Nov 09, 2018 04:37 PM

Opinion: There Are Better Ways to Boost Belt and Road’s Appeal Than Blaming ‘China Bashing’

The Luang Prabang railway bridge, a section of the China-Laos Railway built by the state-owned China Railway Group Ltd., is under construction near Luang Prabang, Laos on Oct. 21. Photo: VCG
The Luang Prabang railway bridge, a section of the China-Laos Railway built by the state-owned China Railway Group Ltd., is under construction near Luang Prabang, Laos on Oct. 21. Photo: VCG

The Belt and Road Initiative (BRI) was initially welcomed throughout much of Southeast Asia and other regions, but recent elections in countries like Malaysia and the Maldives have sparked international criticism. Voices have emerged there and in Pakistan, Central Asia, Latin America and Africa expressing reservations and seeking to re-examine the terms of BRI projects. Scholars and policy experts in China’s public sphere are tempted to dismiss “BRI-bashing” as a tactic calculated to hamper China’s rise. In the face of criticism from the international community, more-nuanced explanations of the recent backlash have been offered, as well as pointers on how the BRI can improve its appeal. But while some Chinese analysts are questioning aspects of the BRI’s implementation, they generally shy away from probing into any structural flaws the initiative may have, and its strategic mission remains sacrosanct.

Key Belt and Road issues

Following elections in a variety of Southeast Asian nations and stalled projects across several regions, accusations of “debt traps” in the Belt and Road Initiative have been mounting. The prospect of Chinese investment is often disruptive to political arrangements in BRI recipient states. Interests are divided among potential winners and losers. This is the case both in democratic and more-authoritarian regimes, but exerts a more visible impact in the former. Incumbent ruling parties who favor BRI deals with China often find that this mobilizes their opposition. Opposition-party criticism may or may not be supported by facts; once in power, they may decide that BRI projects are desirable after all. But the political temperature, having risen, is slow to subside. These disruptions create challenges for the overall investment environment.

Given limited progress on yuan internationalization, BRI projects are also likely to increase Chinese firms’ dollar dependence, especially for the large state-owned enterprises undertaking most projects. Scant reporting of China’s dollar-denominated loans leads to serious underestimations of these projects’ vulnerability to currency risk. Despite reports that some countries will push for domestic currency use in joint projects, this too poses significant challenges.

Aside from economic impacts, governance issues in partner nations are an increasing concern that Beijing must work to address. Investment tends to increase at difficult times for developing democracies. In some states such as Sri Lanka and Malaysia, BRI investment has tended to increase, fueling fears that funding supports undemocratic trends. For countries like the Philippines, accusations of “corrosive capital” raises fears that Chinese money will crowd out domestic producers and weaken good-governance practices. These anxieties are only more likely to increase as partner countries undergo domestic elections and political transition. As pushback in countries like Malaysia, Pakistan, Vietnam, Australia and New Zealand has demonstrated, China is poised to become a wedge issue: low-hanging fruit that is a popular target for criticism as opinions on Chinese investment sour.

China’s take: Blame fearmongering

Chinese analysts remain largely sanguine about the BRI’s basic structure, instead faulting international observers for the change in public opinion. Most defend China against direct attacks on the BRI from Malaysia or other countries.

It is the work of Western nations, not partner countries, that sours perceptions of the BRI, writes Chen Qinghong, a researcher at the China Institute of Contemporary International Relations. For instance, despite interference from Western countries, Chen says, Malaysian Prime Minister Mahathir Mohamad has contributed to the positive development of China-Malaysia relations. China-Malaysia trade now stands at over $100 billion, and firms from the two countries maintain active relations. In response to these warming ties, according to Chen, Western nations jealously provoke disputes through heated rhetorical attacks.

A better Belt and Road

But some Chinese commentators are more sensitive to external criticism, admitting that adjustments are needed in the BRI’s scope and structure. These fall generally into two camps: the first supports institutional upgrading to realize the BRI in its current state, while the second suggests that the nature of the BRI itself must be adjusted to make it sustainable.

The former camp supports structures that formalize and internationalize the BRI, making it less susceptible to isolated failures. The Supreme People’s Court is setting up international Belt and Road courts to provide fair, effective and accessible legal services to participating parties, said Liu Guixiang, a member of the Supreme People’s Court Judicial Committee. The court is also drafting a regulation on understanding and implementing civil and commercial judgments from foreign courts, Liu said. These measures will boost legal cooperation, making BRI projects sustainable and legally defensible for nations regardless of their internal judicial system. Institutional upgrades along these lines craft the BRI as an international strategy, strengthening its credibility, said Xue Li of the Chinese Academy of Social Sciences.

As a global platform, the Belt and Road Initiative is less likely to be undermined by this or that opponent, above all the U.S., Xue said.

The second range of opinion sees the need to adjust the aims and scope of the Belt and Road Initiative, making it more modest and effective through strategic planning, acknowledging geopolitical challenges, and more closely aligning to local conditions. The BRI needs more-modest and realistic claims, or risks facing immediate opposition and suspicion from an international community that already distrusts China, warns Zheng Yongnian, chairman of the South University of Technology Institute of Public Policy Academic Committee. Given these “BRI-bashing” tendencies, overpromising BRI deliverables could be a “fatal error,” he said.

To avoid such errors, argue Cheng Chengping and Wu Fang of Wuhan University Economics and Management School, the BRI must align more closely to local conditions. This includes creating local coordination mechanisms and supporting cooperation in industry and finance. Efforts to assuage fears of a debt crisis, such as aid package to Pakistan’s Imran Khan government, are likely to be made conditional on adopting tighter financial regulations.

The BRI has made lofty promises in its five years on the books, a fact heightened by its integration into the Party Constitution as an integral element of “new-era thinking” under President Xi Jinping. At present, domestic questioning of the BRI is noticeable and expectations are high. However, these questions remain phrased mostly in terms of the BRI’s implementation rather than its strategic mission.

It remains easy for Beijing to reject foreign criticism as part of a Cold War mindset, which Chinese analysts will continue to do unless the BRI fails so thoroughly that that strategy becomes untenable. Until that point, it is not beneficial for analysts to assume that the BRI may be structurally flawed, as the vision of Belt and Road as successful is both the official line and a vision of economic progress. If Beijing continues to rationalize its foreign development and aid policies, we are likely to see less talk of a panacea-style “China solution” and more differentiation of target countries with attention paid to their precise national conditions.

Hannah Feldshuh is a contributing author for China Policy, a leading policy analysis and strategic advisory firm based in Beijing.

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