tech oriented such as digital finance and e-commerce platforms, with the aim of capturing the stronghold of the Global South.
The future of the BRI is intertwined with Xi’s own regime security foothold, and given China’s current and future financial and economic predicaments, it is not in a position to be lending as huge a sum as before, worsened by the rising resistance. Economic and development shifts in regions are playing an integral factor.
The initial focus on basic infrastructure development during the first decade including power and energy became sought after, but countries eventually go through different phases of development which will need different investment and output ranges.
America’s Long Term Advantage
The various strategies to integrate the Chinese push for the Chinese governance model and norms in shaping the global development model have now been integrated deeper into the security strategies and modelling of Beijing more than ever, as the economic tool is now under increased strain for Beijing to exert the desired impact.
While GDP and PPP measurements have been the main yardsticks in the past in elevating China’s place in challenging America’s might, Beijing itself now is cognisant that future economic returns, the focus on energy and food security and technological supremacy alone will not guarantee the capacity to match or deter combined Western hard power capacities or even in economic resilience. Economic superiority, lasting financial capacities to finance large scale or a protracted conflict, or advantage in sheer volumes of military assets, missiles or ships alone will not be the only guarantors of confidence in victories or in matching the might of the enemy.
Ingrained military and combat experience, technology superiority and proven impact, and the ability to summon credible and capable allies both in volume and supremacy all remain the ultimate parameters in which the America led West has in its disposal. This fact remains the highest hurdle and headache for Beijing to face, despite the rhetoric of economic might and sabre rattling of soft and hard power elevation and projection.